M/S Choudhary And Company vs Rajasthan Rajya
2023 Latest Caselaw 6150 Raj

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR S.B. Arbitration Application No. 8/2022

M/s Choudhary And Company, Registered Firm 414, C Road, Nehru Park Ke Pass, Sardarpura District Jodhpur 342003

----Petitioner Versus

1. Rajasthan Rajya, District Collector, Bikaner.

2. Chief Engineer, Indira Gandhi Nahar Pariyojna Bikaner.

3. Executive Engineer, 28Th Block, I.g.n.p. Phalodi.

----Respondents

For Petitioner(s) : Mr. Pradeep Choudhary For Respondent(s) : Mr. Manish Tak, Dy.GC.

HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

Judgment

Reserved on 18/08/2023

Pronounced on 22/08/2023

1. The instant arbitration application has been filed by the

applicant-Firm under Section 10 & 11 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as 'Act of 1996')

claiming the following reliefs:-

";g fd izkFkZuk i= izLrqr dj fuosnu gS fd blesa mYysf[kr fooknksa ds fuiVkjs ds fy, fn vkchZVsª"ku ,.M dksUlhfy;s"ku ,DV 1996 dh /kkjk 10 o 11 ds izko/kku vuqlkj dh fu;qfDr ds vkns"k tkjh Qjek;k tkos A izkFkkhZ dk ;g Hkh fuosnu gS fd bl dkj.k dh vizkFkhZx.k us vius vkpj.k ls e/;LFk fu;qfDr dk viuk vf/kdkj [kks fn;k gS A vr% fdlh lsok fuo`r HkV~Vs ds dk;ksZ esa n{krk j[kus okys Lora= ,oa fu'i{k v/kh{k.k vfHk;ark o bl ls mPp inLFk vf/kdkjh dh e/;LFk ds :i esa fu;qfDr ekuuh; mPp U;k;ky; }kjk dh tkos A "

2. The applicant is a partnership-Firm, who entered into

agreements bearing nos.75 & 76 with the respondent in the year

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1981-1982 for the works pertaining to brick kiln ( bZaV HkV~Vk) to be

done from 19.12.1981 to 18.09.1982; thereafter, the applicant

performed the work, but the due payment against the same was

not made by the respondent.

2.1 The applicant vide letter dated 07.02.2020 demanded from

the respondent the due payment towards the final bill, whereafter,

the applicant again issued a letter detailing out therein the works

performed by it. The applicant received certain documents,

whereafter, letters dated 03.09.2021 and 24.11.2021 were sent

by the applicant making a demand for payment from the

respondent, towards the final bill, which comes to Rs. 86,05,672/-

and Rs.1,19,54,335/- with interest, for the works in question.

However, the respondent vide letter dated 30.01.2020 asked the

applicant to deposit an amount Rs. 84,096/- with the respondent;

whereafter, the present dispute arose between the parties.

2.2. The applicant, for the first time, sent a letter to the

respondent on 14.12.2021 seeking to get the dispute resolved

through arbitration and for appointment of the arbitrator, as per

the Arbitration Clause 19A..

Clause 19(a) i.e. Arbitration Clause is reproduced as hereunder:

"Clause -19 Arbitration -

(a) If any question, difference or objection whatsoever shall arise in any way in connection with or arising out of this instrument or the meaning of operation of any part thereof or the rights and duties or liabilities of either party, then save in so far as the decision of any such matter as herein before provided for and has been so decided every such matter constituting a total claim of Rs. 5,000/- or above whether, its decision has been otherwise provided for and whether it has been finally decided accordingly or whether

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the contract should be terminated or has been rightly terminated and as regards the rights or obligation of the parties as the result of such terminated Termination shall be referred for adjudication to a sole arbitrator to be appointed as hereinafter provided.

For the purpose of appointing the sole arbitrator referred to above, the Chief Engineer/Addl. Chief Engineer will on receipt of notice and prescribed fee from the contractor send a panel of 3 names not below the rank of Supdtg. Engineer of the Rajasthan Govt. and who shall all be presently unconnected with the contract. The contractor shall on receipt of the names as aforesaid select any one of the persons named, to be appointed as a sole arbitrator and communicate his name to the Chief Engineer/Addl. Chief Engineer. The Chief Engineer/Addl. Chief Engineer shall thereupon appoint the said person as the sole arbitrator without delay. The Arbitrator shall given reasons for the award."

3. Learned counsel for the applicant submitted that the

applicant issued several letters to the respondent demanding the

relevant documents, but despite the same, the respondent did not

furnish the same; whereafter, the applicant issued the letter(s)

demanding the due amount against the final bill pertaining to the

works in question.

3.1. Learned counsel further submitted that the agreement in

question has an arbitration clause, as per which, in relation to any

dispute arising between the applicant and the respondent, the

matter deserves to be referred for arbitration.

3.2. Learned counsel also submitted that after completion of the

works in question, the applicant demanded the payment towards

final bill on 03.09.2021, and the period of limitation is to be

computed from that day only.

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3.3. Learned counsel further submitted that the applicant made

the request for appointment of arbitrator on 14.12.2021, and

therefore, on that count also, the claim of the applicant is not time

barred.

4. On the other hand, learned counsel appearing on behalf of

the respondent, while opposing the aforesaid submissions made

on behalf of the applicant, submitted that the present application

is not maintainable, because the work in question was completed

35 years ago, and even as per the record, it is a huge delay, which

does not deserve condonation as per the law.

4.1. It was further submitted that as per clause 19(a) of the

Agreement in question, the dispute has to be referred for

arbitration within 180 days of presentation of the final bill, and

therefore, it is clear that the applicant did not adhere to such time

limit in regard to the dispute in question.

4.2. It was also submitted that the work in question was

completed on 09.12.1983, whereafter through running bill no.13,

an amount of Rs. 10,18,641/- had been paid to the applicant and

there is no pending amount against any bill. It was further

submitted that the recovery in question of an amount of

Rs.84,096/-, as sought to be recovered from the applicant is

justified in law.

5. Heard learned counsel for the parties as well as perused the

record of the case.

6. This Court observes that the agreement was executed

between the petitioner and the respondent for the works to be

done from 19.12.1981 to 18.09.1982; whereafter, the work order

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was issued on 10.04.1996, but as per the applicant, the

respondent did not pay the due amount towards the completed

works in question.

7. At this juncture, this Court considers it appropriate to

reproduce the relevant portions of the judgment rendered in the

case of M/s Kailash Chand Vs Union of India (S.B.

Arbitration Application No. 35/2018, decided by this Court on

16.08.2023), as hereunder;

"4.5. In support of such submissions, learned counsel relied upon the judgments rendered by the Hon'ble Apex Court in the cases of Bharat Sanchar Nigam Ltd. & Ors. Vs. Nortel Networks India Pvt Ltd. (Civil Appeal Nos. 843-844 of 2021, decided on 10.03.2021) and B and T AG Vs. Ministry of Defence (Arbitration Pertition (C) No.13 of 2023, decided on 18.05.2023); and order passed by a Coordinate Bench of this Hon'ble Court in the case of M/s Kamla Construction Company Vs Rajasthan Rajya, (S.B. Arbitration Application No. 21/2020, decided on 10.02.2023).

.......

7. At this juncture, this Court considers it appropriate to reproduce the relevant portions of the judgments rendered in the cases of Bharat Sanchar Nigam Ltd. (supra) and B and T AG (Supra), as hereunder:

Bharat Sanchar Nigam Ltd. & Ors. (Supra):

"1. The present Appeals raise two important issues for our consideration: (i) the period of limitation for filing an application under Section 11 of the Arbitration and Conciliation Act, 1996 ("the 1996 Act"); and (ii) whether the Court may refuse to make the reference under Section 11 where the claims are ex facie time barred?

9.......In Consolidated Engineering v. Principal Secretary, Irrigation, this Court held that:

"45......Section 43 of the AC Act, apart from making the provisions of the Limitation Act, 1963 applicable to arbitrations, reiterates that the Limitation Act

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applies to proceedings in court. Therefore, the provisions of the Limitation Act, 1963 apply to all proceedings under the AC Act, both in court and in arbitration, except to the extent expressly excluded by the provisions of the AC Act." ....

13. Various High Courts have taken the view that Article 137 of the Limitation Act would be applicable to an application under Section 11 of the Arbitration Act.

15. The reasoning in all these judgments seems to be that since an application under Section 11 is to be filed in a court of law, and since no specific Article of the Limitation Act, 1963 applies, the residual Article would become applicable. The effect being that the period of limitation to file an application under Section 11 is 3 years' from the date of refusal to appoint the arbitrator, or on expiry of 30 days', whichever is earlier.

17. Given the vacuum in the law to provide a period of limitation under Section 11 of the Arbitration and Conciliation 1996, the Courts have taken recourse to the position that the limitation period would be governed by Article 137, which provides a period of 3 years from the date when the right to apply accrues. However, this is an unduly long period for filing an application u/S. 11, since it would defeat the very object of the Act, which provides for expeditious resolution of commercial disputes within a time bound period. The 1996 Act has been amended twice over in 2015 and 2019, to provide for further time limits to ensure that the arbitration proceedings are conducted and concluded expeditiously. Section 29A mandates that the arbitral tribunal will conclude the proceedings within a period of 18 months. In view of the legislative intent, the period of 3 years for filing an application under Section 11 would run contrary to the scheme of the Act. It would be necessary for Parliament to effect an amendment to Section 11, prescribing a specific period of limitation within which a party may move the court for making an application for appointment of the arbitration under Section 11 of the 1996 Act.

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18. Applying the aforesaid law to the facts of the present case, we find that the application under Section 11 was filed within the limitation period prescribed under Article 137 of the Limitation Act. Nortel issued the notice of arbitration vide letter dated 29.04.2020, which was rejected by BSNL vide its reply dated 09.06.2020. The application under Section 11 was filed before the High Court on 24.07.2020 i.e. within the period of 3 years of rejection of the request for appointment of the arbitrator. Discussion on Second issue

19. We will now discuss the second issue which has arisen for consideration i.e. whether the Court while exercising jurisdiction under Section 11 is obligated to appoint an arbitrator even in a case where the claims are ex facie time-barred. Limitation is normally a mixed question of fact and law, and would lie within the domain of the arbitral tribunal. There is, however, a distinction between jurisdictional and admissibility issues. An issue of 'jurisdiction' pertains to the power and authority of the arbitrators to hear and decide a case. Jurisdictional issues include objections to the competence of the arbitrator or tribunal to hear a dispute, such as lack of consent, or a dispute falling outside the scope of the arbitration agreement. Issues with respect to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional issues, since these issues pertain to the jurisdiction of the tribunal.

31. Admissibility issues however relate to procedural requirements, such as a breach of pre-arbitration requirements, for instance, a mandatory requirement for mediation before the commencement of arbitration, or a challenge to a claim or a part of the claim being either timebarred, or prohibited, until some pre-condition has been fulfilled. Admissibility relates to the nature of the claim or the circumstances connected therewith. An admissibility issue is not a challenge to the jurisdiction of the arbitrator to decide the claim.

32. The issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be

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decided by the arbitral tribunal. For instance, a challenge that a claim is time-barred, or prohibited until some precondition is fulfilled, is a challenge to the admissibility of that claim, and not a challenge to the jurisdiction of the arbitrator to decide the claim itself.

36. In a recent judgment delivered by a three-judge bench in Vidya Drolia v. Durga Trading Corporation, on the scope of power under Sections 8 and 11, it has been held that the Court must undertake a primary first review to weed out "manifestly ex facie non-existent and invalid arbitration agreements, or non-arbitrable disputes." The prima facie review at the reference stage is to cut the deadwood, where dismissal is bare faced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is certain that no valid arbitration agreement exists, or that the subject matter is not arbitrable, that reference may be refused. In paragraph 144, the Court observed that the judgment in Mayavati Trading had rightly held that the judgment in Patel Engineering had been legislatively overruled. While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere "only" when it is "manifest" that the claims are ex facie time barred and dead, or there is no subsisting dispute.

37. The upshot of the judgment in Vidya Drolia is affirmation of the position of law expounded in Duro Felguera and Mayavati Trading, which continue to hold the field. It must be understood clearly that Vidya Drolia has not resurrected the pre-amendment position on the scope of power as held in SBP & Co. v. Patel Engineering (supra). It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie timebarred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to

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refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal.

38. Applying the law to the facts of the present case, it is clear that this is a case where the claims are ex facie time barred by over 5 ½ years, since Nortel did not take any action whatsoever after the rejection of its claim by BSNL on 04.08.2014. The notice of arbitration was invoked on 29.04.2020. There is not even an averment either in the notice of arbitration, or the petition filed under Section 11, or before this Court, of any intervening facts which may have occurred, which would extend the period of limitation falling within Sections 5 to 20 of the Limitation Act. Unless, there is a pleaded case specifically adverting to the applicable Section, and how it extends the limitation from the date on which the cause of action originally arose, there can be no basis to save the time of limitation.

40.Conclusion Accordingly, we hold that: (i) The period of limitation for filing an application under Section 11 would be governed by Article 137 of the First Schedule of the Limitation Act, 1963. The period of limitation will begin to run from the date when there is failure to appoint the arbitrator; It has been suggested that the Parliament may consider amending Section 11 of the 1996 Act to provide a period of limitation for filing an application under this provision, which is in consonance with the object of expeditious disposal of arbitration proceedings;

(ii) In rare and exceptional cases, where the claims are ex facie time barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference".

B and T A G (Supra):-

"63. Negotiations may continue even for a period of ten years or twenty years after the cause of action had arisen. Mere negotiations will not postpone the "cause of action"

      for    the   purpose     of   limitation.      The       Legislature       has


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prescribed a limit of three years for the enforcement of a claim and this statutory time period cannot be defeated on the ground that the parties were negotiating.

64. In Panchu Gopal Bose v. Board of Trustees for Port of Calcutta reported in (1993) 4 SCC 338, this Court had held that the provisions of the Act 1963 would apply to arbitrations and notwithstanding any term in the contract to the contrary, cause of arbitration for the purpose of limitation shall be deemed to have accrued to the party, in respect of any such matter at the time when it should have accrued but for the contract. Cause of arbitration shall be deemed to have commenced when one party serves the notice on the other party requiring the appointment of an arbitrator. The question was when the cause of arbitration arises in the absence of issuance of a notice or omission to issue notice for a long time after the contract was executed? Arbitration implies to charter out timeous commencement of arbitration availing of the arbitral agreement, as soon as difference or dispute has arisen. Delay defeats justice and equity aids promptitude and resultant consequences. Defaulting party should bear the hardship and should not transmit the hardship to the other party, after the claim in the cause of arbitration was allowed to be barred. It was further held that where the arbitration agreement does not really exist or ceased to exist or where the dispute applies outside the scope of arbitration agreement allowing the claim, after a considerable lapse of time, would be a harassment to the opposite party. It was accordingly held in that case that since the petitioner slept over his rights for more than 10 years, by his conduct he allowed the arbitration to be barred by limitation and the Court would be justified in relieving the party from arbitration agreement under Sections 5 and 12(2)(b) of the Act. [See: State of Orissa v. Damodar Das, (1996) 2 SCC 216]

66. The case on hand is clearly and undoubtedly, one of a hopelessly barred claim, as the petitioner by its conduct slept over its right for more than five years. Statutory arbitrations stand apart.

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67. In view of the aforesaid, this petition fails and is hereby rejected."

10. This Court also observes that Article 137 of the Limitation Act would be applicable to an application under Section 11 of the Arbitration and Conciliation Act, 1996 and the period of limitation provided under the said Article is 3 years. In the present case, even if the period during which the aforementioned writ petition remained pending, is excluded, then also for the period from 2004 to 2011 (7 years), the application did not make any attempt to avail the appropriate legal remedy.

12. This Court further observes that the Hon'ble Apex in the aforementioned precedent law, that, "In rare and exceptional cases where the claims are ex facie time barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference". The present case clearly falls under the said category, being barred by limitation, and therefore, the prayer for referring the dispute for arbitration and appointment of the Arbitrator, deserves refusal.

13. Thus, in light of the aforesaid observations and in view of the aforementioned precedent laws as well as looking into the factual matrix of the present case, this Court does not find it a fit case so as to grant any relief to the applicant in the present application".

8. This Court further observes that the agreement in

question was entered into between the parties in regard to the

G-Schedule amount of Rs. 7,74,255/- along with 15% above

BSR, totalling to Rs. 8,90,370/- commenced on 19.12.1981

and ended on 18.09.1982, but actually the work in question

was completed on 09.12.1983 with delay. Thereafter, the

respondent, as informed, had paid to the applicant as an

amount of Rs.10,18,641/-.

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9. This Court also observes that the applicant demanded the

final payment through various letters dated 03.09.2021 and

24.11.2021, and thereafter, the applicant made the request for

appointment of arbitrator on 14.12.2021, as per the arbitration

Clause 19(a) of the agreement in question.

10. This Court further observes that the applicant made the

request for appointment of arbitrator after an inordinate delay

of 38 years because the running bill of Rs. 10,18,641/- was

paid in year 1983 itself and the applicant wrote the letter in the

year 2021 for appointment of arbitrator, which clearly show

that the claim of the applicant is time barred, even as per the

aforementioned precedent law.

11. This Court also observes that the application has raised

the dispute in question, beyond the prescribed period of

limitation which is 3 years, therefore, the same is ex-facie time

barred and does not deserve any indulgence of this Court in the

present case. This Court further observes that the applicant has

slept over his right for about 38 years, before raising the

dispute in question.

12. This Court also observes that as per the aforementioned

precedent law, the present case is time barred, and therefore,

the prayer for referring the dispute for arbitration and

appointment of the Arbitrator, deserves refusal.

13. Thus, in light of the aforesaid observations and in view of

the aforementioned precedent law as well as looking into the

factual matrix of the present case, this Court does not find it a

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fit case so as to grant any relief to the applicant in the present

application.

14. Consequently, the present application is dismissed.

(DR.PUSHPENDRA SINGH BHATI),J Skant/-

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