Bombay High Court
Vishindas Bhagchand vs Chairman, Maharashtra State ... on 7 September, 2001
Equivalent citations: 2002(1)BOMCR320, 2002(1)MHLJ222
Author: J.N. Patel
Bench: J.N. Patel
JUDGMENT
1. M/s Vishindas Bhagchand a Partnership Firm, has applied to this Court for appointment of Arbitrator in order to resolve the disputes with the respondents.
2. It is the case of the petitioner-Firm that the respondents invited tenders for construction of Post Water Treatment Plant, Hydrogen Generation Plant, A. H. Plant, Switchgear Building for C. T. Electrical Groundings and other associated works at Chandrapur Thermal Power Station, Stage-III-2x500 MW-Unit 5 and 6, as per the tender No. 8 BC. The petitioner's tender was accepted by the respondents and they were issued works order dated 3-11-1988. Under the contract, the work was to be completed on 31-1-1991, but the same was required to be continued upto 1-8-1991 when it was short closed by the respondents.
3. It is the case of the petitioner-Firm that though the work was short closed on 1-8-1991, the respondents had not cleared the final bill of the petitioner. By the letter dated 24-10-1996, the respondent No. 3 called upon the petitioner for settlement of certain issues for finalizing the appeal, pursuant to which the petitioner attended the office of the respondent No. 3 and discussed the pending issue, but the same could not be settled and, therefore, the petitioner served the respondents with notice dated 22-8-1997, raising the pending issue and calling upon the respondent No. 1 to make appointment of Arbitrator as per terms of the contract. By notice dated 20-9-1997, the respondents denied the claim lodged by the petitioner and expressed inability to comply with the notice by stating out various reasons in their notice, According to the petitioner, in spite of this, the parties continued to correspond and negotiate in the matter for settlement of bill and it is in the course of these negotiations, certain issues between them were settled.
4. It is submitted that the respondent No. 3, by the telegram dated 27-7-1999, called upon the petitioner to attend his office for acceptance of the final bill on which the partners of plaintiff-firm on 7-8-1999. The final bill as prepared by the respondents was not acceptable to the petitioner and, therefore, on the same day, the petitioner had given a letter to the respondent No. 3, informing that the measurements are not in dispute. The reduced rates of aluminium window/ventilators are not accepted. The petitioner also did not accept the penal rate of recovery of steel, The petitioner pointed out to the respondent No. 3 that the final bill is accepted under protest. Again by letter dated 9-8-1999, the petitioner-firm informed the respondents that the final bill is not acceptable to them and requested for release of the bank guarantee worth Rs. 6.02 lacs. The petitioner had pointed out to the respondents that the final bill is minus 1.50 lacs and, therefore, it is not acceptable to them and offered that the respondents, till the settlement of the final bill, may retain the bank guarantee of Rs. 2.50 lacs and return the balance bank guarantee of Rs. 3.52 lacs. The parties had discussion in the matter in the office of the respondent No. 3 on 4-1-2000 which was placed on record by the petitioner through letter dated 5-1-2000. It is the case of the petitioner-Firm that the respondents released the Bank Guarantee worth Rs. 3.52 lacs and did not settle the dispute and, therefore, again by letter dated 16-3-2000, requested the respondents to settle the said issues. But, the petitioner did not get any response. Therefore, the petitioner, by letter dated 30-9-2000, pointed out to the respondents that there are three pending issues relating to (i) penal steel recovery, (ii) payable rate for sluice valves, (iii) payable rate for supply of aluminium doors and windows. In the said communication, the respondents were informed that on failure to settle the aforesaid three issues, the petitioner will be constrained to resort to arbitration. The respondents having failed to settle the matter, the petitioner-Firm, by registered post acknowledgment due letter dated 20-12-2000, requested the respondents to make appointment of Arbitrator as per the arbitration clause of the contract for resolving the aforesaid disputes. According to the petitioner-Firm, the said letter was duly received by the respondent No. 1 on 26-12-2000 but still no steps were taken by the respondents for appointment of the Arbitrator. The petitioner again sent letter dated 21-2-2001 by registered post acknowledgment due, calling upon the respondent No. 1 to make appointment of Arbitrator and suggested the names of three persons and requested the respondent No. 1 to appoint either one of them as Arbitrator. The said letter was duly received by the respondent No. 1 on 26-2-2001. But there was no response.
5. According to the petitioner, the respondent No. 3 sent the letter dated 8-2-2001 calling upon the petitioner to make payment of Rs. 3.61 lacs alleging that the final bill has been audited at Divisional level and also threatening the petitioner that on failure to do so, the respondents shall encash the bank guarantee. In the circumstances, the petitioner, by the notice dated 15-3-2001, again called upon the respondent No. 1 to make appointment of Arbitrator. The petitioner also informed the respondent No. 1 that he has failed to make appointment of sole Arbitrator as per the terms of the contract and, therefore, each of the parties has to make appointment of one Arbitrator and the said two Arbitrators shall make appointment of an Umpire in terms of the contract and the petitioner gave the name of Shri N. G. Deshpande, Chief Engineer, (Retd.) (Civil), Maharashtra State Electricity Board, as Arbitrator, and called upon the respondent No. 1 to accept Shri N. G. Deshpande as Sole Arbitrator or make appointment of second Arbitrator from their side as per the terms of the contract. To this notice, the respondents replied by their letter dated 28-3-2001, alleging that the claims of the petitioner are time barred and that is how the petitioner is required to approach this Court.
6. In their reply, it is the case of the respondents that the application filed by the petitioner under Section 11(6) of the Arbitration and Conciliation Act, 1996, before this Court in April, 2001 is hopelessly barred by limitation and, therefore, no appointment of Arbitrator can be and needs to be made. It is submitted that the petitioner is praying for appointment of Arbitrator on the basis of clause 27 of the Works Order dated 3-11-1988 and in support of which the petitioner has not filed any document and for these reasons, the application deserves to be dismissed.
7. It is submitted on behalf of the respondents that on short closing of the contract, the measurements were taken and recorded in the Measurement Book and the final bill was also prepared and the measurement recorded in the Measurement Book were acknowledged by the petitioner on 22-4-1994, by giving following comments, thereon :
"Measurement to the final bill accepted except for the measurements of A/c. windows and allied items and our pending claims such as rates revision for excess quantities, rates, revision for all work done beyond 1-2-1991, reconciliation/recovery of steel account, measurements for surface finishing, plaster done below Shalimar Water Proofing (which is pending) and other claims as per Annexure "A" to the proposal of the short closure of this contract.
For M/s Vishandas Bhagchand sd/-
Partner dated 22-4-1994".
Therefore, according to the respondents, the final bill as prepared was accepted by the petitioner except for the measurements of windows and allied items and the claim for revision of rates for excess quantity etc. Thus, whatever claims the petitioner desires to make against the respondents should have been filed within a period of three years from 22-4-1994 and the said claim not being filed by 22-4-1997 are barred by limitation. Further it is contended by the respondents that in spite of the fact that the claims were barred by limitation. The petitioner-Firm issued notice dated 22-8-1997 to the respondents through their advocate, wherein the details of the claim proposed to be made by the petitioners were specified. The petitioner has deliberately suppressed the said fact of issuing notice dated 22-8-1997 with an intention to practice fraud on this Court. It is submitted that in the said notice dated 22-8-1997 issued on behalf of the petitioner, the petitioner made claims on the basis of the contract between the parties and called upon the respondents to refer the disputes to the arbitrator under the provisions of the Arbitration and Conciliation Act, 1996. It was also mentioned that if the respondents fail to comply with the notice, the petitioner would move the Court for getting the arbitrator appointed. The said notice was replied on behalf of the M.S.E.B. through their advocate vide reply dated 20-9-1997. It was pointed out in the said reply that the claims made by the petitioner are barred by limitation. It is, therefore, submitted that the petitioner-Firm did not take steps after receiving reply notice dated 29-9-1997 sent on behalf of the respondent and it is only in April, 2001, i.e. after the period of limitation was over, the petitioner has approached this Court and, therefore, they are not entitled for the relief as claimed in the proceedings filed by the petitioner. The present application is not maintainable and deserves to be dismissed.
8. Mr. Mehadia, the learned counsel appearing for the petitioner, submitted that on 22-4-1994, what the petitioner-Firm has accepted is the measurement to the final bill except for the measurement of A/c. windows and allied items and so as claimed by them in their notice dated 22-8-1997 and though the petitioner initially sent a notice dated 22-8-1997 , which was replied by the respondents by their notice dated 29-9-1997, there were negotiations between the parties and thereafter, the respondent No. 1 sanctioned payment of extra work on 19-12-1998 and, therefore, a fresh cause of action arose. When the petitioner was called to settle the final bill of the petitioner, the respondents, for the first time, audited the final bill and on 8-3-2001 reached to the conclusion that the final bill of the petitioner is on the minus side. It is, therefore, submitted that correspondence between the parties, namely letters dated 18-5-1998, 19-12-1998 and their telegram to the petitioner on 22-7-1997 calling the petitioner to attend their office on 5-8-1999 with no claim letter on stamp paper for acceptance of the final bill, go to show that the respondents were considering the claim of the petitioner and, therefore, there was no necessity on the part of the petitioner to immediately rush to the Court in the matter of immediate settlement of the accounts and it is only after, through necessary correspondence, that on 15th March, 2001, the petitioners were required to issue a notice to the respondents through Advocate only, they allowed their claim and called upon the respondents either to give consent to the Arbitrator as sole Arbitrator or make appointment of the Arbitrator within 15 days of the date of receipt of the notice failing which they shall be constrained to take legal steps as advised and at the risk of the respondents. In the said notice, the petitioner had also stated that after the appointment of Shri N. G. Deshpande, Chief Engineer (Retd. J (Civil), as Arbitrator, to accept him as sole arbitrator and to make appointment of second Arbitrator from their side. To this notice, the respondents, by their notice dated 28th March, 2001, replied that as their claim is barred by limitation, the same cannot be referred to arbitration.
9. According to Mr. Mehadia, in the case of M/s R. P. Souza and Co. and Ors. v. The Chief Engineer, Public Works Department and Ors., 2000(1) Mh.LJ, 558 = 2000 (1) RAJ, 34 (Bom), this Court has held that it is not the duty of the contractor to raise a claim against the respondent on completion of the work by him, but it is the duty of the respondents themselves to finalise the account by preparation of the final bill on completion of the work and not to expect and wait for the Contractor to put forth his claim regarding dues in respect of the work completed by him in terms of the agreement. As in the said case, no explanation was given on the part of the respondent while, raising the plea of bar of limitation, about so much delay in preparing bill, the respondent cannot raise a point of limitation where he himself unreasonably and without any justification prolongs the preparation of final bill, and, therefore, in the said case, though the agreement between the parties came to be entered into on 30-1-1992 and the work was to commence on 18-1-1992 and was to be completed on October, 1994, the final bill was prepared by the respondents only on 16-1-1996, the claim of the Contractor cannot be said to be time barred. Mr. Mehadia also placed reliance on the case of M/s Parmeshri Dass and Sons v. Union of India and Ors. (2000 (3) RAJ 506(Del).
10. Countering the arguments of Mr. Mehadia on behalf of the petitioner, Mr. Moharir, the learned counsel appearing for the respondents, submitted that the claim of the petitioner to refer the matter to Arbitrator is hopelessly barred by limitation as in the fact and circumstances of the case, the cause of action arose for the first time when the petitioner firm gave notice to the respondents through their advocate on 22-8-1997, giving particulars of claim for consideration and settlement and also stating that in order to settle this claim, to appoint Arbitrator to adjudicate the dispute in terms of the agreement, within a period of 30 days from the receipt thereof, failing which, the petitioner would be constrained to approach the Court seeking appointment of Arbitrator and in that event M.S.E.B. will be solely held responsible for the cost and consequences thereof. To this, respondents gave a reply through their advocate on 20-9-1997, denying the claim of the petitioner and also made it clear that it is barred by limitation and, therefore, in these circumstances, this Court need not entertain the application.
11. Mr. Moharir submitted that merely because there was correspondence between the parties and subsequently certain claims came to be settled by the respondents, would not give accrual to fresh cause of action in respect of the petitioner to approach this Court. It is submitted that the Supreme Court in the case of Utkal Commercial Corporation v. Central Coal Fields Ltd., 1999 SOL Case No. 50 date of decision 20-1-1999). dealt with the question regarding limitation and held as under :--
"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 1980 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 20 of the Act, there must not only be an entitlement to money but there must be a difference or 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 February, 28, 1983 and there was non-payment, the cause of action arose from that 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 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."
Mr. Moharir also relied on the case of M. V. V. Satyanarayana v. Union of India and Ors. (1998 AIHC 4839) to demonstrate that if an application under Section 11 of the Arbitration Act is filed beyond the period of three years, same is barred by limitation and cannot be entertained.
Section 43 of the Arbitration and Conciliation Act 1996 (hereinafter referred to as the said Act of 1996) provides as under :--
"43(1) The Limitation Act, 1963, shall apply to arbitrations as it applies to proceedings in Court.
(2) For the purposes of this section and Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred in Section 21.
(3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper.
(4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963, for the commencement of the proceedings (including arbitration), with respect to the dispute so submitted."
Sub-section (2) of Section 43 of the said Act of 1996 clearly provides that for the purpose of this section and Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred in Section 21. Section 21 of the said Act of 1996 provides as under :--
"21. Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
The facts pleaded before this Court by the parties are not much in dispute, i.e. the petitioner was allotted the work on 3-11-1988 under Tender No. SBC. The said work was to be completed by 31-1-1991. But for one reason or the other, it was continued upto 1-8-1991, when it was short closed by the respondents. On 22-4-1994, final bill was drawn. It was accepted by the petitioner except for the measurements of the windows and allied works, and the claim of rates revision for excess qualities. An endorsement is made by the partner of the petitioner-Firm on 22-4-1994. It is not disputed that from 22-4-1994 till 22-4-1997, the petitioner-Firm did not take any step to lodge their claim with the respondents or initiate any legal proceedings. It is only on 22-8-1997 that they issued a notice to the respondents through their advocate Mr. V. P. Kukday, in which they have called upon the respondents to settle their claims as highlighted in para 11 of the notice. This notice was replied by the respondents on 20-9-1997 through their advocate Shri P. C. Khajanchi, in which the petitioner's claim was specifically denied by giving reasons. It was specifically stated that petitioner's claim was refuted by M.S.E.B. long back. Claim is barred by limitation. Extension of Bank Guarantee and/or correspondence referred to in the notice does not extend limitation prescribed by law. Therefore, without examining as to whether or when cause of action has arisen in favour of the petitioner as to his claim, one thing is clear that by issuing such notice in which a request is made to the respondents that dispute is to be referred to Arbitration and is received by the respondents, arbitral proceeding has commenced between the parties by virtue of Section 21 of the said Act of 1996 and if this is so, the petitioner ought to have approached this Court within a period of three years from the date of receipt of notice dated 20-9-1997 sent by the respondents to the petitioner denying their claims and refusing to refer the matter to Arbitration. Having not done so within the prescribed period of limitation, i.e. three years, the application filed by the petitioner, before this Court on 17-4-2001 is obviously barred by limitation as it was filed beyond the period of three years. (Article 137 of the Limitation Act 1963).
12. Period of limitation is subject to provisions of extension in case of disability, and the postponement in case of acknowledgment or part payment, of fraud or mistake. Otherwise after lapse of a fixed period of time, as prescribed under the Limitation Act, an action is not maintainable. In this case, in order to save period of limitation, it has been stated that after exchange of the notices between the parties and particularly after service of notice dated 22-8-1997 by the petitioner raising certain disputes and the . respondents had given reply through their counsel on 20-9-1997, there were negotiations between the parties and several items and disputes were settled. It has been further canvassed that the petitioner was called by the respondent No. 1 by telegram dated 27-7-1999 to attend his office on 5-8-1999 with no claim letter on stamp paper for acceptance of the final bill and the petitioner had attended the office of the respondent No. 1 and had occasion to peruse the measurement books and the final abstract thereunder and it was noticed that the respondents, for the first time, in respect of certain items in the year 1999, have given approval to the revision of rates in respect of items executed after stipulated period of contract and, therefore, it cannot be said that the petitioner's claim stood barred by limitation. It has been submitted that it is after these negotiations that finally on 8-3-2001, the respondents reached to the conclusion that the final bill of the petitioner is on the minus side, that the cause of action arose and that is how the petitioner, through their advocate, issued notice dated 15-3-2001 for referring the dispute for arbitration. In my opinion, even if it is accepted that there were negotiations between the parties after the issuance of notice dated 22-8-1997 by the petitioner with a request that the dispute be referred to arbitration, it would not save the period of limitation in favour of the petitioner as such negotiations and acknowledgment of part of the claim by the respondents cannot enable the petitioner to refer his claim to arbitration. It is well settled law that any agreement or negotiation entered between the parties after accrual of the cause of action to refer the matter to arbitration, does not have the effect of suspending the cause of action so as to arrest the running of limitation. Steel Authority of India v. J. C. Budharaja, Government and Mining Contractor, . Therefore, in my opinion, the application filed by the petitioner for appointment of Arbitrator for referring the disputes between the parties, is barred by limitation and is dismissed with costs which is quantified at Rs. 3,000/-.
13. Application dismissed.