Holding

The award is upheld only to the extent of claims that were part of the acknowledged pending liability and not barred by limitation (Rs.13,93,373.50); the balance of the award is set aside.

Summary

The contractor (N.C. Budhraja) completed excavation work for Orissa Mining Corp. Ltd. (OMC) and later claimed extra payment for work beyond the contract. OMC acknowledged pending claims in a letter dated 28‑Oct‑1978 and paid Rs.3,50,000 on 4‑Mar‑1980, after which the contractor invoked arbitration on 4‑Jun‑1980. The legal heir, J.C. Budhraja, filed a claim before the arbitrator that included both the acknowledged pending amount and fresh claims, the latter being time‑barred. The arbitrator awarded an amount exceeding the claim and the time‑barred portion, leading OMC to challenge the award. The Supreme Court held that only the portion of the claim that was part of the acknowledged pending liability (Rs.13,93,373.50) was within the limitation period and within the arbitrator's jurisdiction; the rest was barred by limitation and the award was set aside as legal misconduct. Consequently, the Court upheld that part of the award and set aside the remainder, granting interest on the upheld sum.

Issues considered

Whether the claim made before the arbitrator, or any part thereof, was barred by limitation.
Whether the award is liable to be set aside on the ground of legal misconduct and error apparent on the face of the award.
Whether the arbitrator exceeded his jurisdiction in granting amounts beyond the claim.
To what relief the parties are entitled.

Legislation cited

Arbitration Act, 1940s. 30, s. 37(3), s. 8(2)
Code of Civil Procedure, 1908s. Order 22 Rule 3
Limitation Act, 1963s. 18

Subjects

ArbitrationLimitation periodAcknowledgement of liabilityLegal heirWork contractAward set asideJurisdictionLegal misconductEscalation of cost

Judgment

I
[2008] 1 S.C.R. 821

~ J.C. BUDHRAJA A
' II.
CHAIRMAN, ORISSA MINING CORPN. LTD. & ANR.
(C.A. Nos. 1971-1973 of 2000)
JANUARY 18, 2008
B
[H.K. SEMA, G.P. MATHUR & R.V. RAVEENDRAN, JJ.]
~

i Contract - Work contract - On completion, contractor
claiming extra payment for the work done beyond the contract
- Payment for the work under contract received under protest c
- Constitution of Committee for consideration of extra payment
- Statement quantifying the claim, produced before the
Committee - Committee accepting the same only in part -
Contractor issuing notice invoking arbitration - Legal heir of
the contractor, making a claim before the arbitrafor, different
D
from the claim made before the Committee -Arbitrator passing
---1 the award for an amount over and above the claimed amount
- Propriety of- Held: Award in respect of the amount over and
above the claim made before the Committee was barred by
limitation -Limitation period in respect the pending claims
which were made before the Committee having been E
acknowledged stood extended - It is not permissible for a legal
heir to make fresh claim before an arbitrator, which was not
made by his predecessor in interest - Arbitrator committed
error on the face of the record and a legal misconduct in
--+ holding that entire claim was within time - Arbitrator also F
exceeded his jurisdiction in passing award for an amount more
than what was claimed- Arbitration Act, 1940 -: s. 8(2) -
Limitation Act, 1963 -s. 18
Predecessor in interest of the appellant entered into
contract with the respondent for removal of over-burden G
--r by excavation. After completion of the work by the
contractor, respondent prepared final bill which was
further revised in March-April, 1977 amounting to Rs. 1,
49, 190, 76-74. The contractor accepted the amount under
821 H
822 SUPREME COURT REPORTS [2008) 1 S.C.R.

A protest. Contractor claimed that he executed additional
work beyond that provided in the contract and thus
claimed extra payment for the same. He made several
representations in this regard. As a result, by a letter dated
28.10.1978, respondent informed that a Committee would
B be constituted to consider the claim. By letter dated
16.11.1978, contractor sent a statement quantifying the
claims in respect of the contract in question amounting
to Rs. 50, 15,820/-. Committee prepared its final report t
dated 28.10.1979. The Committee admitted the claim only
c an extent of Rs. 3,50,000/- and rest of the claim was not
to
accepted. Information to this effect was given by the
respondent to the contractor by a letter dated 4.3.1980.
Contractor sent a notice dated 4.6.1980 invoking
arbitration in respect of the pending claims. In the
meantime he also moved application u/s 8 (2) of Arbitration
D
Act, 1940. During the pendency of the application the
appellant was substituted as legal heir of the original ~-
contractor. In the meantime, after amendment of the
Arbitration Act, State Government formed Special Arbtiral
Tribunal to settle the disputes. The appellant filed a claim
E statement before the arbitrator, the nature and quantum
whereof was different from what was claimed before the
Committee. Appellant, abandoned the claim to an extent
of Rs. 21,83, 692/- out of the previous claim of Rs.
50, 15,820/- and made further new claim. The whole claim
F was totaling to Rs. 95,96,616/-. During the proceedings, -+ •
appellant contended that out of Rs. 149,88,566.90 received
from the respondent and taken into credit towards the
contract in question, a sum of Rs. 29,86,871/- was
appropriated towards other contracts and therefore the
G amount paid should be considered as Rs. 120,01,695-99.
The arbitrator passed the award for an amount more than i--
the amount claimed i.e. increasing the liability of the
respondent by Rs. 29,86,871/- with interest @ 12% per
annum. The award was for claims in respect of work under
H the contract, the•work which waS"llot part of the contract
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 823
CORPN. LTD. & ANR.

i and in respect of escalation in cost of labour and material A
on account of delay in execution. Appellant filed suit for
making the award rule of the court. Respondent objected
to it. The court made the award rule of the court.
Respondent filed appeal against the order. Appellant also
challenged the order claiming future interest from. the date B
of the decree. High Court allowed the appeal of the
~ ·respondent and dismiss~d the case of the appellant.
In appeal to this court the questions for
consideration were (1) whether the claim made before the
arbitrator or any part thereof was barred by limitation; C
(2) Whether the award was liable to be set aside on the
ground of legal misconduct and the error apparent on
the face of the award; (3) whether the arbitrator
exceeded his jurisdiction; and (4) to what relief the
parties were entitled. D
Partly allowing the appeals, the court
HELD: 1.1Section18 of the Limitation Act, 1963 deals
with effect of acknowledgement in writing. Sub-section
(1) thereof provides that where, before the expiration of E
the prescribed period for a suit or application in ·respect
of any right, an acknowledgement of liability in respect of
such right has been made in writing signed by the party
against whom such right is claimed, a fresh period of
.+ limitation shall be computed from the time when the F
· acknowledgement was so signed. The explanation to the
section provides that an acknowledge.ment may be
sufficient though it omits to specify the exact nature of
the right or avers that the time for payment has. not yet
come or is accompanied by a refusal to pay, or is coupled G
with a claim to set off, or is addressed to a person other
than a person entitled to the right. [Para 14] [841-D-G]
Shapur Fredoom Mazda v. Durga Prosad Chamaria AIR
1961 SC 1236 - referred to.
H
824 SUPREME COURT REPORTS [2008] 1 S.C.R.

A 1.2 A writing to be an acknowledgement of liability
must involve an admission of a subsisting jural
relationship between the parties and a conscious
affirmation of an intention of continuing such relationship
in regard to an existing liability. The admission need not
B be in regard to any precise amount nor by expressed
words. A writing, to be treated as an acknowledgement of
liability should consciously admit his liability to pay or '
admit his intention to pay the debt. [Para 15] [843-A-C] t

1.3 What can be acknowledged is a present
c subsisting liability. An acknowledgment made with
reference to a liability, cannot extend limitation for a time
barred liability or a claim that was not made at the time of
acknowledgment or some other liability relating to other
transactions. Any admission of jural relationship in regard
D to the ascertained sum due or a pending claim, cannot be
an acknowledgement for a new additional claim for .,__
damages. [Para 15] [844-8-D)
1.4 In the instant case, the cause of action accrued
when the final bill was signed by the contractor. The
E respondent informed the contractor that it has been
decided to constitute a Committee which will go into the
claims of the contractor so that the dues, if any, could be
ascertained. It further stated that on the details of the
claims and payments received being given to the
F contractor, the respondent will settle up the pending -+ •
matters at the earliest. This clearly showed an intention
on the part of the respondent to admit the jural relationship
of contractor and employer and an intention to settle the
pending claims after being satisfied about them.
G Therefore, the letter dated 28.10.1978 was clearly an
acknowledgement in writing in so far as the "pending f- -
claims" of the contractor. What were the pending claims
is made clear in the letter dated 16.11.1978 written by the
contractor enclosing a statement showing that in all, a
H sum of Rs.50, 15,820/-was due. The Committee constituted
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 825
CORPN. LTD. & ANR.

i by the respondent examined these claims and admitted A
the claims only to an extent of Rs.3,52,916/- as per its final
report dated 7.12.1979. The respondent paid Rs.3,50,000/
- on 4.3.1980. In view of the acknowledgement in writing
on 28.10.1978 and payment of Rs.3,50,000/- on 4.3.1980,
it can be said that in regard to the pending claims of the s
contractor, the limitation stood extended by three years
from 4.3.1980 and at all events by three years from
+ 28.10.1978. The contractor issued the notice invoking
arbitration on 4.6.1980 and immediately filed a petition
under section 8(2) of the Act for appointment of Arbitrator C
which was allowed on 6.10.1980. Therefore, whatever
claims were made before the Arbitrator which was part of
the claim of Rs.50, 15,820, was within time, having been
made within three years from 28.10.1978 and
4.6.1980.(Para 16] (844-D-H; 845-A-E]
D
1.5 In regard to the claims aggregating to
Rs.95,96,~16/- made in the claim statement filed before the
Arbitrator, only claims aggregating to Rs.28,32, 138 related
to and formed part of the said pending claim of
Rs.50, 15,820. The appellant did not make a claim in regard E
to the remaining Rs.21,83,692. Therefore, out of the claim
of Rs.95,96,616 made by the appellant before the
Arbitrator, the claim for only Rs.28,32, 138/- was not barred
by limitation. The remaining claims of the appellant
aggregating to Rs.67,64,488/- out of the total of F
Rs.95,96,616/- being fresh claims, were not "pending
claims" in respect of which the acknowledgement was
made. Therefore the said fresh claims aggregating to
Rs.67,64,488 made for the first time in the claims statement
filed on 27.6.1986 were clearly barred by limitation.
[Para 17] [845-E, F, G] G
--t
1.6 In the case of arbitration, limitation for the claim
!s to be calculated on the date on which the arbitration is
dE:emed to have commenced. Section 37(3) of the
Arbitration Act provides that for the purpose of Limitation H
826 SUPREME COURT REPORTS [2008] 1 S.C.R.

A Act, an arbitration is deemed to have been commenced ~
when one party to the arbitration agreement serves on
the other party thereto, a notice requiring the appointment'
of an arbitrator. Such a notice having been served on
4.6.1980, it has to be seen whether the claims were in time
B as on that date. If the claims were barred on 4.6.1980, it
follows that the claims had to be rejected by the arbitrator
on the ground that the claims were barred by limitation. ....
The said period has nothing to do with the period of ~

limitation for filing a petition under Section 8(2) of the Act.
c Insofar as a petition under Section 8(2), the cause of
action would arise when the other party fails to comply
with the notice invoking arbitration. Therefore, the period
of limitation for filing a petition under section 8(2) seeking
appointment of an arbitrator cannot be confused with the
D period of limitation for making a claim.[Para-18) [846-B-F]
lnder Singh Rekhi vs. Delhi Development Authority - )>----
1988 (2) SCC 338; Panchu Gopal Bose vs. Board of Trustees
for Port of Calcutta - 1993 (4) SCC 338; Utkal Commercial
Corporation vs. Central Coal Fields 1999 (2)·scc 571 - relied
E on.
1.7 The contractor was the predecessor in interest
of the appellant. The original claim (which was the subject
matter of letter dated 28.10.1978, subjected to examination
by the Committee as per report dated 7.12.1979, and
F + ~
towards which Rs.3,50,000/- was paid) made by the
contractor aggregated to Rs.50, 15,820. The Appellant who
is his legal heir cannot for the first time make a fresh claim
before the Arbitrator, which was never made by the
contractor. The Appellant could only pursue the claim
G
made by the contractor which were pending or subsisting
t--
when the contractor issued the notice dated 4.6.1980.
[Para 20) [847-C, D, E]
2. The arbitrator committed an error apparent on the
H face of the record and a legal misconduct in holding that
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 827
CORPN. LTD. & ANR.

the entire claim was within time. His assumption that if A
the application filed by the contractor in 1980 under
section 8(2) of Arbitration Act for appointment of an
Arbitrator was in time, all claims made in the claim
statement filed before the Arbitrator appointed in such
proceeding under section 8(2) are also in time, is patently B
erroneous and is an error apparent on the face of the
record. The reasoning of the arbitrator that on account of
+ the formation of the Committee by the respondent to
scrutinize the pending claims in pursuance of the
respondent's letter dated 28.10.1978, and the payment of c
Rs.3,50,000/- on 4.3.1980 in pursuance of the Committee
giving its final report on 7.12.1979, every claim of the
contract including new claims which were made for the
first time in the.claim statement filed in 1986 (as contrasted
with 'pending claims' considered by the respondent), are D
not barred by limitation, is also an error apparent in the
~-~
face of the award. [Para 21] [847-F, G; 848-A]
3.1 The prayer before the arbitrator in the claim
statement was for the award of Rs.95,96,616 in regard to
the work done after giving credit of Rs.1,49,88,566.90. The E
categorical stand of the contractor and the appellant all
along has been that the respondent had paid in all a sum
of Rs.149,88,566.90. But during the course of the
arbitration proceedings, the appellant contended that out
~+ of Rs.149,88,566.90 received from the respondent and F
taken into credit towards this contract, a sum of
Rs.29,86,871/- was being appropriated towards other
contracts and therefore the 'payments made by the
respondent towards this contract should be taken as
Rs.120,01,695.90. The arbitrator has mechanically G
-+ accepted the said altered stand contrary to the claim
statement and proceeded to determine the amount
payable by OMC, by taking the amount paid by the
respondent as Rs.120,01,659.90 towards this contract,
even though the claim statement showing that the H
828 SUPREME COURT REPORTS [2008] 1 S.C.R.

A respondent had paid Rs.149,88,566.90 remained
unaltered. The claim statement was not amended to show
that only Rs.120,01,659.90 had been received from the
respondent regard to the contract. When the claim made
in the claim statement is after adjusting Rs.149,88,566.90
B paid by the respondent towards the work, the arbitrator
cannot proceed on the basis that only Rs.120,01,659.90
was paid towards the work. By awarding more than what
was claimed in the claim statement (by showing a lesser
amount as having been paid by the respondent though
c claim statement showed a higher amount), the Arbitrator
clearly exceeded his jurisdiction. The Arbitrator thus
committed a legal misconduct and the award to that extent
is liable to be set aside. [Para 22] [848-G; 849-A-F]
3.2 The Arbitrator has exceeded his jurisdiction in
D another respect. The total claim made by the contractor
before the Arbitration was Rs.95,96,616/- (excluding
interest). But the amount awarded by the arbitrator
towards the said claim was Rs.1,02,66,901/36 (excluding
interest). Making an award in excess of the claim itself by
E Rs.6,70,285 is a clear act of exceeding the jurisdiction and
amounts to a legal misconduct and to that extent of
Rs.6,70,285/- the award is invalid. [Para 23] [849-G, H;
850-A]
F 3.3 In regard to item 35, that is escalation in cost, the
claim in the claim statement was at the rate of 15% for the
value of work done in 1972-73, 28.5% in respect of value
of work done in 1973-74 and 32% in respect of work done
in 1974-75. But the Arbitrator has awarded escalation at a
flat rate of 32.6% on the entire cost of work done from
G 1.4.1973 and thereby awarded an escalation in excess of
what was claimed. This also amounts to exceeding the +--
jurisdiction and therefore legal misconduct. The award in
excess of what was claimed was invalid. [Para 24]
H [850-A-C]
JC. BUDHRAJA v. CHAIRMAN, ORISSA MINING 829
CORPN. LTD. & ANR.

4.1 Awarding amount towards time barred part of the A
claim of Rs.67 ,64,488, and awarding amounts of
Rs.29,86,871, Rs.670,285 and escalation in cost at a rate
more than what is claimed, are all legal misconducts and
·, the award in regard to those amounts are null and void.
There is however some overlapping of the aforesaid B
amounts. [Para 25) [850-D,E]
4.2 That part of the award which is valid and separable
+
can be upheld. That part relates to the claims which were
validly before the Arbitrator, which were part of the existing
or pending claims of Rs.50,15,820 and which were not C
barred by limitation. They were the claims which were
existing or pending in 1978, 1979 and 1980 (considered
by the committee and payment made by the respondent
which were carried before the Arbitrator to an extent of
Rs.28,32,128; Only the amounts awarded by the Arbitrator o
against those claims can be considered as award validly
made in Arbitration, falling within jurisdiction. They are
clearly severable from the other portions of the award.
The total amount awarded by the Arbitrator against claims
which were not barred by limitation was only E
Rs.13,93,373.50. The award to this extent is not open to
challenge. This part of the award does not suffer from any
legal misconduct. There is also no error apparent on the
face of the award in respect of the amount. The scope of
• t interference with an award is limited. The Award of the
Arbitrator has to be upheld to an extent of Rs.13,93,373.50 F
with interest at the rate of 12% P.A. from 1.8.1977 to date
of award (28.11.1986) and at the rate of 6% P.A. thereafter,
that is from 29.11.1986 till date of payment. [Paras 26, 27
and 28) [850-E, F, G; 852-8, C, G, H; 853-A]
' G
I --t Hindustan Construction Co. Ltd. vs. Governor of Orissa
~ 1995 (3) SCC 8; Hindustan Tea Co. vs. Mis K. Sashikant and
Co. 1986 (Supp.) sec 506 - relied on.
CIVIL APPELLATE JURISDICTION Civil Appeal
Nos.1971-1973 of 2000. H
830 SUPREME COURT REPORTS [2008] 1 S.C.R.

A From the final Judgment and Order dated 15.10.1999 of
-t-
the High Court of Orissa at Cuttack in Misc. Appeal Nos. 296 &
198 of 1998 and Civil Revision No. 109of1998.
A.K. Panda and T.S. Doabia, Rutwik Panda and Mridul
Aggarwal for the Appellant.
B
C.S. Vaidyanathan, K.V. Viswanathan, Rajeev Singh and ._
Anup Kumar Singh for the Respondents.
+
The Judgment of the Court was delivered by
c RAVEENDRAN, J. 1. These appeals are filed against
the common judgment dated 15.10.1999 passed by the High
Court of Orissa in Misc. Appeal No.296/1998 filed by the
respondents and Misc. Appeal No.198/1998 and Civil Revision
No.109/1998 filed by the appellant.
D 2. The appellant is stated to be legal heir and successor
in interest of N.C. Budhraja (hereinafter referred to as the
contractor). M/s. Orissa Mining Corporation Ltd. (for short OMC
~ ,, -
or respondent) entered into an agreement dated 16.9.1967
(Agreement No.30/F-2) for removal of over-burden at Kaliapani
E (Cuttack District) by excavation in all kinds of soil (including
stoney earth and gravel mixed with boulders), and depositing/
disposing of the same, as directed. The maximum lift was 6m
including initial lift of one metre. The order to commence work
was issued on 23.9.1967. Parties also entered into three
F supplementary agreements in regard to the said contract No.30/ +~
F-2, on 2.8.1969, 7.3.1970 and 10.2.1972. [Note: OMC had
also entered into other contracts with the contractor including
contract dated 22.2.1968 (Contract No.2/F/2) for raising Chrome
Ore by open excavation from the said mining area. We are not
G concerned with those contracts in these appeals].
i--
3. The main agreement enumerated two items of work •
in its schedule. The first, second, and third supplementary
agreements enumerated respectively eight items, one item
H and four items in their respective schedules. The work was
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 831
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
.:i· completed by the contractor on 15.6.1975. The final bill in A
respect of the work was prepared by OMC on 21.10.1976. It
was revised in March-April 1977 by OMC. The final Bill It
showed the total value of the work done (under several items
in the schedule to main and three supplementary agreements)
as Rs.1,49, 190, 76. 74. The contractor countersigned the B
said bill on 14.4.1977 under protest, but, however, certified
• and confirmed that the measurements shown therein were
-t
correct.

4. According to the contractor, having regard to the zig-
zag route by which the over burden had to be carried, the actual
c
lead was much longer and actual lift was much higher than what
were stipulated in the agreement. He contended that the amounts
shown as due for the work done was as per contract rates which
was for removing overburden to the extent of lift and lead
provided in the contract schedules; and at several places, he D
... ~ had to cut and remove the over-burden beyond the extent of lift
and lead provided in the contract, and he should be paid for
such extra leads and lifts. He claimed to have executed certain
additional works not provided in the contract schedules, on the
directions of OMC. He therefore represented that the matter E
may be examined and enquired into for determination of proper
amounts due. In view of the several representations made by
th.e contractor in respect of the contract no.30/F-2 as also other
contracts, OMC sent the following letter dated 28.10.1978 to
.. + F
the contractor:-
"Re : Settlement of pending claims.
You had called on Chairman, OMC, recently and apprised
him of the dues receivable by you in respect of certain
long pending matters such as mine benches work and G
--t
raising at Kaliapani Quarry-I. In the matter of Kaliapani it
has been decided to constitute a committee which will go
separately into your claims and other facts, in which
connection you are requested to give all possible help
H
832 SUPREME COURT REPORTS [2008] 1 S.C.R.

A and assistance, so that your dues, if any, will be
+--
ascertainable.
In regard to other pending matters, you had indicated
yourself that you will give the details of claims and payment
received by you. This may be given within a day or two so
B
as to enable OMC to settle up the above at the earliest."
5. The contractor sent a reply dated 16.11.1978
..
enclosing therewith a statement quantifying his claims relating t-
to contract no. 30F-2 (subject matter of these appeals) as
c also another contract (no. 2F-2). A Committee was
constituted by OMC to scrutinize and recommend on the
admissibility of the claims made by the contractor in regard
to Agreement No.30/F-2 and Agreement No.2/F-2. Several
meetings were held by the said Committee and the claims
of the contractor aggregating to Rs.50, 15,820 in regard to
D
contract no.30.F2 were considered. Ultimately the Committee
submitted a final report dated 7 .12.1979 expressing the view
~ ,
that the contractor could be paid only a sum of Rs.3,52,916/
- in regard to his claims in respect of the two contracts. The
contractor, thereafter, wrote a letter dated 29.2.1980 stating ~
E that he had come to know that the Committee had submitted
its final report and requested for a copy of the report and for
payments of the amounts due. OMC sent a reply dated
4.3.1980 stating that the claims were not accepted yet but
however agreed to release a sum of Rs.3.5 lakhs and
F released the said sum on that day. + ..
6. The contractor sent a notice dated 4.6.1980 invoking
the Arbitration Agreement (Clause 23) in respect of pending
claims relating to Contract No. 30F-2 and two other contracts.
He suggested a panel of names and requested OMC to appoint
G
one of them as Arbitrator. Immediately, thereafter, the contractor t -
filed Misc. Case No.306/80 in regard to the contract in the Court
of the Sub-Judge, Bhubaneswar, under section 8(2) of
Arbitration Act, 1940 ('Act' for short) for appointment of an
Arbitrator. The court allowed the said petition by order dated
H
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 833
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

-1 6.10.1980 appointing Mr. Justice Balakrishna Patro, a retired A
Judge of the Orissa High Court as Arbitrator by consent. On
16.12.1982, an application was made by the present appellant
under Order 22 Rule 3 CPC claiming to be the son of legatee of
the contractor and for substituting him in place of the deceased
N.C. Budhraja, as his legal heir. The said application was. B
allowed by the court on 15.11.1985. In the meanwhile, Arbitration
..i Act, 1940 ('Act' for short) was amended by the Arbitration
-t (Orissa Amendment) Act, 1984, inserting section 41A providing
for constitution of and reference to the Arbitration Tribunal. By
Notification dated 3.5.1986, (amended by Memo dated C
23.6.1986) the State Government constituted a one Member
Special Arbitral Tribunal with Justice N. K. Das as Arbitral
Tribunal to settle the disputes between the contractor and iµMC
in regard to contract no. 30/F-2.

7. The contractor filed a claim statement dated 27 .6.1986 D
before the arbitrator praying for an award of Rs.3,41,42,040
with interest from 1.6.1986, as detailed below :

Value of work done by the contractor : Rs.2,45,85, 183.89

Less: Amounts paid by OMC to the . E
Contractor : Rs.1,49,88.566.90

Balance due: (Rs.95,96,616.99)
rounded off as : Rs. 95,96,616.00

Add: Interest on the said amounts F
from the respective dates: Rs.2,40,09,948.00

Add: Interest on belated
Payments : Rs. 5.35.476.00 Rs. 2,45,45,424.00
G
Total Rs.3,41,42,040.00

In the claim statement filed before the arbitrator, the nature
and quantum of claim made was different from what was claimed
in the letter dated 16.11.1978 which was considered by the
Committee. In the claim statement the contractor abandoned H
834 SUPREME COURT REPORTS [2008] 1 S.C.R.

A claims to an extent of Rs.21,83,692 out of the claim of -Y-
Rs.50, 15,820/- made on 16.11.1978 and claimed only
Rs.26,32, 128 from the original claim. The balance of the claim
was fresh claims, not made earlier. The claim of Rs.95,96,616
made before the arbitrator was made up of two parts, first being
B a part of the original claim made in the letter dated 16.11.1978
and the second being completely fresh claims made for the first
time in the claim statement, as detailed below : ...
Out of the original claim of t
(i)
Rs.50, 15,820 made in the Rs. 28,32, 128
c letter dated 16.11.1978 (The
claim for balance of Rs.21,83,692
not pursued in arbitration)

(ii) Fresh claims not made earlier Rs. 67,64,488
D
(Note : As per actual calculations, the total of the claims
made by the appellant was Rs.96,66, 107 and the new I- ,
claims were Rs.68,33,979].

8. The Arbitrator made a reasoned award dated
E 28.11.1986 holding that the appellant was entitled to a sum
of Rs.1,02,66,901.36 (which was more than the claim of
Rs.95,96,616) with interest at 12% per annum from 1.8.1977
till date of award, and future interest at the rate of 6% P.A.
from the expiry of one month from the date of the award till
F date of decree. The award is in respect of 35 claims. Out of
35 claims, Items 1 to 16 related to the schedule items of work
~ .
under the contract (main agreement and the supplementary
agreement 1 to 3). Items 17 to 34 were in respect of work
which did not form part of the contract schedule. Claim 35
G related to escalation in cost of labour and material on account
of delay in execution.
+~

8.1) The details of the items 1 to 16, (that is description of
work, total amount claimed, amount admitted, difference in
dispute and amount awarded) are as under :
H
e
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 835
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

SI. Description of item Claim of Amount Amount in Award by A
No. Contractor admitted by dispute Arbitrator
OMC
1 Removal of overburden in 50802.98 45040.32 5762.66 5762.66
all kinds of soil etc. within a
- lead of 100 m.
(Maximum lift 6M) B
2 Removal of overburden etc. 406881.20 406581.20 300.00 300.00
within alead of one km
beyond initial lead of 30 m
(maximum lift-6m)
3 Transportation of excavated 676228.94 616245.60 59983.34 59983.34
overburdened etc., within a c
lead of 1km beyond initial
leadof6m
4 Transportation of excavated 5361.09 5361.09 0 0
over burdened etc., within a
lead of 2km beyond one km.
5 Clearing heavy jungle etc., 6201.72 3303.72 2898.00 0
D
6 Cutting and uprooting trees 29800.80 14205.60 15595.20 0
etc., 5' grith
7 Cutting and uprooting trees 11352.00 3360.00 7992.00 0
etc., 5' to 1O' grith
8 Excavation of overburden 3689850.00 3390979.12 298870.88 298870.88 E
in all kinds of rocks etc.,
upto 60m lead
9 Excavation of overburden 10370041.20 10370041.20 0 0
in all kinds of rock etc., upto
2km distance and within lifts
of35m F
10 Lift beyond 15m upto 16m 5066.85 5054.84 12.01 12.01
depth
11 Lift beyond 16m upto 17m 9858.70 9785.55 73.15 73.15
12 Lift beyond 17m upto 18m 12647.79 12373.84 273.95 273.95
13 Lift beyond 18m upto 19m 13358.54 13037.07 321.47 321.47 G
14 Lift beyond 19m upto 20m 9812.25 9447.79 364.46 364.46
15 Lift beyond 20 upto 21 m 5070.33 4882.89 187.44 187.44
16 Lift beyond 21mupto22m 89.71 76.89 12.82 12.82

1,53,16,507.00 149,19,076/72 397,430/28 365,862/18
H
836 SUPREME COURT REPORTS [2008] 1 S.C.R.

A Though in the claim statement, the appellant had clearly f'·
stated that he had in all received Rs.149,88,566/90, and given
credit for the said sum, during the hearing, the appellant
contended that instead of Rs.149,88,566/90, he had
appropriated only Rs.120,01,695/90 towards this contract and
B that the balance of Rs.29,86,871/- had been adjusted towards
some other contacts. Even though the claim statement was not
amended, the Arbitrator proceeded on that basis and awarded ;..
Rs.32,83,243 in respect of items 1 to 16 as under:
-'\
A. Total amount claimed for
c Items 1to16 Rs. 153, 16,507.00

B. Total of Items 1 to 16 admitted
byOMC Rs. 149,19,076/72
C. Total of claims admitted by
D Arbitrator Rs. 3,65,862/18

(B+C) Total Rs. 152,84,938/90 ~ f

Amount shown as received by Rs.1,20,01,695/90
contractor towards Items 1 to 16
E (as against Rs.149,88,566/90
shown as received from OMC in
the claim statement)

BALANCE arrived at Arbitrator Rs.32,83,243.00
F as due to contractor in respect of
items 1 to 16 -t •
8.2) Claims of contractor at SI. No. 17 to 34 related to
items of work not covered in the schedule to the contract, for
which claim was made on the basis of damages/quantum meruit.
G As against the total of Rs.70,56,573/55 claimed in regard to
these 18 items (Items 17 to 34), the Arbitrator awarded in all
+- •
Rs.52,56,847/36. The details of the claims made by the
appellant and the amount awarded in respect of each of them
are as under :
H
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 837
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

s. Description of item Amount Amount A
N. Claimed Awarded
17 Extra Head Lead for 90 m 2810144.10 2450042.88
18 Removal of excavated materials 54888.60 50858.60
from the edge of the quarry
19 Unmeasured quantity of 848372.64 664720.00 B
excavation
20 Catch Water Drain 278842.50 27842.50
21 Removal of slipped earth from 143646.00 Nil
side slopes
22 Restoration of benches to 186761.16 140070.87
proper shape
c
23 Bullah Pilling to prevent 15722.70 Nil
slipping of benches
24 Dry rubble packing 202499.00 122856.40
25 Extra lift during construction 262837.73 262837.73
of Haul Road D
26 Extra lift for excavated 360690.49 270517.88
materials dumped at quarry
edge.
27 Extra lift measured by 1396128.63 1047096.50
Surveyor but not paid E
28 Idle labour due to non-supply 145577.00 Nil
of working plan
29 Idle labour due to want of 76850.00 Nil
working site
30 Idle labour due to stoppage of 389288.00 194644.00
F
work by the respondent and
restriction of working area
31 Reparing of Haul road 10640.00 Nil
damaged by cyclone
32 Reconstruction of Damsala 25370.00 25370.00
Embankment G
33 Barbed wire fencing· 27315.00 Nil
34 Supply of electricity to work 72000.00 Nil
site and respondent's colony
Rs.70,56,573/55 Rs.52,56,847/36
H
838 SUPREME COURT REPORTS [2008] 1 S.C.R.

A 8.3)The last item of claim of the appellant, namely item 'r-
No.35 was for Rs.22,17,188/34 as escalation in cost between
1972 and 1975 on account of increase in cost of labour and
material, based on the General Price Index. The Arbitrator
determined the value of work executed after 1.4.1973 as
B Rs.52,96,967/-. He awarded an escalation of 32.6% on the said
value of work and awarded Rs.17,26,811.00 as escalation in
cost of labour and material.
"
8.4) Thus the Arbitrator awarded Rs.102,66,901.66 to the '\
appellant as detailed below (exclusive of interest), as against
c the claim of Rs.95,96,616/- (exclusive of interest) made by the
appellant:
(i) Amounts award in respect of Rs.32,83,243.00
claims 1 to 16
D (ii) Amounts awarded in respect of Rs.52,56,847.36
claims 17 to 34 (as against
•. f
claim of Rs.70,56,573/55)
(iii) Amount awarded in respect of Rs. 17,26,811.00
claim 35 as escalation (as against
E
claim of Rs.22,17,188/34)
Total award Rs.102,66,901.36
9. The contractor filed OS No.224/1986 for making the
award rule of the court, on the file of the Civil Judge, Sr. Division,
F Bhubaneswar. The objections to the said award filed by OMC ~ ..
were registered as Misc. Case No.5/1987. The said court, by
common judgment dated 21.3.1998, overruled the objections
and directed that the award of the arbitrator be made the rule of
the court and a decree be drawn in terms of the award.
G
10. Feeling aggrieved, OMC filed Misc. Appeal No.296/
1998, challenging the decision of the Civil Judge refusing to set
aside the award, directing a decree in terms of the award. The
...
contractor filed Misc. Appeal No.198/1998 and Civil Revision
No.109/1998 claiming future interest from the date of decree
H as the judgment of the Civil Judge was silent on that aspect.
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 839
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

-1! The High Court heard and disposed of the said appeals and A
revision petition by common judgment 15.10.1999. It allowed
Misc. Appeal No.296/1998 filed by OMC and dismissed M.A.
No.198/1998 and C.R. No.109/1998 filed by' the contractor. The
High Court held :
(i) The claim of the contractor was barred by limitation 8
and therefore the award was liable to be set aside .
.,

~
(ii) The arbitrator acted beyond his jurisdiction in
awarding huge amounts towards alleged extra work,
even though there was nothing to indicate that c
conditions contemplated in proviso to Clause 11
(relating to additional work) were satisfied.
(iii) Though the award purported to be a reasoned award,
the award in regard to Items 17, 18, 19 and 25 to 27
was not supported by any reason and therefore, the D
award was liable to be set aside .
.,. --.'.i

(iv) The award in respect of escalation in cost (item 35)
at the rate of 32.6% of the value of work was without
basis, (when the claim itself was for a lesser rate}, in
E
the absence of any provision in the contract for
escalation, amounted to legal misconduct.
(v) The award being in excess of the claim made by the
contractor shocked the judicial conscience of the
court. F
.. j
(vi) Interest could have been awarded by the arbitrator
only from the date of reference (6.10.1980) and could
not be awarded in regard to·any pre-reference period.
(vii) Though in the normal course, some of the issues G
would have necessitated remitting the matter to the
~-~
arbitrator for fresh consideration, it was not necessary
to remit the matter as the entire award was being set
aside on the ground of limitation.
The said decision of the High Court is challenged by the H
840 SUPREME COURT REPORTS (2008] 1 S.C.R.

A appellant in this appeal by special leave. r-
11. On the contentions urged, the following questions arise
for consideration :
(i) Whether the claim made before the arbitrator or any
B part thereof was barred by limitation?
(ii) Whether the award is liable to be set aside on the
ground of legal misconduct and the error apparent
on the face of the award?
c (iii) Whether the award is liable to be set aside on the
ground that the arbitrator exceeded his jurisdiction ?
(iv) To what relief the parties are entitled?
.Questions (i) and (ii) :
D 12. The Arbitrator held that the claims were not barred. He
held:
"In the case of a suit, the date on which the cause of action
arises is the date from which the limitation period starts.
Under section 20, it is the date on which the right to apply
E
accrues that determines the starting point. That starting
point does not coincide with the date on which the cause
of action for filing a suit arises. The same principle would
apply to an application under section 8 of the Act. ... The
claimant signed the final bill on 14.4.1977 under protest.
F
It is not correct to say that the claimant accepted the final
bill. ... All these factors show that negotiation was going
on and the matter was in a nebulous and fluid stage. The
committee gave its report in December, 1979. In March,
1980 some portion out of the money said to have been
G found due by the committee was paid on ad hoc basis.
Notice was given by the contractor on 14.6.80. So, the +•
dispute as to final bill still continues. Till the final bill is
prepared and accepted by the contractor, limitation would
not accrue. When the matter went to court in 1980, .it was
H
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 841
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

not barred by limitation ... " A
13. The High Court found that the work was completed on
15.6.1975, final measurement was taken on 16.6.1975 and the
final bill was signed by the contractor under protest on 14.4.1977
and therefore held that the cause of action for the contractor to
B
make a claim arose on 14.4.1977. According to the High Court,
as the notice invoking arbitration was issued on 4.6.1980 and
the petition under section 8(2) of the Act was filed thereafter,
beyond three years from 14.4.1977, the entire claim was barred
by limitation. The High Court further held that as the final bill was C
signed under protest by the contractor, it could be said that the
cause of action arose on a date subsequent to the date of
signing of the final bill. It further held that the fact that the
Departmental Committee considered the claims in 1979,
subsequent to the signing of the final bill under protest, did not
have the effect of saving/extending limitation in the absence of D
any acknowledgement in writing as required under section 18
of the Act.
14. Section 18 of the Limitation Act, 1963 deals with
effect of acknowledgement in writing. Sub-section (1) thereof E
provides that where, before the expiration of the prescribed
period for a suit or application in respect of any right, an
acknowledgement of liability in respect of such right has been
made in writing signed by the party against whom such right
is claimed, a fresh period of limitation shall be computed F
from the time when the acknowledgement was so signed.
The explanation to the section provides that· an
acknowledgement may be sufficient though it omits to specify
the exact nature of the right or avers that the time for payment
has not yet come or is accompanied by a refusal to pay, or is G
coupled with a claim to set off, or is addressed to a person
other than a person entitled to the right. Interpreting section
19 of the Limitation Act, 1908 (corresponding to section 18
of the Limitation Act, 1963) this Court in Shapur Fredoom
Mazda v. Durga Prosad Chamaria (AIR 1961 SC 1236), held: H
842 SUPREME COURT REPORTS [2008] 1 S.C.R.

A "... acknowledgement as prescribed by section 19 merely r-
renews debt; it does not create a new right of action. It is
a mere acknowledgement of the liability in respect of the
right in question; it need not be accompanied by a promise
to pay either expressly or even by implication.
B
The statement on which a plea of acknowledgement is
based must relate to a present subsisting liability though
the exact nature or the specific character of the said liability
may not be indicated in words. Words used in the
acknowledgement must, however, indicate the existence
c of jural relationship between the parties such as that of
debtor and creditor, and it must appear that the statement
is made with the intention to admit such jural relationship.
Such intention can be inferred by implication from the nature
of the admission, and need not be expressed in words. If
D the statement is fairly clear, then the intention to admitjural
relationship may be implied from it The admission in
question need not be express but must be made in
circumstances and in words from which the court can
reasonably infer that the person making the admission
E intended to refer to a subsisting liability as at the date of
the statement. Stated generally, courts lean in favour of a
liberal construction of such statements though it does not
mean that where no admission is made one should be
inferred, or where a statement was made clearly without·
F intending to admit the existence of jural relationship such
intention could be fastened on the maker of the statement
by an involved or far-fetched process of reasoning."
In construing words used in the statements made in writing
on which a plea of acknowledgement rests oral evidence
G
has been expressly excluded but surrounding
circumstances can always be considered .... The effect
of the words used in a particular document must inevitably
depend upon the context in which the words are used and
would always be conditioned by the tenor of the said
H
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 843
CORPN. LTD. & ANR. [RAVEENDRAN, J.)
~
document ..... A
15. It is now well settled that a writing to be an
acknowledgement of liability must involve an admission of a
subsisting jural relationship between the parties and a conscious
affirmation of an intention of continuing such relationship in
B
regard to an existing liability. The admission need not be in
regard to any precise amount nor by expressed words. If a
} defendant writes to the plaintiff requesting him to send his claim
for verification and payment, it amounts to an acknowledgement.
But if the defendant merely says, without admitting liability, it
would like to examine the claim or the accounts, it may not amount c
to acknowledgement. In other words, a writing, to be treated as
an acknowledgement of liability should consciously admit his
liability to pay or admit his intention to pay the debt. Let us
illustrate. If a creditor sends a demand notice demanding
payment of Rs.1 lakh due under a promissory note executed by D
"~ the debtor and the debtor sends a reply stating that he would
pay the amount due, without mentioning the amount, it will still
be an acknowledgement of liability. If a writing is relied on as an
acknowledgement for extending the period of limitation in
respect of the amount or right claimed in the suit, the E
acknowledgement should necessarily be in respect of the
subject matter of the suit. If a person executes a work and issues
a demand letter making a claim for the amount due as per the
final bill and the defendant agrees to verify the bill and pay the
~
·" amount, the acknowledgement will save limitation for a suit for F
recovery of only such bill amount, but will not extend the limitation
in regard to any fresh or additional claim for damages made in
the suit, which was not a part of the bill or the demand letter.
Again we may illustrate. If a house is constructed under the item
rate contract and the amount due in regard to work executed is G
>-_ __.,
Rs. two lakhs and certain part payments say aggregating to
Rs.1,25,0000/- have been made and the contractor demands
payment of the balance of Rs. 75,000/- due towards the bill and
the employer acknowledges liability, that acknowledgement will
be only in regard to the sum of Rs. 75,000/- which is due. If the H
844 SUPREME COURT REPORTS [2008] 1 S.C.R.

A contractor files a suit for recovery of the said Rs.75,000/- due in
regard to work done and also for recovery of Rs.50,000/- as
damages for breach by the employer and the said suit is filed
beyond three years from completion of work and submission of
the bill but within three years from the date of acknowledgement,
B the suit will be saved from bar of limitation only in regard to the
liability that was acknowledged namely Rs.75,000/- and not in
regard to the fresh or additional claim of Rs.50,000/-which was
t
not the subject matter of acknowledgement. What can be
acknowledged is a present subsisting liability. An
c acknowledgment made with reference to a liability, cannot
extend limitation for a time barred liability or a claim that was
not made at the time of acknowledgment or some other liability
relating to other transactions. Any admission of jural relationship
in regard to the ascertained sum due or a pending claim, cannot
D be an acknowledgement for a new additional claim for
damages.
16. We will now examine this case with reference to the
said principles. In this case, the cause of action accrued on
14.4.1977 when the final bill was signed by the contractor. It is
E not in dispute that the final bill showed that a sum of
Rs.17,69,608.73 was payable to the contractor (after giving
credit to the payments made and after withholding a sum of
Rs.7,45,953.83 as 5% security deposit). Towards the said sum
of Rs.17,69,608. 73. Rs.17 lacs was paid on 25.2.1976 and
F Rs.70,000/- was paid on 6.8.1977. The contractor had made
some claims and OMC wrote a letter dated 28.10.1978 in
regard to the pending claims of the contractor. In regard to
Kaliapani matters, OMC informed the contractor that it has been
decided to constitute a Committee which will go into the claims
G of the contractor so that the dues, if any, could be ascertained. It
t· •
further stated that on the details of the claims and payments
received being given to the contractor, OMC will settle up the
pending matters at the earliest. This clearly showed an intention
on the part of OMC to admit the jural relationship of contractor
H and employer and an intention to settle the pending claims after
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 845
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
·-'i being satisfied about them. Therefore, the letter dated A
28.10.1978 was clearly an acknowledgement in writing in so
far as the "pending claims" of the contractor. What were the
pending claims is made clear in the letter dated 16.11.1978
written by the contractor enclosing a statement showing that in
all, a sum of Rs.50, 15,820/-was due. The Committee constituted B
by the OMC examined these claims and admitted the claims
only to an extent of Rs.3,52,916/- as per its final report dated
~
7.12.1979. OMC paid Rs.3,50,000/- on 4.3.1980. In view of the
acknowledgement in writing on 28.10.1978 and payment of the
Rs.3,50,000/- on 4.3.1980, it can be said that in regard to the c
pending claims of the contractor, the limitation stood extended
by three years from 4.3.1980 and at all events by three years
from 28.10.1978. It is not in dispute that the contractor issued
the notice invoking arbitration on 4.6.1980 and immediately filed
a petition under section 8(2) of the Act for appointment of D
Arbitrator which was allowed on 6.10.1980. Therefore, whatever
" "!
claims were made before the Arbitrator which was part of the
claim of Rs.50, 15,820, was within time, having been made within
three years from 28.10.1978 and 4.6.1980.
17. In regard to the claims aggregating to Rs.95,96,616/- E
made in the claim statement filed before the Arbitrator, only
claims aggregating to Rs.28,32, 138 related to and formed part
of the said pending claim of Rs.50, 15,820. The appellant did
not make a claim in regard to the remaining Rs.21,83,692.
-..
,._
Therefore, out of the claim of Rs.95,96,616 made by the F
appellant before the Arbitrator, the claim for only Rs.28,32, 138/
- was not barred by limitation. The remaining claims of the
appellant aggregating to Rs.67,64,488/- out of the total of
Rs.95,96,616/- being fresh claims, were not "pending claims"
in respect of which the acknowledgement was made. Therefore G
·---+ the said fresh claims aggregating to Rs.67,64,488 made for
the first time in the claims statement filed on 27 .6.1986 were
clearly barred by limitation.
18. The learned counsel for the appellant subm.itted that
H
846 SUPREME COURT REPORTS [2008) 1 S.C.R.

A the limitation would begin to run from the date on which a Y-
difference arose between the parties, and in this case the
difference arose only when OMC refused to comply with the
notice dated 4.6.1980 seeking reference to arbitration. We are
afraid, the contention is without merit. The appellant is obviously
B confusing the limitation for a petition under section 8(2) of the
Arbitration Act, 1940 with the limitation for the claim itself. The
limitation for a suit is calculated as on the date of filing of the
suit. In the case of arbitration, limitation for the claim is to be t

calculated on the date on which the arbitration is deemed to
c have commenced. Section 37(3) of the Act provides that for the
purpose of Limitation Act, an arbitration is deemed to have been
commenced when one party to the arbitration agreement serves
on the other party thereto, a notice requiring the appointment of
an arbitrator. Such a notice having been served on 4.6.1980, it
D has to be seen whether the claims were in time as on that date.
If the claims were barred on 4.6.1980, it follows that the claims
J< ~
had to be rejected by the arbitrator on the ground that the claims
were barred by limitation. The said period has nothing to do
with the period of limitation for filing a petition under section
E 8(2) of the Act. Insofar as a petition under section 8(2), the cause
of action would arise when the other party fails to co.mply with
the notice invoking arbitration. Therefore, the period of limitation
for filing a petition under section 8(2) seeking appointment of
an arbitrator cannot be confused with the period of limitation for
making a claim. The decisions of this Court in lnder Singh Rekhi _.,
F ~

vs. Delhi Development Authority- (1988) 2 SCC 338, Panchu
Gopal Bose vs. Board of Trustees for Port of Calcutta - (1993)
4 SCC 338 and Utkal Commercial Corporation vs. Central
Coal Fields - (1999) 2 SCC 571 also make this position clear.

G 19. The appellant next contended, relying on section 18 of
Limitation Act, that as there was acknowledgement of liability in t .
regard to Contract No.30/F-2 in the letter dated 28.10.1978, ,_
and the notice invoking arbitration was issued on 4.6.1980 within
3 years from 28.10.1978, he was at liberty to make any claim in
H regard to the contract before the arbitrator, (even though such
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 847
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

claims had not been earlier made) and all such claims shall A
have to be treated as being within the period of limitation. Such
a contention cannot be countenanced. As noticed above, the
cause of action arose on 14.4.1977. But for the
acknowledgement on 28.10.1978, on the date of invoking
arbitration (4.6.1980), the claims would have been barred by B
time as being beyond the period of limitation. The limitation is
extended only in regard to the liability which was acknowledged
in the letter dated 28.10.1978. It is not in dispute that either on
28.10.1978 or on 4.3.1980, the contractor had not made the
fresh claims aggregating to Rs.67,64,488 and the question of c
such claims made in future for the first time on 27 .6.1986, being
acknowledged by OMC on 28.10.1998 did not arise.
20. Another aspect requires to be noticed. The contractor
was N.C.Budhraja. The original claim (which was the subject
matter of letter dated· 28.10.1978, subjected to examination by D
the Committee as per report dated 7.12.1979, and towards
which Rs.3,50,000/- was paid) made by the contractor N.C.
Budhraja aggregated to Rs.50, 15,820. ihe Appellant who is
his LR cannot for the first time make a fresh claim before the
Arbitrator, which was never made by N.C. Budhraja. The E
Appellant could only pursue the claim made by N.C. Budhraja,
which were pending or subsisting when N.C. Budhraja issued
the notice dated 4.6.1980
21. The arbitrator committed an error apparent on the face F
of the record and a legal misconduct in holding that the entire
claim was within time. His assumption that if the application
filed by the contractor in 1980 under section 8(2) of Arbitration
Act for appointment of an Arbitrator was in time, all claims made
in the claim statement filed before the Arbitrator appointed in G
such proceeding under section 8(2) are also in time, is patently
erroneous and is an error apparent on the face of the record.
The reasoning of the arbitrator that on account of the formation
of the Committee by OMC to scrutinize the pending claims in
pursuance of the OMC's letter dated 28.10.1978, and the
H
848 SUPREME COURT REPORTS [2008] 1 S.C.R.

t--
A payment of Rs.3,50,000/- on 4.3.1980 in pursuance of the
Committee giving its final report on 7.12.1979, every claim of
the contract including new claims which were made for the first
time in the claim statement filed in 1986 (as contrasted with
'pending claims' considered by OMC), are not barred by
B limitation, is also an error apparent in the face of the award.
Under section 18 an acknowledgement in writing extends the
limitation. Under section 19 a payment made on account of a
debt, enables a fresh period of limitation being computed. •
Therefore, the letter of OMC dated 28.10.1978 and the payment
c of Rs.3,50,000/- by OMC, would result in a fresh period of
limitation being computed only in regard to the 'existing debt' in
respect of which acknowledgment and payment was made.
Admittedly, as at that time, the claim of the contractor was only
for a sum of Rs.50, 15,820. Therefore, the letter dated
D 28.10.1978 and payment on 4.3.1980 extended the limitation
only in respect of the claims which were part of the said claim of
Rs.50, 15,820. Therefore, the fresh claims of Rs.67,64,488/- (out
'/i
~
•
of the total claim of Rs.95,96,616) is barred by limitation and
the award made in that behalf is liable to be set aside.
E Consequently, we hold that only that part of the claim before the
Arbitrator which was part of the claim of Rs.5015,820/- made
by the contractor, that was existing or pending as on 28.10.1978
and 4.3.1980, namely Rs.28,32, 128 (out of Rs.95,96,616) could
have been considered by the Arbitrator.
F ~
Question (iii) & (iv) : ..- '

22. In the claim statement filed before the arbitrator the
appellant showed the value of work done as Rs.2,45,85, 183.89
and the total payments made by OMC as Rs.149,88,566.90.
G Thus he claimed the balance due as Rs.95,96,616. Even while
calculating the interest on the amount outstanding, the claimant t· .
proceeded on the basis that he has received in all,
Rs.1,49,88,566.90 from OMC. The prayer before the arbitrator
in the claim statement was for the award of Rs.95,96,616 in
regard to the work done after giving credit of Rs.1,49,88,566.90.
H
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 849
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

~1 The categorical stand of the contractor and the appellant all along A
has been that OMC had paid in all a sum of Rs.149,88,566.90.
But during the course of the arbitration proceedings, the
appellant contended that out of Rs.149,88,566.90 received from
OMC and taken into credit towards this contract, a sum of
Rs.29,86,871 /-was being appropriated towards other contracts B
and therefore the payments made by OMC towards this contract
should be taken as Rs.120,01,695.90. The arbitrator has
... mechanically accepted the said altered stand contrary to the
claim statement and proceeded to determine the amount
payable by OMC, by taking the amount paid by OMC as c
Rs.120,01,659.90 towards this contract, even though the claim
statement showing that OMC had paid Rs.149,88,566.90
remained unaltered. The claim statement was not amended to
show that only Rs.120,01,659.90 had been received from OMC
in regard to the contract. When the claim made in the claim D
statement is after adjusting Rs.149,88,566.90 paid by OMC
,'/ towards the work, the arbitrator cannot proceed on the basis
that only Rs.120,01,659.90 was paid towards the work. As a
result though the Arbitrator found that the amount payable towards
claims at Items 1 to 16 was only Rs.365,862.18, he awarded E
Rs.32,83,243/- to the appellant, thereby increasing the liability
of OMC by Rs.29,86,871/-. By awarding more than what was
claimed in the claim statement (by showing a lesser amount as
having been paid by OMC though claim statement showed a
higher amount), the Arbitrator clearly exceeded his jurisdiction.
... ... F
The Arbitrator thus committed a legal misconduct and the award
to that extent is liable to be set aside. Therefore ·the amount
awarded in respect of claims at items 1 to 16 by the Arbitrator
is to be reduced by Rs.29,86,871/-.
23. The Arbitrator has exceeded his jurisdiction in another G
• 1 respect. The total claim made by the contractor before the
Arbitration was Rs.95,96,616/- (excluding interest). But the
amount awarded by the arbitrator towards the said claim was
Rs.1,02,66,901/36 (excluding interest). Making an award in
excess of the claim itself by Rs.6,70,285 is a clear act of H
850 SUPREME COURT REPORTS [2008] 1 S.C.R.

A exceeding the jurisdiction and amounts to a legal misconduct t-
and to that extent of Rs.6,70,285/- the award is invalid.
23. In regard to item 35, that is escalation in cost, the claim
in the claim statement was at the rate of 15% for the value of
work done in 1972-73, 28.5% in respect of value of work done
B
in 1973-74 and 32% in respect of work done in 1974-75. But
the Arbitrator has awarded escalation at a flat rate of 32.6% on
the entire cost of work done from 1.4.1973 and thereby awarded
an escalation in excess of what was claimed. This also amounts ~

to exceeding the jurisdiction and therefore legal misconduct.
c The award in excess of what was claimed was invalid.
25. The award of the arbitrator in respect of time barred
claim of Rs.67,64,488 is an error apparent on the face of the
award. Award of amounts in excess of claim (referred to in paras
D 22, 23 and 24) clearly amount to exceeding the jurisdiction. All
these, that is awarding amount towards time barred part of the
claim of Rs.67 ,64,488, and awarding amounts of Rs.29,86,871, )t

Rs.670,285 and escalation in cost at a rate more than what is
claimed, are all legal misconducts and the award in regard to
E those amounts are null and void. There is however some
overlapping of the aforesaid amounts.
26. Does it mean that the entire award should be set aside?
The answer is no. That part of the award which is valid and
separable can be upheld. That part relates to the claims which
F were validly before the Arbitrator, which were part of the existing
or pending claims of Rs.50, 15,820 and which were not barred
.. ~

by limitation. As stated above they were the claims which were
existing or pending in 1978, 1979 and 1980 (considered by the
committee and payment made by OMC) which were carried
G before the Arbitrator to an extent of Rs.28,32, 128. Only the
amounts awarded by the Arbitrator against those claims can
t •
be considered as award validly made in Arbitration, falling within
jurisdiction. They are clearly severable from the other portions
of the award. The particulars of the claims and corresponding
H awards are as follows:
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 851
CORPN. LTD. & ANR. [RAVEENDRAN, J.]

Item Description Item No. Contractor's Contractor's Award by A
No. in letter claim claim before Arbitrator
dated originally Arbitrator
16.11.78 made 16.11.78
7. Cutting and uprooting 5 20,869.32 11,352.00 Nil
trees
B
17. Extra head lead for 90 M 7(a) 2,61,926.40 28, 10, 144.00 24,50,042.88
(261,926.40)*
18. Removai of excavated 3 3,43,360.58 54,888.60 50,858.60
material from edge of
quarry
19. Unmeasured quantity of 4 8,44,360.00 8,48,372.64 6,64,720.00
c
excavation
20. Catch water drain 12 1,55,400.00 27,842.50 27,842.50
21. Removal of slipped earth 15 3,42,960.00 1,43,646.00 Nil
from side slopes
26. Extra lift for excavated
D
7(e) 42,370.00 3,60,690.49 270,517.88
material dumped at (42,370.00)*
quarry edge
27. Extra lift measured by 7{b} 1,25,642.00 13,96,128.67 10,47,096.50
surveyor (125,642.00)*
28. Idle labour (non supply 9(a) 1,45,575.00 1,45,575.00 Nil
E
of plans)
29. Idle labour (for want of 9(c) 75,450.00 76,850.00 Ni
site)
30. Idle labour {due to 9(b) & {d 2,61,205.00 3,89,288.00 194,644.00
stoppage of work and F
restriction of working
area)
31. Repairing road damaged 10(iii) 10,640.00 10,640.00 Nil
by cyclone
32. Reconstruction of 10(vii) 25,370.00 25,370.00 25,370.00 G
Embasskent
33. Wire fencing 13 1,05,000.00 27,315.00 Nil
34. Electricity supply to work 6(b} 72,000.00 72,000.00 Nil
site and colony
28,32, 128.30 13,93,373.50 H
852 SUPREME COURT REPORTS [2008] 1 S.C.R.

A [Note : The figures shown by (*) in the column 'Award by t'-
Arbitrator', refer to the maximum that could have been
awarded by the Arbitrator having regard to claim that was
not barred by limitation].
Thus the total amount awarded by the Arbitrator against
B claims which were not barred by limitation was only
Rs.13,93,373.50. The award to this extent is not open to
challenge. This part of the award does not suffer from any legal
misconduct. There is also no error apparent on the face of the
award in respect of the amount. It is not open to challenge.
c
27. The scope of interference is limited. In Hindustan
Construction Co. Ltd. vs. Governor of Orissa - (1995) 3 SCC
8, this Court held :
"It is well known that the court while considering the question
D whether the award should be set aside, does not examine
that question as an appellant court. While exercising the
said power, the court cannot reappreciate all the materials
on the record for the purpose of recording a finding
whether in the facts and circumstances of a particular case
E the award in question could have been made. Such award
can be set aside on any of the grounds specified in section
30 of the Act."
In Hindustan Tea Co. vs. Mis K. Sashikant & Co. - 1986
(Supp.) SCC 506, this Court observed thus :
F ..<\
"The Award is reasoned one. The objections which have ~

been raised against the Award are such that they cannot
indeed be taken into consideration within the limited ambit
of challenge admissible under the scheme of the Arbitration
G
Act. Under the law, the Arbitrator is made the final arbiter
of the dispute between the parties. The award is not open
to challenge on the ground that the Arbitrator has reached t ..
a wrong conclusion or has failed to appreciate facts."
Therefore, the Award of the Arbitrator has to be upheld to
H an extent of Rs.13,93,373.50.
J.C. BUDHRAJA v. CHAIRMAN, ORISSA MINING 853
CORPN. LTD. & ANR. [RAVEENDRAN, J.]
-~ 28. In view of the foregoing, we allow these appeals in A
part, set aside the judgment of the High Court and direct a
decree in terms of the award for a sum of Rs.13,93,373.50 with
interest at the rate of 12% P.A. from 1.8.1977 to date of award
(28.11.1986) and at the rate of 6% P.A. thereafter, that is from
29 .11.1986 till date of payment. Parties to bear their respective B
costs.
K.K.T. Appeals partly allowed.

' "

.. t