STATE Vs. CHELLAPPAN NAIR

JUDGEMENT

(1.) THE revision petition is filed by the State of Kerala challenging the order of the Subordinate Judge, Trivandrum setting aside the award of the arbitrator in O.S. (Arbitration) No. 114 of 1977 of the Sub Court, Trivandrum. The suit related to a contract of work undertaken by the Respondent for the construction of a bridge across the Vamanapuram river at Kollampuzha crossing. A formal agreement was executed on 31st March 1959. The terms of the agreement provided for arbitration of dispute or difference between the parties to the contract either during the progress or after the completion of the works or after the determination, abandonment or breach of the contract, as to the interpretation of the contract or as to any matter or thing arising thereunder (except as to the matters left to the sole discretion of the division officer or Superintending Engineer under the Clauses of this contract) or as to the withholding by the division officer of any bill to which the contractor may claim to be entitled. The contract was terminated in 1962 before the work was completed. Steps were taken against the Respondent under the Revenue Recovery Act in the year 1972 and amounts were realised from him by sale of his properties. On 10th June 1977, the Respondent initiated proceedings before the Subordinate Judge, Trivandrum for directing the Defendants, the State of Kerala and the Executive Engineer, Buildings and Roads Division, Trivandrum to file the agreement dated 31st March 1959 before court and praying for an order of reference to the Chief Engineer (Arbitration), Trivandrum to resolve the disputes between the parties to the agreement or in the alternative to appoint an arbitrator to resolve such disputes. The Chief Engineer (Arbitration) was accordingly directed to make an award. Before the arbitrator, the contractor claimed the price of work done, the cost of materials taken possession of by the Respondents and also compensation for the losses sustained by him. The arbitrator held that the claims put forward by the Respondent were barred by limitation as the Respondent had not taken steps to agitate his claims within the period of three years fixed under the Limitation Act of 1963. The contention put forward that certain letters evidenced by Exts. P -44, 48 and 53 amounted to acknowledgment of liability was not accepted by the arbitrator. On the award being filed in court, the Respondent filed I.A. No. 4931 of 1978 to set aside the award. The learned Subordinate Judge held that the award being a speaking one, it was open to the Court to go into the correctness of the finding regarding limitation. The court held that the termination of the work in 1962 was not tantamount to a denial of right. According to the learned Judge, the letters of the Superintending Engineer and those of the Chief Engineer disclosed that the final accounts had not been settled and as such it could not be said that the claim was made more than three years after the accrual of the cause of action. The award was accordingly set aside and the matter was remitted to the arbitrator to submit a fresh award after going into the merits of the claim. This order is challenged in the revision petition.

(2.) THE point that arises for decision is whether the arbitrator's finding that the claim was barred by limitation required interference by the learned Subordinate Judge. It would appear that the arbitrator proceeded on the footing that the claimant should have moved for arbitration within a period of three years from the date of termination of the contract. The arbitrator also took it for granted that there was a settlement of accounts subsequent to the termination of the contract and it was on the basis of the settlement of accounts that the State initiated proceedings under the Revenue Recovery Act in 1972. The arbitrator did not accept the contention that the letters, Exts. 44, 48 and 53 saved the limitation because those letters were written after the claim became barred. The learned Subordinate Judge, on the other hand, held that it was Article 113 of the Limitation Act that applied and there would be accrual of cause of action only when there is a denial of right so far as the contract is concerned. The learned Subordinate Judge also held that the direction terminating the work in 1962 did not amount to a denial of any right. According to the learned Subordinate Judge, the letters of the Superintending Engineer and the Chief Engineer disclosed that there had not been a final settlement of accounts and as such it could not be said that the claim was made more than three years after the accrual of the cause of action. It was on the above footing that the learned Judge set aside the award and remitted the matter to the arbitrator for a fresh award after going into the merits of the claim.

(3.) WHAT is an error of law on the face of the award is dealt with by Russell on the Law of Arbitration, 19th Edition, Page 448, thus: