Calcutta High Court
Smt. Santosh Agarwal vs Smt. Raja Devi Agarwal And Ors. on 29 September, 2000
Equivalent citations: (2001)1CALLT99(HC)
JUDGMENT V.K. Gupta, J.
1. This Appeal is directed against the Judgment dated 28th March, 1996 passed by a learned single Judge of this Court in A.P. No. 26 of 1995 whereby the application filed by the Appellant under section 20 of the Arbitration Act, 1940 along with interlocutory applications filed by her under section 41 of the Arbitration Act, 1940 have been dismissed on the ground that the application under section 20 of the Arbitration Act was barred by time and since the main application under section 41 of the Arbitration Act not being maintainable, both were dismissed.
2. Brief Facts leading to the filling of the Appeal are that a Partnership Firm comprising of-two partners, namely Jhumer Lal Agarwal and Shyam Sundar Agarwal, father and son respectively, both were carrying on partnership business. On 27th May, 1989 Jhumer Lal Agarwal, the father died and shortly thereafter i.e. on 1st July, 1989 the son, the other partner namely Shyam Sundar Agarwal also died. Their said partnership business was being carried on before their respective deaths in accordance with the terms of the Partnership Deed executed between the two of them on 13th December, 1975. Since the very opening part of the Partnership Deed dated 13th December, 1975 described the two partners as being inclusive of their heirs, executors, administrators and assigns, the appellant Smt. Santosh Agarwal, one of the daughters of Jhumer Lal Agarwal, upon the death of her father on 27th May, 1989 claimed her share (71/2%) on devolution, and not getting the same filed an Application under section 20 of the Arbitration Act in the year 1994 because of a stipulation in the Partnership Deed dated 13th December, 1975 to the effect that all differences and disputes arising between the parties or between their heirs or legal representatives regarding the business of the Firm etc. would be referred to Arbitration in accordance with the provisions contained in the Arbitration Act, 1940. It is worthwhile to notice here that n the meanwhile on the 11th July. 1989 a new Partnership Deed had come to be executed between the mother of the appellant, Smt. Raja Devi Agarwal, respondent No. 1 hrerein and the wife of appellant's sister Smt. Pushpa Devi Agarwal, respondent No. 2 herein whereby a new Partnership Firm was brought into existence. The learned trial Judge, as noticed at the outset, dismissed the aforesaid Application filed by the appellant under section 20 of the Arbitration Act as being time barred by holding that the same was filed beyond the prescribed period of limitation period of three years, as stipulated in terms of Articles 137 of the schedule to the Limitation Act.
3. The appellant-petitioner raised the following disputes and differences which she wanted to refer to arbitration :
(a) Did the partnership firm constituted under the Indenture of Partnership dated 13/12/1975 stand dissolved upon the demise of Jhumer Lal Agarwal on 27-5-1989;
(b) Is the deed of partnership dated 11th July. 1989 liable to be adjudged void, delivered up, and cancelled;
(c) Are the respondent Nos. 1 to 4 wrongfully carrying on business with the assets and the properties of the erstwhile partnership firm constituted under the Indenture of partnership dated 13-12-1975;
(d) Is your petitioner entitled to accounts of the partnership firm constituted under the Indenture of partnership dated 13-12-1975;
(e) Are the respondent Nos. 1 to 4 liable to account for the assets and properties as also the profits earned by them by dealing with the assets and properties of the partnership firm constituted under the Indenture of partnership dated 13-12-1975 and carried on by the said respondent under the purported deed of partnership dated 11th July, 1989;
(f) To what further or other reliefs your petitioner is entitled to;
(g) Are the respondents Nos. 1 and 2 liable to transfer the tenancies of the properties mentioned in annexures 'D' to the legal heirs and representatives of the Late Jhumer Lal Agarwala and/or dealt with in any other manner in accordance with law."
4. The application under section 20 was filed in April 1994. It appears that at the time the petitioner/appellant filed the aforesaid petition under section 20 of the Arbitration Act she did have the apprehensions about the limitation aspect of the same and accordingly made an averment to the effect that even though she was aware about the existence of the Firm but she was never aware of the terms and conditions contained In the Partnership Deed. These averments are contained in para 6 of the petition which reads thus "6. At all material times your petitiner was aware of the existence of the Firm but was never aware of the terms and conditions contained in the Partnership Deed. Only recently, particulars whereof have been given hereinafter your petitioner has come to learn of the various terms and conditions contained in the Deed of Partnership Deed. The relevant terms and conditions contained in the Deed of Partnership are set out herein below :--
"10) That the profits and/or losses of the Firm determined in accordance with the provisions contained hereinbefore shall be shared or divided between the partners in the following manner:-
Profit Loss
(a) SRI JHUMERLAL AGARWALLA, the party hereto of the First Part 60% 60%
(b) SRI SHYAM SUNDER AGARWALLA, the party hereto of the Second Part 40% 40% "17) That upon the death of any partner, the partnership shall not stand dissolved and the surviving partner may continue the business by admitting the heir or legal representatives of the deceased into the partnership".
"18) That in case of any difference of dispute arising between the partners or between the heirs and legal representatives or any partner regarding the business of the partnership Firm or in relation to the construction of this Partnership Deed during the subsistence or after the termination of this partnership. It shall be referred to Arbitration in accordance with the provisions of the Indian Arbitration Act, 1940 for the time being in force."
5. At the same time however in paras 9 and 10 of the petition the petitioner did state that the new Partnership Firm was brought into existence with effect from and by the execution of the new Partnership Deed on 11th July, 1989 between respondents 1 and 2. It is not the case of the petitioner/appellant that she learnt about this fact at any stage beyond the date of actual happening, i.e. 11th July, 1989. Paras 9 and 10 reads thus:
"9. That respondents Nos. 1 and 2 have started carrying on the business of the said Partnership Firm under the indenture of partnership dated 11th July, 1989 a copy whereof is annexed hereto and marked with the letter 'C'.
10. In the said Partnership Deed dated 11th July, 1989, it has been stated that the respondents Nos. 1 and 2 are the legal heirs of the erstwhile partners. It has deliberately been suppressed in the said Partnership Deed that there are other legal heirs and representatives of both erstwhile partners."
6. We have to therefore basically and primarily consider as to whether the petition filed under section 28 of the Arbitration Act was in fact time barred or not. Undoubtedly Articles 137 of the Schedule to the Limitation Act which provides for a period of 3 years as limitation period is application to a petition under section of the Arbitration Act 1948. Article 137 reads thus :
"137.
Any other application for which no period of limitation is provided else where in this Division.
Three years When the right to apply accrues."
7. When does the right to apply, as being the starting point of the Limitation, accrue to a petitioner in so far as it relates to a petition under section 20 of the Act is concerned?
8. In the case of Major (retd.) Inder Singh Rokhi v. Delhi Development Authority reported in AIR 1988 SC 1887. reliance whereof was placed by Mr. Mukherjee appearing for the appellant, it has been held by their Lordships that the existence of a dispute is essential for the appointment of an Arbitrator under section 8 or a reference under section 20 of the Arbitration Act and that a dispute can arise only when a claim is asserted, by one party and denied by the other on whatever grounds. More failure or inaction to pay does not lead to the inference about the existence of a dispute as the expression "dispute" contains a positive element of ascertion and in denying and merely an in-action to accede to a claim or a request. With respect to the period of time, in the light of the facts of that particular case as to when did the dispute actually arises, despite the fact that the contract work in question was completed in the year 1980, their Lordships observed that even though it was true that on completion of the contract work right to get payment would normally arise, but where the final bill had not been prepared and when the ascertion of the claim was made much after the completion of the work and there was non-payment, the cause of action arose from the date when the assertion was made. Their Lordships then went out to observe that it was also true that a party cannot postpond the accrual of a cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by the claimant is the accrual of the cause of action. For a proper understanding of the ratio in the aforesaid judgment. We re-produce herein-below para-4 of the Judgment in its entirety. Para-4 reads thus:
"Therefore, in order to be entitled to order of reference under section 20, it is necessary that there should be an arbitration agreement and secondly, difference must arise to which this agreement applied. In this case, there is no dispute that there was an arbitration 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 is for the present case when did such dispute arise. The High Court proceeded on the basis that the work was completed in 1988 and, therefore, the appellant became entitled to the payment from that date and the cause of action under Article 137 arose from that date. But in order to be entitled to ask for a reference under section 28 of the Act there must not only be an entitlement to money but there must be a difference or a dispute must arise. It is true that on completion of the 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 on 28th Feb. 1983 and there was non-payment, the cause of action from that date, that is to say, 28th of Feb. 1983. It is also true that a party cannot postpons 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 cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under section 8 or a reference under section 20 of the Act. See: Law of Arbitration by R.S. Bachawat, 1st Edition, page-354. There should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion in denying and merely inaction to accede to a claim or a request. When in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case."
9. In the case of Union of India and Another v. M/s. L.K. Ahuja and Com-pany , upon which also very heavy reliance was placed by Mr. Mukherjee. Their Lordships of the Supreme Court while dealing with the twin questions about the claim being barred by limitation and the application under section 20 of the Arbitration Act being barred by limitation observed as follows :--
"It appears that these questions were discussed in the decision of the Calcutta High Court in Jiwani Engineering Works P. Ltd. v. Union of India where (one of us-Sabyasachi Mukherji J.) was a party and which held after discussing with all those authorities the question whether the claim sought to be raised was barred by limitation or not, was not relevant for an Order under section 28 of the Act. Therefore there are two aspects. One is whether the claim made in the arbitration is barred by limitation under the relevant provisions of the Limitation Act and secondly, whether the claim made for application under section 20 is barred. In order to be a valid claim for reference under section of the Arbitration Act 1940. It is necessary that there should be an arbitration agreement and secondly difference must arise to which the agreement in question applied and, thirdly, that must be within time as stipulated in section 20 of the Act."
10. One would thus see that in L.K. Ahuja the Court was dealing with the twin aspects, one whether the claim made in the arbitration was barred by law of limitation under the relevant provisions of the relevant Act, and secondly whether the application under section 20 of the Arbitration Act was barred by limitation. In order to be a valid claim with reference to section 28 of the Arbitration Act it is necessary that there should be an arbitration agreement and secondly differences must arise to which the agreement in question applies and thirdly that application must be within time as stipulated in section 20 of the Act. With reference to the limitation aspect Their Lordships found that assertion of claim and denial of the same was a necessary ingredient and then went on to say that it would be wrong to mix up the two aspects, namely, whether there was any valid claim for reference under section 20 of the Act and whether the claim to be adjudicated by the Arbitrator was barred by lapse of time. These observations were made in para-8 of the judgment which we reproduce herein-below :
"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 be adjudicated by the arbitrator, was barred by lapse of time. The second is a matter which the arbitrator would decide unless, however, if 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 difference 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 payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable. In this case, the claim for reference was made within three years commencing from April 16, 1976. We are, therefore, of the view that the High Court was right in this case. See in this connection the observations of this Court in Major (Retd.) Inder Singh Rekhi v. D.D.A. (1988)2 JT 6 : (AIR 1988 SC 1887)."
11. In the case of Steel Authority of India Limited v. J.C. Budharaja reported in (1989) 8 SCC 122 while dealing with the question relating to the maintainability of the petition under section 20 of the Arbitration Act with reference to the limitation aspect, even while this question did not directly arise in that case, Their Lordships of the Supreme Court while referring to an earlier decision of the Court in the cass of State of Orissa v. Damodar Das and referring to Russel on Arbitration and dwelling on the aspect of "cause of action" and "cause of arbitration" observed and held that under section 3 of the Limitation Act it was the duty of the Arbitrator to reject the claim as it was on the face of it barred by limitation because of the applicability of the Limitation Act to arbitration proceedings in terms of section 37 of the Arbitration Act, 1940 and because on the day the petition under section 20 of the Arbitration was filed by the petitioner, the cause of action for recovering the amount in question was barred and therefore, as per Article 137 of the Limitation Act. the petition under section 28 of the Arbitration Act was also barred by limitation.
12. The period of limitation for the commencement of an arbitration runs from the date on which the "cause of arbitration" accrued. Had there been no arbitration agreement, "the cause of arbitration" would not have accured is an accepted and well settled principle of law. Just as in the case of Suits and causes of actions, the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrues, as in the case of arbitrations the claim is not to be put forward after the expiration of the specified number of years from the date when the cause of action to such a claim accrues, is also a well-established principle of law. It is equally true and well-established that the period of limitation for commencing an arbitration runs from the date on which the cause of arbitration accrues, that is to say, from the date when the claimant first anqutres either a right of action or a right to require that an arbitration takes place with respect to the concerned dispute.
13. Undoubtedly Article 137 of the Limitation Act does say that the period of limitation of 3 years would run from the time the right to apply accrues and the settled preposition of law as would be culled out from the aforesaid decisions of the Supreme Court clearly being that the right to apply for reference of disputes to arbitration would accrue only when a dispute in terms of the arbitration agreement would be brought into existence and further that the dispute cannot be brought into existence unless there is an assertion by the claimant and either assertion or denial by the opposite party. This being the legal position, therefore, we have to see whether on a date when a petition under section 20 of the Arbitration Act is filed, and the claim is barred by limitation on that date itself, can the petition not be held to be barred by limitation merely because the dispute, on the basis of the factum of ascertion and denial is deemed to have arisen at a point later than the accrual of cause of action with respect to the maintainability of the claim itself on the touchstone of Limitation aspect. Even though in L.K. Ahuja Their Lordship had observed that it would be entirely wrong to mix up the two apects about maintainability of the claim and the maintainability of the petition under section 20 of the Arbitration Act on the touch stone of limitation, yet if on admitted facts a claim is found at the time of making an order under section 28 of the Arbitration Act to be barred by limitation, section 20 petition can be considered to be time barred and hence found to be not maintainable. We are saying so because undoubtedly it is for the Arbitrator to decide whether a claim is barred by limitation or not. But if on the facts not disputed and being totally admitted, section 28 petition itself reveals that as on the date of its presentation the claim is patently barred by limitation, no purpose would be served by going through the motions of technical observance of law, with reference to the concept of assertion and denial and to held that even though section 20 application, reckoning the period from assertion date and denial date is within limitation period, the claim patently is time barred. That would, in our opinion, the contrary to the well-settled proposition of law regarding the maintainability of claims on the touchstone of limitation. We are therefore of the view that the 3-year period as prescribed in Article 137 of the Limitation Act with reference to the maintainability of an application under section 20 of the Arbitration Act has to be read in conjunction with the limitation prescribed for the claim forming the subject matter of such an application and if on the date when the application under section 20 is made in a Court. If the Court finds that the claim itself is clearly, patently and on the very face of it, is barred by limitation, section 20 application has to be held as barred by limitation.
14. We may also deal with Mr. Mukherjee's contention that the period of Limitation for section 20 application is irrespective of the period of limitation prescribed for the claim itself in the relevent Articles of the Limitation Act. The question passed by Mr. Mukherjee is, that prescribing the period of limitation (3 years) as contained in Articles 137 of the Limitation Act with respect to section 20 application, with reference to the date when the right to apply accrues, if one considers such date as the one on which the assertion and or denial is made, would amount to extending the period of limitation prescribed also where in the Limitation Act with respect to the claim itself of the same petitioner? Does it therefore also mean that merely because of the prescription of 3-year limitation period in Article 137 and its applicability to section 20 petition, the period of limitation provided for the maintainability of a claim automatically gets extended till such time as the petitioner asserts his claim and the opposite party denies the same? We are opposing these two questions, because of Mr. Mukherjee's contention and his persistent argument that because the existence of a dispute between the two parties with respect to a section 20 petition being sine-quo-non to invoking reference under section 20, the limitation period should start from the date when the right to apply accrues and according to Mr. Mukherjee, the right to apply does not accrue until a dispute is stated to have been brought into existence by the principle of "assertion and denial". We do not agree With the submission and the argument at all. That also perhape docs not seem to be the intention of the legislature and cannot be considered to be at all a correct interpretation to be placed upon Article 137. Article 137 has to be read along with other relevant Articles of the Limitation Act in so far as computing the period of limitation is concerned, and if one considers that the limitation with respect to section 20 petition starts from the tender the dispute is brought into existence by an application of "asertion and denial" principally, that period has to be within the period prescribed for the claim as such in the relevant Article of the Limitation Act, and if in the meanwhile the period prescribed for the claim itself has already expired, notwithstanding the fact that the period of limitation by applying the aforesaid principle with reference to Article 137 may still be available, the petition under section 20 of the Arbitration is liable to be rejected on the ground of its being barred by the time. We are saying so on a very clear understanding that no purpose would be served whatsoever by allowing a petition under section 20 because in our considered view the dispute being the subject matter of that petition cannot be adjudicated by the Arbitrator as the same has in the meanwhile become barred. That being the clear mandate of section 3 of the Limitation Act also, the Arbitration, even if he is referred the dispute by an order of reference passed by a Court under section 20 will have no option but to dismiss the claim as being time barred.
15. This now brings us to the factual aspect as to whether in the present case, the claim was actually time barred or not, as on the date of the presentation of the petition. Undoubtedly, the limitation period prescribed for such a claim is three years. Undoubtedly also it is the admitted case of the petitioner/appellant that she was aware about the existence of the partnership deed and that she was also aware about the fact the new partnership deed had already been executed and brought into existence on 11th July 1989 between the respondent No. 1 and respondent No. 2 herein. The petitioner's husband was working in the Firm at all relevant and material times. In view of the nature of reliefs claimed and in view of the extent and scope of the disputes as projected by the petitioner/ appellants we are of the clear opinion that the claim was barred by limitation as on the date of presentation of the petition under section 20 of the Arbitration Act. We are not impressed by the argument of Mr. Mukherjee that either section 37 of the Partnership Act or section 88 of the Trusts Act being applicable, it was a continuing cause of action and therefore the claim could not be held to be barred by limitation. We do not subscribe to either of the two views and held that it was not a continuing cause of action and that the staring point of limitation actually. In all respect, was the date when the partnership between the father and son stood dissolved. The resolution of the Partnership was clearly on the date when the father died because admittedly the partnership Finn comprised of on the two partners and because of the death of one of them the Firm automatically stood dissolved.
We are therefore of the clear view that the learned single Judge was correct in dismissing the petition as being barred by limitation. The appeal accordingly is dismissed, but without any order as to costs.
A. Barua, J.
16. I agree.
17. Later
18. After this judgment was pronounced, the learned counsel appearing for the appellant made an oral prayer for staying the operation of this order.
19. On consideration the prayer is rejected.
20. Let a xerox copy of this judgment, duly countersigned by the Assistant Registrar of this Court, be given to the parties upon their undertaking to apply for and obtain certified copy of the same on usual undertaking.
21. Appeal dismissed