MEMORIAL ON BEHALF OF THE PETITIONER

TC-

BEFORE THE HON’BLE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3699 OF 2006
Citation: AIR 2016 SUPREME COURT 861

IN THE MATTER OF

RASHTRIYA ISPAT NIGAM LTD...................................................................... APPELLANT(S)

VERSUS

M/S. PRATHYUSHA RESOURCES & INFRA PRIVATE LIMITED AND ANR.

..................................................................................................................................RESPONDENT(S)

Submission by Ajinkya Vivek Ekhe

3rd LL.B.
Rollno.-

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 MEMORIAL ON BEHALF OF THE PETITIONER

TABLE OF CONTENTS

1. INDEX OF AUTHORITIES ……………………………………………...

2. LIST OF ABBREVIATIONS …………………………………………...
3. STATEMENT OF JURISDICTION ……………………………………
4. STATEMENT OF FACTS ……………………………………………….
5. ISSUES RAISED …………………………………………………………..
6. SUMMARY OF ARGUMENTS ………………………………………….
7. ARGUMENT ADVANCED
• Whether the claims made by the respondent are barred by the law of limitation,
specifically assessing the applicability of Article 137 or Article 18 of the Limitation
Act, 1963, in the context of the contract in question.
• When did the cause of action arise concerning the respondent's claims regarding the
determination of the base year for calculating escalation? This involves an
examination of the correspondence exchanged between the parties and the relevant
timelines.
• Whether the arbitration award issued by the Arbitration Tribunal is valid and
enforceable, particularly concerning the findings on the base year for escalation and

the calculations submitted in the final bill by the respondent.

PRAYER ………………………………………………………………………..

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 MEMORIAL ON BEHALF OF THE PETITIONER

INDEX OF AUTHORITIES

LEGISLATION

➢ Indian Limitations Act, 1963

➢ Code of Civil Procedure,1908

CASES REFERRED

➢ State of Orissa vs. Damodar Das (1996) 2 SCC 216

➢ Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. (2003) 5 SCC 705
➢ Union of India vs. Momin Construction Company (1999) 8 SCC 556

BOOKS REFERRED
➢ Civil Procedure Code (CPC) with Limitation Act by M. P. Jain
➢ Commentary on the Civil Procedure Code by S. M. Shah
➢ The Civil Procedure Code, 1908 by C. K. Takwani
➢ The Limitation Act, 1963 by S. C. Tripathi
➢ Limitation Act, 1963: A Comprehensive Commentary by B. S. D. Prasad

LAW LEXICON AND DICTIONARIES

➢ Bryan A. Garner, BLACK’S LAW DICTIONARY, (2nd ed., 2004).

➢ Justice R.P. Sethi, SUPREME COURT ON WORDS AND PHRASES, (2nd ed.,
2004).
➢ Webster’s UNIVERSAL DICTIONARY, (1st ed., 1993).

LEGAL DATABASES

1. http://www.indiancaselaws.org

2. http://www.judic.nic.in

3. http://www.lexisnexis.com

4. http://www.scconline.co.in

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 MEMORIAL ON BEHALF OF THE PETITIONER

LIST OF ABBREVIATIONS

AIR All India Reporter

J. Justice

HC High Court

SC Supreme Court

& And

GOVT Government

ART. Article

HON’BLE Honorable

ANR Another

SCC Supreme Court Cases

SCR Supreme Court Report

CONST. Contitution of Republic

P. Page

ORS Others

CO. Company

V. Versus

NO. Number

CORP. Corporation

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 MEMORIAL ON BEHALF OF THE PETITIONER

STATEMENT OF JURISDICTION

This Honorable Court has jurisdiction to entertain the present appeal under Article 136 of the
Constitution of India, which empowers the Supreme Court to grant special leave to appeal against
any judgment, decree, or order made by any court or tribunal in India. The present appeal is directed
against the judgment and order dated December 16, 2005, passed by the Division Bench of the High
Court of Judicature for Andhra Pradesh at Hyderabad, which upheld the arbitration award despite the
objections raised by the Appellant under Section 34 of the Arbitration and Conciliation Act, 1996.

The appeal is also maintainable under Section 37 of the Arbitration and Conciliation Act, 1996,
which provides for appeals against certain orders of the High Court in arbitration matters,
particularly concerning the confirmation of arbitration awards and the application of limitation
periods. The issues raised in this appeal pertain to substantial questions of law regarding the
interpretation of the Limitation Act and the enforceability of arbitration agreements, thereby making
it appropriate for consideration by this Honorable Court.

In light of the aforementioned provisions, this Honorable Court possesses the requisite jurisdiction to
hear and adjudicate upon the present appeal.

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 MEMORIAL ON BEHALF OF THE PETITIONER

STATEMENTS OF FACTS

1. Rashtriya Ispat Nigam Ltd., the appellant, is a Government of India Undertaking known as
Visakhapatnam Steel Plant, engaged in the manufacture and sale of steel products and pig
iron.
2. The appellant floated a tender on 31.03.1992 for the transportation of pig iron from its
Visakhapatnam Steel Plant to the Visakhapatnam Port area.
3. M/s. Prathyusha Resources & Infra Pvt. Ltd., the respondent, was the successful bidder and
received a work order on 28.07.1992.
4. An agreement was executed between the appellant and the respondent on 24.02.1993,
initially set to expire on 31.03.1993, but was extended multiple times until the work was
completed on 23.10.1997.
5. A dispute arose regarding the rate of escalation based on whether the base year should be
1992 or 1994, leading the respondent to submit a final bill with three annexures, of which
only two were accepted by the appellant.
6. The Arbitration Tribunal was formed, which decided five issues in favor of the respondent,
ruling that the base year was 1992 and that the bar of limitation did not apply.
7. The appellant challenged the arbitration award in the District Court under Section 34 of the
Arbitration Act, 1996, which initially set aside the award on the grounds of limitation.
8. The respondent appealed to the High Court under Section 37 of the Arbitration Act, which
reversed the District Court's decision and upheld the arbitration award.
9. The appellant contended that the notice for arbitration was beyond the limitation period,
arguing that Article 18 of the Limitation Act should apply, stating the right to sue accrued
upon the completion of the contract on 23.10.1997.
10. A civil appeal was subsequently filed in the Supreme Court challenging the judgment and
order of the High Court.

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 MEMORIAL ON BEHALF OF THE PETITIONER

ISSUES RAISED

ISSUE 1

Whether the claims made by the respondent are barred by the law of limitation, specifically
assessing the applicability of Article 137 or Article 18 of the Limitation Act, 1963, in the
context of the contract in question.

ISSUE 2

When did the cause of action arise concerning the respondent's claims regarding the
determination of the base year for calculating escalation? This involves an examination of the
correspondence exchanged between the parties and the relevant timelines.

ISSUE 3

Whether the arbitration award issued by the Arbitration Tribunal is valid and enforceable,
particularly concerning the findings on the base year for escalation and the calculations
submitted in the final bill by the respondent.

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 MEMORIAL ON BEHALF OF THE PETITIONER

SUMMARY OF ARGUMENTS

ISSUE 1

Whether the claims made by the respondent are barred by the law of limitation,
specifically assessing the applicability of Article 137 or Article 18 of the Limitation Act,
1963, in the context of the contract in question.

It is humbly submitted that the claims made by the respondent are barred by limitation under
Article 18 of the Limitation Act, 1963, which applies to work contracts. The right to sue accrued
upon the completion of the contract on 23.10.1997, and the respondent issued the arbitration
notice after the limitation period had expired. The High Court erroneously applied Article 137,
which governs residuary matters. Since the arbitration notice was issued beyond the permissible
limitation period, the claims are time-barred, and the High Court's application of Article 137 is
flawed.

ISSUE 2

When did the cause of action arise concerning the respondent's claims regarding the
determination of the base year for calculating escalation? This involves an examination of
the correspondence exchanged between the parties and the relevant timelines.

The cause of action arose after the completion of the contract on 23.10.1997, and not during the
earlier correspondence in 1996. The dispute became actionable only after the final bills were
raised in 1998. Citing State of Orissa vs. Damodar Das [(1996) 2 SCC 216], it is submitted that
the cause of action accrues when the final bill is submitted and disputed. Therefore, the real
dispute only emerged after the final submission of bills in 1998, making the respondent’s claim
time-barred.

ISSUE 3

Whether the arbitration award issued by the Arbitration Tribunal is valid and
enforceable, particularly concerning the findings on the base year for escalation and the
calculations submitted in the final bill by the respondent.

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It is humbly submitted that the arbitration award is not valid as it misapplied the law of limitation
and incorrectly determined the base year for escalation. The Tribunal’s decision to use 1992 as the
base year was contrary to the contractual terms. Referring to Oil and Natural Gas Corporation Ltd.
vs. Saw Pipes Ltd. [(2003) 5 SCC 705], an arbitration award can be set aside if it conflicts with the
terms of the contract or Indian law. Moreover, the arbitration was invoked after the limitation period,
rendering the award unenforceable as held in Union of India vs. Momin Construction Company
[(1999) 8 SCC 556].

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 ARGUMENTS ADVANCED
ISSUE 1

Whether the claims made by the respondent are barred by the law of limitation, specifically
assessing the applicability of Article 137 or Article 18 of the Limitation Act, 1963, in the
context of the contract in question.

It is humbly submitted before this Honorable Court that the present appeal arises from the dispute
between the appellant, Rashtriya Ispat Nigam Ltd., and the respondent, M/s. Prathyusha Resources &
Infra Pvt. Ltd., concerning the calculation of the rate of escalation in a work contract. The arbitration
award, confirmed by the High Court of Judicature for Andhra Pradesh, has raised significant legal
issues that merit the intervention of this Honorable Court. The appellant seeks to address these issues
concerning the law of limitation, the cause of action, and the validity of the arbitration award, as
discussed below:

It is also submitted that the appellant has consistently maintained that the claims made by the
respondent were barred by the law of limitation. The appellant asserts that the limitation period
applicable in this case is governed by Article 18 of the Limitation Act, 1963, which applies to work
contracts. The appellant contends that under Article 18, the right to sue accrued upon the completion
of the contract, i.e., on 23.10.1997, when the work was fully executed and completed.

The respondent, however, issued a notice for arbitration after the limitation period had expired. The
appellant submits that the High Court erroneously applied Article 137 of the Limitation Act, which
governs residuary matters, rather than the specific provision applicable to work contracts under
Article 18. It is submitted that the Supreme Court in a catena of judgments has held that the right to
sue accrues when the contract is completed, not when preliminary disputes arise. Therefore, the
application of Article 137 by the High Court is fundamentally flawed. It is worth noting that the
arbitration notice was issued only after the limitation period under Article 18 had lapsed, making the
respondent’s claims time-barred.

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 Issue 2

When did the cause of action arise concerning the respondent's claims regarding the
determination of the base year for calculating escalation? This involves an examination of the
correspondence exchanged between the parties and the relevant timelines

It is humbly submitted before this Honorable Court that the cause of action in the present case did
not arise from the exchange of letters in 1996, as contended by the respondent, but instead, upon the
completion of the contract on 23.10.1997. This position is supported by established legal principles
consistently upheld by this Honorable Court. The appellant respectfully submits that the mere
existence of preliminary discussions or correspondence prior to the completion of the contract does
not constitute a crystallized cause of action. The real dispute only emerged when the contractual
obligations were fully performed, and the final bills were submitted and contested by the parties.

I. Principle of Cause of Action

It is a well-settled principle that the cause of action arises when there is a definitive assertion of a
right by one party, and a corresponding denial or refusal by the other party. This legal principle has
been reaffirmed by this Honorable Court in numerous judgments. In the present case, while
differences over the base year for calculating escalation may have surfaced during the
correspondence exchanged in 1996, these differences were not final or conclusive as the contract was
still ongoing at that time. It is respectfully submitted that the dispute did not become actionable until
after the final bills were raised in 1998, following the completion of the contractual work on
23.10.1997.

The contract in question was for the transportation of pig iron and was extended several times until
the final completion on 23.10.1997. The appellant submits that until the work was completed and all
obligations under the contract were performed, there could be no conclusive claim or denial from
either party. The respondent’s claim for escalation based on the base year 1992 was not finalized
until the submission of the final bills. The appellant, upon receiving the final bills, rejected the
respondent’s claim for escalation, and it is only at this stage that the real dispute emerged, thereby
giving rise to a valid cause of action.

II. State of Orissa vs. Damodar Das [(1996) 2 SCC 216]

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In the case of State of Orissa vs. Damodar Das [(1996) 2 SCC 216], this Honorable Court laid down
the guiding principle regarding the accrual of the cause of action in contractual disputes. The Court
held that “the cause of action accrues when the final bill is submitted and disputed by the other
party.” This judgment is directly applicable to the present case, where the final bill was submitted by
the respondent in 1998, and the dispute arose when the appellant refused to accept the calculations
made by the respondent.

In Damodar Das, the Supreme Court recognized that prior discussions or disagreements over the
execution of a contract do not constitute a cause of action until the work is completed and the final
demand for payment is made and denied. This Honorable Court observed that the submission of the
final bill marks the point when the parties are definitively asserting and denying their respective
rights. Following this reasoning, it is humbly submitted that the respondent’s claim for escalation
based on the 1992 base year only became actionable after the final submission of bills in 1998, and
not during the earlier correspondence in 1996.

III. The Error of the High Court

It is respectfully submitted that the High Court, in upholding the arbitration award, erred in
determining that the cause of action arose in 1996 based on the correspondence between the parties.
The appellant contends that these letters reflected ongoing discussions and not a definitive denial of
rights. The contract was still being executed, and the final calculations for escalation were yet to be
determined.

The High Court, in its judgment, relied on an incorrect assessment of the facts by concluding that the
cause of action arose during the 1996 correspondence. However, the appellant submits that the
correct interpretation of the facts and the law indicates that the cause of action arose upon the
completion of the contract and the submission of final bills in 1998, when the appellant formally
rejected the respondent’s claim for escalation. By applying the principle laid down in State of Orissa
vs. Damodar Das, it is clear that the real cause of action did not accrue until after 23.10.1997, and
the arbitration notice issued by the respondent was therefore beyond the permissible limitation period
under the Limitation Act, 1963.

IV. Consequence of the Late Notice for Arbitration

It is further submitted that the arbitration notice issued by the respondent was time-barred under the
Limitation Act. The appellant submits that since the cause of action arose after the completion of the
contract and the submission of the final bills in 1998, the respondent was required to issue a notice

13
for arbitration within the limitation period prescribed by law. The failure to do so has rendered the
claim barred by limitation, and the continuation of the arbitration proceedings was unlawful. The
appellant respectfully contends that the High Court's failure to properly consider the issue of
limitation resulted in an incorrect judgment in favor of the respondent.

In light of the foregoing, it is humbly submitted that the real cause of action in the present case arose
only after the final submission of bills in 1998 and not during the earlier correspondence in 1996.
The arbitration notice issued by the respondent was, therefore, time-barred, and the High Court erred
in upholding the arbitration award. The appellant prays that this Honorable Court set aside the
judgment of the High Court and the arbitration award, and allow the appeal on the grounds that the
claim was barred by limitation.

ISSUE 3

Whether the arbitration award issued by the Arbitration Tribunal is valid and enforceable,
particularly concerning the findings on the base year for escalation and the calculations
submitted in the final bill by the respondent.

It is humbly submitted that the arbitration award, upheld by the High Court, is not valid and
enforceable due to the fundamental misapplication of the law of limitation and the incorrect
determination of the cause of action. The appellant respectfully submits that the Arbitration Tribunal
exceeded its jurisdiction by allowing claims that were barred by the law of limitation and by
endorsing an escalation formula that was not in accordance with the contractual terms.

The decision of the Tribunal regarding 1992 as the base year was flawed, as it overlooked key
contractual provisions and timelines. The appellant submits that the Supreme Court has repeatedly
held that arbitration awards must adhere to the terms of the contract. In Oil and Natural Gas
Corporation Ltd. vs. Saw Pipes Ltd. [(2003) 5 SCC 705], the Supreme Court ruled that "an arbitral
award can be set aside if it is in conflict with the terms of the contract or the fundamental policy of
Indian law." The appellant contends that the Tribunal's award is contrary to the express terms of the
contract and must be set aside on this basis.

Incorrect Invocation of Arbitration

It is humbly submitted that the arbitration proceedings themselves were invoked incorrectly by the
respondent, as the limitation period had already expired by the time the notice for arbitration was
issued. The Arbitration Tribunal should have considered the expiry of the limitation period as a
preliminary issue. The Supreme Court has held in Union of India vs. Momin Construction
14
Company [(1999) 8 SCC 556] that the arbitrator is bound by the limitation law and must refuse to
entertain claims that are time-barred. The failure to address this issue renders the arbitration award
unenforceable.

In light of the above submissions, it is respectfully prayed that this Honorable Court set aside the
arbitration award and the judgment of the High Court of Judicature for Andhra Pradesh. The
appellant humbly submits that the claims raised by the respondent are barred by limitation, the cause
of action arose upon the completion of the contract, and the arbitration award is invalid. It is
submitted that the appeal should be allowed, and the arbitration proceedings should be dismissed.

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 MEMORIAL ON BEHALF OF THE PETITIONER

PRAYER

WHEREFORE IN THE LIGHT OF THE ISSUES RAISED, ARGUMENTS ADVANCED

AND AUTHORITIES CITED, IT IS HUMBLY REQUESTED THAT THIS HONORABLE
COURT MAY BE PLEASED TO ADJUDGE AND DECLARE:

1. Declare that the claims made by the respondent are barred by the law of limitation under
Article 18 of the Limitation Act, 1963, and that the arbitration notice was issued beyond the
prescribed period.
2. Hold that the cause of action arose only after the completion of the contract on 23.10.1997
and the submission of final bills in 1998, rendering the respondent's claims time-barred.
3. Set aside the arbitration award and the judgment of the High Court of Judicature for Andhra
Pradesh as it misapplied the law of limitation and contractual terms.
AND/OR

PASS ANY SUCH ORDER, WRIT OR DIRECTION AS THE HONORABLE COURT

DEEMS FIT AND PROPER, FOR THIS THE PLANTIFF SHALL DUTY BOUNDPRAY.

COUNSEL FOR THE PETITIONER

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