STEEL AUTHORITY OF INDIA LTD. versus J.C. BUDHARAJA, GOVERNMENT AND MINING CONTRACTOR

Citation: [1999] SUPP. 2 S.C.R. 155 · Decided: 01-09-1999 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Appeal(s) allowed

Judgment (excerpt)

STEEL AUTHORITY OF INDIA LTD. 
A 
v. 
J.C. BUDHARAJA, GOVERNMENT AND MINING CONTRACTOR 
SEPTEMBER 1, 1999 
[D.P. WADHWA AND M.B. SHAH, JJ.] 
B 
Arbitration Act, 1940: Section 30. 
Misconduct-Jurisdictional error-Contract stipulated that no claim 
would be tenable for delay in handing over the work site-Contract only C 
provided extension of time for completion in case of such delay-Despite 
such prohibition, award given for losses due to delay in handing over work 
site-Held: Arbitrator has to function within the limits of the agreement and 
cannot exceed his jurisdiction-Whether or not the arbitrator has so functioned 
would be a jurisdictional fact and required to be gone into by the court- D 
Arbitrator may have jurisdiction to entertain a claim but does not have 
jurisdiction to pass award in respect 'of prohibited items of contract-I/ he 
does so it will be a jurisdictional error-Hence, the said award is, on the face 
of it, illegal. 
Arbitration-Disputes-Reference to-Period of limitation-Cause of 
action-Arising of-Contractor gave notice on 29-8-1979 demanding a E 
certain sum-No response and no payment from company-Contractor's right 
to receive damages not kept alive in subsequent supplementary agreement-
Instead contractor agreed to complete work within the stipulated time on a 
higher rate-Company wrote letter in [on 3.9.1983} repudiating the claim 
made by the contractor-No action to refer the dispute for arbitration taken p 
by contractor within 3 years from 29-8-1979-When dispute with regard to 
second agreement [dated 20.12.1980} arose in 1985 contractor gave notice 
for appointment of arbitrator and the matter was referred to arbitration-In 
that reference contractor raised the dispute pertaining to the first agreement-
Arbitrator appointed in December I 985 with reservation that the claim was 
barred by the period of limitation-Held: Cause of action arose on G 
29-8-1979, the date of notice of demand-Hence, Claim before the arbitrator 
in December 1985 barred by period of limitation-:-Letter written in 1983 
would not give fresh cause of action because on that date cause of action 
for recovering the amount was barred by the period of three years prescribed 
under Art. 137 of the Limitation Act-Under S. 3 of the Limitation Act it was H 
155 
'\ 
Cl 
156 
SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R. 
A the duty of the arbitrator to reject the claim as it was, on the face of it, barred 
by limitation-Limitation Act, 1963, Art. 13 7 and S. 3. 
Arbitration-4ward-Speaking or non-speaking-Contractor claimed 
damages for delay in handing over the work site-Arbitrator awarded damages 
and also gave reasons for it-Held: The reasons clearly reveal that the 
B award is a speaking award-Hence, court can go behind it. 
The predecessor of the appellant executed a contract with the 
predecessor of the respondent for certain construction within a wild life 
sanctuary. The agreement stipulated that no claim for delay in giving the 
C entire site or giving it gradually would be tenable and in such cases the 
appellant was only obliged to extend the time for completion of the work. 
The respondent raised a dispute on 29-8-1979 for losses incurred due 
to delay in handing over the work site but there was no response from the 
appellant and no payment was made. Thereafter a supplementary agreement 
D was executed between the appellant and the respondent in which it was 
nowhere stated that the respondent's .alleged right of getting payment for 
damages or losses suffered was kept alive. On the contrary, the respondent 
had agreed to complete the work within the time stipulated in the second 
agreement by charging some higher rate. The respondent had not sought 
E any reference of the aforesaid dispute within three years from the date when 
cause of action arose i.e., 29-8-1979. However, the appellant wrote a letter 
in 1983 repudiating the respondent's claim on account of damages or losses 
suffered by him. 
When a dispute arose with regard to the second agreement the 
F respondent gave a notice on 2-12-1985 to appoint an arbitrator and the 
matter was referred to arbitration. In that reference, the respondent raised 
certain claims relating to the work done under the first agreement. The 
appellant appointed an arbitrator with a specific reservation regarding the 
tenability, maintainability and validity of reference as also on the ground that 
G the claim was barred by the period of limitation and it pertained to excepte

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