R.K. Aneja vs Delhi Development Authority & ...
1999 Latest Caselaw 971 Del

ORDER

S.N. Variava, C.J.

1. This Appeal is against an Order dated 5th August, 1996 by which Appellants Application under Section 20 of the Arbitration Act, 1940 has been dismissed on the ground that it was barred by limitation.

2. Briefly stated the facts are as follows.

3. The Appellant had entered into a contract with the Respondent. Clause 25 of that contract provided for Arbitration. The question for consideration is whether the Application under Section 20 is in time. For consideration of this question it is necessary to set out relevant dates :-

On 12th August, 1988 the final Bill was issued by the Respondent.

On 2nd May, 1989 10 cc part payment was made.

On 30th May, 1989 the last payment was made by the Respondent.

On 20th July, 1989 a request for appointment of an Arbitrator was made. In this letter it is stated that disputes had arisen and that the disputes still persisted. This letter was received by the Respondent on 31st July, 1989.

On 25th October, 1990 a reminder was sent as the Respondents did nothing.

On 15th October, 1991 the Respondents declined Arbitration on the ground that the final payment had been made as far back as 2nd May, 1989 and that the request had only been received on 7th August, 1989 i.e. after the expiry of the time prescribed under Clause 25. The Respondents stated that the claim was thus deemed to have been waived.

On 20th January, 1992 the Appellant addressed a letter pointing out that the request for Arbitration was within the period of 90 days and therefore the rejection was not correct.

By their letter dated 9th June, 1992 the Respondents again declined the request for appointment of an Arbitrator.

The Appellant then wrote letters dated 24th June, 1992 and 10th October, 1993.

On 11th October, 1993 the Appellant made a demand for payment of the balance work.

On 14th October, 1993 the Petition under Section 20 of the Arbitration Act 1940 was filed.

4. Both parties are agreed that Article 137 of the Limitation Act would be applicable. Under this Article the period of limitation is three years from the date when the right to apply accrues.

5. The Supreme Court has in the case of Union of India Vs. Momin Construction Company held that under Article 137 of the Limitation Act the period of limitation for an Application under Section 20 of the Arbitration Act, 1940 would start from the date when a 'No Claim Certificate' and the final bill in respect of the construction were issued. In this case the final bill was issued on 12th August, 1988. The period of limitation thus starts from that date. The Petitioner under Section 20 having been filed on 14th October, 1993 would thus be barred by limitation. The law laid down by the Supreme Court is binding on this Court. Thus this Appeal will have to and stands dismissed.

6. However, as the Appeal has been argued at great length the Court must set out and deal with the submissions.

7. It was submitted, in spite of above mentioned judgment of the Supreme Court, that the period of limitation would start only when the right to apply accrued. It was submitted that the right to apply accrues only when a cause of action comes into existence and there was an infringement or a threat to infringe that cause of action. It was submitted that for an Application under Section 20 the cause of action would only arise when a claim to refer dispute to Arbitration is made and it is rejected. It was submitted that until there was a refusal to refer disputes to Arbitration, the right to apply did not arise. It has been strenuously urged that the period of limitation cannot start to run till the Respondents declined to appoint an Arbitrator. It has been submitted that it is only when the Respondent declined to appoint an Arbitrator that the right to apply under Section 20 arose. It has been submitted that the request was declined for the first time only on 15th October, 1991 and finally on 9th July, 1992 it is submitted that the Petition having been filed within a period of three years, from either of these dates was within time.

8. Reliance has been placed upon in the case of Ved Prakash Mithal Vs. The Union of India and Others . In this case the question of limitation did not arise at all. In this case all that the Court is holding is that if the Arbitration machinery fails, because the Chief Engineer does not appoint, then the Court has power to fill in the gap. This case is therefore based upon Section 20 of the Arbitration Act which confers upon the Court a residual power to appoint an Arbitrator when the parties do not agree upon the Arbitrator. This case therefore is of no assistance to the Appellant herein as it does not deal with the question under consideration.

9. Reliance was next placed upon the case of Shah Construction Company Ltd. Vs. Municipal Corporation of Delhi . In this case the question was when the cause of action for an Application under Section 20 arises in a case where the Arbitrator ignored the counter claim and made an Award. It was held that the period of limitation ran from the date the right to apply accrued. It was held that right to apply would accrue when a right first came into existence and thus was an infringement or a threat to infringe that right. It was held that the nature of dispute would have to be seen in each case. It was held that (in that case) the cause of action arose when counter-claim was denied by the other party. There can be no dispute with the proposition. However, on this principle the Application of the Appellant was clearly barred by limitation. It could not be denied that dispute and differences had already arisen. It is because disputes and differences had arisen, that a request for appointment of Arbitrator was made on 20th July, 1989. Even on this basis, a Petition filed after a period of three years from the 20th July, 1989 would be barred by the law of limitation.

10. Reliance was also placed upon the case of Gannon Dunkerley & Co. Ltd. Vs. Union of India . In this case the Supreme Court has held that there is no right to sue until there is an accrual of a right and an infringement thereof. The Supreme Court held that an Application filed after the expiry of three years from that date would be barred. In our view even this Judgment is against the Appellant.

11. Lastly reliance was placed upon the case of L.K. Ahuja and Co. Vs. Union of India and Others reported in 1987 (1) Arb. L.R. 33. In this case the Allahabad High Court has held that the limitation period for filing an Application under Section 20 would arise when the reference of dispute to an Arbitrator is refused. With great respect to the learned Judges concerned, we find it difficult to accept the reasoning given therein. In any event this Judgment would be directly contrary to the Judgment of the Supreme Court in the case of Union of India Vs. Momin Construction Company (supra) and would, therefore, not be good law any longer. Faced with this situation it was submitted that an Appeal filed against this Judgment had been dismissed by the Supreme Court. However, no Order of the Supreme Court could be shown to this Court. The Judgment of the Supreme Court in the case of Union of India Vs. Momin Construction Company (supra) is a much latter Judgment which has now settled the law on this topic.

12. Under these circumstances, we are in agreement with the learned Single Judge that Application was filed beyond time and was barred by the law of limitation. We thus see no reason to interfere.

13. Appeal stands dismissed.