BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY VS RAMA KANT SINGH

BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY VS RAMA KANT SINGH

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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

area. The respondent offered a bid which the first appellant

accepted. Accordingly, an agreement was executed on 15th

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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 21st  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 subsection   (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 21st March

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

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 twentytwo   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/­

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(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 1st 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 8th  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 21st 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

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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 4th bill. The Arbitration Tribunal

held   that  an   amount   of  Rs.   27,94,990/­ (Rupees   twentyseven 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 29th

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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