# VOLTAS LTD v. ROLTA INDIA LTD

- **Citation:** [2014] 2 S.C.R. 797
- **Court:** Supreme Court of India
- **Decided:** 2014-02-14
- **Case number:** Civil Appeal No. 2073 of 2014
- **Bench:** Anil R. Dave, Dipak Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/voltas-ltd-v-rolta-india-ltd-29862
- **Pages:** 27

## Headnote

ARBITRATION AND CONCILIATION ACT, 1996: ss.21,
43 - Counter claim - Limitation period - Held: Limitation period
A
8
for filing counter claim should be computed as on the date of C
service of notice of such claim on the claimant and not on
the date of final counter claim - Exception to the said rule is
if a party. against whom a claim is made in arbitration can
satisfy that he had previously made a claim against the
claimant and sought arbitration by serving a notice to the
D
claimant - However, limitation cannot be saved solely on the
ground that a party had previously in a notice vaguely stated
that it would be claiming liquidated damages.
JUDGMENT/ORDER: Binding effect of - Held: A
, judgment is not to be read as a statute but to understand the
coffect ratio stated in the case it is necessary to appreciate
the repetitive use of the words.
E
The appellant and the respondent entered into a civil
construction contract for construction of buildings.
F
Dispute arose between them and on 03.12.2004, the
respondent terminated the contract. By letter dated
29.03.2006, the appellant invoked the arbitration clause.
On 17.04.2006, the respondent denied any amount being
payable by them and called upon the appellant to pay
G
Rs.68.63 crores. The appellant filed an application for
appointment of arbitrator and a sole arbitrator was
appointed by the High Court. Before the arbitrator, the
appellant filed its statement of claim on 13.04.2011
797
H
798
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A claiming Rs. 23.31 crores. The respondent filed statement
of defence and counter claim of Rs.333.73 crores on
24.08.2011. The Arbitrator passed interim order that the
limitation for making a counter claim is required to be
asserted with reference to the date on which the cause
B of action arose and the date on which counter claim was
filed. The respondent filed an application under Section
34 of Arbitration Act for setting aside decision of
Arbitrator. The Single Judge of the High court rejected the
section 34 application holding that when the notice was
c given by the appellant on 29.03.2006, the said notice was
only in respect of the disputes having arisen between the
parties due to refusal of claims made by the respondent.
On the date of issuance of such notice, the respondent
had not even asserted its claim and after issuance of
0 notice dated 29.03.2006, the respondent by its letter dated
17.04.2006 had asserted its claim for the first time and,
therefore, counter claim was beyond the period of
limitation. On appeal, the Division Bench of the High
Court set aside the order of the Single Judge. Hence the
E instant appeal.
Partly allowing the appeal, the Court
HELD: 1.1. By letter dated 01.03.2005, the appellant,
while referring to the letter dated 03.12.2004 issued by the
F respondent terminating the contract on the ground of
alleged delay and default in completion of the project,
without prejudice had made a request for payment of final
bill in full and settle the claim made therein at the earliest.
It was also suggested therein that if the respondent
G needed any additional information or material in support
of the claim put forth, the appellant would furnish the
same. On 18.03.2005, the respondent communicated to
the appellant that it would compute its losses, damages,
costs, charges, expenses, etc. after the building work was
over and claim the same from the appellant. The appellant
H
VOLTAS LTD. v. ROLTA INDIA LTD.
799
by letter dated 7.4.2005 intimated the respondent that it A
was not liable to pay any alleged losses, damages, costs,
charges and expenses, allegedly suffered by the
respondent. On 27 .04.2005 by another communication an
assertion was made about the losses suffered by the
respondent. The respondent asseverated that it was not
B
liable to pay to the appellant any compensation and
damages or other amounts as claimed in the letter dated
01.0~.2005. In fact, the respondent was compelled to
terminate the contract as per the recommendati

## Text

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[2014] 2 S.C.R. 797
VOLTAS LTD.
V.
ROLTA INDIA LTD.
(Civil Appeal No. 2073 of 2014)
FEBRUARY 14, 2014
[ANIL R. DAVE AND DIPAK MISRA, JJ.)
ARBITRATION AND CONCILIATION ACT, 1996: ss.21,
43 - Counter claim - Limitation period - Held: Limitation period
A
8
for filing counter claim should be computed as on the date of C
service of notice of such claim on the claimant and not on
the date of final counter claim - Exception to the said rule is
if a party. against whom a claim is made in arbitration can
satisfy that he had previously made a claim against the
claimant and sought arbitration by serving a notice to the
D
claimant - However, limitation cannot be saved solely on the
ground that a party had previously in a notice vaguely stated
that it would be claiming liquidated damages.
JUDGMENT/ORDER: Binding effect of - Held: A
, judgment is not to be read as a statute but to understand the
coffect ratio stated in the case it is necessary to appreciate
the repetitive use of the words.
E
The appellant and the respondent entered into a civil
construction contract for construction of buildings.
F
Dispute arose between them and on 03.12.2004, the
respondent terminated the contract. By letter dated
29.03.2006, the appellant invoked the arbitration clause.
On 17.04.2006, the respondent denied any amount being
payable by them and called upon the appellant to pay
G
Rs.68.63 crores. The appellant filed an application for
appointment of arbitrator and a sole arbitrator was
appointed by the High Court. Before the arbitrator, the
appellant filed its statement of claim on 13.04.2011
797
H
798
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A claiming Rs. 23.31 crores. The respondent filed statement
of defence and counter claim of Rs.333.73 crores on
24.08.2011. The Arbitrator passed interim order that the
limitation for making a counter claim is required to be
asserted with reference to the date on which the cause
B of action arose and the date on which counter claim was
filed. The respondent filed an application under Section
34 of Arbitration Act for setting aside decision of
Arbitrator. The Single Judge of the High court rejected the
section 34 application holding that when the notice was
c given by the appellant on 29.03.2006, the said notice was
only in respect of the disputes having arisen between the
parties due to refusal of claims made by the respondent.
On the date of issuance of such notice, the respondent
had not even asserted its claim and after issuance of
0 notice dated 29.03.2006, the respondent by its letter dated
17.04.2006 had asserted its claim for the first time and,
therefore, counter claim was beyond the period of
limitation. On appeal, the Division Bench of the High
Court set aside the order of the Single Judge. Hence the
E instant appeal.
Partly allowing the appeal, the Court
HELD: 1.1. By letter dated 01.03.2005, the appellant,
while referring to the letter dated 03.12.2004 issued by the
F respondent terminating the contract on the ground of
alleged delay and default in completion of the project,
without prejudice had made a request for payment of final
bill in full and settle the claim made therein at the earliest.
It was also suggested therein that if the respondent
G needed any additional information or material in support
of the claim put forth, the appellant would furnish the
same. On 18.03.2005, the respondent communicated to
the appellant that it would compute its losses, damages,
costs, charges, expenses, etc. after the building work was
over and claim the same from the appellant. The appellant
H
VOLTAS LTD. v. ROLTA INDIA LTD.
799
by letter dated 7.4.2005 intimated the respondent that it A
was not liable to pay any alleged losses, damages, costs,
charges and expenses, allegedly suffered by the
respondent. On 27 .04.2005 by another communication an
assertion was made about the losses suffered by the
respondent. The respondent asseverated that it was not
B
liable to pay to the appellant any compensation and
damages or other amounts as claimed in the letter dated
01.0~.2005. In fact, the respondent was compelled to
terminate the contract as per the recommendation of the
architects and the respondent had suffered huge losses c
and damages and had incurred heavy costs, charges and
expenses for which the appellant was solely responsible.
It was also mentioned in the letter that the respondent
reserved its right to take appropriate steps against the
appellant as per the agreement entered into between the
0
parties as per law. On 29.3.2006, the appellant, referring
to its earlier communications dated 14.04.2004,
23.04.2004, 24.05.2004, 18.06.2004, 13.07 .2004 and
01.03.2005, claimed for appointment of an arbitrator. On
17.4.2006, the respondent specified the claims under
E
various heads and also claimed payment to be made
within seven days failing which it will invoke the
arbitration clause. Thus, the correspondences between
the parties make it vivid that the claims made by the
respondent were denied by the appellant on many a
ground and, therefore, it would be inappropriate to say
that there was inaction or mere denial. [Paras 15 and 16]
[812-E-H; 813-A-E; 814-A-B]
F
Major (Retd.) lnder Singh Rekhi v. Delhi Development
Authority (1988) 2 sec 338: 1988 (3) SCR 351; Jammu and
G
Kashmir State Forest Corporation v. Abdul Karim Wani and
Ors. (1989) 2 SCC 701: 1989 (2) SCR 380 - held
inapplicable.
1.2. The two communications dated 17.04.2006 and
21.04.2006 make it clear that the respondent had
H
800
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A crystallized the claims on various heads by letter dated
17.4.2006 and the appellant had agreed to appoint an
arbitrator within thirty days. The heads that have been
mentioned in the letter dated 17 .4.20~ pertained to
liquidated damages for delay in performance, cost of
B repairs and rework which had to be done' by the
respondent, differential cost of the works left over by the
appellant and was completed by the respondent through
other agencies, cost of direct consequential damages to
the respondent due to defect in the work done by the
C appellant, cost of consultancy fees and other expenses,
loss of profit for four years based on revenue generated
per employee, etc. and outstanding mobilization advance
remaining with the appellant. The total sum as mentioned
in the letter was Rs.74.78 crores. From the said amount
0
monies retained by the respondent and monies received
by the respondent as per the contract, i.e., Rs.6.14 trores
were reduced. The validity of the claims had to be
addressed by the Arbitrator but the fact remained that the
respondent had raised the claims by giving heads. Thus,
there can be no scintilla of doubt that the respondent had
E particularized or specified its claims and sought
arbitration for the same. [Para 19] [815-E-H; 816-A-B]
2. In *Praveen Enterprises, the two-Judge Bench,
after referring to, Sections 21 and 43 of the Act and
F Section 3 of the Limitation Act opined, regard being had
to the language employed in Section 21, that an
exception has to be carved out. It saves the limitation for
filing a counter claim if a respondent against whom a
claim has been made satisfies the twin test, namely, he
G had made a claim against the claimant and sought
arbitration by serving a notice to the claimant. The said
exception squarely applies to the case at hand inasmuch
as the respondent had raised the counter claim and
sought arbitration by expressing its intention on number
H of occasions. That apart, it is also perceptible that the
VOLTAS LTD. v. ROLTA INDIA LTD.
801
appellant had assured for appointment of an arbitrator.
Thus, the counter claim was in·stituted on 17.4.2006 and
hence, the irresistible conclusion is that it was within
limitation. In *Praveen Enterprises, the Court while
carving out an exceptio.n, has clearly stated that the
!imitation for "such counter claim" should be computed
as on the "date of service of notice" of "such claim on
the claimant" and not on the date of final counter claim.
A
B
A judgment is not to be read as a statute but to
understand the correct ratio stated in the case it is
necessary to appreciate the repetitive use of the words. c
That apart, if the counter claim filed after the prescribed
period of limitation before the arbitrator is saved in
entirety solely on the ground that a party had vaguely
stated that it would be claiming liquidated damages, it
would not attract the conceptual exception carved out in
D
*Praveen Enterprises. In fact, it would be contrary to the
law laid down not only in the said case, but also to the
basic principle that a time barred claim cannot be
asserted after the prescribed period of limitation. [Paras
24, 26] [819-B-E; 820-E-H; 821-A]
*State of Goa v. Praveen Enterprises (2012) 12 SCC
581: 2011 (10) SCR 1026 - relied on.
E
Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd.
(2003) 5 SCC 705: 2003 (3) SCR 691; Bharat Sanchar
F
Nigam Limited and another v. Motorola India Private Limited
(2009) 2 SCC 337: 2008 (13) SCR 445 - held applicable.
3. In the instant case, when it is absolutely clear that
the counter claim in respect of the enhanced sum is
totally barred by limitation and is not saved by exception
G
carved out by the principle stated in Praveen Enterprises,
the view of the Division Bench of the High Court that the
counter claim, as a whole, is not barred by limitation is
not correct. Thus analysed, the counter claim relating to
the appeal which deals with civil contracts shall be
H
802
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A restricted to the amount stated in the letter dated
17.4.2006, i.e., Rs.68.63 crores, and as far as the other
appeal which pertains to air-conditioning contract, the
quantum shall stand restricted to as specified in the letter
dated 21.3.2006. The interim award passed by Arbitrator
B as regards rejection of the counter claims in toto stands
nullified. [Paras 29, 31] [822-A-C, G; 823-A]
Rashtriya /spat Nigam Limited v. Dewan Chand Ram
Saran 2012 5 SCC 306; 2012 (4) SCR 1 - Distinguished.
C
/spat Industries Limited v. Shipping Corporation of India
Limited Arbitration Petition No. 570 of 2001 decided on
4.12.2001 ; Oil and Natural Gas Corporation Ltd. v. Saw Pipes
Ltd. (2003) 5 SCC 705; McDermott International Inc. v. Bum
Standard Co. Ltd. and Ors. (2006) 11 SCC 181: 2006 (2)
D Suppl. SCR 409; K. Raheja Constructions Ltd. and another
v. Alliance Ministries and Ors. 1995 Supp (3) SCC 17: 1995
(3) SCR 960; South Konkan Distilleries and Anr. v.
Prabhakar Gajanan Naik and Ors. (2008) 14 SCC 632: 2008
(13) SCR 295; Van Vibhag Karamchari Griha Nirman Sahkari
E Sanstha Maryadit (Registered) v. Ramesh Chander and
others (2010) 14 SCC 596: 2010 (12) SCR 1045; Revajeetu
Builders and Developers v. Narayanaswamy and sons and
Ors. (2009) 10 SCC 84: 2009 (15) SCR 103 - referred to.
Case Law Reference:
F
2011 (10) SCR 1026
relied on
Para 7
2003 (3) SCR 691
referred to
Para 9
2012 (4) SCR 1
distinguished
Para 10
G
2006 (2) Suppl. SCR 409 referred to
Para 11
1988 (3) SCR 351
held inapplicable Para 12
1989 (2) SCR 380
held inapplicable Para 12
H
2008 (13) SCR 445
referred to
.Para 25
VOLTAS LTD. v. ROLTA INDIA"LTD.
803
1995 (3) SCR 960
referred to
Para 27
A
2008 (13) SCR 295
referred to
Para 27
2010 (12) SCR 1045
referred to
Para 27
2009 (15) SCR 103
referred to
Para 28
B
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2073 of 2014.
From the Judgment and Order dated 16/08/2013 of the
High Court of Bombay in APL No. 1239/2012, AN No. 7/2013. c
WITH
Civil Appeal No. 2076 of 2014.
K.K. Venugopal, Prateek Jalan, R.N. Karanjawala, Manik
Karanjawala (for Karanjawala & Co.} for the Appellant.
D
R.F. Nariman, Pratap Venugopal, S. Ganoo, Surekha
Raman, Meenakshi Chauhan, Anuj Sharma (for K.J. John &
Co.} for the Respondent.
The Judgment of the Court was delivered by
DIPAK MISRA, J. 1. Leave granted in both the Special
Leave Petitions.
2. Regard being had to the similitude of controversy in
both the appeals they were heard together and are disposed
of by a common judgment. Be it noted, the Division Bench of
the High Court of Judicature at Bombay, by two separate
judgments and orders passed on 16.8.2013 in Appeals Nos.
E
F
7 of 2013 and 8 of 2013 has set aside the judgment and order
dated 1.10.2012 passed by the learned single Judge in
G
Arbitration Petition (L} Nos. 1239 <;>f 2012 and 1240 of 2012
respectively as a consequence of which two interim awards
passed by the learned Arbitrator on 26. 7 .2012 in respect of two
contracts between the same parties rejecting the counter claim
of the respondent-herein have been annulled. For the sake of
H
804
SUPREME ·coURT REPORTS
[2014] 2 S.C.R.
A clarity and convenience we shall state the facts from Civil
Appeal arising out of Special Leave Petition (C) No. 30015 of
2013, for the Division Bench has observed that the Appeal No.
7 of 2013 had emanated from the disputes which arose in
respect of civil construction agreement dated 2.2.2001 and in
B Appeal No. 8 of 2013 the disputes related to agreement dated
8.1.2003 for air-conditioning of the two buildings to be
constructed for the appellant therein and no separate
submissions were advanced before it and the position was the
same before the learned single Judge.
c
3. The expose' of facts are that the appellant and
respondent entered into a civil construction contract for
construction of two buildings known as Rolta Bhawan II (RB-II) ,
and Rolta Bhawan Ill (RB-II) and also for modification of building
Rolta Bhawan l(RB-1) previously constructed by the respondent.
D As certain disputes arose, on 3.12.2004 the respondent
terminated the contract. After certain correspondences between
the parties pertaining to the termination of the contract the
appellant by letter dated 29.3.2006 invoked the arbitration
clause in respect of its cl~ims against the respondent. As the
E respondent failed to appoint an arbitrator, it filed an application
under Section 11 of the Arbitration and Conciliation Act, 1996
(for short "the Act") before the High Court of Bombay for
appointment of arbitrator and the designated Judge/vide order
dated 19.11.2010 appointed the sole arbitrator.
F
4. After the controversy came in seisin before the learned
Arbitrator, he issued certain directions and, as the facts would
unfurl, the appellant filed its statement of claim on 13.4.2011
claiming a sum of Rs.23,31,62,429.77 together with interest at
the rate of 15% per annum from the respondent. The
G respondent, after filing its defence on 24.8.2011, filed the
counter claim of Rs.333, 73,35,026/- together with interest at the
rate of 18% per annum from the date of filing till payment/
realization thereof. In the counter claim the respondent justified
the termination of the agreement and contended that it was
H
VOLTAS LTD. v. ROLTA INDIA LTD.
805
[DIPAK MISRA, J.] .
entitled to damages for breach of contract. In the counter claim
A
the notice dated 17.4.2006 sent by the respondent detailing its
counter claim to the appellant was referred to.
5. After the counter claim was lodged, the appellant-herein
filed its objections about the tenability of the counter claim
8
stating that the same was not maintainable and was also
barred by limitation. The learned Arbitrator on 7.1.2012 framed
two issues regarding the tenability and limitation of the counter
claim as preliminary iss:ues. They are: -
~ .... · :
"(i)
Whether th~· counter claim, or a substantial part
C
thereof, is barred by the law of limitation?
(ii)
Whether the counter claim is not maintainable and
beyond the scope of reference?"
6. After adumbrating to the facts the learned Arbitrator
D
came to hold that the limitation for making a counter claim is
required to be asserted with reference to the date on which the
cause of action arises and the date on which the counter claim
is filed. After so opining the learned Arbitrator recorded as
follows: -
E
"The respondent has been vigilant and assertive of its legal
rights right from 3rd December 2004 on which date the
Contract was terminated. The assertions in the letters
dated 27th April 2005 and 29th March 2006 show
F
unmistakable consciousness of its rights on the part of the
Respondent. The last Jetter dated 29th March 2006 is the
notice of the Advocates of the Respondent asserting its
right to invoke arbitration. The Tribunal is of the view that
cause of action for the Counter-claim which must be treated
G
as an independent action to be instituted, really arose
latest by 29th March 2008, if not earlier it is clear that the
Counter claim is filed only on 26th September, 2011 and
as such it is beyond the period of limitation of three years."
It may be noted here that the learned Arbitrator, however,
H
806
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A
overruled the objection with regard to the maintainability of the
counter claim being beyond the scope of reference.
B
7. After the interim award was passed by the learned
Arbitrator, the respondent filed an application under Section 34
of the Act for setting aside the decision of the learned Arbitrator
rejecting the counter claims made by it on the ground of
limitation. The learned single Judge, after adverting to the facts
in detail and the contentions raised by the learned counsel for
the parties, referred to certain authorities, namely, /spat
Industries Limited v. Shipping Corporation of India Umited1
C
and State of Goa v. Praveen Enterprises2, and came to hold
that the arbitral proceedings in respect of those disputes
commenced on the date on which the request for the said
disputes to be referred to arbitration was received by the
respondent, and further that only such disputes which were
D
referred to in the notice invoking arbitration agreement with a
request to refer the same to arbitration, the arbitral proceedings
commenced and it would not apply to the counter claim.
Thereafter the learned single Judge proceeded to state as
follows: -
E
F
G
"When the notice was given by the respondent on 29th
March, 2006, the said notice was only in respect of the
disputes having arisen between the parties due to refusal
of claims made by the petitioner. On the date of issuance
of such notice, the petitioner had not even asserted its
claim. After issuance of such notice on 29th March, 2006,
the petitioner by its letter dated 17th April, 2006 had
asserted its claim for the first time. The dispute in respect
of the counter claim raised when the petitioner did not pay
the said amount as demanded. Such disputes thus did not
exist when the notice invoking arbitration agreement was
given by the respondent on 29th March, 2006. In my view,
the arbitral proceedings therefore, cannot be said to have
1.
Arbitration Petition No. 570 of 2001 decided on 4.12.2001.
H
2.
(2012> 12 sec 581.
VOLTAS LTD. v. ROLTA INDIA LTD.
807
[DIPAK MISRA, J.]
commenced in respect of the counter claim when the
A
notice was given by the respondent on 29th March, 2006.
The counter claim was admittedly filed on 26th September,
2011 which was made beyond the period of limitation. The
arbitral proceedings commenced in respect of the counter
claim only when the said counter claim was lodged by the
B
petitioner on 26th September, 2011. Even if the date of
refusal on the part of the respondent, to pay the amount
as demanded by the petitioner by its notice dated 17th
April, 2006 is considered as commencement of dispute,
even in such case on the date of filing the counter claim c
i.e. 26th September, 2011, the counter claim was barred
by law of limitation. In my view, thus the tribunal was
justified in rejecting the counter claim filed by the petitioner
as time barred."
8. After so stating the learned single Judge held that the
D
opinion expressed by the learned Arbitrator was not perverse
and based on co'rrect appreciation of documents and was
resultant of a plausible interpretation and accordingly rejected
the application preferred under Section 34 of the Act..
9. Being dissatisfied, the respondent-herein preferred an
appeal before the Division Bench which chronologically referred
to the correspondences made between the parties, the
reasoning ascribed by the learned Arbitrator, the submissions
propounded before it, the principles stated in Oil and Natural
F
Gas Corporation Ltd. v. Saw Pipes Ltd. 3 as regards the
jurisdiction of the Court while dealing with an application under
Section 34 of the Act, the concept of limitation as has been
explained in Praveen Enterprises (supra), the demand made
by the appellant therein by letter dated. 17.4.2006 quantifying
G
a sum of Rs.68.63 crores, exclusion of period between
3.5.2006 to 19.11.2010 during which period the application
under Section 11 of the Act was pending before the High Court
and on that foundation, in the ultimate eventuate, came to hold
3.
(2003) s sec 10s.
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808
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A that the counter claim filed on 26.9.2011 was within limitation.
The aforesaid view obliged the Division Bench to allow the
appeal, set aside the judgment and order passed by the
learned single Judge as a consequence thereof the rejection
of the counter claim by the learned Arbitrator stood overturned.
B Be it noted, rest of the interim award of the learned Arbitrator
was not disturbed.
10. Assailing the legal substantiality of the view expressed
by the Division Bench, Mr. K.K. Venugopal, learned senior
counsel appearing for the appellant, has raised the following
C contentions: -
(i) Existence of dispute is fundamentally essential for a
controversy to be arbitrated upon and in the case at hand there
being no dispute raised by the respondent as warranted in law,
D the counter claim put forth before the learned Arbitrator
deserved to be thrown at the threshold and the High Court would
have been well advised to do so.
(ii) The limitation for a counter claim has to be strictly in
E accordance with Section 43(1) of the Act read with Section
3(2)(b) of the Limitation Act, 1963 and any deviation therefrom
is required to be authorized by any other provision of law. The
only other provision of law which can depart from Section 43(1)
of the Act read with Section 3(2)(b) of the Limitation Act, is the
provision contained in Section 21 of the Act, where the
F respondent to the claimant's claim invokes arbitration in regard
to specific or particular disputes and further makes a request
for the said disputes to be referred to arbitration and in +hat
event alone, the date of filing of the counter c!:::im w ... ;o not be
the relevant date but the date of rv:c.i<mg such request for
G arbitration would be the dat~ ror computing limitation. The
Division Bench has not kept itself alive to the requisite twin tests
and has erroneously ruled that the counter claim as filed by the
re~r-ondent is not barred by limitation.
H
(iii) The principle stated in Praveen Enterprises's case is
VOLTAS LTD. v. ROLTA INDIA LTD.
809
[DIPAK MISRA, J.]
not applicable to the present case because the
A
correspondences made by the respondent, including the letter
dated 17 .4.2006, show that there had neither been any
enumeration of specific claims nor invocation of the arbitration
clause but merely computation of certain claims, though for
application of the exception as carved out in Praveen
B
Enterprises (supra), both the conditions precedent, namely,
making out a specific claim and invocation of arbitration are
to be satisfied.
(iv) The exclusion of the period during pendency of the
application under Section 11 of the Act, as has been held by
C
the Division Bench, is wholly contrary to the principle laid down
in paragraphs 20 and 32 in Praveen Enterprises (supra).
(v) Assuming the principle stated in Praveen Enterprises
(supra) is made applicable, the claims asserted by the
D
respondent in its letter dated 17.4.2006 could only be saved
being not hit by limitation and not the exaggerated counter claim
that has been filed before the learned Arbitrator.
(vi) The Division Bench completely erred in interfering with
the interim award in exercise of power under Section 34 of the
E
Act, though the principle stated in Saw Pipes Ltd. (supra) is not
attracted and further that the recording of finding that the award
passed by the learned Arbitrator suffers from perversity of
approa..ch is not acceptable inasmuch as a possible and
plausible interpretation of the contract and documents has been
F
made which is within the domain of the learned Arbitrator as
has been stated in Rashtriya /spat Nigam Limited v. Dewan
Chand Ram Saran4•
11. Mr. R.F. Nariman, learned senior counsel appearing
for the respondent, defending the impugned judgment, has
G
proponed the following: -
(a)
The documents brought on record demonstrably
· establish that dispute existed between the parties
-----
4.
c2012) s sec 306.
H ..
810
A
B
c
D
E
SUPREME COURT REPORTS
(2014) 2 S.C.R.
as regards the counter claim and hence, the
submission raised on behalf of the appellant on that
score is sans substance.
(b)
The Division Bench has rightly come to hold that the
counter claim filed by the respondent-herein was
within time on the basis of the law laid down in
Praveen Enterprises (supra) inasmuch as the date
of filing of the counter claim has to relate back to
the date of claim made by the respondent and the
correspondences between the parties do clearly
show that the respondent had raised its claim and
also sought for arbitration in a legally accepted
manner.
(c)
The alternative submission that the counter claim
has to be confined to the amount quantified in the
letter dated 17.4.2006 is unacceptable in law, for
in Praveen Enterprises (supra) it has been held
that the statement of claim need not be restricted
to the claims in the notice and on that base it can
safely be concluded that the said proposition holds
good for counter claims as well. That apart, the
principle also gets support from what has been laid
down in McDermott International Inc. v. Burn
Standard Co. Ltd. and others5.
F
12. First, we shall address to the submissions pertaining
to existence and raising of dispute as regards the counter
claim. We are required to deal with the same in the case at
hand since Mr. Venugopal, learned senior counsel, has urged
that if no dispute was raised at any point of time, it could not
G have been raised before the learned Arbitrator as it would be
clearly hit by limitation. Learned senior counsel has placed
reliance on Major (Retd.) lnder Singh Rekhi v. Delhi
Development Authority6 and Jammu and Kashmir State
s.
(2006) 11 sec 181.
H
6.
(1988) s sec 338.
VOLTAS LTD. v. ROLTA INDIA LTD.
811
[DIPAK MISRA, J.]
Forest Corporation v. Abdul Karim Wani and others7, to bolster
A
the submission that in the case at hand the disputes as regards
the counter claim really had not arisen, for mere assertions and
denials do not constitute a dispute capable of reference to
arbitration and hence, not to be entertained when it is dead or
stale.
B
13. In Major (Retd.) lnder Singh Rekhi (supra) the High
Court had rejected the petition preferred under Section 20 of
Arbitration Act, 1940 as barred by limitation. The two-Judge
Bench referred to Section 20 of the 1940 Act and opined that
in order to be entitled to order of reference under Section 20,
C
it is necessary that there should be an arbitration agreement
and secondly, dispute must arise to which the agreement
applied. In the said case, there had been an assertion of claim
of the appellant and silence as well as refusal in respect of the
same by the respondent. The Court observed that a dispute
D
had arisen regarding non-payment of the alleged dues to the
appellant and, in that context, observed thus: -
"A dispute arises where there is a claim and a denial and
repudiation of the claim. The existence of dispute is
E
essential for appointment of an arbitrator under Section 8
or a reference under Section 20 of the Act. See Law of
Arbitration by R.S. Bachawat, first edition, page 354. There
should be dispute and there can only be a dispute when a
claim is asserted by one party and denied by the other on
F
whatever grounds. Mere failure or inaction to pay does not
lead to the inference of the existence of dispute. Dispute
entails a positive element and assertion of denying. not
merely inaction to accede to a claim or a request. Whether
in a particular case a dispute has arisen or not has to be
G
found out from the facts and circumstances of the case."
14. In Abdul Karim Wani and others (supra) the question
arose whether the dispute mentioned in the contractor's
7.
(1989) 2 sec 101.
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812
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A application could have been referred to the arbitration at all. The
majority came to hold that the claim raised by the plaintiff in his
application was not covered by the arbitration clause and,
therefore, was not permissible to be referred for a decision to
the arbitrator. Be it noted, in the said case, the work under the
B contract had already been executed without any dispute. The
majority also observed that in the absence of a repudiation by
the Corporation of the respondent's right to be considered, if
and when occasion arises, no dispute could be referred for
arbitration. It further ruled that in order that there may be a
c reference to arbitration, existence of a dispute is essential and
the dispute to be referred to arbitration must arise under the
arbitration agreement.
15. The principles laid down in the aforesaid cases were
under the 1940 Act at the stage of appointment of arbitrator. In
D the case at hand, though we are dealing with a lis under the
1996 Act, yet we are to deal with the said facet as the learned
Arbitrator has passed an interim award as regards the
sustenance of the counter claim. In this regard, it is necessary
to refer to the correspondences entered into between the
E parties and to appreciate the effect and impact of such
communications. By letter dated 1.3.2005 the appellant, while
referring to the letter dated 3.12.2004 issued by the respondent
terminating the contract on the ground of alleged delay and
default in completion of the project, without prejudice had made
F a request for payment of final bill in full and settle the claim made
therein at the earliest. It was also suggested therein that if the
respondent needed any additional information or material in
support of the claim put forth, the appellant would furnish the
same. On 18.3.2005 the respondent communicated to the
G appellant through its counsel that it would compute its losses,
damages, costs, charges, expenses, etc. after the building work
was over and claim the same from the appellant. The appellant
vide letter dated 7.4.2005, through its counsel, intimated the
respondent that it was not liable to pay any alleged losses,
H damages, costs, charges and expenses, allegedly suffered by
VOLTAS LTD. v. ROLTA INDIA LTD.
813
[DIPAK _MISRA, J.] .
the respondent. On 27.4.2005 by another communication an
A
assertion was made about the losses suffered by the
respondent. The respondent asseverated that it was not liable
to pay to the appellant any compensation and damages or
other amounts as claimed in the letter dated 1.3.2005 to the
respondent. In fact, the respondent was compelled to terminate
B
the civil contractor as per the recommendation of the Architects,
M/s. Master & Associates, and the respondent had suffered
huge losses and damages and had incurred heavy costs,
charges and expenses for which the appellant was solely
respondible. It was also mentioned in tt:ie letter that the c
respondent reserved its right to take appropriate steps against
the appellant as per the agreement entered into between the
parties as per law. As the factual exposition would unfurl, on
29.3.2006 the appellant, referring to its earlier communications
dated 14.4.2004, 23.4.2004, 24.5.2004, 18.6.2004, 13.7.2004
D
and 1.3.2005, claimed for appointment of an arbitrator. On
17 .4.2006 the respondent specified the claims under various
heads and also claimed payment to be made within seven days
failing which it will invoke the arbitration clause. To the said
communication and another communication dated 21.4.2006
we shall refer to at a later stage while dealing with the other
E
facet of submission. It may be noted here that on 9.5.2006 the
appellant, referring to letter dated 17.4.2006 whereby the
respondent had raised its claims, stated as follows: -
"Our clients deny that the claim made against you is false
F
and frivolous. Our clients deny that any amount is due to
you for the alleged breach of the aforesaid contract. Our
clients deny that they have committed any breach of the
aforesaid contract.
xxx
xxx
xxx
In view of what is stated hereinabove, our clients deny that
they are liable to pay to you a sum of Rs.68,63,72,743.08
or any other sum."
G
H
814
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A
16. Thus, the correspondences between the parties make
it vivid that the claims made by the respondent were denied
by the appellant on many a ground and, therefore, it would be
inappropriate to say that there was inaction or mere denial.
Therefore, in the obtaining fact situation, the principles stated
B in Major (Retd.) lnder Singh Rekhi (supra) and Abdul Karim
Wani and others (supra) are not applicable.
17. The next aspect that has been highlighted by Mr.
Venugopal is that the respondent had never, in the true sense
C of the term, invoked arbitration by appropriately putting forth
specified claims. In this context, we may refer to the letter dated
29.3.2006 which would show that the appellant had asserted
that the disputes and differences had arisen between the
parties to the agreement and invoked the arbitration clause
calling upon the respondent to appoint an independent
D unbiased arbitrator within 30 days from the receipt of the said
notice, failing which they would be constrained to approach the
designated Judge of the Chief Justice of Bombay High Court
for appointment of an arbitrator under Section 11 of the Act.
The respondent, vide letter dated 17.4.2006, sent through its
E counse.1 while stating that it was surprised to receive the demand
made by the appellant with regard to the final R.A. bill dated
21.12.2004, clearly stated that the earlier letter dated 1.3.2005
had already been replied to vide letter dated 18.3.2005. In the
said letter it was mentioned by the respondent that it had
F crystallized its claim amounting to Rs.68,63,72,743.08 and, be
it noted, the said claim was made on various heads by the
respondent. Reproduction of part of the said letter would be
apposite: -
G
H
"The final R.A. Bill sent by you is incorrect in many respects;
one of them being that you have made claims based on
works actually not done by you Nothing is due and payable
by us to you against your final R.A. Bill. We call upon you
to pay to us the aforesaid sum of Rs.68,63,72,743.08
within seven days of the receipt of this letter, failing which
VOLTAS LTD. v. ROLTA INDIA LTD.
815
[DIPAK MISRA, J.]
you will be liable to pay interest at the rate of 18% p.a. on
A
expiry of seven days after receipt of this letter by you, till
payment and/or realization. Please note that if the
aforesaid payment is not made within seven days of the
receipt of this letter, we will invoke the arbitration clause
of the civil contract and refer the disputes to arbitration."
B
18. In this regard reference to letter dated 21.4.2006 written
by the appellant is seemly. The relevant part of the said letter
is as follows: -
"We are instructed to inform you that our client was out of C
India in connection with the business tour and returned to
India on 19th April, 2006. Our client thereafter has been
extremely busy with the work of the Company. He has seen
your letter dated 29th March, 2006.
Please, therefore, ask your clientS to note that our client
will appoint an Arbitrator within 30 days from the date of
his return to India."
D
19. These two communications make it clear that the
respondent had crystallized the claims on various heads by
E
letter dated 17.4.2006 and the appellant had agreed to appoint
an arbitrator within thirty days. The heads that have been
mentioned in the letter dated 17.4.2006 pertained to liquidated .
damages for delay in performance, cost of repairs and rework
which had to be done by the respondent, differential cost of the
F
works left over by the appellant and was completed by the
respondent through other agencies, cost of direct consequential
damages to the respondent due to defect in the work done by
the appellant, cost of consultancy fees and other expenses, loss
of profit for four years based on revenue generated per G
employee, etc. and outstanding mobilization advance remaining
with the appellant. The total sum as mentioned in the letter was
Rs.74,78,34,921.54. Fromthe said amount monies retained by
the respondent and monies received by the respondent as per
the contract, i.e., Rs.6,14,62,178.46 were reduced. Needless
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816
SUPREME COURT REPORTS
[2014] 2 S.C.R.
A to emphasize, the validity of the claims had to be addressed
by the learned Arbitrator but the fact remains that the
respondent had raised the claims by giving heads. Thus, there
can be no scin"tilla of doubt that the respondent had
particularized or specified its claims and sought arbitration for
B the same.
20. Keeping in view the aforesaid factual scenario we shall
now proceed to appreciate what has been stated by this Court
in Praveen Enterprises (supra). In the said case, the
respondent therein had raised certain claims and given a notice
C to the appellant-therein to appoint an arbitrator in terms of the
arbitration clause. As the appellant did not do so, the
respondent filed an application under Section 11 of the Act and
an arbitrator was appointed. The respondent filed its claim
statement before the arbitrator and the learned arbitrator
D passed an award. In regard to the counter claims made by the
appellant, the arbitrator awarded certain sum without any
interest. An application under Section 34 of the Act was filed
by the respondent challenging the award for rejection of its other
claims and award made on a particular item of the counter
E claim. The civil court disposed of the matter upholding the
award in respect of the claims of the respondent but accepted
the objection raised by it in regard to the award made on the
counter claim opining that the arbitrator could not have enlarged
the scope of the reference and entertain either fresh claims by
F the claimants or counter claims from the respondent. The said
judgment came to be assailed before the High Court which
dismissed the appeal by holding that the counter claims were
bad in law as they were never placed before the court by the
appellant in the proceeding under Section 11 of the Act and
G they were not referred to by the court to arbitration and,
therefore, the arbitrator had no jurisdiction to entertain the
matter.
21. This Court posed two questions, namely, whether the
respondent in an arbitration proceeding is precluded from
H
VOLTAS LTD. v. ROLTA INDIA LTD.
817
[DIPAK MISRA, J.]
making a counter claim, unless (a) it had served a notice upon
A
the claimant requesting that the disputes relating to that,counter
claim be referred to arbitration and the claimant had concurred
in referring the counterclaim to the same arbitrator; and/or (b)
it had set out the said counterclaim in its reply statement to the
application under Section 11 of the Act and the Chief Justice
B
or his designate refers such counter claim also to arbitration.
Thereafter. the Court referred to the concept of "reference to
arbitration" and, analyzing the anatomy of Sections 21 and 43
of the Act and Section 3 of the Limitation Act, 1963, opined
thus: -
c
"Section 3 of the Limitation Act, 1963 specifies the date
of institution for suit, but does not specify the date of
"institution" for arbitration proceedings. Section 21 of the
Act supplies the omission. But for Section 21 there would
be considerable confusion as to what would be the date
D
of "institution" in regard to the arbitration proceedings.