Khanna Builders vs Union Of India (Uoi)
1989 Latest Caselaw 255 Del

JUDGMENT

Sunanda Bhandare, J.

1. The petitioner was awarded the work for providing drainage arrangements in the Northern Colony at SSB within the operational jurisdiction of Northern Railway, New Delhi vide telegram dated 22nd July 1981. A formal agreement was executed between Northern Railway and the petitioner on 25th November 1981. The work was to be completed by 22nd January 1982. However since some difficulties cropped up, on the request of the petitioner, the time was extended to 15th March 1982. Vide letter dated 18th March 1982, the petitioner informed to Railway Authority that the work had been completed and requested the authorities to prepare the final bill for payment of the dues. The Railway Authorities however on 20th April 1982 wrote a letter to the petitioner that the work had not been completed and had in fact been abandoned by the petitioner and the railways had therefore decided to terminate the contract and get the balance work done departmentally at the risk and costs of the petitioner. The petitioner was also informed that the liquidated damages and losses incurred by the Railways would be reckoned from the dues of the petitioner available with the administration. Since under the agreement between the parties disputes in respect of the contract had to be resolved by arbitration the petitioner filed a petition in this Court being Suit No. 63A/82 under Section 20 of the Arbitration Act for a reference. The railways however objected the reference and raised a preliminary objection that since the petitioner had not made any demand for arbitration in the first instance to the railway authorities, the petition be dismissed as pre-mature. The petitioner therefore withdrew the petition. The petitioner thereafter wrote a letter on 8th August 1984 to the Railways claiming a sum of Rs. 1,65,911.15 and refund of security amount of Rs. 13,000. The railway authorities replied to his letter on 5th September 1984 and asked the petitioner to meet the concerned officer to resolve the disputes by discussion. Since the disputes could not be resolved, the petitioner filed the present petition under Section 20 of the Arbitration Act.

2. The respondent has raised two preliminary objections. Firstly, it was contended by the learned counsel for the respondent that the cause of action, if any, arose on 20th April 1982, i.e. the day the respondent terminated the contract of the petitioner and therefore the petition having been filed on 30th May 1985 is beyond the period of 3 years, which is the prescribed limitation for that purpose. Secondly, it was contended that just as the first petition was pre-mature, the present petition is also pre-mature because even now the petitioner had not made a specific demand for reference to arbitration to the railway authorities. It was submitted that only if the railway authorities had refused to make a reference that the petitioner could approach the court under Section 20 of the Arbitration Act for reference. It was however not disputed that under Clause 64 of the General Conditions of Contract the disputes if any between the parties could be resolved by Arbitration as provided under the said clause. Counsel referred to Union of India and Anr. v. Vijay Construction Co., AIR 1981 Delhi 193 and Ved Prakash Mittal v. Union of India and Ors., in support of his contention. It was also not denied that claim of the petitioner is disputed by the respondent.

3. On the other hand, it was contended by the learned counsel for the petitioner that the cause of action actually arises when the claim is disputed and in the present case the dispute arose on 8th August 1984, i.e.', the date on which the petitioner issued a notice claiming money from the respondent and not on 20th April 1982, i.e. the date on which the respondent terminated the contract. Counsel submitted that the final bill had to be prepared by the railway authorities and since they failed to prepare the final bill till the filing of the petition, it cannot be said that the petition was barred by time. Learned counsel further submitted that it was not necessary for the petitioner to make a specific demand for reference to arbitration and the filing of the petition under Section 20 itself amounted to demand for arbitration as provided under Clause 64. Counsel relied on Anand Kumar Jain v. Union of India, reported as 1984 RLR 438 in support of this contention.

4. It is well settled that the right to apply under Section 20 accurse to a party to the contract containing arbitration clause from the date when the dispute arises. Limitation for filing a petition under Section 20 is 3 years.

5. In the present case I find that though the respondent terminated the contract on 20th April 1982 the question of payment of the claim of the petitioner towards the work which had already been completed still remained. The respondent by their letter dated 20th April 1984 informed the petitioner that the balance work would be done departmentally and that the liquidated damages and losses sustained by the railways shall be recovered from the dues available with the railway administration. Thus there is an implied admission that some amount was due to the petitioner for the work which was already done. However that amount was to be adjusted towards liquidated damages and losses incurred by the railway authorities. Now it is not disputed that the final bill has to be prepared by the railway authorities. The petitioner therefore wrote a letter on 8th August 1984 demanding the railway authorities to prepare the final bill. In response thereto the railway authorities asked the petitioner to discuss the matter with the Divisional Engineer concerned. The petitioner thereafter tried to contact the Divisional Engineer to resolve the points in difference, however, he failed. Only thereafter the present petition was filed. Till date the respondent has not prepared the final bill. Since the railway authorities informed the petitioner vide letter dated 4th September 1984 that the petitioner should discuss the matter and the final bill is yet to be prepared, in my view, it cannot be said that the limitation has expired and the petition is time barred. It is true that in Union of India & Another (supra) a Division bench of this Court has observed that the limitation begins as soon as the contract is rescined. However, the facts of that case were completely different. It is equally well settled that filing of a petition under Section 20 demanding that disputer arising therein be referred to arbitration was by itself sufficient to constitute a demand as contemplated by Clause 64. Kirpal, J while reiterating this view in Anand Kumar Jain's case (supra) has referred to decisions in Inderjit Singh Avtar Singh & Co. v. Union of India and Ors., S. no. 403-A/74 D/-17-5-77, M/s. Hindustan Iron & Steel Co. v. U.O.I, S. No, 660-A/79 D/-26-10-79, H.R. Kalra v. Union of India, S. No. 115/-A/82, D/- 25-10 83 and Greenland Foods Pvt. Ltd. v. Union of India, on this point. I see no reason to differ from it because in my view the decision of the full bench of this court in Ved Parkash finals case (supra) does not help the respondent in any manner. In that case the Court was dealing with the power of the court to appoint an arbitrator in case the Chief Engineer refuses to appoint the arbitrator as provided under the Act and held that the Court was not powerless under Section 20(4) of the Arbitration Act. The questions raised by the respondent were not before the full bench for consideration.

6. Since the respondent has strongly opposed the petition on two preliminary objections it will not be out of place to reproduce observations of the Division Bench in Union of India and another (supra) which reads thus:

"We are not happy that the Government Agency, like the Railways, should deny the citizens right by taking the plea of limitation. Governmental agencies should normally have the matter adjudicated on merits and succeed or fail on the justification or otherwise of the claim."

Interestingly the respondent has relied on this judgment for raising the objection of limitation but has not considered the above observation. I am in respectful agreement with what is observed by the Division Bench. Since admittedly the contract provided for adjudication of the dispute by arbitration, instead of raising one preliminary objection after another it would have been most appropriate if the authorities had referred the matter at 1st instance itself and got the dispute adjudicated on merits. However when the petitioner filed the first petition they objected to it as being premature and objected to the second petition on the same ground or in the alternative as time barred. In my view, such objections not only cause harassment to the citizen but also aggravate the problem of mounting arrears. Unless there are gross laches or inordinate delays probity requires that Government as the single largest litigant should not deny citizen's right by taking plea of limitation and contest the matter as any ordinary litigant but must have the matter adjudicated on merits and succeed or fail on the justification or otherwise of the claim.

7. The petition is therefore allowed. The respondent is directed to appoint the arbitrator in accordance with Clause 64 of the General Conditions of Contract within two months from today failing which Shri J.D. Jain, (Retd. Judge of Delhi High Court) shall be the arbitrator. No costs.