Kochhar Construction Works vs D.D.A. And Others
1998 Latest Caselaw 756 Del

ORDER

Dr. M.K. Sharma, J.

1. In this petition under Sections 4, 8 & 20 of the Arbitration Act the petitioner has prayed for an order directing the respondents to file the original arbitration agreement and for appointment of an independent arbitrator to decide the disputes arising between the parties since the respondent No.1 has failed to appoint an arbitrator.

The petitioner initially filed proceedings under Section 20 of the Arbitration Act in this court which were registered as Suit No.1502/1992. In the said proceedings the respondent herein filed a counter affidavit and contested the proceedings on various grounds including the ground of non-maintainability of the petition because the petitioner was an un-registered firm and also on the ground of limitation contending that the proceeding is barred by limitation. The Single Judge of this court by judgment/order dated 4.11.1993 allowed the suit and issued a direction to the respondent to appoint an arbitrator in accordance with the arbitration clause within 2 months. An appeal was preferred by the respondent before the Division Bench of this court. The aforesaid appeal filed by the respondent was dismissed holding that the subsequent registration of the petitioner cured the initial defect since that was within the period of limitation.

2. Being aggrieved by the aforesaid order passed by the Division Bench a Special Leave Petition was preferred by the respondent before the Supreme Court which was registered as S.L.P.(Civil) No.22167/1994. The aforesaid special leave petition was allowed by the Supreme Court by its order dated 18.1.1996. The Supreme Court set aside the order of the High Court and held that the proceedings were ab initio defective as the said proceedings could not have been instituted since the firm in whose name the proceedings were instituted was not registered on the date of institution of the proceedings. The petitioner obtained registration of the firm on 26.2.1993, when the appeal filed by the respondent was pending before the Division Bench of this Court.

3. In the present petition filed by the petitioner, it is stated that the parties entered into a contract with the respondent for work relating to the construction of some buildings and that the petitioner completed the construction on 18.11.1985. It is also stated that there is an arbitration clause in the said agreement between the parties being clause No.25 which provides that all questions and disputes relating to the contract are to be referred to and decided by an arbitrator appointed by the Engineer Member, DDA at the time of dispute. Since the petitioner has acquired its registration and a suit by a registered firm is maintainable, the disputes arising between the parties should be referred to and be adjudicated upon by a sole independent arbitrator to be appointed by this court. The petitioner alongwith the aforesaid petition has filed an application under Section 5 read with Section 14 of the Limitation Act praying for condensation of delay in filing the petition under Section 20 of the Arbitration Act.

4. The respondents have contested the petition contending inter alia that the suit is barred by limitation as the provisions of neither Section 5 nor Section 14 of the Limitation Act are applicable to the facts and circumstances of the case. It is also contended that even sufficient cause to bring the case within the purview of Section 14 of the Limitation Act has not been made out by the petitioner and thus the petition is required to be dismissed.

5. In order to maintain a petition under Section 20 of the Arbitration Act a party must come to the court with an appropriate petition within 3 years. The relevant provision is Article 137 of the Limitation Act. An application under Section 20 is governed by Article 137 of the Limitation Act and must be made within 3 years from the date when the right to apply accrues. The aforesaid provision of Section 20 of the Arbitration Act read with Section 137 of the Limitation Act came to be considered by the Supreme Court in the case of State of Orissa and another Vs. Damodar Das; reported in (1) 1996 CLT 294 (SC). The issue raised before the Supreme Court in that case was also whether the claims of the claimants were barred by limitation. The Supreme Court in the said decision took note of the provisions of Section 37(1) of the Arbitration Act which provides that all the provisions of Indian Limitation Act shall apply to arbitrations as they apply to proceedings in Civil Court. The Supreme Court also took note of he provisions of sub-section (2) with a non obstante clause which provides that a cause of action shall, for the purpose of limitation, be deemed to have accrued in respect of any such matter at the time when it would have accrued but for that term in the agreement. The Supreme Court also considered the provisions of sub-section (3) which provides that an arbitration shall be deemed to have commenced when one party to the arbitration agreement serves on the other party thereto a notice requiring appointment of an arbitrator, or where the arbitration agreement provides that reference shall be to a person named or designated in the agreement requiring that the difference be submitted to the person so named or designated. Reference was also made to the provisions of Section 3 of the Limitation Act which enjoins the Court to consider the question of limitation whether it is pleaded or not. The Supreme Court extracted a passage from "Russell on Arbitration - by Anthony Walton", 19th Edition, at page 4 & 5, which states that the period of limitation for commencing an arbitration runs from the date on which the `cause of arbitration' accrued, that is to say, from the date when the claimant first acquired either a right of action or a right to require that an arbitration takes place upon the dispute concerned. In the said passage it is further stated that the period of limitation for the commencement of an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued. After onsidering all those passages from Russell as also a passage from page 549 of Law of Arbitration by Justice Bachawat, the Supreme Court held that for the purpose of Section 37(1) `action' and `cause of arbitration' should be construed as arbitration and cause of arbitration and that the cause of arbitration arises when the claimant becomes entitled to raise the question, that is, when the claimant acquires the right to require arbitration. It was laid down that an arbitration under Section 20 is governed by Article 137 of the Schedule to the Limitation Act, 1963 and must be made within 3 years from the date when the right to apply first accrues. It was held that there is no right to apply until there is a clear and unequivocal denial of that right by the respondent and it must, therefore, be clear that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of the cause of action arises in a civil action.

6. The records were placed before me by the counsel appearing for the parties. My attention was also drawn to Annexure P-2 which is dated 23.5.1988. This is a document placed on record by the petitioner itself alongwith the petition under Section 20 of the Arbitration Act. In the said letter written by the petitioner to the respondent No.1 on 23.5.1988 it was stated that the petitioner entered into a contract for the execution of the work and an agreement was executed between the parties. It was also stated that since the disputes as tabulated in Annexure A thereto had arisen out of the above said contract the same were to be referred to arbitration as per clause 25 of the agreement as contained therein. By the said letter the petitioner called upon the respondent herein to appoint an arbitrator for adjudication of the disputes stated to have arisen out of the said contract. It is also apparent that the petitioner by the said letter invoked the arbitration clause in the agreement and requested the respondent to act in terms thereof within a period of one month failing which they would proceed under Section 20 of the Arbitration Act. Alongwith the said letter the petitioner enclosed Annexure 'A' giving details of the claims of the petitioner. My attention is also drawn to the contents of Annexure P-3 which is again a notice of the petitioner to the respondent dated 20.2.1991 asking the respondent to appoint an arbitrator in respect of the disputes arising between the parties in terms of clause 25 of the aforesaid agreement. The said letter also contains an annexure namely- Annexure 'A' setting out various claims of the petitioner. On a comparative study of the two annexures namely - annexures to letter dated 23.5.1988 and letter dated 20.2.1991, I find that the disputes and the claims set out in the said two annexures are common and similar. By another letter dated 20.3.1992 which is annexed as Annexure P-5 the petitioner has added two more claims and revised one claim already put up.

It is thus crystal clear that the right to invoke the arbitration agreement and the claim for reference of the dispute for arbitration accrued in the present case as far back as 1988 and in fact the petitioner sought for reference of the disputes for arbitration by letter dated 23.5.1988. Since the cause of arbitration accrued prior to 23.5.1988 i.e. the date when the claimant first acquired either a right of action or a right that an arbitration takes place on the disputed question, the period of limitation for an arbitration runs from the said date and the said period of limitation is 3 years from the said date. Computing the period of limitation as such the present petition is apparently and ex facie barred by limitation.

7. Although the petition could be dismissed on the aforesaid count only, I am inclined to examine the other contentions raised by the petitioner and determine as to whether the petitioner is entitled to invoke the provisions of Section 5 and/or 14 of the Limitation Act praying for condensation of delay in filing the present application. For that purpose and in order to appreciate the contention of the learned counsel for the petitioner I carefully perused the averments made in the said application. The petitioner in the said application has stated that it has initially moved this court under Section 20 of the Arbitration Act in the year 1992. If the period of limitation is computed from 23.5.1988 the said application itself was barred by limitation. The aforesaid issue that the petition was barred by limitation was raised before the Single Judge in Suit No.1502/1992. A copy of the said judgment is also placed on record and I have perused the same carefully. It is recorded in the said judgment that a preliminary objection was taken that the said petition was barred by time. The learned Single Judge held that as to whether the claim is time barred or not under the Arbitration clause is to be decided by the arbitrator. On an appeal filed by the respondent against the aforesaid decision the Division Bench however, did not decide the said plea and instead dismissed the appeal on the ground of maintainability of the suit that the firm has in the meantime obtained registration. The Supreme Court set aside the Judgment of the High Court. Accordingly, I am of the firm opinion that the judgments passed by the learned Single Judge as also the Division Bench got merged into the decision of the Supreme Court which set aside the judgments of the High Court and did not itself record any finding on the question of limitation. The aforesaid plea of limitation, was not decided by the Supreme Court and, therefore, could be raised and is available for consideration even now. The present petition is therefore, barred by limitation, since the petitioner slept over his rights and did not approach the court within 3 years of the period of limitation after lodging the claim on 23.5.1988 with the respondent. Since the initial petition itself was beyond the period of limitation the petitioner is not entitled to get any benefit under Section 14 of the period from 23.5.1988 till it filed the initial petition under Section 20 in the year 1992.

8. Even assuming that such an application is maintainable for any subsequent period the petitioner in his application seeks for condensation of delay for the period from 26.2.1993 to 18.1.1996. The present petition has been filed in this court on 9.2.1996. Even if the petitioner is given the benefit of the aforesaid period and the delay in filing the present petition is condoned for the aforesaid period then also the present petition is barred by limitation and thus the petitioner is not entitled to any relief in the present petition.

However, in the context of the submission of the learned counsel for the petitioner, let me consider whether the petitioner has been able to make out a case for invocation of the provisions of Section 14 of the Limitation Act or not even for the aforesaid period it was pursuing a remedy in court. Admittedly, neither the provisions of Section 5 nor the provisions of Section 12 of the Limitation Act are applicable to the facts and circumstances of the present case. The only provision that could probably be said to be applicable herein is the provisions of Section 14 i.e. time taken by the petitioner in pursuing a remedy elsewhere. The said section states that in computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceedings whether in a court of first instance or in appeal or revision against the defendant shall be excluded. However, in order to get the benefit of the aforesaid provision the petitioner has to prove that the aforesaid proceedings in another court was being prosecuted by the petitioner in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain. The word 'good faith' is defined under the Limitation Act itself, wherein it is defined as nothing shall be deemed to be done in good-faith which is not done with due care and attention. Therefore, good-faith means such action which is done with due care and attention. Counsel for the petitioner submitted that although the petitioner firm was un-registered at the relevant time it was pursuing the said proceedings bonafide and the court also entertained the same and allowed the petition. Although the Single Bench as also the Division Bench of this Court allowed the petition but the same came to be dismissed by the Supreme Court.

In M/s. Siri Ram Finance Corporation and others Vs. Yasin Khan and another; it was held by the Supreme Court that an application filed by an un-registered firm under Section 20 would also be treated as a suit and would be hit by Section 69(2) if the firm filing the application is not registered with the Registrar of Firms. With the aforesaid pronouncement made by the Supreme Court as far back as 1989 the law was clear and settled with regard to a suit instituted by an unregistered firm. In spite of the aforesaid settled position of law the petitioner chose to file a petition under Section 20 of the Arbitration Act although it was an un-registered firm and continued the proceedings even after obtaining registration in the year 1992. The petitioner did not withdraw the proceedings and continued with the same till the same was dismissed on that count by the Supreme Court holding the same to be ab initio defective. Subsequent application filed by the petitioner before this court for withdrawing the said proceedings was dismissed by this court on the ground that the petitioner had already instituted the present proceedings without obtaining any leave. Thus in my considered opinion the petitioner did not act with due care and attention and therefore, it is also not entitled to the benefit of the provisions of Section 14 as it has failed to make out a case under the said provision.

9. In the result, on all counts this petition has no merit and is accordingly dismissed, but without any costs.