Delhi High Court Partly Sets Aside Arbitral Award Against Airports Authority Of India Over Limitation

The Delhi High Court has recently partly set aside an arbitral award against the Airports Authority of India, holding that claims not raised or specifically reserved in the contractor's 1999 correspondence could not be sustained years later in arbitration.

Justice Harish Vaidyanathan Shankar ruled that limitation may extend only to claims expressly articulated or reserved. It cannot apply to claims that were never mentioned in the relevant correspondence.

“Merely because certain objections in respect of penalty and escalation were subsequently resolved in the year 2005, it cannot be held that the limitation stood extended in respect of claims which were never raised, reserved, or acknowledged,” the Court held.

The dispute arose from a contract for construction of a composite structure and associated works at IGI Airport, New Delhi.

The contractor, Rajdeep Industries, raised its final bill on April 16, 1999. It was accepted under protest later that month.

On 16 July 1999, the contractor wrote to the Airports Authority of India objecting only to the imposition of a penalty under Clause 2 of the agreement and non-payment of escalation under Clause 10CC. The letter also contained a general reservation of the right to invoke arbitration.

No other claims were articulated in the July 1999 letter.

An arbitral tribunal later held that the final bill did not attain finality until 2005. It treated January 2005, when the penalty was waived and escalation was worked out, as the stage at which the bill became final. On that basis, it held that limitation commenced only in 2005 and allowed several claims.

The Airports Authority of India challenged the award under Section 34 of the Arbitration and Conciliation Act, contending that the final bill had crystallised in 1999 and that only penalty and escalation had been specifically reserved. It argued that other claims, some relating to events dating back to 1996, had never been raised in the 1999 correspondence and were therefore barred by limitation.

The contractor argued that its omnibus reservation of the right to invoke arbitration in the July 1999 letter was sufficient to preserve all claims.

Rejecting this contention, the Court held that what was decisive was what was recorded in the 1999 documents. Only those claims that were expressly raised or reserved could benefit from any extension of limitation.

“While limitations may stand extended in respect of claims expressly reserved, the same cannot apply to claims which were never articulated at all, at least from 1999 till 2005. Such claims are wholly time-barred,” the court observed.

The court further held that there was no evidence demonstrating acknowledgment, reservation, or extension of limitation in respect of the disputed claims. The Court held that the arbitrator's conclusion that limitation began only in 2005 was not backed by evidence and could not be upheld.

Referring to the Supreme Court's ruling in J.C. Budhraja v. Chairman, Orissa Mining Corporation Ltd., the Court reiterated that any acknowledgment extending limitation must relate specifically to the claim in question.

It held that allowing time-barred claims would conflict with the public policy of India.

Applying the doctrine of severability as laid down by the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., the court partly set aside the award in respect of six disputed claims. The remaining findings were left undisturbed.

The petition was allowed to that extent. No order as to costs.