M/S. Pandit Munshi Ram & ... vs Delhi Development Authority And ...
2000 Latest Caselaw 787 Del

ORDER

O.P. Dwivedi. J

1. Through this writ petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged the order dated 11th August, 2000, passed by the learned single Judge whereby petitioner's application under section 11(6) of the arbitration and Conciliation Act, 1996 (in short called 'the Act), AA No. 278/99, was dismissed as time barred.

2. Briefly stated the relevant facts set out in the application under section 11(6) of the Act were that the petitioner was awarded the work of construction of 288 Janta Flats for Harijans at Vasant Gaon, New Delhi vide formal agreement being No. 88/EE/S.W.D-7/D.D.A./A/ 89-90 dated 22nd january, 1990. The date of starting of the work was 26th January, 1990 and the stipulated date completion of the work was 25th april, 1991. The actual date of completion of the work was 29th may, 1992. It was pleaded in the application that the delay in completion of work was solely attributable to the respondent DDA so the time for completion of work was extended without levy of the compensation. In part 7(v) of the application it was specifically alleged that the final bill has not been given to the petitioner nor the security deposit has been paid. So the petitioner wrote a letter dated 11th August, 1997 to the Executive Engineer of the respondent DDA but no reply was received. Petitioner wrote further letters/reminders dated 31st October 1997 and 1st December, 1997 but of no avail. the agreement contained an arbitration cause No. 25 under which all the disputes concerning the agreement were to be referred to the sole arbitration to be appointed by the Engineer-member of DDA. So the petitioner vide his letter dated 1st December, 1997, 6th December, 1997 asked the respondent to appoint an arbitrator in terms of the clause 25 of the agreement.

Along with these letters the petitioner had also sent a statement showing the outstanding dues. In response to these letters, the respondent wrote a letter dated 24th February 1998 asking the petitioner to submit the application for appointment of arbitrator in the prescribed proforma along with the list of claims. The petitioner submitted the requisite application in the prescribed proforma vide letter dated 3rd April, 1998 and 10th April 1998. the respondent vide letter dated 22nd September 1998 turned down petitioner's request for arbitration was received after the expiry of the time stipulated under clause 25 of the agreement, so the petitioner's claims are deemed to have been vaiwed and absolutely time barred as per the stipulation contained in the arbitration clause and the DDA stands discharged and released of all liabilities under the contract. In their letter dated 22nd September 1998, the DDA asserted that as per the office record the final bill stands paid on 5th May, 1995. The petitioner thereupon filed application under section 11(6) of the Act (being AA No. 278/99) on 30th July, 1999 for appointment of Arbitrator.

3. In their counter affidavit, the respondent DDA submitted that the final bill was prepared by the DDA and was accepted by one Mr. Suresh Kumar, representative of the petitioner company on 2n February, 1994. Therefore, copy of the final bill dated 2nd February 114 was furnished to the petitioner vide respondent's letter dated 15th April, 1997. The respondent contended that the petitioner's request for appointment of the arbitrator was received after the expiry of the time stipulated in clause 25 of the agreement. Besides, payments were duly made to the petitioner from time to time and there was no dispute left between the parties so the request for appointment of arbitrator was declined.

4. In the rejoinder the petitioner has re-asserted that no final bill was ever issued or paid to him. It is submitted in para 2 of the rejoinder that Executive Engineer of the respondent had obtained the signatures in the measurement book by exercising coercion and undue influence but neither the amount of bill was mentioned in the said measurement book nor any payment has been made.

5. The petition was contested before the leaned single judge mainly on the ground that the petition under section 11(6) of the Act should have been filed within a period of three years (as per the period of limitation prescribed under Articles 137 of the schedule to the Limitation Act) from the date of acceptance of the final bill i.e. 2nd February, 1994 and therefore this petition which was filed in July 1999 must be held to be time barred. As against this, the submission of the leaned counsel for the petitioner was that the cause of action for filing the petition under section 11(6) of the Act would arise only when there is subsisting dispute i.e. when a claim to refer the dispute to arbitration is raised and is rejected. Since this case petitioner's request for appointment of arbitration was rejected by the respondent vide their letter dated 22nd september, 1998, this petition which was filed within a period of three years from 22nd September 1998 is well within time. After considering various decisions which were cited at the bar, leaned single Judge was of the view that the ration of two cases namely Union India Vs. L.K. Ahuja - AIR 1988 1172 and Prafulla Kumar Singh Deo, Vs. State of Orissa runs contrary to the judgment of the Supreme Court in Union of India Vs. Momin Construction Company (1997) (Supreme Court Cases 97 wherein the starting point of limitation for filing the petition under section 20 of the arbitration Act was taken to be date of preparation of the Arbitration Act was taken to be the date of preparation of the final bill to which the respondent had given no claim certificate. Learned Single Judge observed that the decision in the case of Momin Constructions Company (supra) was later in point of time and therefore it has to be given preference over decision in L.K. Ahuja's case. Leaned single Judge, therefore, concluded that single Judge, therefore, concluded that since in this case the final bill was prepared on 2nd February, 1994, the petitioner under section 11(6) of the Arbitration & Conciliation Act, 1996 which was filed in July, 1999 is barred by limitation. Accordingly, the petition was dismissed as time barred. feeling aggrieved, the petitioner has filed the instant writ petition challenging the said order.

6. We have heard leaned counsel for the parties and perused the record.

7. Articles 137 of the schedule to the Limitation Act apples to the petition under section 11(6) of the Arbitration and Conciliation Act 1996. Reference in this connection may be made to the decision of the Supreme court in the case of The Kerala State Electricity Board, Trivandrum Vs. T.P. Kunhaliumma - 1974 SCC 634 wherein it was held that Articles 137 of the Limitation Act applies to an application under section 20 of the Arbitration Act, 1940. The parties are not at issue on this point. Therefore the only question which remains for consideration is `even the right to apply accrues'? This question has come up for consideration on several occasions before the Supreme Court. In the case of Major I.S. Rekhi Vs. DDA the facts were that the DDA granted contracted for construction on 240 Janta Houses to the appellant. The work commenced on 15th October 1976 and was to be completed by 14th July, 1977. the work was finally completed on 2nd April, 1980. Between February to December 1985 the appellant contractor sent several letters to the respondent requesting them to finalise the bill and finally on 4th September 1985 wrote to the respondent to finalise the bill, to release the security deposit of Rs. 1 lack and to refer the dispute to the arbitrator. The respondent, however, did not heed the request of the appellant. Thereupon the appellant filed an application under section 20 of the Arbitration Act in January 1986. The application was registered on the plea of the limitation. The learned single Judge of the High Court dismissed the plea as being time barred and the decision of the learned single Judge was upheld by the Division bench of the High Court. In appeal, Supreme Court observed that in such a case court has a decide `when the dispute arise'. The High Court Proceeded on the basis that the work was completed in April 1980 so appellant became entitled to payment in April 1980 and therefore the cause of action for filing application under section 20 of arbitration Act arose from that date. reversing the judgment of the High court, the Supreme Court observed as under:-

"4. Therefore, in order to be entitled is necessary that there should be an difference must be arise to which this agreement applied. In this case, there is agreement. There has been an assertion of claim by the appellant and silence as well as refusal in respect of the same by respondent. Therefore, a dispute has arisen regarding non payment of the alleged dues of the appellant. The question for the present case is when did such dispute arise. The High Court proceeded on the basis that the work was completed in 1980 and, therefore, the appellant became entitled to the payment from that date and cause of action under article 137 arose from that date and the cause of action under articles 137 arose from that date. But in order to be entitled to ask for a reference under section 20 of the Act there must not only be an entitlement to money but there must be a difference or dispute. it is true that on completion of that work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claim was made date, that is to say, February 28,1983. It is also true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the case of action. a dispute arises where there is claim and a denial and repudiation of the claim. The existence of arbitrator under section 8 or a reference under section 20 of the Act. There should be dispute and there can only be a dispute when a claim is asserted by one party and denial by the other on whatever grounds. merely failure or inaction to pay does not lead to the inference of the existence of dispute. dispute entails a positive element and assertion of the denial, not merely inaction to accede to a claim or a request. Whether in a particular case a dispute has arise or not has to be found out from the facts and circumstances of the case".

8. It is important to note that in that case no final bill had been prepared or issued to be contractor. so the Supreme Court held that the cause of action arose when the petitioner made his claim vide letter dated 28th February, 1983 and that claim was not paid. In that case the petition under section 20 of the Arbitration act was filed in the court in January 1986 i.e. within a period of three years from 28th February, 1983. Therefore, it was held that petition was not time barred. it would thus be seen that although the contractor became entitled to his dues on completion f work in april 1980, the cause of action for filing petition under section 20 of the Arbitration Act arose only when the respondent did not pay any heed to appellants, letter dated 28th February, 1983 because no final bill had been prepared by the respondent similar view was taken by the Supreme Court in the case of Union of India Vs. L.K.Ahuja, wherein the facts were that on 18th September 1969 four agreements were entered into between the parties for construction of some quarters. All the four contracts were executed and completed on different dates, the last one of 30th May, 1971. The respondent contractor accepted for final bills and gave no claim declaration in respect of the four contracts between 29th May, 1972 to 19th June 1972. Thereafter on 16th April 1976 the respondent contractor wrote a letter to the additional Chief engineer stating that a sum of Rs. 1,91,137/-

were due to him on account work executed by him and made request to refer the disputes to arbitration. On 4th June 1976 a reply was sent to him that there was no dispute between the parties.

so the question of appointment of arbitration does not arise. On 13th December 1976 the contractor filed a petition under section 20 of the Arbitration Act which was dismissed as time barred. The contractor's appeal to the High Court. Supreme Court held that the application under section 20 was not time barred because the same was filed within three years from 16th April, 1976 the date on which the claim of Rs. 1,91,137/- was raised by the contractor. The claim of Rs. 1,91,137/- was raised for the first time on 16th April, 1976 after the expiry of more than four years from the date of acceptance of the final bill and giving of no claim declaration by the contractor between 29th May, 1972 to 19th June 72. It was held that the period of limitation of three years for filing the petition under section 20 would begin to run from the date on which the claim is raised which remain unpaid. In para 8 of the judgment, the Supreme Court observe as follows:-

"In view of the well-settled principles we are of the view that it will be entirely wrong to mix up the two aspects, namely whether there was any valid claim for reference under section 20 of the Act, and, secondly, whether the claim to the adjudicated by the Arbitrator would decide, unless, however, on admitted, facts a claim is found at the time of making an order under section 20 of the Arbitration Act, to be barred by limitation. In order to be entitled to ask for a reference under section 20 of the Act, there must be an entitlement to money and a defense or dispute in respect of the same. It is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payments gets weekends but the claim subsists and whether it does subsists, it a matter which is arbitrable. In this case, the claim for reference was made within three years commencing from April 16, 1996 and the application was filed on December 18, 1976. We are, therefore, of the view that the High court was right in this case."

9. It will thus be seen that in both these cases the starting point of limitation for filing the petition under section 20 of the Arbitration Act was taken to e the date on which the claim was first raised by the contractor irrespective of the date on which the work was completed. In the case of Prafull Kumar Singh Deo (supra) a similar question came up for consideration before the High Court of Orissa. In that case after completion of the work the final bill was paid to the contractor on 30th July 1978. The contractor then issued a notice dated 29the July 1981 asking for appointment of arbitration as according to him amount due to him has not been paid. Failing to get favorable response he filed a petition under section 20 of the Arbitration Act on 23rd December 1981. The application was dismissed by the sub-Judge as time barred. The High Court accepted the revision with the observation that limitation for filing application under section 8(2) of the Arbitration Act does not have any relation with the cause of action for preferring a claim of realisation of the dues. The High Court observed that it may be that the claim of the contractor has bene barred by he limitation yet he may issue notice under section 8(1) and pray for appointment of arbitration under section (2) of the Act on the expiry of notice period. in such a situation court is not called upon to decide about the merits of the claim or whether the claim is time barred. These questions are to be decided by the arbitrator.

10. Another decision which the leaned Single Judge has take not of is the judgment of Supreme Court in the case of UOI Vs. Momin Construction wherein the facts were that after completion of the work the contractor gave a no claim certificate on 11th August 1965 whereupon the final bill was passed. On 26th February, 1971 the contractor filed a petition under 20 of the Arbitration act which was contested on the plea of limitation but the petition was allowed. UOI preferred an appeal to the Gujrat High Court. The High Court dismissed the appal holding that the Article 137 of the Limitation Act did not apply to the application under section 20 of the Arbitration Act. UOI preferred an appeal to the Supreme Court and it was held that Article 137 of Limitation Act did apply to the proceedings under section 20 of the Arbitration Act as held in the case of The Kerala State Electricity Board, Trivanbdrum Vs. T.P. Kunhaliumma - Supreme Court further observed that since no claim certificate was issued on 11th August 1965, right to apply under section 20 of the Arbitration Act arose on or before 11th August 1965. So the application which was filed after the expiry of three years there from was plainly time barred. The observation of the Supreme Court to the effect that the application under section 20 was time barred as it was filed after the expiry of more than three years from the date of giving no claim certificate by the contractor, would suggest that the starting point of the limitation for filing a petition under sedation 20 of the Arbitration Act is the date on which a final bill is prepared and no claim certificate has been given by the contractor. Learned single Judge felt that the view taken by the Supreme Court in Momin Construction case is not in consonance with the observations made by the Supreme Court in the case of L.K. Ahuja. But on a close scrutiny it will be seen that from the narration of facts given in the case of Momin Construction Company (supra) it does not appear that before filing petition under section 20 of the Arbitration Act the contractor had served any notice on the respondents invoking the arbitration clause. It also clause. It also does not appear from the facts reported in the said judgment that at any time before coming to the Court under section 20 of the Arbitration Act the contactor had raised any claim which remained unpaid,. so this case is distinguishable from the case of L.K. Ahuja (supra) on facts. When the contractor does not raise any claim for long six years after issuing no claim certificate not does he serve any notice invoking arbitration clause, it would be safety inferred that no cause of action for filing the petition under section 20 of the Arbitration Act in fact arose. In absence of any notice rasing a claim which is denied, limitation period will have to be computed from the date on which the no claim certificate was given by the contractor, there being no other referral point of time for accrual of cause of action, if at all there be any.

11. As observed earlier, in the cases of Major I.S. Rekhi and L.K. Ahuja (supra) right to apply was held to accrue only when there is a dispute namely when there a claim which is denied. In both these cases the contractor had raised dispute and served notice invoking arbitration clause but in the case of Momin Construction (supra) it does not appear from the naration of facts that any claim was raised by the contractor which was denied or any notice was served invoking arbitration clause. Obviously, therefore, other cause of action in the MoMin Construction (supra) was taken to related back to the date of issuance of no claim certificate and therefore the petition under section 20 f the Arbitration Act which was filed after the expiry of about six years from that was rightly held to be time barred. It cannot be said that in Momin Construction case (supra) the ration decidendi was different from hat of L.K. Ahuja's case. of course,the fact situation was different in as much as there was no notice invoking arbitration clause in Momin Construction case. The question as to whether a dispute has arisen or not has to be decide from the facts and circumstances of each case and viewed from these angle the decision in the case and viewed from this angle the decision in the case of MoMin Construction (Supra) is distinguishable from the decision in the case of L.K. Ahuja on facts.

12. Now coming to the facts of the present case, we find that the parties are at issue on the point as to when final bill was paid. In their petition under section 11(6) of the Arbitration and Conciliation Act, 1996, the petitioner alleged in para No. 7(v) that the final due. In reply thereto the respondent in para No. 7(v) of their counter affidavit have pleaded that the respondent prepared the final bill which was duly accepted by the petitioner's representative Mr. Suresh Kumar who signed the measurement book on 2nd February 1994. According to the respondent the payments were made from time to time. In the rejoinder affidavit the petitioner has denied that any final bill was accepted on 2nd February 1994 voluntarily.

It is pleaded that Executive Engineer of the respondent obtained the signatures on the measurement book by exercising undue influence on the pretext, that payment will be made immediately. According to the petitioner the amount as claimed by him remains still un-paid. We have seen the measurement book which purports to have been signed by the representative of the petitioner on 2nd February 1994. surprisingly, it does not mentioned even the amount payable to the petitioner. At the most it can be taken to be the acceptable of the correctness of measurements of work done. Acceptance of Correctness of the bill by itself does not necessarily imply that the bill has been paid. The dispute remains until the bill is fully paid. Acceding to the respondent money was paid from time to time. In their counter affidavit the respondents have not even specified any particular date on which the contractor's claim. From the letter dated 22nd September 1998 written by the respondent to the petitioner , it appears that the date of payment of final bill was 5th May, 1995 which is disputed by the petitioner. As already observed, the respondents sent a copy of final bill to the contractor vide their letter dated 15 the April, 1997. Thereafter , the contractor started writing letters demanding payment and invocation of the arbitration clause. First such letter dated 21st August, 1997 was written by the petitioner to the respondent wherein the petitioner raised a claim for about Rs. 45 lacs. This was followed by letters dated 31st October 1997 and 1st December 1997. Admittedly, vide letter dated 6th December 1997 the petitioner invoked arbitration clause and requested the respondent to appoint an arbitrator in terms of the clause 25 of the agreement. The respondent sent a letter dated 24th February, 1998 asking the petitioner to submit request for appointment of arbitrator in the prescribed proforma vide letter dated 3rd April 1998 followed by a corrigendum dated 10th April, 1998. The respondent finally turned down the request for appointment of the arbitration vide letter dated 22nd September 1998 on the ground that the petition for appointment of arbitrator has been received after the expiry of 90 days as stipulated in the arbitration clause.

13. Assuming that the signature of the petitioner's representative on measurement book dated 2nd February, 1994 amounts to acceptance of the final bill, the dispute regarding the payment of final bill still persists as is clear from the pleadings of the parties. According to the petitioner the amounts are still outstanding. According toe the respondent final bill was paid on 5th May, 1995.

As already noted the measurement book dated 2nd February, 1994 did not contain any particular figure showing the amount payable to the petitioner. Moreover there is a letter dated 15th April, 1997 written by the respondent to the petitioner sending therewith a copy of final bill with necessary statement. When the bill itself is being sent on 15th April 1997 where is the question of the having been paid on 5th ? It is on the receipt of the final bill vide letter dated 15 the April, 1997 that the petitioner started writing letters claiming the balance amount due and ultimately invoking arbitration clause. Under these circumstances we think that the period of limitation for filing the petition under section 11(6) of the Arbitration Act Would begin to run when the respondent served the final bill vide letter dated 15 the April, 1987 and the petitioner raised his claim which remained unpaid. As observed in the case of Major I.S, Rekhi and L.K. Ahuja the cause of action for filing a petition under section 20 of the Arbitration Act would arise only wen there a difference or dispute regarding the payment. In L.K, Ahuja's case the contractor had given no claim declaration on 19th June 1972. then he raised a claim for Rs. 1,91,137/- vide letter dated 15th April 1976 i.e. after the expiry of more than four years. This claim was disputed. The matter went up to the Supreme Court but the Supreme Court rejected the appeal of the UOI. In the present case it appears that the respondent had been making payment from time to time and according to them last payment was made on 5th May, 1995 would title the contractor to raise a dispute regarding outstanding claim, if any, with three years there from. He raised the claim on 21st August 1997 on receipt of final bill on 15th April, 1997. The application under section 11(6) was filed on 30th July 1999 i.e. well within three years from the date of petitioner raising the claim which was rejected vide respondents's letter dated 22nd September 1998. So in view of the law laid down by the Supreme Court in the case of Major I. S. Rekhi and L.K. Ahuja referred to above, we think that the petitioner's application under section 11(6) of the Arbitration and Conciliation Act, 1996 was well within the limitation period prescribed in Articles 137 of schedule to the Limitation Act, 1963.

14. For these reasons, we do not subscribe to the view taken by the learned single Judge that there is apparent contradiction in the ratio decidendi of Momin Construction case and L.K. Ahuja (supra). Rather they are distinguishable on facts, as already noticed. This writ petition, therefore, deserves to be allowed.

15. Arbitration agreement as contained in clause 25 of the agreement between the parties recites that "It is also a term of the contract that no person other than a person appointed by such Engineer Member, DDA as aforesaid should act as arbitrator and, if for any reason that it not possible, the matter is not to be referred to the arbitration at all". In the case of R.P. Souza & Co., Vs. Chief Engineer PWD & others (1999) (3) Arbitration Law Reporter 495 Bombay the arbitration agreement contained a similar clause. The respondent in that case clause. The respondent in that case had refused to appoint an arbitrator on the ground that the claim for appointing arbitrator was preferred afar the expiry of more than 90 days stipulated in clause 25 of the agreement so the respondent stood absolved of all its liabilities. The plea of limitation was also raised. The High Court of Bombay held that the application under section 11(6) was filed by the petitioner within time and in such a situation when one party fails to perform any function entrusted to him under the arbitration clause other party is entitled to request the Chief Justice, under section 11 of the Act for appointment of an arbitrator. It was held that the scheme of section 11 of the Act Specifically provides that if the procedural part of the appointment of arbitrator is not followed by the designated or concerned authority the arbitration clause would not frustrated or defeated and the Chief Justice can appoint an arbitrator under section 11(6) (c) of the Act notwithstanding any stipulation to the contrary contained in the arbitration clause.

16. In view of our discussion above, this writ petition is accepted and the application under section 11(6) filed by the petition is allowed. We appoint Justice P.K. Bahri, a retired Judge of this court, as Sole Arbitrator to decide all questions (SCI) dispute between the parties which are covered in the arbitration clause. The arbitration shall be (SCI) 50,000/- as his fee to shared equally by the parties.