Patna High Court
State Of Bihar And Anr. vs Gobind Prasad Agrawal on 25 October, 2000
Equivalent citations: AIR2001PAT151, AIR 2001 PATNA 151
Author: Shiva Kirti Singh
Bench: Shiva Kirti Singh
JUDGMENT Shiva Kirti Singh, J.
1. This Misc. Appeal has been filed by the appellant State of Bihar and its concerned Officials against the Judgment and Decree dated 17-3-1997 passed by learned Sub-Judge. Chaibasa whereby he has decreed Title Suit No. 9 of 1991 after rejecting objections filed by the defendants / appellants under Section 30 of the Arbitration Act. 1940 and has made the award given by the order dated 31-5-1994 a rule of the Court.
2. In view of arguments advanced by the parties in this appeal the relevant facts required to be noticed are as follows :--
The plaintiff/respondent is a Government contractor, pursuant to acceptance of his tender or agreement dated 6-3-1981 was entered into between the plaintiff/contractor and the concerned department of Minor Irrigation, Chakradharpour, for a work contract valued at Rs. 28,32,709.62 paise. The contractor deposited Rs. 1,41,751/- as security deposit and the work order was issued on 27-3-1981. As per agreement the stipulated date for completion of the work was 30-10-1982. The work could not be completed in time for which either party blames the other. Thereafter a proceeding under Section 144 of the Code of Criminal Procedure allegedly causing stoppage of work from May, 1981 to 10-11-1981 was initiated, thereafter the plaintiff/contractor applied for extension of the time which was allowed and the time for complying the contract work was admittedly extended till 30-6-1985. The work could not be completed by then and on 3-9-1985 the contractor applied for closing of agreement and return of the security deposit. Thereafter on 10-12-1985 the plaintiff/contractor sent his claims to which he was allegedly entitled on account of various grounds.
3. The case of the plaintiff/contractor is that his claim remained pending with the defendants for decision and he was given no intimation of any decision nor any action was taken to meet his claims and in such circumstances on 2-3-1991 the plaintiff/contractor sent a letter requesting for refund of security deposit and settlement of his final dues. Thereafter he was paid a part of security deposit only on 13-3-1991. Thereafter the plaintiff/contractor sent a noticed dated 21-3-1991 for settlement of his pending case and thereafter on 10-4-1991 he filed Title Suit No. 9/91 in the court below wherein through an application under Section 20 of the Arbitration Act a prayer was made to direct the defendants to file the relevant agreement in Court to refer the disputes/claims contained in annexure-1 to the plaint to Arbitration by any independent arbitrator and for costs etc.
4. In his plaint (petition under Section 20 read with Sections 11 and 12 of the Arbitration Act) the plaintiff/contractor pleaded that his claim was not referred to Arbitration in spite of arbitration clause contained therein and it was further pleaded that the concerned Superintending Engineer, defendant No. 2, passed an order contained in letter No. 222 dated 6-2-1986 by which he merely accepted the recommendation of the Executive Engineer and ordered to close the agreement in question and for deduction of an amount of Rs. 2581/- as recovery from the security deposit of the plaintiff/contractor. In paragraph- 10 of the aforesaid petition the plaintiff further pleaded that he was given no intimation or information of the aforesaid order dated 6-2-1986 nor the said order was carried out till 13-3-1991 when the balance of the security deposit was paid to the plaintiff/contractor. According to the plaintiff/ contractor the cause of action first arose on 2-3-1991 when a demand was made for settlement of his claims and again on 21-3-1991 when a notice was again sent for such settlement.
5. In the show cause filed on behalf of defendant No. 1 it was pleaded that the suit is barred by limitation, waiver and acquiescence. The stand of the defendants was that the claims preferred by the plaintiff/contractor was not in accordance with agreement hence it was not referred to Arbitration by defendant No. 2, the Superintending Engineer and as per order of defendant No. 2 the rest of the security deposit was released to the plaintiff on 13-3-1991 when he applied for refund of security deposit. However, a perusal of the show cause shows that the averment of the plaintiff that the order of the superintending Engineer. Defendant No. 2 dated 6-2-1986 was not communicated to the plaintiff and was not acted upon till 13-3-1991 has not been denied in specific and clear terms.
6. After hearing the parties the court below by order dated 28-2-1992 decided to refer the dispute to an independent arbitrator for which names were asked for and by order dated 30-3-1992 the Court below appointed Shri Jagdish Prasad Verma, retired Chief Engineer as the Arbitrator in the case as the learned Government Pleader accepted that he had no objection against his appointment as arbitrator. The parties appeared before the Arbitrator and filed their documents. After hearing the parties to their satisfaction, the arbitrator prepared the award dated 31-5-1994 and the same was received in the Court below on 2-6-1994. On behalf of defendants/appellants an objection under Section 30 of the Arbitration Act was filed but the same was rejected by the judgment impugned in this appeal and the award dated 31-5-1994 has been made the rule of the Court.
7. A perusal of the award in question shows that the plaintiff/contractor had preferred a claim of Rs. 84,83,857.15 paise besides interest on the amount of claim at the rate of 18% per annum, in past and future both. The arbitrator has recorded in the award that after carefully going through examining and considering all the pleadings, statements and documentary evidence and contentions at length and having duly considered all the matters he had decided to award Rs. 18,61,000/- in favour of the plaintiff/contractor which was to be paid by defendant No. 1 the State of Bihar. He also awarded that the amount shall carry simple interest at the rate of 12% per annum with effect from 10-9-1985 till the date of award and also from the date of award till the date of payment or the date of decree, whichever is earlier. The award is clearly one which does not give reasons for the conclusion reached.
8. In the petition under Section 30 of the Arbitration Act appellants/defendants raised several objections to the award which included objection on the grounds that the arbitrator should have made a reasoned awards; he failed to consider properly the contents of several letters and documents, he failed to decide the issue of limitation raised before him and the rate of interest granted by learned Arbitrator was too high. On these grounds it was contended that the learned Arbitrator has misconducted himself in the Arbitration proceeding and the award was otherwise bad in law and fit to be set aside.
9. Learned counsel for the appellants/ defendants made a feable attempt to argue that in terms of Clause (23) of the agreement only the Superintending Engineer could have been appointed as arbitrator and hence the appointment of arbitrator in question by the Court was against the agreement and therefore illegal. However, in fairness to learned counsel for the appellants it must be mentioned that he did not pursue this contention seriously in view of settled law that once the party accept the appointment of arbitrator and participate in the arbitration proceeding they are stopped from challenging his appointment. Having taken their chance before the arbitrator, the appellants/defendants cannot now raise the aforesaid contention in view of estoppel as well as acquiescence.
10. The next and the only contention requiring consideration in this appeal is on the ground of limitation. It has been contended on behalf of the appellants that the entire claim of the plaintiff/contractor in the suit as well as before the arbitrator was barred by limitation because as per Section 3 of the Limitation Act every suit, appeal and application made after the prescribed period requires to be dismissed even if limitation has not been set-up as a defence, whereas in this case the plea of limitation was raised by the defendants before the Court below as well as before the Arbitrator. Section 37 of the Arbitration Act provides that all the provisions of the Indian Limitation Act shall apply to arbitrations as they apply to proceedings in Court. In this case there is no dispute that Article 137 is a relevant article applicable which prescribes a limitation of three years from the date when the right to apply accrues.
11. According to learned counsel for the appellants the period of limitation in this case would begin from 3-9-1985 when the plaintiff/contractor himself asked for closing agreement and return of security deposit and in any case from 10-12-1985 the date on which the plaintiff submitted his claims before the defendants. In support of the first date it was submitted that any claim for payment under an agreement which has losts its force must be made within three years of the agreement loosing its force. With regard to the next date i.e. 10-12-1985. It was submitted that if for the purpose of a reference under Section 20 of the Arbitration Act there must not only be an entitlement of money but there must be a difference or dispute between the parties, in a case where final bills have not been prepared, the cause of action would arise on the date when the claim was made i.e. on 10-12-1985. In support of the aforesaid proposition that in this case a cause of action arose on 10-12-1985 reliance has been placed upon judgments of the Apex Court in the case of Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, (1988) 2 SCC 338 : (AIR 1988 SC 1007) and in the case of Steel Authority of India Ltd. v. J. C. Budharaja, (1999) 8 SCC 122: (AIR 1999 SC 3275).
12. On the other hand it has been argued on behalf of the respondent that for the purpose of seeking a reference to arbitration under Section 20 of the Arbitration Act there must be elements of dispute between the parties and such dispute cannot arise only due to inaction of the party concerned and there must be a denial of the claim of the other party either in express terms or by necessary implication. On the basis of aforesaid contentions it has been submitted that in this case since payment of balance amount of security deposit after making deductions was made on 13-3-1991 hence a dispute between the parties and cause of action for reference of such dispute to arbitration arose only on 21-3-1991 and hence the suit as well as the claims preferred by the plaintiff are not barred by limitation. In support of aforesaid contention, on behalf of respondent reliance was placed upon a Division Bench judgment of this Court reported in AIR 1964 Pat 225, (State of Bihar v. Thawar Das Pherumal) and upon following judgments of the Supreme Court :--
(i) AIR 1975 SC 230, (N. N. Challappan v. Secretary, Kerala State Electricity Board,
(ii) (1996) 2 SCC 216 : (AIR 1996 SC 1615), (The State of Orissa v. Demodar Das) and
(iii) AIR 1988 SC 1172, (Union of India v. L.K. Ahuja and Company).
12. If the aforesaid contention of the respondent is accepted then further submissions made on behalf of the respondent to the effect that the arbitrator has not committed any mistake so as to render his award invalid in law and that there are no good grounds in the objection petition filed under Section 30 of the Arbitration Act for rejecting the award would require no consideration because this appeal would failed if the submission of the appellants on the point of limitation falls. Hence the first contention of the parties is taken first for consideration. The relevant facts have already been noticed earlier. There is no dispute that although the work could not be completed within the extended time i.e. till 30-6-1985, on 3-9-85 the plaintiff/ contractor applied for closing of agreement and return of earnest money. In ordinary course on the basis of work done and on the basis of stipulations and agreement between the parties the plaintiff/contractor should have been paid the money legally due to him at once and more so when on 3-9-85 he gave in writing his intention to treat the agreement as closed. Clearly, when the dues were not paid to the plaintiff to which the plaintiff was allegedly entitled for various reasons and factors then, in the words of the plaintiff as find mentioned in paragraph 5 of the plaint". ..... several disputes/claims arose between the parties in relation to in connection with the agreement noted above. The plaintiff/contractor had intimated these disputes/claims to the defendants by his noticed dated 10-12-85 which was served upon both the defendants by registered post with A/D".
13. In the aforesaid factual background the contention of learned counsel for the appellants appears to be well founded that in clear terms disputes/claims had arisen at least on 10-12-1985 when admittedly claims had been lodged by the plaintiff. In the case of Major (Retd.) Inder Singh Rekhi, (AIR 1988 SC 1007) (supra) the Supreme Court was examining the question whether the application under Section 20 of the Arbitration Act was beyond the period of limitation as held by the High Court on the basis of date of entitlement to money or it was within time on the basis of date when it can be said that the dispute arose between the parties requiring reference to arbitration. The Apex Court held that in order to be entitled to ask for a reference under Section 20 of the Arbitration Act there must not only be an entitlement to money but there must be a difference or dispute. The Court further proceeded to hold by referring to Law of Limitation by R. S. Bachawat, 1st Edition page 354 that "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 politive element and sassetion of denying, not merely inaction to accede to a claim or a request. Whether in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case." In the facts of that case the Apex Court held that since in spite of earlier demands the final bills had not been prepared and assertion of the claim was made first through a letter dated 28-2-1983 and was not paid hence the cause of action arose from that date.
14. In the case of Steel Authority of India Ltd., (AIR 1999 SC 3275) (supra) while considering the question of limitation the Apex Court held that cause of action arise on the date when respondent contractor gave notice claiming amount of damages for losses sustained and there was no respondent from appellant and no comment made. In that case it was further held that a subsequent letter written by the appellant repudiating the respondent's claim would not give a fresh cause of action because by then the cause of action for recovering the amount was already barred by limitation. The Apex Court further held after referring to decision of the Apex Court in the case of State of Orissa v. Damodar Das, (AIR 1996 SC 942) (supra), in the case of Panchu Gopal Bose v. The Board of Trustees for Port of Calcutta reported in (1993) 4 SCC 338 : (AIR 1994 SC 1615) and in the case of Major (Retd.) Inder Singh Rekhi, (AIR 1988 SC 1007) (supra) that the period of limitation for the commencement of an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued and that whether in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case. In that case applying the aforesaid ratio the Apex Court held that the right to refer the dispute to the arbitrator arose when the contractor gave a notice demanding the amount and there was no response from the appellant and the amount was not paid, the cause of action for recovery of the said amount arose from the date of the notice. In the aforesaid case it was further 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 the period of limitation.
15. The aforesaid judgments of the Apex Court fully support the contention of the appellants that the period of limitation in this case would start from 10-12-1985 when demand of his claims was formally made by the plaintiff/contractor and the period of limitation would expire three years thereafter in December, 1988 as by then neither the payment was made nor any petition was filed for referring the dispute to arbitration. The cause of action, once arisen could not have been postponed on account of subsequent notices or even payment made much after the period of limitation had already expired. The Court below clearly erred in law in showing helplessness in the matter of limitation when it observed that it was for the arbitrator to decide the issue of limitation raised before him. Thereafter the Court below proceeded to hold that the calim was not barred by limitation on account of payment of balance of security deposit on 13-3-91. This finding suffers from clear error of law because such payment was made much after the expiry of period of limitation. There is no law that payment on the head of refund of security deposit will revive a monetory claim already barred by limitation.
16. The judgments cited on behalf of the respondents noticed earlier are of no help to the respondent in view of subsequent decision of the Apex Court in the case of Steel Authority of India Ltd., (AIR 1999 SC 3275) (supra) in which some of the earlier judgments have been considered including the judgment in the case of State of Orissa v. Damodar Das on which emphasis was led on behalf of respondent on the ground that this is also a recent judgment and by three Judges. Moreover none of the judgments cited on behalf of the respondent take a different view of the established proposition of law that in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case. In the facts of this case this Court finds that a dispute had arisen requiring reference on 10-12-1985 which fact is rather admitted in paragraph 5 of the plaint and hence the claim of the plaintiff/ contractor was on the face of it barred by period of limitation when he filed the petition under Section 20 of the Arbitration Act on 10-4-1991.
17. Learned counsel for the respondent has further submitted that even if the claim was barred by limitation but once, in spite of such plea taken before the Court below the case was referred to arbitrator then this plea is no longer available after making of an award by the arbitrator which contains no reason and does not reject the claim on the ground of limitation raised before him also. In support of aforesaid submission learned counsel for the respondent has first referred to judgment of the Apex Court in the case of N. Chellappan, (AIR 1975 SC 230) (supra). In that case the arbitrator did not address himself to the question of limitation but in the facts of the case the Court did not find that omission to be an error of law apparent on the fact of the record. Hence this judgment do not help the case of the respondent. He next referred to the judgment of the Supreme Court in the case of Union of India v. L.K. Ahuja. (AIR 1988 SC 1172) (supra). In that case the Apex Court merely held that whether the claim to be adjudicated by the arbitrator was barred by lapse of time is a matter which the arbitrator would decide unless on admitted facts claim is found at the time of making an order under Section 20 of the Arbitration Act to be barred by limitation. The aforesaid judgment also does not help the case of the respondent because in the present case the claim of the plaintiff-contractor has been found by this Court to be barred by limitation and in the facts of the present case as per Section 3 of the Limitation Act it was the duty of the Court below at the time of making the reference as well as of the arbitrator to act in accordance with law to find out whether the claim was barred by law of limitation or not, more so when objection on this account was taken before them. A judgment of the Supreme Court in the case of State of U.P. v. Harichandra and Company reported in (1999) 1 SCC 63 was cited in support of a proposition that questions purely on merits of the award cannot be raised in objection under Section 30 of the Arbitration Act. The said proposition is not in question because question of limitation is not a question purely on merits of the award. It is a question of law which if apparent on the face of the record, requires determination by the Court or the arbitrator in view of Section 3 of the Limitation Act. On the same lines, a reliance was placed upon judgment of the Apex Court in the case of Sudarshan Trading Company v. Government of Kerala, AIR 1989 SC 890 to submit that since the arbitrator has not given reasons for his award hence it is not upon the Court to speculate as to what compelled the Arbitrator to arrive at his conclusion. The aforesaid proposition is also not in question in this case as no conclusions of the arbitrator are being examined by the Court. Here the question relates to an objection that arbitrator ought to have arrived at a conclusion regarding limitation in view of Section 3 of the Limitation Act as well as objection raised before him and his failure to come to any conclusion on the question of limitation will not make the claim of the plaintiff/contractor within time of the same is on the face of the record, barred by limitation.
18. Thus, after giving full and anxious consideration to all the facts and circumstances of this case as well as to various judgments cited by the parties this Court find no substance in the other submissions raised on behalf of respondent notice above. The impugned judgment and decree of the Court below is found to be unsustainable in law. It is further found that the learned Arbitrator committed apparent error of law in ignoring the requirements of Section 3 of the Limitation Act in entertaining a claim which was, on the face of it barred by limitation. Accordingly, this Miscellaneous Appeal is allowed, the judgment and decree of the Court below as well as the award of the Arbitrator are set aside. In the facts of the case the parties are directed to bear their own costs.