Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2928 OF 2010
(Arising out of SLP(C) No. 3937 of 2009)
State of Maharashtra …Appellant
Versus
M/s. Hindustan Construction Company Ltd. …Respondent
JUDGEMENT
R.M. Lodha, J.
Leave granted.
2. The question presented in this appeal by special
leave is : whether in an appeal under Section 37 of the
Arbitration and Conciliation Act, 1996 (for short ‘1996 Act’)
from an order refusing to set aside the award, an amendment
in the memorandum of appeal to raise additional/new grounds
can be permitted.
3. M/s. Hindustan Construction Company Limited
(respondent) and the State of Maharashtra (Irrigation
Department, the Executive Engineer - appellant) entered into a
contract on March 14, 1992 being ICB Contract No. II/1992 for
the construction of civil work of Pressure Shafts and Power
House Complex at Koyana Hydro Electric Project, Stage-IV.
The contract work was completed by respondent within the
extended period i.e., by March 31, 2000. However, it appears
that disputes arose between the parties in respect of the work
carried out by respondent in relation to (a) revision of
percentages for hidden expenses, over breaks and profit for
further additional cases of extract items/rate revision; (b) claim
for extended stay at site; (c) revision of rate for Pressure Shaft
excavation; (d) fixation of new rate on account of variation in
the item of Transformer hall arch concrete; and (e) fixation of
new rate on account of variation in the item of Transformer Hall
excavation. These disputes were referred to the Arbitral
Tribunal. The Arbitral Tribunal made award on June 26, 2003
2
and a signed copy thereof was forwarded to the appellant
along with the letter dated June 30, 2003. By the said award
the Arbitral Tribunal awarded an amount of Rs. 17,81,25,152/-
to respondent and further directed that if the said amount was
not paid by appellant within two months from the date of the
award, then the awarded sum shall carry an interest at the rate
of 15 per cent per annum from June 27, 2003.
4. Not satisfied with the award dated June 26, 2003,
appellant made an arbitration application on August 22, 2003
for setting aside the award. The appellant also relied upon
Sections 28, 33 and 16 of 1996 Act in assailing the award
being in contravention of the provisions of 1996 Act and set up
the grounds viz., (i) waiver (final bill was accepted by
respondent without protest and the claims are not arbitrable);
(ii) acquiescence (contract ceased to exist after accepting final
payment which was made on March 30, 2001 after completion
of maintenance period); (iii) delay (claims are time barred under
the provisions of the Limitation Act); (iv) laches (respondent’s
Arbitrator was not appointed before expiry of 30 days from the
defect liability and, therefore, the claimant was not entitled to
3
bring claim Nos. 3, 4 and 5 to arbitration) and (v) res judicata
(claim No. 1 was referred to the earlier Arbitration Panel in the
year 1998 and hence the said claim is barred by principles of
r es judicata ).
5. The District Judge, Ratnagiri vide order dated June
29, 2006 rejected the application for setting aside the award
dated June 26, 2003.
6. The appellant aggrieved thereby preferred an
appeal under Section 37 of 1996 Act on February 6, 2007
before the High Court of Judicature at Bombay.
7. On June 23, 2008, appellant made an application
before the High Court seeking amendment to the memorandum
of arbitration appeal by adding additional grounds, namely, that
the Arbitral Tribunal exceeded jurisdiction in awarding revision
of percentage for hidden expenses over-heads and profits for
further additional items (Claim No. 1); that the Arbitral Tribunal
acted beyond the scope of arbitration with regard to extended
stay charges (Claim No. 2); the Arbitral Tribunal exceeded
jurisdiction and, in fact, committed error of jurisdiction in
granting claim pertaining to revision of rate for pressure shaft
4
excavation and mis-conducted themselves in awarding
escalation considering March 2000 Indices.
8. The aforesaid application was opposed by
respondent on diverse grounds, inter alia, that the additional
grounds sought to be incorporated in the memorandum of
arbitration appeal can not be allowed at this stage after the
expiry of period prescribed in Section 34(3) as that would
tantamount to entertaining a challenge after and beyond the
period of limitation and that the award has not been challenged
by the appellant on any of the grounds sought to be
urged/added through the amendment application.
9. On January 9, 2009, learned Single Judge
dismissed the application for amendment in the memorandum
of arbitration appeal. Learned Single Judge held that the
ground not initially raised in a petition for setting aside the
arbitral award can not be permitted to be raised beyond the
period of limitation prescribed in Section 34(3). It was also
observed that the proposed amendments in the memorandum
of arbitration appeal are not even sought to the grounds
contained in the application under Section 34.
5
10. Mr. Shekhar Naphade, learned senior counsel for
the appellant submitted that there is no nexus between
pleadings and limitation and it is the relief that determines the
limitation. The grounds/objections in the petition under Section
34 of 1996 Act are in the nature of pleadings and any
amendment thereto must be guided by the same principles
which govern amendments to the pleadings. He heavily relied
upon the decisions of this Court in L.J. Leach and Company
1
Ltd., v. Jardine Skinner and Co. and Pirgonda Hongonda Patil
2
v. Kalgonda Shidgonda Patil and Others in support of his
contention that delay does not affect the power of the court to
order amendments if that is required in the interest of justice.
Learned senior counsel also placed reliance upon decision of
this Court in Jai Jai Ram Manohar La l v. National Building
3
Material Supply, Gurgaon and submitted that the Court always
grants leave to amend pleadings of a party, unless it is mala
fide or that the other side can not be compensated for by an
order of costs.
1
(1957) SCR 438
2
(1957) SCR 595
3
(1969) 1 SCC 869
6
11. Mr. Shekhar Naphade submitted that although the
Arbitral Tribunal is bound to decide in accordance with the
terms of the contract, as mandated by Section 28 of 1996 Act,
in the present case respondent got the relief from the Arbitral
Tribunal beyond the terms of contract and, therefore, in the
interest of justice, the amendments sought for by the
appellant for addition of grounds in the memorandum of
arbitration appeal ought to have been granted. He also
contended that decision of the Division Bench of Bombay High
Court in Vastu Invest & Holdings Pvt. Ltd., Mumbai v. Gujarat
4
Lease Financing Ltd., Mumbai does not lay down the correct
law.
12. Mr. Ashok Desai, learned senior counsel for the
respondent, on the other hand, submitted that recourse to a
court against an arbitral award could be made only by way of
an application under Section 34 for setting aside such award
and sub-section (3) thereof stipulates that such an application
may not be made after three months have elapsed from the
date on which the party making the application has received
4
2001 (2) Arb. LR 315 (Bombay)
7
the arbitral award. Proviso to Section 34(3) empowers the
Court, if satisfied of sufficient cause, to entertain the application
for setting aside award within a further period of thirty days but
not thereafter. He would submit that the time limit prescribed
under Section 34 to challenge an award is absolute and
unextendible by Court. He relied upon two decisions of this
Court in this regard, namely (i) Union of India v. Popular
5
Construction Co. and Consolidated Engineering Enterprises v.
6
Principal Secretary, Irrigation Department and Others . He
submitted that Bombay High Court in Vastu Invest and
4
Holdings Private Limited has rightly held that new ground/s
cannot be permitted to be introduced into an arbitration petition
for setting aside of the award beyond the period of four months
stipulated in Section 34(3) of the 1996 Act. He also relied upon
decisions of this Court in Madan Lal v. Sunder Lal and
7
Another ; Bijendra Nath Srivastava v. Mayank Srivastava and
8 9
others and Dhartipakar Madan Lal Agarwal v . Rajiv Gandhi .
5
(2001) 8 SCC 470
6
(2008) 7 SCC 169
7
AIR 1967 SC 1233
8
(1994) 6 SCC 117
9
1987 (Supp.) SCC 93
8
13. Mr. Ashok Desai submitted that more than five
years after the award, the appellant was not entitled to seek
amendment in the memorandum of arbitration appeal by adding
new grounds which were not taken in the application for setting
aside the award. He, thus, submitted that High Court was not
unjustified in rejecting the application for amendment in the
memorandum of arbitration appeal.
14. Pleadings and particulars are required to enable the
court to decide true rights of the parties in trial. Amendment in
the pleadings is a matter of procedure. Grant or refusal
thereof is in the discretion of the court. But like any other
discretion, such discretion has to be exercised consistent with
10
settled legal principles. In Ganesh Trading Co. v. Moji Ram ,
this Court stated :
“ Procedural law is intended to facilitate and not to
obstruct the course of substantive justice. Provisions
relating to pleading in civil cases are meant to give to
each side intimation of the case of the other so that it
may be met, to enable Courts to determine what is really
at issue between parties, and to prevent deviations from
the course which litigation on particular causes of action
must take.”
10
(1978) 2 SCR 614
9
15. Insofar as Code of Civil Procedure, 1908 (for short
‘CPC’) is concerned, Order VI Rule 17 provides for amendment
of pleadings. It says that the Court may at any stage of the
proceedings allow either party to alter or amend his pleadings
in such manner and on such terms as may be just, and all such
amendments shall be made as may be necessary for the
purpose of determining the real questions in controversy
between the parties. The matters relating to amendment of
pleadings have come up for consideration before courts from
time to time. As far back as in 1884 in Clarapede & Company v.
11
Commercial Union Association - an appeal that came up
before Court of Appeal, Brett M.R. stated :
“…..The rule of conduct of the court in such a case is
that, however negligent or careless may have been the
first omission, and, however late the proposed
amendment, the amendment should be allowed if it can
be made without injustice to the other side. There is no
injustice if the other side can be compensated by costs;
but, if the amendment will put them into such a position
that they must be injured, it ought not to be made…..”
16. In Charan Das and Others v. Amir Khan and
12
Others , Privy Council exposited the legal position that
11
Vol XXXII The Weekly Reporter 262
12
(1920) LR 47 IA 255
1
although power of a Court to amend the plaint in a suit should
not as a rule be exercised where the effect is to take away from
the defendant a legal right which has accrued to him by lapse
of time, yet there are cases in which that consideration is
outweighed by the special circumstances of the case.
17. A four-Judge Bench of this Court in L.J. Leach and
1
Company Ltd., v. Jardine Skinner and Co. while dealing with
the prayer for amendment of the plaint made before this Court
whereby plaintiff sought to raise, in the alternative, a claim for
damages for breach of contract for non-delivery of the goods
relied upon the decision of Privy Council in Charan Das &
12
Others ; granted leave at that stage and held :
“It is no doubt true that courts would, as a rule, decline
to allow amendments, if a fresh suit on the amended
claim would be barred by limitation on the date of the
application. But that is a factor to be taken into account
in exercise of the discretion as to whether amendment
should be ordered, and does not affect the power of the
court to order it, if that is required in the interests of
justice.”
18. Again, a three-Judge Bench of this Court in
2
Pirgonda Hongonda Patil in the matter of amendment of the
1
plaint at appellate stage reiterated the legal principles
1
exposited in L.J. Leach and Company Ltd. and Charan Das
12
and others . This Court observed :
“Recently, we have had occasion to consider a similar
prayer for amendment in L.J. Leach & Co. v. Jardine
Skinner & Co., 1957 SCR 438, where, in allowing an
amendment of the plaint in an appeal before us, we
said: “It is no doubt true that courts would, as a rule,
decline to allow amendments, if a fresh suit on the
amended claim would be barred by limitation on the
date of the application. But that is a factor to be taken
into account in exercise of the discretion as to whether
amendment should be ordered, and does not affect the
power of the court to order it, if that is required in the
interests of justice.” These observations were made in a
case where damages were originally claimed on the
footing of conversion of goods. We held, in agreement
with the learned Judges of the High Court, that on the
evidence the claim for damages on the footing of
conversion must fail. The plaintiffs then applied to this
Court for amendment of the plaint by raising, in the
alternative, a claim for damages for breach of contract
for non-delivery of the goods. The application was
resisted by the respondents and one of the grounds of
resistance was that the period of limitation had expired.
We accepted as correct the decision in Charan Das v.
Amir Khan, (1920) LR 47 IA 255 which laid down that
“though there was full power to make the amendment,
such a power should not as a rule be exercised where
the effect was to take away from a defendant a legal
right which had accrued to him by lapse of time; yet
there were cases where such considerations were
outweighed by the special circumstances of the case”.
As pointed out in Charan Das case the power exercised
was undoubtedly one within the discretion of the learned
Judges. All that can be urged is that the discretion was
exercised on a wrong principle. We do not think that it
1
was so exercised in the present case. The facts of the
present case are very similar to those of the case before
Their Lordships of the Privy Council. In the latter, the
respondents sued for a declaration of their right of pre-
emption over certain land, a form of suit which would not
lie having regard to the proviso to s.42 of the Specific
Relief Act (1 of 1877). The trial Judge and the first
appellate court refused to allow the plaint to be
amended by claiming possession on pre-emption, since
the time had expired for bringing a suit to enforce the
right. Upon a second appeal the court allowed the
amendment to be made, there being no ground for
suspecting that the plaintiffs had not acted in good faith,
and the proposed amendment not altering the nature of
the relief sought. In the case before us, there was a
similar defect in the plaint, and the trial Judge refused to
allow the plaint to be amended on the ground that the
period of limitation for a suit under O. XXI, r.103 of the
Code of Civil Procedure, had expired. The learned
Judges of the High Court rightly pointed out that the
mistake in the trial Court was more that of the learned
pleader and the proposed amendment did not alter the
nature of the reliefs sought.”
3
19. In Jai Jai Ram Manohar Lal , this Court was
concerned with a matter wherein amendment in the plaint was
refused on the ground that the amendment could not take
effect retrospectively and on the date of the amendment the
action was barred by the law of limitation. It was held :
“….Rules of procedure are intended to be a handmaid
to the administration of justice. A party cannot be
1
refused just relief merely because of some mistake,
negligence, inadvertance or even infraction of the Rules
of procedure. The Court always gives leave to amend
the pleading of a party, unless it is satisfied that the
party applying was acting mala fide, or that by his
blunder, he had caused injury to his opponent which
may not be compensated for by an order of costs.
However negligent or careless may have been the first
omission, and, however late the proposed amendment,
the amendment may be allowed if it can be made
without injustice to the other side.”
This Court further stated :
“…..The power to grant amendment of the pleadings is
intended to serve the ends of justice and is not
governed by any such narrow or technical limitations.”
20. Do the principles relating to amendment of
pleadings in original proceedings apply to the amendment in
the grounds of appeal? Order XLI Rule 2 CPC makes a
provision that the appellant shall not, except by leave of the
Court, urge or be heard in support of any ground of objection
not set forth in the memorandum of appeal; but the Appellate
Court, in deciding the appeal, shall not be confined to the
grounds of objections set forth in the memorandum of appeal
1
or taken by leave of the Court. Order XLI Rule 3 CPC provides
that where the memorandum of appeal is not drawn up as
prescribed, it may be rejected, or be returned to the appellant
for the purpose of being amended.
21. The aforesaid provisions in CPC leave no manner
of doubt that the appellate court has power to grant leave to
amend the memorandum of appeal. As a matter of fact, in
13
Harcharan v. State of Haryana , this Court observed that the
memorandum of appeal has same position like the plaint in the
suit. This Court said:
“…..When an appeal is preferred the memorandum of
appeal has the same position like the plaint in a suit
because plaintiff is held to the case pleaded in the
plaint. In the case of memorandum of appeal same
situation obtains in view of Order 41, Rule 3. The
appellant is confined to and also would be held to the
memorandum of appeal. To overcome any contention
that such is not the pleading the appellant sought the
amendment…..”
22. In light of the aforesaid legal position governing the
amendment of pleadings in the suit and memorandum of
appeal, the immediate question to be considered is : whether
13
(1982) 3 SCC 408
1
the same principles must govern the amendment of an
application for setting aside the award or for that matter,
amendment in an appeal under Section 37 of 1996 Act. In
7
Madan Lal , this Court with reference to the provisions of the
Arbitration Act, 1940 (for short, ‘1940 Act’) stated that under the
scheme of 1940 Act there has to be an application to set aside
the award; such application has to be made within the period of
limitation and any objection to the award after the limitation has
elapsed cannot be entertained. This Court observed :
“ 8. It is clear, therefore, from the scheme of the Act that
if a party wants an award to be set aside on any of the
grounds mentioned in S. 30 it must apply within 30 days
of the date of service of notice of filing of the award as
provided in Art. 158 of the Limitation Act. If no such
application is made the award cannot be set aside on
any of the grounds specified in S. 30 of the Act. It may
be conceded that there is no special form prescribed for
making such an application and in an appropriate case
an objection of the type made in this case may be
treated as such an application, if it is filed within the
period of limitation. But if an objection like this has been
filed after the period of limitation it cannot be treated as
an application to set aside the award, for if it is so
treated it will be barred by limitation.
9. It is not in dispute in the present case that the
objections raised by the appellant were covered by S.
30 of the Act, and though the appellant did not pray for
setting aside the award in his objection that was what he
really wanted the court to do after hearing his objection.
As in the present case the objection was filed more than
30 days after the notice it could not be treated as an
1
application for setting the award, for it would then be
barred by limitation. The position thus is that in the
present case there was no application to set aside the
award on grounds mentioned in S. 30 within the period
of limitation and therefore the court could not set aside
the award on those grounds. There can be no doubt on
the scheme of the Act that any objection even in the
nature of a written-statement which falls under S. 30
cannot be considered by the court unless such an
objection is made within the period of limitation (namely,
30 days), though if such an objection is made within
limitation that objection may in appropriate cases be
treated as an application for setting aside the award.”
5
23. In Popular Construction Company this Court, while
considering the question whether the provisions of Section 5 of
Limitation Act, 1963 are applicable to an application
challenging an award under Section 34 of the 1996 Act, held :
“12 . As far as the language of Section 34 of the 1996
Act is concerned, the crucial words are “but not
thereafter” used in the proviso to sub-section (3). In our
opinion, this phrase would amount to an express
exclusion within the meaning of Section 29(2) of the
Limitation Act, and would therefore bar the application of
Section 5 of that Act. Parliament did not need to go
further. To hold that the court could entertain an
application to set aside the award beyond the extended
period under the proviso, would render the phrase “but
not thereafter” wholly otiose. No principle of
interpretation would justify such a result.
1
13 . Apart from the language, “express exclusion” may
follow from the scheme and object of the special or local
law:
“[E]ven in a case where the special law does not
exclude the provisions of Sections 4 to 24 of the
Limitation Act by an express reference, it would
nonetheless be open to the court to examine
whether and to what extent the nature of those
provisions or the nature of the subject-matter and
scheme of the special law exclude their
operation.”
14 . Here the history and scheme of the 1996 Act
support the conclusion that the time-limit prescribed
under Section 34 to challenge an award is absolute and
unextendible by court under Section 5 of the Limitation
Act. The Arbitration and Conciliation Bill, 1995 which
preceded the 1996 Act stated as one of its main
objectives the need “to minimise the supervisory role of
courts in the arbitral process”. This objective has found
expression in Section 5 of the Act which prescribes the
extent of judicial intervention in no uncertain terms:
“5. Extent of judicial intervention .—
Notwithstanding anything contained in any other
law for the time being in force, in matters
governed by this Part, no judicial authority shall
intervene except where so provided in this Part.”
15 . The “Part” referred to in Section 5 is Part I of the
1996 Act which deals with domestic arbitrations. Section
34 is contained in Part I and is therefore subject to the
sweep of the prohibition contained in Section 5 of the
1996 Act.”
1
6
24. Again in Consolidated Engineering Enterprises ,
this Court observed:
“19 . A bare reading of sub-section (3) of Section 34 read
with the proviso makes it abundantly clear that the
application for setting aside the award on the grounds
mentioned in sub-section (2) of Section 34 will have to
be made within three months. The period can further be
extended, on sufficient cause being shown, by another
period of 30 days but not thereafter. It means that as far
as application for setting aside the award is concerned,
the period of limitation prescribed is three months which
can be extended by another period of 30 days, on
sufficient cause being shown to the satisfaction of the
court.”
25. There is no doubt that application for setting aside
an arbitral award under Section 34 of 1996 Act has to be made
within time prescribed under sub-section(3) i.e., within three
months and a further period of thirty days on sufficient cause
being shown and not thereafter. Whether incorporation of
additional grounds by way of amendment in the application
under Section 34 tantamounts to filing a fresh application in all
situations and circumstances. If that were to be treated so, it
would follow that no amendment in the application for setting
aside the award howsoever material or relevant it may be for
consideration by the Court can be added nor existing ground
1
amended after the prescribed period of limitation has expired
although application for setting aside the arbitral award has
been made in time. This is not and could not have been the
intention of Legislature while enacting Section 34. Moreso,
Section 34(2)(b) enables the Court to set aside the arbitral
award if it finds that the subject matter of the dispute is not
capable of settlement by arbitration under the law for the time
being in force or the arbitral award is in conflict with the public
policy of India. The words in Clause (b) “the Court finds that” do
enable the Court, where the application under Section 34 has
been made within prescribed time, to grant leave to amend
such application if the very peculiar circumstances of the case
so warrant and it is so required in the interest of justice. L.J.
1 2
Leach and Company Ltd. and Pirgonda Hongonda Patil ,
seem to enshrine clearly that courts would, as a rule, decline to
allow amendments, if a fresh claim on the proposed
amendments would be barred by limitation on the date of
application but that would be a factor for consideration in
exercise of the discretion as to whether leave to amend should
be granted but that does not affect the power of the court to
2
order it, if that is required in the interest of justice. There is no
reason why the same rule should not be applied when the
Court is called upon to consider the application for amendment
of grounds in the application for setting aside the arbitral award
or the amendment in the grounds of appeal under Section 37 of
1996 Act.
26. It is true that, the Division Bench of Bombay High
4
Court in Vastu Invest and Holdings Pvt. Ltd. held that
independent ground of challenge to the arbitral award cannot
be entertained after the period of three months plus the grace
period of thirty days as provided in the proviso of sub-section
(3) of Section 34, but, in our view, by ‘an independent ground’
the Division Bench meant a ground amounting to a fresh
application for setting aside an arbitral award. The dictum in
the aforesaid decision was not intended to lay down an
absolute rule that in no case an amendment in the application
for setting aside the arbitral award can be made after expiry of
period of limitation provided therein. Insofar as Bijendra Nath
8
Srivastava is concerned, this Court did not agree with the view
of the High Court that the trial court did not act on any wrong
2
principle while allowing the amendments to the objections for
setting aside award under 1940 Act. This Court highlighted the
distinction between ‘material facts’ and ‘material particulars’
and observed that amendments sought related to material facts
which could not have been allowed after expiry of limitation.
Having held so, this Court even then went into the merits of
objection introduced by way of amendment. In our view, a fine
distinction between what is permissible amendment and what
may be impermissible, in sound exercise of judicial discretion,
must be kept in mind. Every amendment in the application for
setting aside an arbitral award cannot be taken as fresh
application.
9
27. In the case of Dhartipakar Madan Lal Agarwal this
Court held that a new ground cannot be raised or inserted in an
election petition by way of an amendment after the expiry of the
period of limitation. It may not be proper to extend the
9
principles enunciated in Dhartipakar Madan Lal Agarwal in the
context of the provisions contained in Section 81 of the
Representation of the People Act, 1951 to an application
seeking amendment to the application under Section 34 for
2
setting aside an arbitral award or an appeal under Section 37 of
1996 Act for the reasons we have already indicated above.
28. The question then arises, whether in the facts and
circumstances of the present case, the High Court committed
any error in rejecting the appellant’s application for addition of
new grounds in the memorandum of arbitration appeal. As
noticed above, in the application for setting aside the award,
appellant set up only five grounds viz., waiver, acquiescence,
delay, laches and res judicata. The grounds sought to be
added in the memorandum of arbitration appeal by way of
amendment are absolutely new grounds for which there is no
foundation in the application for setting aside the award.
Obviously, such new grounds containing new material/facts
could not have been introduced for the first time in an appeal
when admittedly these grounds were not originally raised in the
arbitration petition for setting aside the award. Moreover, no
prayer was made by the appellant for amendment in the
petition under Section 34 before the concerned court or at the
appellate stage. As a matter of fact, the learned Single Judge
in paragaraph 6 of the impugned order has observed that the
2
grounds of appeal which are now sought to be advanced were
not originally raised in the arbitration petition and that the
amendment that is sought to be effected is not even to the
grounds contained in the application under Section 34 but to
the memo of appeal. In the circumstances, it cannot be said
that discretion exercised by learned Single Judge in refusing to
grant leave to appellant to amend the memorandum of
arbitration appeal suffers from any illegality.
29. The result is, appeal has no force and is dismissed
with no order as to costs.
…….…...…………
………J.
(R.V. Raveendran)
…………..…… ……………..J
(R. M. Lodha)
New Delhi
April 1, 2010.
2