M/S. EMM ENN ASSOCIATESversusCOMMANDER WORKS ENGINEER & ORS.

                        [2016] 5 S.C.R. 503


                  M/S. EMM ENN ASSOCIATES                               A
                                 v.
          COMMANDER WORKS ENGINEER & ORS.
                   (Civil Appeal No.7184 of2008)
                          JUNE 29, 2016                                 B

[ABHAY MANOHAR SAPRE AND ASHOK BHUSHAN, JJ.)
      Arbitration and Conciliation Act, 1996 - s. 11 - Work contract
- To appellant-contractor, by Government - After completion of
work, payment of undisputed part of final bill on 10.4.2001 - As
per the contract defect liability period was two years, during which
                                                                        c
recovery could be made from the contractor - On 23.2.2005
contractor served notice to the Government raising other claims
which were disputed - Claim denied - Letter by contractor to
Government for appoint111ent of arbitrator as per the contract -
Thereafter application uls.11 filed - Rejection of application by       D
the Chief Justice of High Court on the ground that the clai111 was
not a live clai111 and the notice dated 23.2.2005 was ti111e-barred -
On appeal, held: The Chief Justice since exercises judicial power
while deciding application u/s. 11, can examine the question as to
whether the claim survives or needs to be adjudicated - But a clai111
                                                                        E
can be held to be a dead claim only when the clai111 is evidently and
patently long time-barred and there is no need for any detailed
consideration of evidence - Jn the present case there was a dispute
which needed adjudication after looking into all relevant documents,
which could have been appropriately exa111ined by Arbitral Tribunal
- Case remitted to Designated Judge for appointment of the              F
arbitrator.
     Allowing the appeals and remitting the matters to
Designated Judge, the Court
      HELD: 1. The Chief Justice exercises the judicial power
while passing an order under Section 11 of the Arbitration and          G
Conciliation Act, 1996 and thus can examine the question as to
whether the claim which has been raised before him survives
and needs to he adjudicated. If Chief Justice finds that claim is a
dead claim, he can exercise jurisdiction in rejecting the
application. [Para 17] [509-B-C)                                        H
                               503
504           SUPREME COURT REPORTS                      [2016) 5 S.C.R.


A          SEP & CO. versus Patel Engineering Ltd and another
           2005 (4) Suppl. SCR 688 : (2005) 8 SCC 618 - relied
           on.
            2. An application under Section 11 of the Act is expected to
      contain pleading about the existence of a dispute and the applicant
B     is not expected to justify the claim or plead extensively in regard
      to limitation or production of document to demonstrate that claim
      is within time in proceeding under Section 11 and that issue should
      normally be left to the Arbitral Tribunal. Therefore, the Chief
      Justice may chose to hold a claim as a dead claim only when the
      claim is evidently and patently long time barred claim and there
c     is no need for any detailed consideration of evidence. [Paras 19
      and 20] [510-C-D, H; 511-A)
            Indian Oil Corporation Limited v. SPS Engineering
            Limited 2011 (2) SCR 512 : 2011 (3) SC 507 - relied
            on.
D
            3. In the present case, the appellant has also contended
      that there is a defect liability period of two years during which
      any recovery can be made from the contractor. Further the
      categorical case of the appellant was that final payment made at
      10.04.2001 was the final payment of the undisputed claim and
E     there were other claims of the appellant which were disputed.
      There being no adjudication with regard to disputed claim, the
      claim raised by notice dated 23.02.2005 cannot be said to be
      barred by time or a dead claim. [Para 21] [511-B-C]
            4. The examination of the additional materials brought on
 F    this appeal, d.oes indicate that the case required consideration of
      relevant bills and certificates and determination on the question
      as to whether the claim laid by appellant was a dead claim and
      was not a live claim depended upon scrutiny of relevant
      documents. The pleadings in the proceeding under Section 11 by
 G    the appellant were clearly to the effect that on 10.04.2001, he
      was paid only undisputed part and the appellant has reserved his
      right to raise claim to the disputed part. [Para 25] [513-A-B)
            5. Thus, there was a dispute which needed an adjudication
      after looking into all relevant documents, bills and certificates
      which could have been appropriately examined by Arbitral
H
   MIS. EMM ENN ASSOCIATES v. COMMANDER WORKS                                  505
                  ENGINEER & ORS.

Tribunal and the observation of the Chief Justice "As the appellant            A
has failed to prinw facie show this court that there was a live
claim of the appellant" is not correct. [Para 27] [513-D-E]
      6. It is apposite to remit the case to the High Court
(designated Judge) to pass consequential orders for appointment
of the arbitrator for deciding the disputes which have arisen                   B
between the parties. The appointment of the arbitrator may be
made in the first instance with the consent of the parties and if,
for any reason, it is not possible to do so then the Court will
appoint the arbitrator in its discretion. (Para 29) (513-G-H]
                         Case Law Reference                                     C
2005 ( 4) Suppl. SCR 688                   relied on        Para 16
2011 (2) SCR 512                           relied on        Para 18
        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7184 of
2008.                                                                           D
      From the Judgment and Order dated 12.03.2007 of the High Court
of Punjab and Haryana at Chandigarh in Arbitration Case No. 184 of
2006.
                                     WITH
        C. A. No. 7185 of 2008.
                                                                                E

        Petitioner-in-person.
     Yashank Adhyaru, Sr. Adv., 8. Krishna Prasad, Ms. Rashmi
Malhotra, Advs. for the Respondents.
        The Judgment of the Court was delivered by                              F
       ASH OK BHUSHAN, J. 1. These two appeals raising identical
questions oflaw have been heard together and are being decided by this
common judgment. For deciding both the appeals, it shall be sufficient
to refer to facts and pleadings in Civil Appeal No. 7184 of2008. Appeal
No. 7184 of 2008 has been filed against judgment of Chief Justice of            G
Punjab & Haryana High Court in Arbitration Case No. 184 of2006 by
which judgment learned Chief Justice has dismissed the application, filed
by appellant for referring the dispute to an arbitrator in exercise of power
under Section 11 of the Arbitration and Conciliation Act 1996 (hereinafter
referred to as 'Act').
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506            SUPREME COURT REPORTS                           [2016] 5 S.C.R.



A            2. Civil Appeal No. 7185 of2008 has also been filed against the
      identical judgment ofleatned Chief Justice in Arbitration Case No. 89 of
      2006 by which the application filed by the appellant for appointing an
      arbitrator has been dismissed.
            3. Brief facts giving rise to Appeal No. 7184 of2008 now need to
B     be noted.
             The appellant a partnership firm was allotted a contract on
      I 0.11.1998 for providing additional security fencing at Mullanpur. The
      work was completed on 10.7.2000. Work completion certificate was
      issued. Final bill was prepared on 20.2.2001 and the payment of final bill
c     was made to the petitioner on 10.04.2001. Payment of the undisputed
      part of the final bill was made by cheque dated 10.04.2001.
             4. Although Clause 67 of general conditions of contract
      contemplated for recovery from contractor in several contingencies one
      of which as referred in sub-Clause (t) was that if as a result of any audit
D     and technical examination, any over payment is discovered in respect of
      work done under this contract, the contractor shall on demand make
      payment of a sum equal to the amount of over-payment. Sub-Clause (g)
      further provided that the Government shall not be entitled to recover any
      over-payment beyond a period of two years from the date of payment
      of the undisputed portion of the final bill.
E
             5. Even though, two years period expired after payment of final
      bill, no demand for any recovery was issued by the Government.
      Contractor by letter dated 23.02.2005 served a notice stating that final
      bill amount as paid during April, 2001 did not include the payments due to
      contractor against several items which were claimed as per appendix A
 F    annexed to the notice.
             6. It was further stated that the decision be communicated within
      thirty days failing which it shall be assumed that the claim is disputed
      and contractor shall be left with no remedy except to seek adjudication
      by an arbitrator appointed in terms of the contract.
G
             7. The Garrison Engineer issued a letter dated 22.03.2005
      informing that contractor had signed the final bill without any protest and
      had given 'No Further Claim' certificate. Hence no arbitrable dispute
      exists. The claim now intimated after the lapse of a period of approx
      four years is baseless and hence denied.
H
   MIS. EMM ENN ASSOCIATES v. COMMANDER WORKS                                 507
           ENGINEER & ORS. [ASHOK BHUSHAN, J. ]

       8. A letter dated 24.03.2005 was written by the contractor to the      A
chief engineer in reference to notice dated 23.02.2005 with a prayer
that arbitrator under condition 70 of the Contract may kindly be appointed
to adjudicate the dispute. The appeilant thereafter filed an application
under Section 11 of the Arbitration Act before District Judge, Ropar.
The application was ultimately taken by Chief Justice of the High Court
                                                                              B
and by an order dated 12.03.2007, the application was rejected taking
the view that appel !ant's claim is not a live claim. Aggrieved against the
above judgment dated 12.03 .2007 in Arbitration Case No. 184 of2006,
Appeal No. 7184 of 2008 has been filed.
      9. Arbitration Case No. 89 of 2006 has also been filed by the
appellant seeking appointment of an arbitrator under Section 11 of the
                                                                              c
Act in the said case and also the work was completed on 23.09.2000
and the final bill was paid on 10.04.200 I. Notice along with list of claim
was sent by the appellant on 23.02.2005 i.e. on the same day when
notice in Arbitration Case No. 184 of2006 has been sent.
       I 0. Hon 'hie Chief Justice giving the same reasons rejected the       D
application in Arbitration Case No. 89 of 2006 holding that the claim
made by the appellant is not a live claim. Hon'ble Chief Justice by order
dated 12.03.2007 took the view that final bill has been paid on 10.04.2001,
the notice having been given only on 23.02.2005 the period oflimitation
was over. With regard to the Clause 67 of the contract, it was observed        E
by the Chief Justice that Embargo of two years as per sub-Clause (f)
and (g) is with regard to the right of the Government for effecting
recovery from the contractor which clause does not extend the period
of limitation in favourofthe contractor.
       11. Shri 0. P. Gupta, the partner of the appellant firm has appeared    F
in-person and made his submission. We have also heard the learned
counsel appearing for the respondents.
       12. The appellant's case is that the claim raised by contractor by
notice dated 23.02.2005, was not barred by time and was a live claim
which ought not to have been rejected by the Chief Justice in exercise         G
of his power under Section 11 of the Act. It is contended that the issues
as to whether the claim is barred by time are the issues which ought to
have been left for decision of arbitrator. It is contended that payment in
respect to the final bill made on 10.04.2001, was payment with regard to
undisputed amount. Apart from undisputed amount there were other
                                                                               H
508             SUPREME COURT REPORTS                            [2016] 5 S.C.R.



A     claims of the contractor and the 'No Liability' certificate given by the
      appellant was only with regard to undisputed claim. Payment made on
      10.04.2001 was the payment only in reference to undisputed claim and
      that in no manner precluded the appellant from raising claim.
             13. As per Clause 67 of the contract, there was two years period
B     for effecting any recovery from the contractor and when no claim against
      the contractor was raised during the aforesaid period, the appellant raised
      the claim for disputed amount which was not paid. The period of two
      years is defect liability period and it was clearly open for the appellant to
      raise the claim for disputed amount after expiry of the aforesaid period
      of two years.
c
             14. The respondents never adjudicated the disputed part of the
      final bill and after serving notice the appellant had rightly sought for
      adjudication by an arbitrator which application has been rejected by
      Hon'ble Chief Justice not on valid considerations.
D            15. Learned counsel appearing for the respondents supported the
      judgment of the Chief Justice and contends that for filing any application
      limitation is three years as per Article 137 of the Limitation Act, 1963.
      Final bill had been paid on I 0.04.2001, any application for any claim in
      respect to final bill ought to have been raised within three years. It is
      contended that the respondents have raised the preliminary objections in
 E    replyobjectingthe application for arbitration filed by the appellant, which
      has rightly been rejected by the Chief Justice.
             16. We have considered the submissions of both the parties and
      have perused the record, what is the nature of jurisdiction of the Chief
      Justice while deciding an application under Section 11 of the Act has
 F    elaborately been considered by Seven Judge Bench of this court in SBP
      & CO. versus Patel Engineering Ltd and another (2005) 8 SCC
      618. In para 4 7 of the judgment, conclusions were recorded by the
      larger Bench. Conclusion IV is relevant for the present case which is
      quoted as below:
 G           "4 7. We, therefore, sum up our conclusio11s as follows:
             (iv) Tile Chief Justice or the designated Judge will /lave tile
             right to decide tile prelimillary aspects as indicated in tile
             earlier part ofthis judgment. T/lese will be /tis own jurisdiction
             to entertain tlte request, tlte existence of a valid arbitration
 H           agreement, tlte existence or otherwise of a live claim, tlte
    MIS. EMM ENN ASSOCIATES v. COMMANDER WORKS                                 509
          ENGINEER & ORS. [ASHOK BHUSHAN, J.]

       existence of tire condition for tire exercise of liis power and         A
       on tire qualifications oftlte arbitrator or arbitrators. Tire Cltief
       Justice or tire designated Judge would be entitled to seek tire
       opinion of an institution in tlte matter of nominating an
       arbitrator qualified in terms of Section 11 (8) of tlte Act if tlte
       need arises but tlte order appointing tlte arbitrator could only
                                                                                B
       be tliat of tire Cltief Justice or tlte designated Judge."
        17. The Chief Justice exercises the judicial power while passing
 an order under Section 11 of the Act thus can examine the question as to
 whether the claim which has been raised before him survives and needs
 to be adjudicated. It goes without saying that if Chief Justice finds that
 claim is a dead claim, he can exercise jurisdiction in rejecting the           c
 application.
         18. A two Judge Bench of this court in Indian Oil Corporation
. Limited vs. SPS Engineering Limited, 2011 (3) SCC 507, had
  occasion to· consider what is a 'live claim' within the meaning of Section
  11 of the Act. Elaborating the jurisdiction of the Chief Justice, under       D
  Section 11 of the Act following was laid down by this court in para 14 of
  the judgment:
        "14........ Tlte Chief Justice or llis designate may ltowever
        clroose to decide wlretlrer tire claim is a dead (long-barred)
        claim or wlretlter tlte parties !rave; by recording satisfaction,       E
        exhausted all riglrts, obligations and remedies under tlte
        contract, so tltat neither tile contract nor tlte arbitration
        agreement survived. Wiren it is said tllat tile Cllief Justice or
        llis designate may clloose to decide wltetller tile claim is a
        dead claim, it is implied tlrat Ile will do so only wllen tile claim    F
        is evidently and patently a long time-barred claim and tllere
        is no need for any detailed consideration of evidence. We may
        elucidate by an illustration: if tile contractor makes a claim a
        decade or so after completion of t/1e work wit/tout referring to
        any acknowledgment of a liability or otlter factors tltat kept
        tile claim alive in law, and tile claim is patently long time-          G
        barred, tile Cllief Justice or llis designate will examine
        wltetller tlte claim is a dead claim (tllat is, a long time-barred
        claim). On tile otlter lland, if tile contractor makes a claim
        for payment, beyond tllree years of completing of tile work
        but say wit/tin jive years of completion of work, and alleges
                                                                                H
510             SUPREME COURT REPORTS                           [2016] 5 S.C.R.



A           that tile final bill was drawn up and payments were made
            within three years before tile claim, the Court will not enter
            into a disputed question whether tile claim was barred by
            limitation or not. Tile Court will leave tile matter to the decision
            ofthe Tribunal. Iftile distinction between apparent and obvious
            de(l(/ claims, and claims involving disputed issues of limitation
B
            is not kept in view, tile Chief Justice or his designate will end
            11p deciding tile question oflimitation in all applications under
            Section 11 of tile Act."
              19. Further this court has observed that an application under
      Section 11 of the Act is expected to contain pleading about the existence
c     of a dispute and the applicant is not expected to justify the claim or plead
      extensively in regard to limitation or production of document to
      demonstrate that claim is within time in proceeding under Section 11 and
      that issue should normally be left to the Arbitral Tribunal. Following was
      observed in para 15:
D            "15. An 11pplicatio11 111uler Section 11 of tile Act is expected
             to ctmtain ple11di11gs about the exi.~te11ce of 11 dispute mu/ tile
             existence of <Ill arbitration agreement to decide suclt disp11te.
             Tlte applimnt is 1101 expected to justify tile claim or plead
             exhaustively in regard to limitlllion or produce documents to
E            denwmtrate tli11t tile claim is wit/till time in a proceeding
             under Section 11 of tlte Act. Tll11t is~·ue sl1011/d normally be
             left to tlieArbitral Tribunal. If tile CltiefJustice or his designate
             is of tile view that in addition to examining whether there is
             wi arbitration agreement between tile parties, lie should
             consider tile issue wlletller tlte claim is a dead one (long time-
F            barred) or whether there has been satisfaction of mutual rights
             and obligation under the contract; lie should record his
             intention to do so and give aJI opportuJ1ity to tile parties to
             place their materials OJI such issue. UJ1less tile parties are
             put OJI notice that suclt an il·sue will be examined, they will be
G            11J1der tlte impression that only questions of jurisdiction aJ1d
             existence of arbitratioJI agreement between tile parties will
             be considered in such proceedinJ:S."
         20. From the above, it is clear that Chief Justice may chose to hold a
      claim as a dead claim only when the claim is evidently and patently long
H     time barred claim and there is no need for any detailed consideration of
   M/S. EMM ENN ASSOCIATES v. COMMANDER WORKS                               511
         ENGINEER & ORS. [ASHOK BHUSHAN, J. ]

evidence. An illustration have been given in para 14 as extracted above.     A
The above illustration becomes relevant for the facts of the present
case. In the present case also, the appellant has raised the claim beyond
the three years of completing of the work but within five years of
completion of the work.
       21. In the present case, the appellant has also contended that        B.
there is a defect liability period of two years during which any recovery
can be made from the contractor. Further the categorical case of the
appellant was that final payment made at 10.04.200 I was the final
payment of the undisputed claim and there were other claims of the
appellant which were disputed and the payment received on 10.4.2001
was with regard to undisputed claim. There being no adjudication with        c
regard to disputed claim the claim raised by notice dated 23.02.2005
cannot be said to be barred by time or a dead claim.
      22. In the present appeal by IA No. 03 of2012, the appellant has
brought certain additional materials for consideration of the Court. By
annexure 16 certain certificates which were given by the contractor on       D
20.02.2001 that is when the final bill was prepared, has been brought on
record. The payment was made by cheque dated I 0.04.200 I and para
3/4 of the certificate filed at the 2nd page of the annexure 16 states as
follows:
      "3. Printed Certificate signed by tlte petitioner at tlte time of      E
      receiving payment of tile undisputed part of tile Final Bill.
      Received Rs. 575321-. Tltis payment is in full and final
      settlement of all money due under C WE/AF CHD I CHD-51
      98-99 and I have no f.urt/ier claim in respect of tlte
                                                                             F
                                                                    Sd/-
                                                          Contractor"
      "4. Payment by Clteque of tlte undisputed part of tile Final
      Bill made by tlte dispersing officer, mentio11ed-lierein-below:-
                                                                             G
      Clieq11e No. H - 916930 dated 10.4.2001 for Rs. 575321-
      issued in favour of Mis Emm Emt Associates on SB/ AF
      Cllandigarli Treasury.
                                                  Sd/-
                                     Signature of Dispersing Office"         H
 512            SUPREME COURT REPORTS                         (2016] 5 S.C.R.


  A          .23. Para 04 of the above certificate as quoted above clearly
       mentions payment by cheque of the undisputed part of the final bill and
       above certificate also clearly indicates that payment on I 0.04.200 I was
       made of the undisputed part of the final bill which presupposes that
       there are certain other claims which are disputed. Clause 67 of the
       contract entered between the parties also uses expressions "undisputed
_,_B
       portion of the Final Bill"
              24. Appellant had relied on Clause 67 which contains a heading
       "Recovery From Contractor'' under sub-Clause (t) and (g) which is to
       the following effect:

  c          (/) If, as a result of sucft audit and tecftnica/ examination,
             any over-payment is discovered in respect of tfte work done
             under tftis Contract, tfte contractor sftall on demand make
             payment of a sum equal to tfte amount of over-payment or
             agree for effecting necessary adjustment from any amounts
             due to ftim by Government. If ftowever, lie refuses or neglects
  D          to make tfte payment on demand or does not agree for
             effecting adjustment from any amounts due to ftim,
             Government sltal/ be entitled to take action as in sub-para (a)
             ltereinbefore. If as a result of suclt audit and tee/mica/
             examination any under payment is discovered, tlte amount
  E          of under payment slta/l be duly paid to tlte Contractor by
             Government.
             (g) Provided, tltat, not/ting ltereinbefore contained s/1a//
             entitled tlte Government to recover any over-payment in
             respect of any price agreed between tlte C. W.E or tlte G.E.
  F          and tlte Contractor under tfte circumstances specifically
             prescribed for suclt metftod of assessment and tltilt tlte said
             rigftt oftlte Government to adjust over-payment from any sum
             due or from any sum wlticlt may become due to tlte Contractor
             or from Security Deposit or Security Bond amount and adjust
             under payment, sltall not extend beyond a period of two years
  G          from tlte date of payment of tfte undisputed portion of tile
             Final Bill or in tile case of minus Bill, from tile date, tile net
             amount of tile final bill is communicated to tlte Contractor. "
            25. In sub-Clause (g) the period of two years under which the
       Government is entitled to make recovery is "from the date of payment
  H
   MIS. EMM ENN ASSOCIATES v. COMMANDER WORKS                                  513
         ENGINEER & ORS. [ASHOK BHUSHAN, J. ]

of the undisputed portion of the final bill". The examination of the           A
additional materials brought on this appeal, does indicate that the case
required consideration of relevant bills and certificates and determination
on the question as to whether the claim laid by appellant was a dead
claim and was not a live claim depended upon scrutiny of relevant
documents. The pleadings in the proceeding under Section 11 by the
                                                                                B
appellant were clearly to the effect that on 10.04.200 I, he was paid only
undisputed part and the appellant has reserved his right to raise claim to
the disputed part.
       26. In view of the Division Bench judgment in Indian Oil
Corporation Ltd. supra para 14 as extracted above, the present was
the case which ought to have been left for the decision by the Tribunal.        c
We, however, have proceeded further to examine the claim raised by
the appellant in his notice dated 23.02.2005. The pleadings of the appellant
are categorical to the effect that the final payment made on 10.04.2001
was only with regard to undisputed portion and he has reserved his right
to raise claim with regard to other disputed claims.                            D
       27. The disputed claims having never been adjudicated, we are of
the view that there was a dispute which needed an adjudication after
looking into all relevant documents, bills and certificates which could
have been appropriately examined by Arbitral Tribunal and the observation
of the Chief Justice "As the appellant has failed to prima facie show this      E
court that there was a live claim of the appellant" does not commend us.
       28. The claim raised by petitioner in the facts of the case could
not have been said to be a dead claim. Especially in view of the additional
documents which have been placed before us by IA No. 03 of2012. We
are thus of the view that the order dated 12.03 .2007 passed in Arbitration     F
Case No. 184 of 2006 and 89 of 2006 deserves to be set-aside.
       29. As a consequence thereof, the application made by the appellant
under Section 11 of the Act is allowed. We, however, consider it apposite
to remit the case to the High Court (designated Judge) to pass
consequential orders for appointment of the arbitrator for deciding the         G
disputes which have arisen between the parties. The appointment of the
arbitrator may be made in the first instance with the consent of the
parties and if, for any reason, it is not possible to do so then the Court
will appoint the arbitrator in its discretion. It be done within .one month
from the date of the parties appearance.
                                                                                H --
514             SUPREME COURT REPORTS                          [2016] 5 S.C.R.



A           30. Parties to appear before the designated Judge in the High
      Court on 25 .07 .2016 to enable the Court to pass appropriate consequential
      order as directed above. Both the appeals are accordingly allowed.
      Kalpana K. Tripathy                                        Appeals allowed.


B