Delhi High Court
Prasar Bharti vs Maa Communcation on 8 February, 2010
Equivalent citations: AIR 2011 DELHI 26, (2010) 1 ARBILR 551 (2010) 167 DLT 559, (2010) 167 DLT 559
Author: Rajiv Sahai Endlaw
Bench: Chief Justice, Rajiv Sahai Endlaw
* 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, ARB. A. 18/2005 & ARB. A. 20/2005 Page 1 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 2 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 3 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 4 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 5 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 6 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 7 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 8 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 9 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 10 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 11 of 12 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 ARB. A. 18/2005 & ARB. A. 20/2005 Page 12 of 12