IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO  5849-5850 OF 2002

Visakhapatnam Port Trust     …  Appellant

Versus

M/s Continental Construction Company           … Respondent

J U D G E M E N T

R.M. Lodha, J.

Both these appeals by special leave, arise out of one and the

same  judgment dated 26th April, 2002 rendered  by the  High Court

of Judicature Andhra Pradesh whereby it allowed the two appeals

being  CMA No. 1559/1994 and CMA No. 77/1995.

2.    For  the sake of  convenience,  we shall  refer  the appellant  -

Visakhapatnam  Port  Trust,  “VPT”  and  the  respondent  -  M/s

Continental Construction Company,  “the Contractor”.  

3.   In  CMA No. 1559/1994 before the High Court, the  dispute

between the parties was in respect of refund of an amount of Rs.

74,810.38  which  was  recovered  by  VPT  from  the   contractor’s

running  bill  no.  21.    VPT  entered  into  an  agreement  with  the

contractor on 7th January, 1973 whereunder the  contractor was to

construct  the  ore  berth  263   meters  long  29.73  meters  wide

comprising of eight  numbers of  18 meters x 27.73 meters long

concrete cribs spaced at 35M  centres on prepared foundations and

connected  by pre-cast pre-stressed deck   and  R.C.C.  slab and

construction  of  two Mooring Dolphins  comprising  concrete  deck

supported on 900mm internal diameter Racker bored piles.  For the

execution  of  the  said  contract,   VPT  was  to   supply  various

equipments comprising  of  hydraulic jacks, hydraulic pumps, steel

yoke assembly, jack rods  etc. and it appears to be fairly admitted

position that  950 nos.  of  jack rods were  supplied by  VPT to the

contractor.  Towards cost of  500 jack rods, on 8th August, 1974,

from   the   contractor’s  running  bill  no.  21,  an  amount  of

Rs.74,810.38  was recovered by VPT.  

4. As there was a dispute between VPT and the contractor with

regard  to  return  of  950  jack  rods  valuing   Rs.  9,65,155/-,  VPT

referred  to  the  dispute  to  arbitration  in  the  year  1975.   The

statement of claim  was filed by  VPT  before the arbitrators on 4th

June, 1976.    On 23rd March, 1980,  the arbitrators rejected the

2

claim of VPT.  The award dated 23rd March, 1980 was challenged

by VPT before the Civil Judge,  Visakhapatanam by filing a petition

under Sections 30 & 33 of the Arbitration Act,  1940 (for short, ‘Act,

1940’ ).     The Civil Judge,  Visakhapatanam dismissed the said

petition on 10th September, 1984.

5.    It  is pertinent  to notice here that until the rejection of claim

made by VPT  for Rs. 9,65,155/-  towards the cost  of 950 jack rods

vide award dated  23rd March, 1980,  the contractor did not  raise

any dispute with regard to  recovery of Rs. 74,810.38 made by VPT

on 8th August, 1974 from the contractor’s  running bill no. 21.     It

was only  thereafter,  to  be specific  on  27th March,  1980 that  the

contractor called upon VPT  to release  the sum of Rs. 74,810.38.

Then  on  22nd of  September,  1984,   the  contractor  initiated

proceedings  under  the  Act,  1940  in  respect  of  claim  of

Rs.74,810.38 by appointing its arbitrator and also  called upon VPT

to appoint its arbitrator. The arbitrators entered upon the  reference

on  1st February,  1985 and they also appointed an Umpire.  The

contractor filed its statement of claim before the  arbitrators on 16th

March,  1985.   The arbitrators by their  award dated 27th October,

1985 accepted the claim of the contractor and passed an award for

Rs.74,810.38 in favour of the contractor.

3

6.  VPT  challenged  the  award  by  filing  petition  (O.P.No.

10/1986)  under  Sections 30 and 33  of  the Act,  1940,  inter  alia

raising  the  objection  that  the  claim  of  the  contractor  was  time

barred.   The  Court  of  the  Principal  Subordinate  Judge,

Visakhapatnam  vide  his  judgment  dated  16th February,  1994

allowed  OP No. 10/1986; set aside the award of the arbitrators and

held that the claim of the contractor was barred by limitation.     

7. The  contractor  challenged  the  judgment  of  the  Principal

Subordinate Judge, Visakhapatanam  dated 16th February, 1994  by

filing  an appeal  before the  High Court which was registered  as

CMA No. 1559/1994.   The High Court upturned the judgment of the

Principal  Subordinate  Judge,  Visakhapatnam  and  held  that  the

claim of the contractor for Rs. 74,810.38  was  within limitation.

8.    The other   appeal  being CMA No. 77/1995 before the High

Court arose out of C-3 contract for execution of  marine works and

break waters at the outer harbour at Lova Garden, Visakhapatnam .

The  dispute  seems  to  have  arisen  between   VPT   and  the

contractor  on  3rd February,  1975  in  respect  of  the  charges  for

power driven survey boat used by the  contractor.   The dispute was

referred  to the  consulting engineers who opined vide their report

dated 3rd May, 1975 that it was the responsibility of the contractor to

4

provide  the   survey  vessel  and  consequently,   the  contractor’s

claim in this regard was untenable.   The contractor then on 15th

May, 1975 appointed Shri G.N. Bajpai  as its arbitrator and called

upon VPT to appoint its arbitrator.   VPT  appointed one Mr.  T.V.

Rajaram as its arbitrator  and the arbitrators in turn   appointed  Mr.

A.W. De’Lima as Umpire.  The arbitrators, however, could not enter

upon the reference.  The contractor, accordingly, approached  the

Principal Subordinate Judge, Visakhapatnam for the appointment of

arbitrators by invoking  Sections  8, 9 and 20 of the  Act,  1940.

The Principal Subordinate Judge, Visakhapatnam treated that suit

under Section 8  of  the Act,  1940 and  vide its  order dated 10th

September  1984  allowed  the  suit  filed  by  the  contractor  and

directed  each  party  to  appoint  its  arbitrators   within  15  days

therefrom.  Each party, accordingly, appointed its arbitrator and the

appointed  arbitrators  entered  upon  reference.    On  14th March,

1985,  the contractor filed claim in the sum of Rs. 8,49,000/-  with

interest and cost pertaining to the charges for  power driven survey

boat.  

9.      The arbitrators passed the award on 20th November, 1985

allowing the claim of the contractor for Rs. 6,44,500/- but no interest

or cost were allowed.   

5

10.   VPT challenged the award  dated 20th November, 1985 in the

Court  of   Subordinate  Judge,  Visakhapatnam  by  filing  petition

numbered as OP No. 164/1986.   The award was mainly opposed

by VPT on the ground of limitation and that  the award was non-

reasoned.  

11.  The sub-ordinate Judge, Visakhapatnam  allowed the petition

vide its order dated 16th February, 1994 and set aside the award

holding that the claim was barred by limitation.  

12. The contractor, then carried the matter to the High Court by

filing CMA No.  77/1995.   The said appeal has been allowed by

the High Court  vide its judgment dated  26th April, 2002.  

13. As noticed above, it is from the common judgment dated 26th

April,  2002  disposing  of   CMA  No.  1559/1994  and   CMA  No.

77/1995 that these two appeals arise.  

14. We  shall  first  deal   with  the  contractor’s  claim  of

Rs.74,810.38.  The only issue that falls for our consideration with

regard to  this claim is whether it is barred by limitation.

15. Section 37 of the Arbitration Act, 1940 and Article 137 of the

Limitation Act,  1963 are relevant for the purpose.

The Arbitration Act, 1940;

6

“37.  Limitations. –  (1)  All   the  provisions  of  the  Indian Limitation Act, 1908 (9 of 1908), shall apply to arbitrations as they apply to proceedings in Court.

(2) Notwithstanding any term in an arbitration agreement to the effect  that  no cause of  action accrue in respect  of  any matter  required  by  the  agreement  to  be  referred  until  an award is made under the agreement, a cause of action shall, for the purpose of limitation, be deemed to have accrued in respect of any such matter  at the time when it  would have accrued but for that term in the agreement.

(3)  For  the  purposes  of  this  section  and  of  the  Indian Limitation  Act,  1908  (9  of  1908),  an  arbitration  shall  be deemed to be commenced when one party to the arbitration agreement  serves  on  the  other   parties  thereto  a  notice requiring  the   appointment  of  an  arbitrator,  or  where  the arbitration agreement provides that the reference shall be to a person named or  designated in the agreement, requiring that the  difference  be  submitted  to  the  person  so  named  or designated.

(4)  Where  the  terms  of  an  agreement  to  refer  further differences to arbitration provide that any claims to which the agreement applies shall be barred unless  notice to appoint an arbitrator  is given or an arbitrator is  appointed or some other  step  to  commence  arbitration  proceedings  is  taken within a time fixed by the agreement, and a difference arises to which the agreement applies, the Court  if it  is of opinion that in the circumstances of  the case undue hardship would otherwise be caused, and notwithstanding  that the time so fixed has expired, may on such terms, if any, as the justice of the case may require,  extend the time for such period as it thinks proper.

(5) Where  the Court  orders  that  an award be set  aside or orders,  after  the  commencement  of  an  arbitration,  that  the arbitration agreement shall cease to have effect with respect to  the  difference  referred,  the  period  between  the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed

7

by  the  Indian  Limitation  Act,  1908  (9  of  1908)   for  the commencement of the proceedings (including arbitration) with respect to the difference  referred.”

The Limitation Act, 1963 ;

“ 137.  Any other application        three years        When the             for which no period of                              right to apply             limitation is provided       accrues.”             elsewhere in this division.

16. It is apparent from the  bare reading of Section 37 that the law

of limitation is applicable to the proceedings before the arbitrators

as it applies to proceedings before the Courts.   Under Sub-section

(3), arbitration proceedings are to be deemed to have commenced

when notice is served by one party upon the other – (i) requiring

him to appoint an arbitrator,  or (ii)  if the arbitrator  was named or

designated in the  arbitration agreement, requiring him to submit the

difference to arbitrator named or designated.

17. In the  backdrop  of aforesaid legal position, let us now turn to

the  facts.   On  8th August,  1974,  VPT  recovered  an  amount  of

Rs.74,810.38  being the cost of 500 jack rods from running bill no.

21  tendered by the contractor. The dispute  with regard to  claim of

Rs. 74,810.38, thus, arose on that date.  The contractor ought to

8

have given notice calling upon VPT to appoint arbitrator within three

years therefrom or apply to the  Court  within  this time.   However,

it was after ten years on 22nd September, 1984  that  the contractor

appointed  its  arbitrator  and  called  upon   VPT   to  appoint  its

arbitrator.   Significantly,  VPT  had  already  made  a  claim  of  Rs.

9,65,155/- against the contractor for  withdrawal and return of jack

rods  and  the dispute was referred to arbitration  at the instance of

VPT in the year 1976.    Although the contractor contested the said

claim of VPT before the arbitrators  but curiously  no  counter claim

for Rs. 74,810.38 was made in those proceedings. It is true  that

arbitrators rejected the claim of VPT on 23rd March, 1980 and the

petition  before  the  Civil  Judge,  Visakhapatnam also came to  be

dismissed on 10th September, 1984 but that does not improve the

case of the contractor  in so far as limitation is concerned as the

limitation began to run from 8th August, 1974.  It was too late on 22nd

September,  1984   for  the  contractor  to  agitate  the  claim  of

Rs.74,810.38 for which the cause of action accrued on 8th August,

1974.  The contractor ought to have made counter claim before the

arbitrators  in  the  year  1976  itself  when  VPT  made  a  claim  of

9,65,155/- for withdrawal  of jack rods.  In any view of the matter,

the claim of Rs. 74,810.38 raised for the first time after 10 years of

9

accrual  of cause of  action is apparently barred by time and rightly

rejected  by  Principal  Subordinate  Judge,  Visakhapatnam  vide

judgment  dated 16th February, 1994.  

18.   As a matter of fact, Mr. S.B. Upadhyay, Senior Counsel  for

the respondent  could not show  that claim for Rs. 74,810.38  was

within time.

19. As noticed above, CMA No. 77/1995  before the High Court

related to non-payment of the  charges of the power driven survey

boat used by the contractor.  Admittedly, the dispute in this regard

arose between the parties on 3rd February, 1975  and the matter

was referred to the consulting engineers.  The consulting engineers

rejected the claim of the contractor on 3rd May, 1975  holding that it

was the responsibility  of  the contractor  to  provide survey vessel.

The contractor on 15th May, 1975  appointed  its arbitrator and gave

notice to VPT requiring them to appoint their arbitrator.  VPT also

appointed its arbitrator but  the arbitrators could not enter upon the

reference.  It  was  in  the  year  1979,   then  that  the  contractor

approached  the Principal  Subordinate Judge,  Visakhapatnam by

filing suit  under the Arbitration Act,  1940 which was allowed vide

order dated 10th September, 1984 directing each party to appoint its

10

arbitrator  within  15  days.      In  compliance  thereof,  the  parties

appointed their arbitrators and on 16th March,1985  the contractor

filed its statement of claim for payment of hire charges for  power

driven survey boat.   

20. Sub-Section (3)  of Section 37  of the Act, 1940,   inter alia,

provides that   an arbitration  shall  be deemed to  be commenced

when one party to the arbitration agreement  serves on the other

party  thereto a notice requiring the appointment of an arbitrator.

The core controversy is:    in the facts  and circumstances of  the

case, when the arbitration can be said to have commenced.

21. In  what we have already  noticed above,  the dispute   with

regard to  charges for  the power driven survey boat  arose on 3rd

February, 1975 and after the claim  was rejected by the consulting

engineers on 3rd May, 1975,  the contractor appointed the arbitrator

on 15th May, 1975 and asked  VPT to appoint its  arbitrator.    In

other words on 15th May, 1975,   the  contractor served on  VPT    a

notice  requiring  them  to  appoint  their   arbitrator  under  the

agreement.   Thus  under  Section  37(3),  the  arbitration  shall  be

deemed to have commenced on 15th May,1975 i.e. well within time

and the High Court rightly rejected the objection of VPT that  the

11

claim with regard to  charges for the survey vessel was time barred.

Merely because, the arbitrators could not enter upon reference and

the contractor had to approach the Court in the year, 1979 by filing

suit  which  was  allowed  on  10th September,  1984  and  new

arbitrators were  appointed by the parties and statement of claim

was filed by the contractor  on 14th March, 1985,  that  would not

render the contractor’s  claim  time barred.

22. Mr.  Kailash  Vasudev,  Senior   Counsel  contended  that  the

non-reasoned  award  is  bad  in  law.   In  this  connection,  learned

Senior  Counsel   referred   to  Section  17 of  the  Act,  1940 which

came to be amended  by insertion of proviso vide  Andhra  Pradesh

Act (1 of 1990).   

23. Section 17 of the Act, 1940 reads thus ;

“17. Judgment in terms of award. – Where the Court sees -- no cause to remit the award or  any of the matters referred to arbitration for reconsideration or to set aside the award, the Court  shall,  after  the time for making an application to set aside the award has expired, or such application having been made,  after  refusing  it,  proceed  to  pronounce  judgment according  to  the  award,  and  upon  the  judgment  so pronounced  a decree shall  follow and  no appeal  shall  lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.”

12

24. Vide Andhra Pradesh Act ( 1 of 1990),  the following proviso

have been inserted to Section 17;

“Provided that  where as award pending in the Court at the commencement  of  the  Arbitration  (Andhra  Pradesh Amendment)  Act,  1990  or  an  award  filed  in  the  Court, thereafter does not contain reasons therefore as required by the proviso to sub-section (1) of Section 14 the  Court shall not  proceed  to  pronounce  the  judgment  according  to  the award,  but  shall   remit  the  award  to  the  arbitrators  or  the umpire for giving reasons therefore as required by the said proviso and thereupon the arbitrators or umpire shall, within thirty days from the date of remittance of the award to them by the Court give reasons for the award and file the same in the Court:

Provided  Further  that on the application of the arbitrators or the  umpire and for reasons to be recorded in writing, it shall be competent for the Court, to extend the period of thirty days aforesaid for a further period not exceeding fifteen days:

Provided also  that where an award pending in the court as aforesaid  does  not  contain  any  reasons  and  there  is  no possibility  to  remit  the  award  to  the  arbitrator  or  panel  of arbitrators  or  umpire  due  to  their  incapacity,  negligence, refusal to act or death, the Court  shall  set aside the award and direct the parties to initiate fresh arbitration in accordance with the terms of the agreement.”

25. Firstly, amendment in Section 17 vide Andhra Pradesh Act (1

of 1990)  is not attracted in the present fact situation as the award

was passed by the  arbitrators on 20th November, 1985 i.e. much

before the amendment.  As per Section 17 then obtaining, it  was

not imperative for the arbitrators to give reasons in support of the

13

award.   Secondly,  upon  the  award  dated  20th November,  1985

being  challenged  by  VPT  before  Principal  Sub-ordinate  Judge,

Visakhapatnam,  the Principal Sub-ordinate Judge, Visakhapatnam,

directed the arbitrators to  give reasons for the award in the light of

the amendment aforenoticed.

26. Consequently,  the arbitrators gave the following reasons:

“Having gone through the various provisions in the contract documents  which  have  a  bearing  on  the  dispute  between  the parties  and  after  applying  correct  and  proper  interpretation  for adjudication of  the said dispute,  we find  that  the Visakhapatnam Port trust, the Respondents in this case, were under a Contractual obligation to make available a Survey Boat for use on these works and that, although the survey boat was available  with  them, they failed  totally  to  fulfil  that  contractual  obligation  necessitating  the claimants to obtain a boat from their own resources and deploy the same on the works throughout the construction period.  We find that after allowing some adjustments found necessary on perusal of the contract  and after  having considered the written as also the oral submissions made to us by the parties, the claimants are entitled to be paid by the Respondent  the sum as determined by us in our award.”

27. Although this exercise was  unnecessary but the fact of the

matter is,  that subsequently the arbitrators did give their reasons.

Reasonableness of  the reasons  given by  arbitrators  cannot   be

gone into by the Court.   This objection of the Senior Counsel is,

accordingly, overruled.  

14

28. For the foregoing reasons, we  dispose of these appeals as

follows:-

(1) The judgment of the High Court  of Judicature of

Andhra Pradesh  in  CMA No.  1559/1994   is  set

aside.   The claim of M/s Continental Construction

Company  for  Rs.  74,810.38  stands  dismissed.

The amount of Rs. 74,810.38 deposited with the

executing  Court   by  Visakhapatnam  Port  Trust

pursuant  to  the   order   dated  27th September,

2004  of  this  Court  shall  be   refunded  to  them

alongwith  interest  accrued  thereon.

(2) The  judgment  of  the  High  Court  in  CMA  No.

77/1995 is affirmed. The amount of Rs. 6,44,500/-

deposited by   Visakhapatnam Port Trust with the

executing Court pursuant to the order of this Court

dated 27th September,  2004 shall be paid  to M/s

Continental  Construction  Company   alongwith

interest accrued thereon.  

(3) The parties  shall bear their own costs.

…………………………..J.

15

(MARKANDEY KATJU)

...…………………………J. (R.M. LODHA)

New Delhi February 20, 2009.

16