Bihar Industrial Area … vs Rama Kant Singh on 15 March, 2022


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Supreme Court of India

Bihar Industrial Area … vs Rama Kant Singh on 15 March, 2022

Author: Abhay S. Oka

Bench: Ajay Rastogi, Abhay S. Oka

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                                                                     NON­REPORTABLE


                                IN THE SUPREME COURT OF INDIA

                                 CIVIL APPELLATE JURISDICTION

                                 CIVIL APPEAL NO. 2030 OF 2022
                          [arising out of SLP (CIVIL) No. 4843 OF 2022]
                                   [DIARY NO. 41870 OF 2019]


                  BIHAR INDUSTRIAL AREA DEVELOPMENT
                  AUTHORITY & ORS.               …                  APPELLANTS
                                               v.

                  RAMA KANT SINGH                             …     RESPONDENT


                                         J U D G M E N T

ABHAY S. OKA, J.

Delay condoned. Leave granted.

1. The first appellant, the Bihar Industrial Area

Development Authority, has been constituted under the

provisions of the Bihar Industrial Area Development Act,

1974. A tender was invited by the executive engineer of the

first appellant to carry out the drainage work in an industrial
Signature Not Verified

area. The respondent offered a bid which the first appellant
Digitally signed by
Jayant Kumar Arora
Date: 2022.03.15
16:52:50 IST
Reason:

accepted. Accordingly, an agreement was executed on 15 th
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December 2007 by and between the first appellant and the

respondent. After issuing a notice, the first appellant

terminated the agreement and forfeited the security deposit of

the respondent.

2. Under the Bihar Public Works Contracts Disputes

Arbitration Tribunal Act, 2008 (for short “the 2008 Act”), the

Bihar Public Works Contract Disputes Arbitration Tribunal

(for short, “the Arbitration Tribunal”) has been constituted for

dealing with and deciding the disputes between the parties to

a works contract. Clause (a) of Section 2 of the 2008 Act

defines what is meant by a works contract.

3. Under sub­section (1) of Section 9 of the 2008 Act, when

any dispute arises between the parties to the contract,

irrespective of the fact whether such contract does or does

not contain an arbitration clause, either party can refer the

dispute in writing in the prescribed form to the Arbitration

Tribunal. The dispute can be referred within one year from

the date on which the dispute has arisen. The respondent

filed a reference to the Arbitration Tribunal on 21 st March

2013. The dispute was regarding the termination of the

agreement made on 8th June 2010. The Arbitration Tribunal

made an award on 15th September 2014. One of the
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contentions raised by the first appellant before the

Arbitration Tribunal was that the respondent did not refer the

dispute to the Arbitration Tribunal within one year from the

date on which the dispute had arisen as provided under sub­

section (1) of Section 9 of the 2008 Act. The Arbitration

Tribunal held that Article 137 of the Limitation Act, 1963 (For

short, “the 1963 Act”) was applicable. Hence, it was held that

the reference made to the Arbitration Tribunal on 21 st March

2013, raising a dispute about the termination order dated 8 th

June 2010, was not barred by limitation. The Arbitration

Tribunal held that the respondent was entitled to a refund of

the earnest money and the security deposit. It was held that

the respondent was entitled to unpaid dues in the sum of Rs.

27,94,990/­ (Rupees twenty­seven lakh ninety­four thousand

nine hundred ninety only). The Arbitration Tribunal held that

the respondent is entitled to Rs.22,42,269/­ (Rupees twenty­

two lakh forty­two thousand two hundred and sixty­nine

only) towards the security deposit. In addition, the

Arbitration Tribunal held that the respondent is entitled to

the amounts of Rs.6,22,476/­ (Rupees six lakh twenty­two

thousand four hundred seventy­six only) and Rs.50,000/­
4

(Rupees fifty thousand only) deducted towards the penalty by

the first appellant. Even the amount of provisional deduction

in the sum of Rs.3,68,400/­ (Rupees three lakh sixty­eight

thousand four hundred) was ordered to be refunded to the

respondent. The Tribunal granted simple interest at the rate

of 10% per annum on the amounts mentioned above. Except

on the amount of Rs.22,42,269/­, interest was made payable

from 29th July 2010. On the amount of Rs.22,42,269/­,

interest at the same rate was made payable from 1 st February

2011.

4. Being aggrieved by the award, the appellants filed a

revision petition before the High Court by invoking Section 13

of the 2008 Act. By the impugned judgment, the High Court

dismissed the revision petition. The High Court also held that

Article 137 of the 1963 Act was applicable and, therefore, the

dispute raised by the respondent was not barred by the

limitation.

5. Shri Rajiv Dutta, the learned Senior Counsel appearing

for the appellants submitted that under sub­section (1) of

Section 9 of the 2008 Act, a reference to the Arbitration

Tribunal was maintainable provided it was made within one
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year from the date on which the dispute had arisen. He

pointed out that the dispute arose on 8 th June 2010, when

the agreement was terminated, and the respondent’s earnest

money and security deposit were forfeited. He pointed out

that by the said order, the respondent was blacklisted. He

further pointed out that the reference to the Administrative

Tribunal was made belatedly on 21 st March 2013. He urged

that the reference application filed by the respondent

proceeds on the erroneous footing that it was filed within

limitation. He invited our attention to sub­section (2) in

Section 29 of the 1963 Act. He submitted that the 2008 Act is

a local law which describes a period of limitation different

from the period prescribed by the Schedule to the 1963 Act

and, therefore, Section 5 of the 1963 Act will not apply.

Moreover, Article 137 of the 1963 Act will have no application

as sub­section (1) of Section 9 of the 2008 Act prescribes the

period of limitation of one year. He submitted that as the

respondent was blacklisted, the earnest money and security

deposit paid by the respondent was rightly forfeited.

6. The learned senior counsel relied upon a decision of this

Court in the case of Hukumdev Narayan Yadav v. Lalit
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Narayan Mishra1. This decision was relied upon to support

the contention that Section 5 of the 1963 Act will not apply.

The learned Senior Counsel also relied upon a decision of this

Court in the case of the State of Bihar v. Brahmaputra

Infrastructure Limited2. He submitted that as there is no

agreement between the parties to conduct the arbitration in

accordance with the Arbitration and Conciliation Act, 1996

(for Short “the 1996 Act”), the reference to the Arbitration

Tribunal will be governed by the provisions of the 2008 Act.

He urged that grant of interest at the rate of 10% per annum

is illegal.

7. The learned counsel appearing for the respondent

submitted that under Section 18 of the 2008 Act, the

Arbitration Tribunal has a power to extend the period of

limitation. He, therefore, submitted that there is no infirmity

in the finding recorded by the Arbitration Tribunal on the

ground of bar of limitation. He submitted that the Arbitration

Tribunal has recorded a finding that there was no clause in

the agreement providing for the forfeiture of the earnest

money and security deposit. He submitted that the Tribunal

1 AIR 1974 SC 480.

2 (2018) 17 SCC 444
7

also held that there was no power to impose a penalty. He

urged that the award of interest at the rate of 10% per

annum was justified.

8. We have given careful consideration to the submissions

made across the Bar. Sections 8, 9, 13 and 18 of the 2018

Act are relevant which read thus:

“8. Act to be in addition to Arbitration &
Conciliation Act, 1996. ­ Notwithstanding
anything contained in this Act, any of the
provisions shall be in addition to and
supplemental to Arbitration & Conciliation Act,
1996 and in case any of the provision contained
herein is construed to be in conflict with
Arbitration Act, then the latter Act shall prevail to
the extent of conflict.”

“9. Reference to Tribunal and making of
award. ­ (1) Where any dispute arises
between the parties to the contract, either
party shall, irrespective of whether such
contract contains an arbitration clause or
not, refer, within one year from the date on
which the dispute has arisen, such dispute
in writing to the Tribunal for arbitration in
such form and accompanied by such
documents or other evidence and by such
fees, as may be prescribed.

(2) On receipt of a reference under sub­section (1),
the Tribunal may, if satisfied after such inquiry as
it may deem fit to make, that the requirements
under this Act in relation to the reference are
complied with, admit such reference and where
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the Tribunal is not so satisfied, it may reject the
reference summarily.

(3) Where the Tribunal admits the reference under
sub­section (2), it shall, after recording evidence if
necessary, and after perusal of the material on
record and on affording an opportunity to the
parties to submit their arguments, make an
award or an interim award, giving its reasons
therefor.

(4) The Tribunal shall use all reasonable dispatch
in entering on and proceeding with the reference
admitted by it and making the award, and an
endeavour shall be made to make an award
within four months from the date on which the
Tribunal had admitted the reference.

(5) The award including the interim award made
by the Tribunal shall, subject to an order, if any
made under Section – 12 or 13, be final and
binding on the parties to the dispute.

(6) An award including an interim award as
confirmed or varied by an order, if any, made
under Section – 12 or 13 shall be deemed to be a
decree within the meaning of section – 2 of the
Code of Civil Procedure, 1908 of the principal
Court of original jurisdiction within the local limits
whereof the award or the interim award has been
made and shall be executed accordingly.”
(emphasis added)

“13. Revision.­ (1) The High Court may, suo motu
at any time or on an application made to it within
three months from the date on which the award or
interim award is made or reviewed under this Act,
by any party aggrieved by the award or interim
award so made or reviewed, call for the record of
any case in which an award or interim award has
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been made or as the case may be reviewed and if
the Tribunal appears­

(a) to have exercised a jurisdiction not vested
in it by law, or

(b) to have failed to exercise a jurisdiction so
vested, or

(c) to have acted in the exercise of its
jurisdiction illegally or with material
irregularity, the High Court may make such
order in the case as it thinks fit.

(2) For the purpose of exercising its powers of
revision under this section, ∙ the High Court
shall have the same powers as it has, and as
far as may be, follow the same procedure as it
follows, under the Code of Civil Procedure,
1908 while exercising its powers of revision
under section­115 of the Code and for that
purpose the Tribunal shall be deemed to be a
Court subordinate to it.”
“18. Extension of period of limitation in
certain cases. – The Tribunal may admit a
reference under sub­section (2) or entertain an
application for review under sub­section (1) of
Section 11 or for revision under sub­section (1) of
Section 12 after the period of limitation laid down
in sub­section (1) of Section 8, sub­section (2) of
section 11 or as the case may be, sub­section (1)
of Section 12 if the party satisfies the Tribunal
that the party had sufficient cause for not making
the reference, or as the case may be, the
application for review or revision within such
period.”

9. In this case, admittedly, there is no arbitration clause in

the agreement between the parties. Sub­section (1) of Section
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9 provides that even if there is no arbitration clause, the

dispute arising between the parties to the contract must be

referred to the Arbitration Tribunal. The dispute has been

defined under Clause (e) of Section 2 of the 2008 Act. It

means any difference relating to any claim arising out of the

execution or non­execution of the whole or a part of a works

contract, including the dispute regarding rescission thereof.

Section 22 of the 2008 Act starts with a non­obstante clause

which provides that notwithstanding anything contained in

any other law, rule, order, scheme, or contract, any dispute

as defined under section (e) of Section 2 shall be regulated by

the provisions of the 2008 Act in the absence of an

arbitration clause in the agreement.

10. In view of Section 8 of the 2008 Act, if any of the

provisions of the 2008 Act are in conflict with the 1996 Act,

the latter shall prevail to the extent of the conflict. In the

present case, as there is no arbitration clause in the

agreement between the parties, the provisions of the 1996 Act

will have no application. Therefore, the reference to the

Arbitration Tribunal will be governed by the 2008 Act.

11. As noted earlier, under sub­section (1) of Section 9 of

the 2008 Act, the period of limitation is of one year from the
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date on which the dispute has arisen, which date in the

present case is 8th June 2010, when the first appellant

terminated the agreement.

12. As the 2008 Act provides for a specific period of

limitation, Article 137 of the schedule in the 1963 Act will not

apply. To that extent, the Arbitration Tribunal has committed

an error. Under Section 18 of the 2008 Act, the Arbitration

Tribunal has the power to condone the delay. The High Court

recorded a finding that as the representation made by the

respondent against the order of termination of the contract

was kept pending for an inordinately long time and was not

at all decided, the delay was explained by the respondent.

The High Court, by recording the said finding in paragraph

10 of the impugned Judgment, held that sufficient cause was

made out by the respondent for the delay. As observed

earlier, the Arbitration Tribunal has the power to condone the

delay in making a reference. Therefore, under Article 136 of

the Constitution of India, this is not a fit case to interfere

with the award on the ground that the reference was barred

by limitation.

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13. On merits, we find that the Arbitration Tribunal has

interpreted various clauses of the agreement between the

parties and held that there was no provision therein to forfeit

the earnest money as well as the security deposit. The

Arbitration Tribunal held that the first appellant had made

only a part payment of the 4 th bill. The Arbitration Tribunal

held that an amount of Rs. 27,94,990/­ (Rupees twenty­

seven lakh ninety­four thousand nine hundred ninety only)

was not paid as per the 4th bill.

14. As can be seen from Section 13 of the 2008 Act, the

scope of revision is limited. A perusal of the judgment of the

High Court shows that it has considered and interpreted

some of the clauses in the agreement between the parties.

High Court found that the Arbitration Tribunal had the

jurisdiction to make the award and that the award does not

suffer from manifest illegality and material irregularity. The

High Court rightly found that the scope for interference with

the award of the Arbitration Tribunal in revisional

jurisdiction was very narrow. In the absence of any

perversity, the High Court could not have given a different
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interpretation to the clauses in the agreement from the one

provided by the Arbitration Tribunal.

15. Though the High Court held that the respondent had

explained the delay in approaching Arbitration Tribunal, the

delay was of 21 months. Moreover, the respondent’s

reference petition proceeded on the footing that there is no

delay. The Arbitration Tribunal granted interest at the rate of

10% on Rs. 22,42,269/­ (Rupees twenty­two Lakhs forty­two

thousand two hundred sixty­nine only) from 1st February

2011. On the other claims, the interest was granted from 29 th

July 2010. In the facts of the case, we do not find any

justification for the grant of interest on the claims made by

the respondent. To that extent, the award will have to be

modified.

16. However, interest will be payable by the appellants on

the amounts awarded at the rate of 10% per annum from the

date of making the reference to the Arbitration Tribunal, in

the event the entire principal amount made payable under

the award is not paid to the respondent within three months

from today.

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17. Hence, the appeal is partly allowed. The impugned

award made in Reference Case No.35/2013 is modified only

to the extent to which interest at the rate of 10% was allowed

on the claims.

18. We direct the appellants to pay only the principal

amounts payable as per the award to the respondent within

three months from today. On the failure of the appellants to

pay the said amounts within three months from today, the

appellant shall pay the interest at the rate of 10% per annum

on the principal amounts set out in the award with effect

from 21st March 2013.

19. The Civil Appeal stands disposed of with the above

directions. All the pending applications, if any, also stand

disposed of.

……..…………………J.

(AJAY RASTOGI)

……..…………………J.

(ABHAY S. OKA)
New Delhi;

March 15, 2022.



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