# J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING

- **Citation:** [2008] 1 S.C.R. 821
- **Court:** Supreme Court of India
- **Decided:** 2008-01-18
- **Case number:** Civil Revision No. 109of1998
- **Bench:** H.K. Sema, G.P. Mathur, R.V. Raveendran
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j-c-budhraja-v-chairman-orissa-mining-24186
- **Pages:** 33

## Headnote

~
i
Contract - Work contract - On completion, contractor
claiming extra payment for the work done beyond the contract
- Payment for the work under contract received under protest c
- Constitution of Committee for consideration of extra payment
- Statement quantifying the claim, produced before the
Committee - Committee accepting the same only in part -
Contractor issuing notice invoking arbitration - Legal heir of
the contractor, making a claim before the arbitrafor, different D
from the claim made before the Committee -Arbitrator passing
---1
the award for an amount over and above the claimed amount
- Propriety of- Held: Award in respect of the amount over and
above the claim made before the Committee was barred by
limitation -Limitation period in respect the pending claims
E
which were made before the Committee having been
acknowledged stood extended - It is not permissible for a legal
heir to make fresh claim before an arbitrator, which was not
made by his predecessor in interest - Arbitrator committed
error on the face of the record and a legal misconduct in
--+
holding that entire claim was within time - Arbitrator also F
exceeded his jurisdiction in passing award for an amount more
than what was claimed- Arbitration Act, 1940 -: s. 8(2) -
Limitation Act, 1963 -s. 18
Predecessor in interest of the appellant entered into
G
contract with the respondent for removal of over-burden
--r
by excavation. After completion of the work by the
contractor, respondent prepared final bill which was
further revised in March-April, 1977 amounting to Rs. 1,
49, 190, 76-74. The contractor accepted the amount under
821
H
822
SUPREME COURT REPORTS
[2008) 1 S.C.R.
A protest. Contractor claimed that he executed additional
work beyond that provided in the contract and thus
claimed extra payment for the same. He made several
representations in this regard. As a result, by a letter dated
28.10.1978, respondent informed that a Committee would
B be constituted to consider the claim. By letter dated
16.11.1978, contractor sent a statement quantifying the
claims in respect of the contract in question amounting
to Rs. 50, 15,820/-. Committee prepared its final report
t
dated 28.10.1979. The Committee admitted the claim only
c to an extent of Rs. 3,50,000/- and rest of the claim was not
accepted. Information to this effect was given by the
respondent to the contractor by a letter dated 4.3.1980.
Contractor sent a notice dated 4.6.1980 invoking
arbitration in respect of the pending claims. In the
D meantime he also moved application u/s 8 (2) of Arbitration
Act, 1940. During the pendency of the application the
appellant was substituted as legal heir of the original
~-
contractor. In the meantime, after amendment of the
Arbitration Act, State Government formed Special Arbtiral
E Tribunal to settle the disputes. The appellant filed a claim
statement before the arbitrator, the nature and quantum
whereof was different from what was claimed before the
Committee. Appellant, abandoned the claim to an extent
of Rs. 21,83, 692/- out of the previous claim of Rs.
50, 15,820/- and made further new claim. The whole claim
F was totaling to Rs. 95,96,616/-. During the proceedings,
-+ •
appellant contended that out of Rs. 149,88,566.90 received
from the respondent and taken into credit towards the
contract in question, a sum of Rs. 29,86,871/- was
appropriated towards other contracts and therefore the
G amount paid should be considered as Rs. 120,01,695-99.
The arbitrator passed the award for an amount more than
i--
the amount claimed i.e. increasing the liability of the
respondent by Rs. 29,86,871/- with interest @ 12% per
annum. The award was for claims in respect of work under
H the contract, the•work which waS"llot part of the contract
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
823
CORPN. LTD. & ANR.
i
and in respect of escalation in cost of labour and material A
on account of delay in execution. Appellant filed suit for
making the award rule of the court. Respondent

## Text

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I
[2008] 1 S.C.R. 821
~
J.C. BUDHRAJA
A
'
II.
CHAIRMAN, ORISSA MINING CORPN. LTD. & ANR.
(C.A. Nos. 1971-1973 of 2000)
JANUARY 18, 2008
B
[H.K. SEMA, G.P. MATHUR & R.V. RAVEENDRAN, JJ.]
~
i
Contract - Work contract - On completion, contractor
claiming extra payment for the work done beyond the contract
- Payment for the work under contract received under protest c
- Constitution of Committee for consideration of extra payment
- Statement quantifying the claim, produced before the
Committee - Committee accepting the same only in part -
Contractor issuing notice invoking arbitration - Legal heir of
the contractor, making a claim before the arbitrafor, different D
from the claim made before the Committee -Arbitrator passing
---1
the award for an amount over and above the claimed amount
- Propriety of- Held: Award in respect of the amount over and
above the claim made before the Committee was barred by
limitation -Limitation period in respect the pending claims
E
which were made before the Committee having been
acknowledged stood extended - It is not permissible for a legal
heir to make fresh claim before an arbitrator, which was not
made by his predecessor in interest - Arbitrator committed
error on the face of the record and a legal misconduct in
--+
holding that entire claim was within time - Arbitrator also F
exceeded his jurisdiction in passing award for an amount more
than what was claimed- Arbitration Act, 1940 -: s. 8(2) -
Limitation Act, 1963 -s. 18
Predecessor in interest of the appellant entered into
G
contract with the respondent for removal of over-burden
--r
by excavation. After completion of the work by the
contractor, respondent prepared final bill which was
further revised in March-April, 1977 amounting to Rs. 1,
49, 190, 76-74. The contractor accepted the amount under
821
H
822
SUPREME COURT REPORTS
[2008) 1 S.C.R.
A protest. Contractor claimed that he executed additional
work beyond that provided in the contract and thus
claimed extra payment for the same. He made several
representations in this regard. As a result, by a letter dated
28.10.1978, respondent informed that a Committee would
B be constituted to consider the claim. By letter dated
16.11.1978, contractor sent a statement quantifying the
claims in respect of the contract in question amounting
to Rs. 50, 15,820/-. Committee prepared its final report
t
dated 28.10.1979. The Committee admitted the claim only
c to an extent of Rs. 3,50,000/- and rest of the claim was not
accepted. Information to this effect was given by the
respondent to the contractor by a letter dated 4.3.1980.
Contractor sent a notice dated 4.6.1980 invoking
arbitration in respect of the pending claims. In the
D meantime he also moved application u/s 8 (2) of Arbitration
Act, 1940. During the pendency of the application the
appellant was substituted as legal heir of the original
~-
contractor. In the meantime, after amendment of the
Arbitration Act, State Government formed Special Arbtiral
E Tribunal to settle the disputes. The appellant filed a claim
statement before the arbitrator, the nature and quantum
whereof was different from what was claimed before the
Committee. Appellant, abandoned the claim to an extent
of Rs. 21,83, 692/- out of the previous claim of Rs.
50, 15,820/- and made further new claim. The whole claim
F was totaling to Rs. 95,96,616/-. During the proceedings,
-+ •
appellant contended that out of Rs. 149,88,566.90 received
from the respondent and taken into credit towards the
contract in question, a sum of Rs. 29,86,871/- was
appropriated towards other contracts and therefore the
G amount paid should be considered as Rs. 120,01,695-99.
The arbitrator passed the award for an amount more than
i--
the amount claimed i.e. increasing the liability of the
respondent by Rs. 29,86,871/- with interest @ 12% per
annum. The award was for claims in respect of work under
H the contract, the•work which waS"llot part of the contract
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
823
CORPN. LTD. & ANR.
i
and in respect of escalation in cost of labour and material A
on account of delay in execution. Appellant filed suit for
making the award rule of the court. Respondent objected
to it. The court made the award rule of the court.
Respondent filed appeal against the order. Appellant also
challenged the order claiming future interest from. the date B
of the decree. High Court allowed the appeal of the
~
·respondent and dismiss~d the case of the appellant.
.+
In appeal to this court the questions for
consideration were (1) whether the claim made before the
arbitrator or any part thereof was barred by limitation; C
(2) Whether the award was liable to be set aside on the
ground of legal misconduct and the error apparent on
the face of the award; (3) whether the arbitrator
exceeded his jurisdiction; and (4) to what relief the
parties were entitled.
D
Partly allowing the appeals, the court
HELD: 1.1Section18 of the Limitation Act, 1963 deals
with effect of acknowledgement in writing. Sub-section
(1) thereof provides that where, before the expiration of E
the prescribed period for a suit or application in ·respect
of any right, an acknowledgement of liability in respect of
such right has been made in writing signed by the party
against whom such right is claimed, a fresh period of
limitation shall be computed from the time when the F
· acknowledgement was so signed. The explanation to the
section provides that an acknowledge.ment may be
sufficient though it omits to specify the exact nature of
the right or avers that the time for payment has. not yet
come or is accompanied by a refusal to pay, or is coupled G
with a claim to set off, or is addressed to a person other
than a person entitled to the right. [Para 14] [841-D-G]
Shapur Fredoom Mazda v. Durga Prosad Chamaria AIR
1961 SC 1236 - referred to.
H
824
SUPREME COURT REPORTS
[2008] 1 S.C.R.
A
1.2 A writing to be an acknowledgement of liability
must involve an admission of a subsisting jural
relationship between the parties and a conscious
affirmation of an intention of continuing such relationship
in regard to an existing liability. The admission need not
B be in regard to any precise amount nor by expressed
words. A writing, to be treated as an acknowledgement of
liability should consciously admit his liability to pay or
'
admit his intention to pay the debt. [Para 15] [843-A-C]
t
c
1.3 What can be acknowledged is a present
subsisting liability. An acknowledgment made with
reference to a liability, cannot extend limitation for a time
barred liability or a claim that was not made at the time of
acknowledgment or some other liability relating to other
transactions. Any admission of jural relationship in regard
D to the ascertained sum due or a pending claim, cannot be
an acknowledgement for a new additional claim for
.,__
damages. [Para 15] [844-8-D)
1.4 In the instant case, the cause of action accrued
E when the final bill was signed by the contractor. The
respondent informed the contractor that it has been
decided to constitute a Committee which will go into the
claims of the contractor so that the dues, if any, could be
ascertained. It further stated that on the details of the
F
claims and payments received being given to the
contractor, the respondent will settle up the pending
-+ •
matters at the earliest. This clearly showed an intention
on the part of the respondent to admit the jural relationship
of contractor and employer and an intention to settle the
pending claims after being satisfied about them.
G Therefore, the letter dated 28.10.1978 was clearly an
acknowledgement in writing in so far as the "pending
f- -
claims" of the contractor. What were the pending claims
is made clear in the letter dated 16.11.1978 written by the
contractor enclosing a statement showing that in all, a
H sum of Rs.50, 15,820/-was due. The Committee constituted
i
+
--t
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
825
CORPN. LTD. & ANR.
by the respondent examined these claims and admitted A
the claims only to an extent of Rs.3,52,916/- as per its final
report dated 7.12.1979. The respondent paid Rs.3,50,000/
- on 4.3.1980. In view of the acknowledgement in writing
on 28.10.1978 and payment of Rs.3,50,000/- on 4.3.1980,
it can be said that in regard to the pending claims of the s
contractor, the limitation stood extended by three years
from 4.3.1980 and at all events by three years from
28.10.1978. The contractor issued the notice invoking
arbitration on 4.6.1980 and immediately filed a petition
under section 8(2) of the Act for appointment of Arbitrator C
which was allowed on 6.10.1980. Therefore, whatever
claims were made before the Arbitrator which was part of
the claim of Rs.50, 15,820, was within time, having been
made within three years from 28.10.1978 and
4.6.1980.(Para 16] (844-D-H; 845-A-E]
1.5 In regard to the claims aggregating to
Rs.95,96,~16/- made in the claim statement filed before the
Arbitrator, only claims aggregating to Rs.28,32, 138 related
D
to and formed part of the said pending claim of
Rs.50, 15,820. The appellant did not make a claim in regard E
to the remaining Rs.21,83,692. Therefore, out of the claim
of Rs.95,96,616 made by the appellant before the
Arbitrator, the claim for only Rs.28,32, 138/- was not barred
by limitation. The remaining claims of the appellant
aggregating to Rs.67,64,488/- out of the total of F
Rs.95,96,616/- being fresh claims, were not "pending
claims" in respect of which the acknowledgement was
made. Therefore the said fresh claims aggregating to
Rs.67,64,488 made for the first time in the claims statement
filed on 27.6.1986 were clearly barred by limitation.
[Para 17] [845-E, F, G]
G
1.6 In the case of arbitration, limitation for the claim
!s to be calculated on the date on which the arbitration is
dE:emed to have commenced. Section 37(3) of the
Arbitration Act provides that for the purpose of Limitation H
826
SUPREME COURT REPORTS
[2008] 1 S.C.R.
A Act, an arbitration is deemed to have been commenced
~
when one party to the arbitration agreement serves on
the other party thereto, a notice requiring the appointment'
of an arbitrator. Such a notice having been served on
4.6.1980, it has to be seen whether the claims were in time
B as on that date. If the claims were barred on 4.6.1980, it
follows that the claims had to be rejected by the arbitrator
on the ground that the claims were barred by limitation.
....
The said period has nothing to do with the period of
~
limitation for filing a petition under Section 8(2) of the Act.
c Insofar as a petition under Section 8(2), the cause of
action would arise when the other party fails to comply
with the notice invoking arbitration. Therefore, the period
of limitation for filing a petition under section 8(2) seeking
appointment of an arbitrator cannot be confused with the
D period of limitation for making a claim.[Para-18) [846-B-F]
lnder Singh Rekhi vs. Delhi Development Authority -
)>----
1988 (2) SCC 338; Panchu Gopal Bose vs. Board of Trustees
for Port of Calcutta - 1993 (4) SCC 338; Utkal Commercial
Corporation vs. Central Coal Fields 1999 (2)·scc 571 - relied
E on.
1.7 The contractor was the predecessor in interest
of the appellant. The original claim (which was the subject
matter of letter dated 28.10.1978, subjected to examination
F by the Committee as per report dated 7.12.1979, and
+ ~
towards which Rs.3,50,000/- was paid) made by the
contractor aggregated to Rs.50, 15,820. The Appellant who
is his legal heir cannot for the first time make a fresh claim
before the Arbitrator, which was never made by the
G contractor. The Appellant could only pursue the claim
made by the contractor which were pending or subsisting
when the contractor issued the notice dated 4.6.1980.
t--
[Para 20) [847-C, D, E]
2. The arbitrator committed an error apparent on the
H face of the record and a legal misconduct in holding that
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
827
CORPN. LTD. & ANR.
the entire claim was within time. His assumption that if A
the application filed by the contractor in 1980 under
section 8(2) of Arbitration Act for appointment of an
Arbitrator was in time, all claims made in the claim
statement filed before the Arbitrator appointed in such
proceeding under section 8(2) are also in time, is patently B
erroneous and is an error apparent on the face of the
record. The reasoning of the arbitrator that on account of
+
the formation of the Committee by the respondent to
scrutinize the pending claims in pursuance of the
respondent's letter dated 28.10.1978, and the payment of c
Rs.3,50,000/- on 4.3.1980 in pursuance of the Committee
giving its final report on 7.12.1979, every claim of the
contract including new claims which were made for the
first time in the.claim statement filed in 1986 (as contrasted
with 'pending claims' considered by the respondent), are D
~-~
not barred by limitation, is also an error apparent in the
face of the award. [Para 21] [847-F, G; 848-A]
3.1 The prayer before the arbitrator in the claim
statement was for the award of Rs.95,96,616 in regard to
the work done after giving credit of Rs.1,49,88,566.90. The E
categorical stand of the contractor and the appellant all
along has been that the respondent had paid in all a sum
of Rs.149,88,566.90. But during the course of the
~+
arbitration proceedings, the appellant contended that out
of Rs.149,88,566.90 received from the respondent and F
taken into credit towards this contract, a sum of
Rs.29,86,871/- was being appropriated towards other
contracts and therefore the 'payments made by the
respondent towards this contract should be taken as
Rs.120,01,695.90. The arbitrator has mechanically G
-+
accepted the said altered stand contrary to the claim
statement and proceeded to determine the amount
payable by OMC, by taking the amount paid by the
respondent as Rs.120,01,659.90 towards this contract,
even though the claim statement showing that the H
828
SUPREME COURT REPORTS
[2008] 1 S.C.R.
A respondent had paid Rs.149,88,566.90 remained
unaltered. The claim statement was not amended to show
that only Rs.120,01,659.90 had been received from the
respondent regard to the contract. When the claim made
in the claim statement is after adjusting Rs.149,88,566.90
B paid by the respondent towards the work, the arbitrator
cannot proceed on the basis that only Rs.120,01,659.90
was paid towards the work. By awarding more than what
was claimed in the claim statement (by showing a lesser
amount as having been paid by the respondent though
c claim statement showed a higher amount), the Arbitrator
clearly exceeded his jurisdiction. The Arbitrator thus
committed a legal misconduct and the award to that extent
is liable to be set aside. [Para 22] [848-G; 849-A-F]
3.2 The Arbitrator has exceeded his jurisdiction in
D another respect. The total claim made by the contractor
before the Arbitration was Rs.95,96,616/- (excluding
interest). But the amount awarded by the arbitrator
towards the said claim was Rs.1,02,66,901/36 (excluding
interest). Making an award in excess of the claim itself by
E Rs.6,70,285 is a clear act of exceeding the jurisdiction and
amounts to a legal misconduct and to that extent of
Rs.6,70,285/- the award is invalid. [Para 23] [849-G, H;
850-A]
F
3.3 In regard to item 35, that is escalation in cost, the
claim in the claim statement was at the rate of 15% for the
value of work done in 1972-73, 28.5% in respect of value
of work done in 1973-7 4 and 32% in respect of work done
in 1974-75. But the Arbitrator has awarded escalation at a
flat rate of 32.6% on the entire cost of work done from
G 1.4.1973 and thereby awarded an escalation in excess of
what was claimed. This also amounts to exceeding the
jurisdiction and therefore legal misconduct. The award in
excess of what was claimed was invalid. [Para 24]
H [850-A-C]
+--
·,
+
• t
' I --t
~
JC. BUDHRAJA v. CHAIRMAN, ORISSA MINING
829
CORPN. LTD. & ANR.
4.1 Awarding amount towards time barred part of the A
claim of Rs.67 ,64,488, and awarding amounts of
Rs.29,86,871, Rs.670,285 and escalation in cost at a rate
more than what is claimed, are all legal misconducts and
the award in regard to those amounts are null and void.
There is however some overlapping of the aforesaid B
amounts. [Para 25) [850-D,E]
4.2 That part of the award which is valid and separable
can be upheld. That part relates to the claims which were
validly before the Arbitrator, which were part of the existing
or pending claims of Rs.50,15,820 and which were not C
barred by limitation. They were the claims which were
existing or pending in 1978, 1979 and 1980 (considered
by the committee and payment made by the respondent
which were carried before the Arbitrator to an extent of
Rs.28,32,128; Only the amounts awarded by the Arbitrator o
against those claims can be considered as award validly
made in Arbitration, falling within jurisdiction. They are
clearly severable from the other portions of the award.
The total amount awarded by the Arbitrator against claims
which were not barred by limitation was only E
Rs.13,93,373.50. The award to this extent is not open to
challenge. This part of the award does not suffer from any
legal misconduct. There is also no error apparent on the
face of the award in respect of the amount. The scope of
interference with an award is limited. The Award of the
Arbitrator has to be upheld to an extent of Rs.13,93,373.50
F
with interest at the rate of 12% P.A. from 1.8.1977 to date
of award (28.11.1986) and at the rate of 6% P.A. thereafter,
that is from 29.11.1986 till date of payment. [Paras 26, 27
and 28) [850-E, F, G; 852-8, C, G, H; 853-A]
Hindustan Construction Co. Ltd. vs. Governor of Orissa
1995 (3) SCC 8; Hindustan Tea Co. vs. Mis K. Sashikant and
Co. 1986 (Supp.) sec 506 - relied on.
CIVIL APPELLATE JURISDICTION
Civil Appeal
G
Nos.1971-1973 of 2000.
H
830
SUPREME COURT REPORTS
[2008] 1 S.C.R.
A
From the final Judgment and Order dated 15.10.1999 of
-tthe High Court of Orissa at Cuttack in Misc. Appeal Nos. 296 &
198 of 1998 and Civil Revision No. 109of1998.
A.K. Panda and T.S. Doabia, Rutwik Panda and Mridul
B Aggarwal for the Appellant.
C.S. Vaidyanathan, K.V. Viswanathan, Rajeev Singh and
Anup Kumar Singh for the Respondents.
._
+
The Judgment of the Court was delivered by
c
RAVEENDRAN, J. 1. These appeals are filed against
the common judgment dated 15.10.1999 passed by the High
Court of Orissa in Misc. Appeal No.296/1998 filed by the
respondents and Misc. Appeal No.198/1998 and Civil Revision
No.109/1998 filed by the appellant.
D
2. The appellant is stated to be legal heir and successor
-
in interest of N.C. Budhraja (hereinafter referred to as the
~ ,,
contractor). M/s. Orissa Mining Corporation Ltd. (for short OMC
or respondent) entered into an agreement dated 16.9.1967
E
(Agreement No.30/F-2) for removal of over-burden at Kaliapani
(Cuttack District) by excavation in all kinds of soil (including
stoney earth and gravel mixed with boulders), and depositing/
disposing of the same, as directed. The maximum lift was 6m
including initial lift of one metre. The order to commence work
was issued on 23.9.1967. Parties also entered into three
+ ~
F supplementary agreements in regard to the said contract No.30/
F-2, on 2.8.1969, 7.3.1970 and 10.2.1972. [Note: OMC had
also entered into other contracts with the contractor including
contract dated 22.2.1968 (Contract No.2/F/2) for raising Chrome
Ore by open excavation from the said mining area. We are not
G concerned with those contracts in these appeals].
i--
3. The main agreement enumerated two items of work
•
in its schedule. The first, second, and third supplementary
agreements enumerated respectively eight items, one item
H and four items in their respective schedules. The work was
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
831
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
.:i·
completed by the contractor on 15.6.1975. The final bill in A
respect of the work was prepared by OMC on 21.10.1976. It
was revised in March-April 1977 by OMC. The final Bill It
showed the total value of the work done (under several items
in the schedule to main and three supplementary agreements)
as Rs.1,49, 190, 76. 7 4. The contractor countersigned the B
•
said bill on 14.4.1977 under protest, but, however, certified
and confirmed that the measurements shown therein were
-t
correct.
4. According to the contractor, having regard to the zig- c
zag route by which the over burden had to be carried, the actual
lead was much longer and actual lift was much higher than what
were stipulated in the agreement. He contended that the amounts
shown as due for the work done was as per contract rates which
was for removing overburden to the extent of lift and lead
D
provided in the contract schedules; and at several places, he
... ~
had to cut and remove the over-burden beyond the extent of lift
and lead provided in the contract, and he should be paid for
such extra leads and lifts. He claimed to have executed certain
additional works not provided in the contract schedules, on the
E
directions of OMC. He therefore represented that the matter
may be examined and enquired into for determination of proper
amounts due. In view of the several representations made by
th.e contractor in respect of the contract no.30/F-2 as also other
.... +
contracts, OMC sent the following letter dated 28.10.1978 to
F
the contractor:-
"Re : Settlement of pending claims.
You had called on Chairman, OMC, recently and apprised
him of the dues receivable by you in respect of certain
long pending matters such as mine benches work and G
--t
raising at Kaliapani Quarry-I. In the matter of Kaliapani it
has been decided to constitute a committee which will go
separately into your claims and other facts, in which
connection you are requested to give all possible help
H
832
SUPREME COURT REPORTS
[2008] 1 S.C.R.
A
and assistance, so that your dues, if any, will be
+--
ascertainable.
In regard to other pending matters, you had indicated
yourself that you will give the details of claims and payment
B
received by you. This may be given within a day or two so
as to enable OMC to settle up the above at the earliest."
5. The contractor sent a reply dated 16.11.1978
..
enclosing therewith a statement quantifying his claims relating
tto contract no. 30F-2 (subject matter of these appeals) as
c also another contract (no. 2F-2). A Committee was
constituted by OMC to scrutinize and recommend on the
admissibility of the claims made by the contractor in regard
to Agreement No.30/F-2 and Agreement No.2/F-2. Several
meetings were held by the said Committee and the claims
D of the contractor aggregating to Rs.50, 15,820 in regard to
contract no.30.F2 were considered. Ultimately the Committee
submitted a final report dated 7 .12.1979 expressing the view
~ ,
that the contractor could be paid only a sum of Rs.3,52,916/
- in regard to his claims in respect of the two contracts. The
contractor, thereafter, wrote a letter dated 29.2.1980 stating
~
E that he had come to know that the Committee had submitted
its final report and requested for a copy of the report and for
payments of the amounts due. OMC sent a reply dated
4.3.1980 stating that the claims were not accepted yet but
however agreed to release a sum of Rs.3.5 lakhs and
+ ..
F released the said sum on that day.
6. The contractor sent a notice dated 4.6.1980 invoking
the Arbitration Agreement (Clause 23) in respect of pending
claims relating to Contract No. 30F-2 and two other contracts.
G He suggested a panel of names and requested OMC to appoint
one of them as Arbitrator. Immediately, thereafter, the contractor
t -
filed Misc. Case No.306/80 in regard to the contract in the Court
of the Sub-Judge, Bhubaneswar, under section 8(2) of
Arbitration Act, 1940 ('Act' for short) for appointment of an
H
Arbitrator. The court allowed the said petition by order dated
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
833
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
-1
6.10.1980 appointing Mr. Justice Balakrishna Patro, a retired A
Judge of the Orissa High Court as Arbitrator by consent. On
16.12.1982, an application was made by the present appellant
under Order 22 Rule 3 CPC claiming to be the son of legatee of
the contractor and for substituting him in place of the deceased
N.C. Budhraja, as his legal heir. The said application was. B
allowed by the court on 15.11.1985. In the meanwhile, Arbitration
..i
Act, 1940 ('Act' for short) was amended by the Arbitration
-t
(Orissa Amendment) Act, 1984, inserting section 41A providing
for constitution of and reference to the Arbitration Tribunal. By
Notification dated 3.5.1986, (amended by Memo dated C
23.6.1986) the State Government constituted a one Member
Special Arbitral Tribunal with Justice N. K. Das as Arbitral
Tribunal to settle the disputes between the contractor and iμMC
in regard to contract no. 30/F-2.
7. The contractor filed a claim statement dated 27 .6.1986 D
before the arbitrator praying for an award of Rs.3,41,42,040
with interest from 1.6.1986, as detailed below :
Value of work done by the contractor
: Rs.2,45,85, 183.89
Less:
Amounts paid by OMC to the .
Contractor
: Rs.1,49,88.566.90
Balance due: (Rs.95,96,616.99)
rounded off as
Add: Interest on the said amounts
: Rs. 95,96,616.00
from the respective dates: Rs.2,40,09,948.00
Add: Interest on belated
Payments : Rs. 5.35.476.00
Rs. 2,45,45,424.00
E
F
Total
G
Rs.3,41,42,040.00
In the claim statement filed before the arbitrator, the nature
and quantum of claim made was different from what was claimed
in the letter dated 16.11.1978 which was considered by the
Committee. In the claim statement the contractor abandoned H
834
SUPREME COURT REPORTS
[2008] 1 S.C.R.
A claims to an extent of Rs.21,83,692 out of the claim of
-YRs.50, 15,820/- made on 16.11.1978 and claimed only
Rs.26,32, 128 from the original claim. The balance of the claim
was fresh claims, not made earlier. The claim of Rs.95,96,616
made before the arbitrator was made up of two parts, first being
B a part of the original claim made in the letter dated 16.11.1978
and the second being completely fresh claims made for the first
time in the claim statement, as detailed below :
...
(i)
Out of the original claim of
t
c
Rs.50, 15,820 made in the
Rs. 28,32, 128
letter dated 16.11.1978 (The
claim for balance of Rs.21,83,692
not pursued in arbitration)
(ii)
Fresh claims not made earlier
Rs. 67,64,488
D
(Note : As per actual calculations, the total of the claims
made by the appellant was Rs.96,66, 107 and the new
I-
,
claims were Rs.68,33,979].
8. The Arbitrator made a reasoned award dated
E 28.11.1986 holding that the appellant was entitled to a sum
of Rs.1,02,66,901.36 (which was more than the claim of
Rs.95,96,616) with interest at 12% per annum from 1.8.1977
till date of award, and future interest at the rate of 6% P.A.
from the expiry of one month from the date of the award till
F date of decree. The award is in respect of 35 claims. Out of
~ .
35 claims, Items 1 to 16 related to the schedule items of work
under the contract (main agreement and the supplementary
agreement 1 to 3). Items 17 to 34 were in respect of work
which did not form part of the contract schedule. Claim 35
G related to escalation in cost of labour and material on account
of delay in execution.
+~
8.1) The details of the items 1 to 16, (that is description of
work, total amount claimed, amount admitted, difference in
H
dispute and amount awarded) are as under :
e
SI.
No.
1
-
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
Description of item
Claim of
Amount
Amount in
Contractor
admitted by
dispute
Arbitrator
OMC
Removal of overburden in
50802.98
45040.32
5762.66
all kinds of soil etc. within a
lead of 100 m.
(Maximum lift 6M)
Removal of overburden etc.
406881.20
406581.20
300.00
within a lead of one km
beyond initial lead of 30 m
(maximum lift-6m)
Transportation of excavated
676228.94
616245.60
59983.34
overburdened etc., within a
lead of 1 km beyond initial
leadof6m
Transportation of excavated
5361.09
5361.09
0
over burdened etc., within a
lead of 2km beyond one km.
Clearing heavy jungle etc.,
6201.72
3303.72
2898.00
Cutting and uprooting trees
29800.80
14205.60
15595.20
etc., 5' grith
Cutting and uprooting trees
11352.00
3360.00
7992.00
etc., 5' to 1 O' grith
Excavation of overburden
3689850.00
3390979.12
298870.88
in all kinds of rocks etc.,
upto 60m lead
Excavation of overburden
10370041.20
10370041.20
0
in all kinds of rock etc., upto
2km distance and within lifts
of35m
Lift beyond 15m upto 16m
5066.85
5054.84
12.01
depth
Lift beyond 16m upto 17m
9858.70
9785.55
73.15
Lift beyond 17m upto 18m
12647.79
12373.84
273.95
Lift beyond 18m upto 19m
13358.54
13037.07
321.47
Lift beyond 19m upto 20m
9812.25
9447.79
364.46
Lift beyond 20 upto 21 m
5070.33
4882.89
187.44
Lift beyond 21mupto22m
89.71
76.89
12.82
1,53, 16,507.00 149,19,076/72
397,430/28
835
Award by
A
5762.66
B
300.00
59983.34 c
0
0
D
0
0
298870.88
E
0
F
12.01
73.15
273.95
321.47
G
364.46
187.44
12.82
365,862/18
H
A
B
c
D
E
F
836
SUPREME COURT REPORTS
[2008] 1 S.C.R.
Though in the claim statement, the appellant had clearly
stated that he had in all received Rs.149,88,566/90, and given
credit for the said sum, during the hearing, the appellant
contended that instead of Rs.149,88,566/90, he had
appropriated only Rs.120,01,695/90 towards this contract and
that the balance of Rs.29,86,871/- had been adjusted towards
some other contacts. Even though the claim statement was not
amended, the Arbitrator proceeded on that basis and awarded
Rs.32,83,243 in respect of items 1 to 16 as under:
A. Total amount claimed for
Items 1to16
Rs. 153, 16,507.00
B. Total of Items 1 to 16 admitted
byOMC
Rs. 149,19,076/72
C. Total of claims admitted by
Arbitrator
Rs. 3,65,862/18
(B+C)
Total
Rs. 152,84,938/90
Amount shown as received by
Rs.1,20,01,695/90
contractor towards Items 1 to 16
(as against Rs.149,88,566/90
shown as received from OMC in
the claim statement)
BALANCE arrived at Arbitrator
Rs.32,83,243.00
as due to contractor in respect of
items 1 to 16
8.2) Claims of contractor at SI. No. 17 to 34 related to
items of work not covered in the schedule to the contract, for
which claim was made on the basis of damages/quantum meruit.
G As against the total of Rs.70,56,573/55 claimed in regard to
these 18 items (Items 17 to 34), the Arbitrator awarded in all
Rs.52,56,847/36. The details of the claims made by the
appellant and the amount awarded in respect of each of them
are as under :
H
f'·
;..
-'\
~ f
-t •
+- •
s.
N.
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
837
Description of item
Amount
Amount
Claimed
Awarded
Extra Head Lead for 90 m
2810144.10
2450042.88
Removal of excavated materials
54888.60
50858.60
from the edge of the quarry
Unmeasured quantity of
848372.64
664720.00
excavation
Catch Water Drain
278842.50
27842.50
Removal of slipped earth from
143646.00
Nil
side slopes
Restoration of benches to
186761.16
140070.87
proper shape
Bullah Pilling to prevent
15722.70
Nil
slipping of benches
Dry rubble packing
202499.00
122856.40
Extra lift during construction
262837.73
262837.73
of Haul Road
Extra lift for excavated
360690.49
270517.88
materials dumped at quarry
edge.
Extra lift measured by
1396128.63
1047096.50
Surveyor but not paid
Idle labour due to non-supply
145577.00
Nil
of working plan
Idle labour due to want of
76850.00
Nil
working site
Idle labour due to stoppage of
389288.00
194644.00
work by the respondent and
restriction of working area
Reparing of Haul road
10640.00
Nil
damaged by cyclone
Reconstruction of Damsala
25370.00
25370.00
Embankment
Barbed wire fencing·
27315.00
Nil
Supply of electricity to work
72000.00
Nil
site and respondent's colony
Rs.70,56,573/55 Rs.52,56,847/36
A
B
c
D
E
F
G
H
838
SUPREME COURT REPORTS
[2008] 1 S.C.R.
A
8.3)The last item of claim of the appellant, namely item
'rNo.35 was for Rs.22,17,188/34 as escalation in cost between
1972 and 1975 on account of increase in cost of labour and
material, based on the General Price Index. The Arbitrator
determined the value of work executed after 1.4.1973 as
B Rs.52,96,967/-. He awarded an escalation of 32.6% on the said
value of work and awarded Rs.17,26,811.00 as escalation in
cost of labour and material.
"
8.4) Thus the Arbitrator awarded Rs.102,66,901.66 to the
'\
appellant as detailed below (exclusive of interest), as against
c the claim of Rs.95,96,616/- (exclusive of interest) made by the
appellant:
(i)
Amounts award in respect of
Rs.32,83,243.00
claims 1 to 16
D
(ii) Amounts awarded in respect of
Rs.52,56,847.36
claims 17 to 34 (as against
claim of Rs.70,56,573/55)
•.
f
(iii) Amount awarded in respect of
Rs. 17,26,811.00
E
claim 35 as escalation (as against
claim of Rs.22,17,188/34)
Total award
Rs.102,66,901.36
9. The contractor filed OS No.224/1986 for making the
award rule of the court, on the file of the Civil Judge, Sr. Division,
F Bhubaneswar. The objections to the said award filed by OMC
~ ..
were registered as Misc. Case No.5/1987. The said court, by
common judgment dated 21.3.1998, overruled the objections
and directed that the award of the arbitrator be made the rule of
the court and a decree be drawn in terms of the award.
G
10. Feeling aggrieved, OMC filed Misc. Appeal No.296/
1998, challenging the decision of the Civil Judge refusing to set ...
aside the award, directing a decree in terms of the award. The
contractor filed Misc. Appeal No.198/1998 and Civil Revision
H
No.109/1998 claiming future interest from the date of decree
as the judgment of the Civil Judge was silent on that aspect.
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
839
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
-1
The High Court heard and disposed of the said appeals and A
!
revision petition by common judgment 15.10.1999. It allowed
Misc. Appeal No.296/1998 filed by OMC and dismissed M.A.
'
No.198/1998 and C.R. No.109/1998 filed by the contractor. The
High Court held :
(i)
The claim of the contractor was barred by limitation 8
and therefore the award was liable to be set aside .
. ,
~
(ii)
The arbitrator acted beyond his jurisdiction in
awarding huge amounts towards alleged extra work,
even though there was nothing to indicate that c
conditions contemplated in proviso to Clause 11
(relating to additional work) were satisfied.
(iii) Though the award purported to be a reasoned award,
the award in regard to Items 17, 18, 19 and 25 to 27
was not supported by any reason and therefore, the D
award was liable to be set aside .
.,.
--.'.i
(iv) The award in respect of escalation in cost (item 35)
at the rate of 32.6% of the value of work was without
basis, (when the claim itself was for a lesser rate}, in
E
the absence of any provision in the contract for
escalation, amounted to legal misconduct.
(v)
The award being in excess of the claim made by the
contractor shocked the judicial conscience of the
.. j
court.
F
(vi)
Interest could have been awarded by the arbitrator
only from the date of reference (6.10.1980) and could
not be awarded in regard to·any pre-reference period.
(vii) Though in the normal course, some of the issues G
would have necessitated remitting the matter to the
~-~
arbitrator for fresh consideration, it was not necessary
to remit the matter as the entire award was being set
aside on the ground of limitation.
The said decision of the High Court is challenged by the
H
840
SUPREME COURT REPORTS
(2008] 1 S.C.R.
A appellant in this appeal by special leave.
11. On the contentions urged, the following questions arise
for consideration :
(i)
Whether the claim made before the arbitrator or any
B
part thereof was barred by limitation?
(ii)
Whether the award is liable to be set aside on the
ground of legal misconduct and the error apparent
on the face of the award?
c
(iii) Whether the award is liable to be set aside on the
ground that the arbitrator exceeded his jurisdiction ?
(iv) To what relief the parties are entitled?
.Questions (i) and (ii) :
D
12. The Arbitrator held that the claims were not barred. He
E
F
G
H
held:
"In the case of a suit, the date on which the cause of action
arises is the date from which the limitation period starts.
Under section 20, it is the date on which the right to apply
accrues that determines the starting point. That starting
point does not coincide with the date on which the cause
of action for filing a suit arises. The same principle would
apply to an application under section 8 of the Act. ... The
claimant signed the final bill on 14.4.1977 under protest.
It is not correct to say that the claimant accepted the final
bill. ... All these factors show that negotiation was going
on and the matter was in a nebulous and fluid stage. The
committee gave its report in December, 1979. In March,
1980 some portion out of the money said to have been
found due by the committee was paid on ad hoc basis.
Notice was given by the contractor on 14.6.80. So, the
dispute as to final bill still continues. Till the final bill is
prepared and accepted by the contractor, limitation would
not accrue. When the matter went to court in 1980, .it was
r-
+ •
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING
841
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
not barred by limitation ... "
13. The High Court found that the work was completed on
15.6.1975, final measurement was taken on 16.6.1975 and the
final bill was signed by the contractor under protest on 14.4.1977
and therefore held that the cause of action for the contractor to
make a claim arose on 14.4.1977. According to the High Court,
as the notice invoking arbitration was issued on 4.6.1980 and
the petition under section 8(2) of the Act was filed thereafter,
beyond three years from 14.4.1977, the entire claim was barred
A
B
by limitation. The High Court further held that as the final bill was C
signed under protest by the contractor, it could be said that the
cause of action arose on a date subsequent to the date of
signing of the final bill. It further held that the fact that the
Departmental Committee considered the claims in 1979,
subsequent to the signing of the final bill under protest, did not
have the effect of saving/extending limitation in the absence of D
any acknowledgement in writing as required under section 18
of the Act.
14. Section 18 of the Limitation Act, 1963 deals with
effect of acknowledgement in writing. Sub-section (1) thereof E
provides that where, before the expiration of the prescribed
period for a suit or application in respect of any right, an
acknowledgement of liability in respect of such right has been
made in writing signed by the party against whom such right
is claimed, a fresh period of limitation shall be computed
F
from the time when the acknowledgement was so signed.
The explanation to the section provides that· an
acknowledgement may be sufficient though it omits to specify
the exact nature of the right or avers that the time for payment
has not yet come or is accompanied by a refusal to pay, or is G
coupled with a claim to set off, or is addressed to a person
other than a person entitled to the right. Interpreting section
19 of the Limitation Act, 1908 (corresponding to section 18
of the Limitation Act, 1963) this Court in Shapur Fredoom
Mazda v. Durga Prosad Chamaria (AIR 1961 SC 1236), held: H
842
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2008] 1 S.C.R.
" ... acknowledgement as prescribed by section 19 merely
renews debt; it does not create a new right of action. It is
a mere acknowledgement of the liability in respect of the
right in question; it need not be accompanied by a promise
to pay either expressly or even by implication.
The statement on which a plea of acknowledgement is
based must relate to a present subsisting liability though
the exact nature or the specific character of the said liability
may not be indicated in words.