Shivaraj Kamshetty S/O Vishwanathappa vs. The Commissioner

Facts

The petitioner, Shivaraj Shamshetty, a Class-I contractor, entered into an agreement with the respondent, Karnataka Housing Board, on January 9, 2008, for the construction of Mini Vidhana Soudha at Surpur. The petitioner submitted bills for work done, including GST, but alleged that the respondent failed to pay the full amount due to revenue shortages and internal approval issues. On May 15, 2020, the petitioner issued a legal notice claiming an outstanding amount of Rs. 1,34,51,374/- as of September 16, 2011, plus interest of Rs. 2,78,48,800/-, totaling Rs. 4,13,00,174/-. The notice also invoked Clause 24 of the Special Conditions of Contract and requested the appointment of an arbitrator. The respondent appeared and filed objections, contending the petitioner suppressed facts, the claim was false, the work was incomplete, and the petition was barred by time. The respondent relied on a letter dated November 3, 2010, as a final decision.

Held

The Court held that the letter dated November 3, 2010, did not constitute a final decision of the employer as contemplated under Clause 24.1 of the Special Conditions of Contract. The Court observed that the letter, titled 'final intimation letter,' stated in its last paragraph that the works would be taken back without further notice and the balance work would be entrusted to other parties at the petitioner's cost. The Court interpreted the Kannada phrase used in the letter as referring to future action. Therefore, the Court found it impossible to accept the respondent's contention that the limitation period commenced from November 3, 2010. Consequently, the Court ruled that the petition filed under Section 11 of the Arbitration and Conciliation Act was not time-barred. The Court found that an arbitral dispute had been raised in furtherance of the contract, which contemplated the appointment of an arbitrator. The Court, therefore, invoked Section 11 of the Arbitration and Conciliation Act and appointed Sri Arun Chaoudapurkar, retired District Judge, as the Arbitrator by consent of both parties. The parties were directed to appear before the Arbitrator.

Key Issues

1. Whether the letter dated November 3, 2010, issued by the respondent constitutes a 'final decision' of the employer as contemplated under Clause 24.1 of the Special Conditions of Contract, thereby triggering the 30-day period for referring the dispute to arbitration? The petitioner argued that the letter dated November 3, 2010, was merely a warning and did not constitute a final decision, as it referred to future actions. Therefore, the limitation period for invoking arbitration should commence from the legal notice dated May 15, 2020. The petitioner relied on the Supreme Court's decision in BHARAT SANCHAR NIGAM LTD. & ANR. Versus. M/S. NORTE NETWORKS INDIA PVT. LTD. regarding the distinction between jurisdictional and admissibility issues and the commencement of limitation. The respondent contended that the letter dated November 3, 2010, communicated the termination of the contract and entrustment of remaining works to a third party at the petitioner's cost, constituting a final decision. Consequently, the present petition filed under Section 11 of the Arbitration and Conciliation Act was time-barred, as it was filed beyond the 30-day period stipulated in Clause 24.1.