Prasar Bharti vs Maa Communcation
2010 Latest Caselaw 680 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI
+        ARB. A. 18/2005

                                      Date of decision:- 8th February, 2010.
         PRASAR BHARTI                            ..... Petitioner
                      Through: Mr. Rajeev Sharma, Advocate
                                       Versus
         MAA COMMUNCATION                   ..... Respondent
                    Through: Mr. Shyam Moorjani with Ms.
                            Anuradha Anand, Advocates
                                       AND
+        ARB. A. 20/2005
         PRASAR BHARTI                            ..... Petitioner
                      Through: Mr. Rajeev Sharma, Advocate
                                       Versus
         MAGNA VISION ADVERTISERS               ..... Respondent
                      Through: Mr. Amit Kumar, Advocate
         CORAM:
         HON'BLE THE CHIEF JUSTICE
         HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

         1.        Whether reporters of Local papers may
                   be allowed to see the judgment?             Yes
           2.      To be referred to the reporter or not?                    Yes
           3.      Whether the judgment should be reported                   Yes
                   in the Digest?

RAJIV SAHAI ENDLAW, J.

1. These applications under Section 11 (6)(c) of the Arbitration

Act, 1996, though entertainable by the Chief Justice or his designate,

were vide order dated 4th September, 2009 referred to this Bench, to

consider the aspect of limitation within which an application under

Section 11(6) can be filed. The counsels for the respondents had relied

upon the judgment of a Single Judge of this Court in Sh. Rajesh

Kumar Garg v. MCD 149 (2008) DLT 343 to contend that the

limitation of three years commences from the date on which, had there

been no arbitration clause, the cause of action would have accrued. It

was felt that the matter was required to be considered by a larger

bench.

2. The counsels for the respondents during the hearing also relied

on Steel Authority of India Ltd. Vs. J.C. Budharaja AIR 1999 SC

3275; therein, relying on Panchu Gopal Bose v. Board of Trustees for

Port of Calcutta (1993) 4 SC 338, it was held that the period of

limitation for commencement of 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 an arbitration to take place upon the dispute concerned. It was

further held that the period of limitation for commencing an arbitration

runs from the date on which, had there been no arbitration clause, the

cause of action would have accrued. In fact, the said passage from

Panchu Gopal Bose (supra) reproduced in Steel Authority of India

Ltd. (supra) forms the backbone of the contention of the counsels for

the respondents. Reliance in this regard is also placed on Shah

Construction Co. Ltd. v. Municipal Corporation of Delhi AIR 1985

Delhi 358.

3. The judgments in Steel Authority of India Ltd., Panchu Gopal

Bose and in Shah Construction Company Ltd. (supra) are under

Section 20 of the Arbitration Act, 1940. In fact, the Division Bench of

this Court in Shah Construction Co. Ltd. noticed that the 1940 Act

provided for three kinds of arbitration i.e. (i) arbitration without

intervention of Court (i.e. Section 3 to Section 19), (ii) arbitration with

intervention of a court where there is no suit pending (Section 20) and

(iii) arbitration in suits (Chapter IV). It was further held that a party

may proceed under Section 20 instead of proceeding under Chapter-II

(Section 8); Section 20 confers power on court to order the agreement

to be filed and further to make an order of reference to the arbitrator

appointed by the parties or where the parties cannot agree upon an

appointment, to an arbitrator appointed by the court. It was further

distinguished that Section 8 does not contain any provision

empowering the court to make an order of reference as one found in

Section 20 (4); the party has thus an option to proceed either under the

provision of Chapter II (Section 8) or of Chapter III (Section 20) in

proceeding with the reference; there is nothing in Section 20 to compel

the other party not to take recourse to Section 8 of the Act; it is his

choice whether to apply under Section 8 of under Section 20 of the

Act. Yet further it was held that there is no period of limitation if the

parties proceed under Section 8 of the Act.

4. The Division Bench in Shah Construction Co. Ltd. therefore

carved out the difference between Section 8 and Section 20. The law as

laid down in Panchu Gopal Bose and in Steel Authority of India Ltd.

of the limitation of three years from the date of accrual of cause of

action for the claim was held to apply to a petition under Section 20 of

the Act only and not to a petition under Section 8 of the Act.

5. We find that the limitation for filing a petition under Section 8 of

the 1940 Act has been the subject matter in Utkal Commercial

Corporation v. Central Coal Fields Ltd. AIR 1999 SC 801 where it

was held that in a case under Section 8 (2) of the 1940 Act, Article 137

of the Limitation Act, providing limitation of three years, applies and

the time for the purpose of limitation begins to run from the date when

the right to make an application under Section 8 accrues i.e. upon the

failure of the other party to concur in the appointment of the arbitrator

within 15 days inspite of notice. It was held by the Supreme Court that

in order to be entitled to ask for a reference there must be a notice

contemplated under Section 8 and no compliance thereof.

6. The position under the 1996 Act in Section 11 is akin to that

under Section 8 and not to that under Section 20 of the 1940 Act. In

fact, the procedure as prescribed under Section 20 of the 1940 Act has

been totally done away with in the 1996 Act. Under the 1996 Act, a

party to an arbitration agreement cannot straightaway approach the

court for appointment of the arbitrator, as a party to an arbitration

agreement was entitled to under Section 20 of the old Act. Under

Section 11 of the new Act, even if there is no named arbitrator, the

party is not entitled to approach the court straightaway and is required

to first issue notice to the other party proposing the names of the

arbitrators and is to approach the court only upon the failure of

consensus within 30 days of such notice. The procedure prescribed in

Section 11 is mandatory. Thus, the question of a party preferring an

application under Section 11(4) or under Section 11(6) to the Chief

Justice or his designate does not arise unless the procedure of giving a

notice is followed and without such procedure being followed and

failure thereof, there would be no cause of action for the petition under

Section 11(4) or 11(6) of the Act. Thus, the limitation for filing an

application under Section 11(4) or 11(6) of the Act cannot but accrue

only upon the failure of the procedure prescribed and can possibly have

nothing to do with the limitation for preferring the claim. The

Supreme Court in J.C. Budhraja Vs. Chairman, Orissa Mining

Corporation Ltd. (2008) 2 SCC 444, relied by the counsel for the

petitioner, has clearly held that the period of limitation for filing a

petition under Section 8(2) of the 1940 Act seeking appointment of an

arbitrator cannot be confused with the period of limitation for making

the claim.

7. We therefore find that the limitation for filing an application

under Section 11(4) would commence running only from the expiry of

30 days from the receipt of request mentioned in Section 11(4) (a) or

(b) and the limitation for an application under Section 11(6) would

commence running from the happening of the contingencies mentioned

in sub-clause (a) or (b) or (c) thereof.

8. Faced with the aforesaid, the counsel for the respondent has in

his written submissions handed over today contended that the law

aforesaid qua Section 8 of the 1940 Act would not apply inasmuch as

the arbitration clause in the agreement between the parties in the

present case is for arbitration of an officer appointed to be the

arbitrator by the Director General, Doordarshan. The same in our view

will not make any difference. Section 8 of the 1940 Act also applied in

a situation where the appointed arbitrator neglected or refused to act or

when the vacancy in the Arbitral Tribunal is not filled. The petitioners

in the present cases have pleaded that they approached the Director

General, Doordarshan for appointment of the arbitrator vide notice

dated 3rd May, 2003 but the Director General, Doordarshan failed to

appoint the arbitrator till the filing of the petition in /or about January,

2005. Section 11(6)(c) applies when in an appointment procedure

agreed upon by the parties, a person fails to perform any function

entrusted to him under that procedure. In the present case, the

petitioner had filed the applications under Section 11(6) of the Act

within three years of approaching the Director General, Doordarshan

for appointment of the arbitrator. The applications are thus within

time.

9. There is no dispute that the Article of the Schedule to the

Limitation Act that is applicable is Article 137, providing limitation of

three years. It was also so held in Kerala State Electricity Board Vs.

T.P. Kunhaliumma AIR 1977 SC 282.

10. The learned Single Judge in Rajesh Kumar Garg (supra) found

that the contractor had given notice demanding arbitration after more

than 6-8 years of completion of the work; it was not the case that the

final bills were not prepared and for that reason the dispute could not

have arisen. It was held that the cause of action for the application

under Section 11 was when the claims had accrued and the applicant in

that case had slept over their rights. The claims were held to be stale

and hopelessly barred by limitation and the application under Section

11 dismissed. The said judgment relied on Major (Retd.) Inder Singh

Rekhi Vs. DDA (1988) 2 SCC 338, also a case under Section 20 of the

1940 Act and which has been distinguished hereinabove. We therefore

do not find Rejesh Kumar Garg, relying on Inder Singh Rekhi as

limitation applicable to a petition under Section 11 of the Act, as good

law. We may however clarify that even if the petition under Section 11

is found to be in time, it may still be dismissed if claims sought to be

resuscitated are still found to be long dead ones.

11. The respondent has also challenged the claims being within

time. We had at the time of hearing clarified that the question of

claims being within time or not is not found by us to be such which can

be decided by the Chief Justice or his designate. The same is in any

case not the obligatory function of the Chief Justice under Section 11

of the Act as held in National Insurance Co. Ltd. Vs. Boghara

Polyfab Pvt. Ltd. AIR 2009 SC 170. However, we find that the

respondent in the synopsis of submissions has taken the said plea

again, though no arguments have been addressed thereon. The

petitioners have pleaded that an agreement (on 25th March, 1989 in AA

20/2005 and on 10th April, 1995 in AA 18/2005) was entered into

between the President of India and the respondents, that payments were

due under the said agreement; that in 1997, The Prasar Bharati

(Broadcasting Corporation of India) Act, 1990 was notified; that in

terms of the said Act, the amounts payable by the respondents to the

Government of India, became payable to the petitioner; that ultimately

in 2001-2002 notices demanding the amounts were sent and upon the

same remaining uncomplied with, in 2003 the Director General,

Doordarshan was approached for appointment of arbitrator in terms of

the agreement, as aforesaid. It is the case of the petitioner that since the

petitioner has stepped into the shoes of the President of India, the same

period of limitation for recovery of dues, as available to the

Government, is available to the petitioner also. The respondents have

controverted the said position. We, having at the time of hearing itself

indicated that all the said questions shall be left to the arbitrator and the

counsel for the respondents having not controverted at that time, we

reiterate the same. We have recorded the respective contentions only to

demonstrate that without further investigation, it cannot be said that the

claims are long dead ones and such investigation/adjudication is best

left to the arbitrator.

12. The counsel for the respondent has in the synopsis also stated

that the Chief Justice is also required to decide whether there is privity

of contract between the parties or not. The agreement in the present

case was between the President of India and the respondent. It is the

case of the petitioner Prasar Bharati (Broadcasting Corporation of

India) Ltd. that upon the promulgation of The Prasar Bharati

(Broadcasting Corporation of India) Act, 1990, the amounts due from

the respondent to the Govt. of India have become the entitlement of the

petitioner under Section 16 of the said Act. The present is a case

where the petitioner claims to be the successor in interest of the party

with whom the respondent had admittedly entered into agreement. We

deem it appropriate that the said objection of the respondents be also

kept open and be left to be decided by the arbitrator. Suffice it to state

that in the facts it cannot be said that there is no arbitration agreement

between the parties or that the respondent should not be vexed with the

arbitration without determination on the said aspect.

13. The synopsis of the respondent also raises the pleas of the

petitioner having no cause of action and of the qualification of the

agreed arbitrator being an officer of the government or the

Corporation. The first of the same is outside the ambit of Section 11 of

the Act. As far as the qualification of arbitrator is concerned, though

the Supreme Court in Northern Railway Administration Vs. Patel

Engineering Co. Ltd. 2008 (10) SCC 240 has held that the court even

while appointing the arbitrator under Section 11 of the Act is to give

due regard to the qualifications if any prescribed in the agreement, but

we do not find any qualification to have been prescribed in the present

case; being an officer of the Govt. of India or the Prasar Bharati is not

a qualification for appointment as the arbitrator.

14. The result is that the applications succeed. The petitioners have

become entitled to the appointment of an arbitrator by the Chief Justice

or his designate. We accordingly appoint Justice Arun B. Saharya

as the arbitrator. He is on the panel of the Delhi High Court

Arbitration Centre. The arbitration shall be under the aegis of the said

Centre. The parties are left to bear their own costs.

CHIEF JUSTICE

RAJIV SAHAI ENDLAW

February 8, 2010 gsr