Punjab-Haryana High Court
The Hisar Model Town Azad Co-Operative vs The State Of Haryana And Others on 18 May, 2011
Author: Hemant Gupta
Bench: Hemant Gupta
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
Arb. Case No.37 of 2009
Date of decision: 18.05.2011
The Hisar Model Town Azad Co-operative .....Petitioner
Labour & Construction Society Limited
vs.
The State of Haryana and others .....Respondents
CORAM: - HON'BLE MR. JUSTICE HEMANT GUPTA
Present: - M/s P.S.Rana and John Kumar, Advocates,
for the petitioner.
Mr. Pradeep Singh Poonia, Addl. AG, Haryana,
for the respondents.
HEMANT GUPTA, J.
This is a petition for appointment of an Arbitrator to adjudicate the disputes between the parties arising out of contract work of "Upgradation of Rural Roads under MORD/PMOSY Scheme" as per Agreement No.13 of 2001-2001 executed with Executive engineer, Provincial Division, PWD B&R, Hissar.
The brief background out of which the present petition arises is that the petitioner was allotted contract vide letter dated 21.06.2001. The approximate cost of the said work was Rs.454 lacs with a time limit of 9 months to complete the work allotted. The petitioner completed the work on 31.03.2003 i.e. within extended period to complete work.
The petitioner sought payment of the final bills of the work done. The petitioner was paid a sum of Rs.20,70,000/-on 11.10.2004. The Arb. Case No. 37 of 2009 2 security amounting to Rs.20,93,171/- was also paid on 07.12.2004 though the same was to be released on 30.06.2003. The petitioner claimed that certain payments are still due and payable to it. It was on 08.06.2006, the petitioner sought appointment of an Arbitrator to settle the disputes in respect of entitlement of the petitioner for the payments now claimed as per the terms and conditions of the Agreement. The petitioner served a legal notice on 09.04.2007 for appointment of an Arbitrator under Section 11 of the Arbitration & Conciliation Act, 1996 (for short 'the Act') as the Arbitrator was not appointed even though notice was received by the respondents. The petitioner filed the present petition on 25.08.2008 when arbitrator was still not appointed.
In reply filed on behalf of the respondents, it is inter alia pleaded that the final payment was made to the petitioner on 11.10.2004, whereas the request for appointment of an Arbitrator has been made beyond the time limit provided in under sub-clause 9 of Clause 25-A of the Contract Agreement. Therefore, the petitioner has forfeited its right to seek adjudication of disputes by an Arbitrator. It is also pleaded that the petitioner has not deposited the security as required by sub-clause 7 of Clause 25-A of the Agreement, therefore, the present petition is not maintainable.
I have heard learned counsel for the parties, but find that the argument raised by the learned counsel for the respondents that the petitioner has not sought appointment of an Arbitrator within a period of six months of payment of final bill in terms of the contract agreement between parties, therefore, the right of the petitioner to seek appointment of an Arbitrator stands forfeited is not tenable after Section 28 of the Contract Arb. Case No. 37 of 2009 3 was amended vide Indian Parliament Act No.1 of 1997, notified on 08.01.1997.
This Court has the occasion to consider such amendment carried out in Section 28 of the Contract Act in Arbitration Case No.124 of 2010 titled 'Sunil Goyal Vs. Haryana State Agriculture Marketing Board & others' (decided on 06.04.2011). It has been held that neither the right nor the remedy is extinguished by such a clause in the agreement. In the present case, the contract between the parties was executed in the year 2001 i.e. much after Section 28 of the Act was modified. In view of the judgment of this court, the amended Section 28 would be applicable to the facts of the present case and the extinguishment of right contemplated by Clause 25-A of the Agreement is not a valid clause. Therefore, the petitioner does not forfeit its right to seek resolution of dispute by an arbitrator only because it has not sought to dispute the payment of final bill within six months.
The learned counsel for the respondent raised another argument that if the bar of six months in terms of the agreement is not applicable but still, the petitioner can seek resolution of dispute through an arbitrator only if an application to seek appointment of an arbitrator is filed within three years from the day, the cause of arbitration arises. It is contended that the final payment was made to the petitioner on 11.10.2004, therefore, the right to dispute the final payment or to claim any other amount arises on that day. The petitioner could initiate legal action for adjudication of disputes within the period of limitation from the date cause of action arises i.e. within three years from 11.10.2004 in terms of Article 137 of the schedule to the Limitation Act, 1963, therefore, the present petition filed on 25.8.2008 is beyond the period fixed for filing of such petitions. Arb. Case No. 37 of 2009 4
Learned counsel for the petitioner vehemently argued that in terms of Section 21 of the Act, the arbitral proceedings commences, when the notice requesting the reference of dispute to an Arbitrator is received by the respondent. It is contended that the notices dated 08.06.2006 and 09.04.2007 seeking appointment of arbitrators served on the respondents, are within the period of limitation i.e. 3 years from the date cause of arbitration arose to the petitioner, therefore, the present petition for appointment of an Arbitrator filed on 25.08.2008 is within the period of limitation. It is contended that once arbitration proceedings have commenced in terms of Section 21 of the Act, the petitioner can seek appointment of an Arbitrator from this court under section 11 of the Act at any point of time. Learned counsel for the petitioner relies upon judgment of this court in M/s Kartar Singh & Co. Vs. Punjab State Electricity Board and others 2007 (3) RCR (Civil) 205 and Prasar Bharti Vs. Maa Communication and etc. AIR 2011 Delhi 26.
On the other hand, learned counsel for the respondents has argued that deemed fiction of commencement of arbitral proceedings contemplated under Section 21 of the Act is primarily to determine the applicability of the Arbitration & Conciliation Act, 1996 or the Arbitration Act, 1940 or for other ancillary purposes such as to determine when the lis commences to apply the doctrine of lis pendence in respect of subject matter of dispute. It is relevant only when arbitration proceedings are initiated and concluded without intervention of court. But, in cases where parties fail to appoint an arbitrator, the aggrieved party can seek intervention of the court within period of limitation, which has started running, on the day the cause of action has arisen. It is contended that in the event of non appointment of an Arbitrator even after serving of notice, the aggrieved party has to Arb. Case No. 37 of 2009 5 approach Court within three years of the date of accrual of cause of arbitration. However, such party may be entitled to exclude the period required to serve statutory notice in terms of Section 15(2) of the Limitation Act, 1963. It is contended that to determine the period of limitation, there cannot be two starting points for start of the cause of action i.e. on accrual of cause of action i.e. final payment and another on account of respondent failing to appoint an Arbitrator. It is contended that the limitation period cannot be uncertain, therefore, the petition filed before this Court on 25.08.2008 is beyond the period of limitation from the date cause of action or arbitration arose to the petitioner.
Having heard learned counsel for the parties for some time, I find that following question arise for consideration:
1. Whether Section 11 of the Act corresponds to the provisions of Section 8 and 20 of the Arbitration Act, 1940?
2. Whether there is any period of limitation to seek intervention of the court after the arbitration proceeding commenced in terms of Section 21 of the Act?
3. Whether, the cause of arbitration arises to seek appointment of an arbitrator from the date claim of the aggrieved party is denied or when the other party fails to appoint an arbitrator?
Question No.1 To determine the above said question as well as the relevancy of the provisions of the Arbitration Act, 1940 (for short '1940 Act') while interpreting the provisions of the Act, the relevant extract of the two statues need to be examined, i.e.:
Arbitration Act, 1940 Arbitration & Conciliation Act, 1996 Arb. Case No. 37 of 2009 6
8. Power of Court to appoint 11. Appointment of Arbitrators arbitrator or umpire: -(1) In any of the following cases: - xxx xxx xxx
(a) where an arbitration agreement provides that the reference shall be to 4. If the appointment procedure in sub-
one or more arbitrators to be appointed section (3) applies and- by consent of the parties, and all the (a) a party fails to appoint an arbitrator parties do not, after differences have within thirty days from the receipt of a arisen, concur in the appointment or request to do so from the other party; or appointments; or (b) the two appointed arbitrators fail
(b) If any appointed arbitrator or to agree on the third arbitrator within umpire neglects or refuses to act, or is thirty days from the date of their incapable of acting, or dies, and the appointment, arbitration agreement does not show the appointment shall be made, upon that it was intended that the vacancy request of a party, by the Chief Justice or should not be supplied and the parties any person or institution designated by or the arbitrators, as the case may be, him.
do not supply the vacancy; or
(c) Where the parties or the 5. Failing any agreement referred to in arbitrators are required to appoint an sub-section (2), in an arbitration with a umpire and do not appoint him; sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from Any party may serve the other parties receipt of a request by one party from the or the arbitrators, as the case may be, other party to so agree the appointment with a written notice to concur in the shall be made, upon request of a party, appointment or appointments or in by the Chief Justice or any person or supplying the vacancy. institution designated by him. (2) If the appointment is not made 6. Where, under an appointment within fifteen clear days from the procedure agreed upon by the parties: -
service of the said notice, the Court (a) a party fails to act as required may, on the application of the party under that procedure; or who gave the notice and after giving (b) the parties, or the two appointed the other parties an opportunity of arbitrators, fail to reach an agreement being herd, appoint an arbitrator or expected of them under that procedure; arbitrators or umpire, as the case may or be who shall have like power to act in (c) a person, including an institution, the reference and to make an award as fails to perform any function entrusted to if he or they had been appointed by him or it under that procedure, consent of all parties. a party may request the Chief Justice or any person or institution designated by
20. Application to file in Court him to take the necessary measure, arbitration agreement: - unless the agreement on the appointment (1) Where any persons have procedure provides other means for entered into an arbitration agreement securing the appointment.
before the institution of any suit with respect to the subject-matter of the xxx xxx xxx agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter of which the agreement relates that the agreement be filed in Court.
Arb. Case No. 37 of 2009 7
The provisions or the judgments interpreting the 1940 Act are not helpful in interpretation of the provisions of the Act. Hon'ble Supreme Court in Sundaram Finance Ltd. Vs. NEPC India Ltd. (1999) 2 SCC 479, Firm Ashok Traders v. Gurumukh Das Saluja, (2004) 3 SCC 155 and in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. (2005) 7 SCC 234 has held that the provisions of Act are required to be examined independent of the provisions of the old Act. In Sundaram Finance Ltd. case (supra), the Hon'ble Supreme Court held to the following effect:
"9. The 1996 Act is very different from the Arbitration Act, 1940. The provisions of this Act have, therefore, to be interpreted and construed independently and in fact reference to the 1940 Act may actually lead to misconstruction. In other words, the provisions of the 1996 Act have to be interpreted being uninfluenced by the principles underlying the 1940 Act. In order to get help in construing these provisions, it is more relevant to refer to the UNCITRAL Model Law rather than the 1940 Act."
In Firm Ashok Traders case (supra), the Hon'ble Supreme Court held that:
"13. The A&C Act, 1996 is a long leap in the direction of alternate dispute resolution systems. It is based on UNCITRAL Model. The decided cases under the preceding Act of 1940 have to be applied with caution for determining the issues arising for decision under the new Act."
Thus, the provisions of the Act are required to be examined keeping in view UNCITRAL model or the judgments considering the same or similar provisions contained in other statutes.
In Prasar Bharti's case (supra), the petitioners approached the Director General, Doordarshan for appointment of an Arbitrator vide notice dated 03.05.2003, but the Arbitrator was not appointed till January 2005, when an application under Section 11(6) was filed before the Court. The Arb. Case No. 37 of 2009 8 question whether the claim is within the period of limitation was left to the Arbitrator for decision, as it was held that without further investigations, it cannot be said that the claims are long dead. But the Division Bench also held that Section 8 of Arbitration Act, 1940 is analogous to Section 11 of the Arbitration and Conciliation Act, 1996. I am unable to persuade myself to follow the said finding.
In Union of India Vs. Shri Om Prakash, AIR 1976 SC 1745, the Hon'ble Supreme Court considered the scope of Sections 8 and 20 of the Arbitration Act, 1940. It was held that Section 8 does not contain any provision empowering the Court to make an order of reference to arbitration as is contained in sub-section 4 of Section 20. It was held that the Court had no jurisdiction after appointing any Arbitrator under Section 8(2) of the Arbitration Act, 1940 to proceed further to make an order referring the disputes to the Arbitrator. Such findings were necessitated on account of seven applications filed by the Contractor before the Civil Judge under Section 8(2) of the Act stating that the offices by reference to which the Arbitrators were selected in the agreements have been abolished; therefore, it is necessary to appoint new Arbitrators. Certain Arbitrators were named and the Court appointed an Arbitrator, who was not in the list submitted by the contractor. Such Arbitrator was given two months' time to give his award. Subsequently, the said Arbitrator returned the papers. The Small Cause Court appointed Director of Farms, General Headquarters, Simla to act as an Arbitrator with further direction to file his award within one month. The contractor did not participate in the proceedings before such Arbitrator, but the Arbitrator gave his award in respect of which Union of India moved an application for making such award as rule of the Court. The learned trial Court made award as rule of the Court, but the High Court Arb. Case No. 37 of 2009 9 allowed the appeals holding that the Court was functus officio after appointing the arbitrator under Section 8(2) and had no jurisdiction to refer the cases to the arbitrator. The Court held that it was for the parties to refer their disputes to Arbitrator after he was appointed by the court and the reference by the court was without jurisdiction and, thus, the awards were invalid. It is the said view, which has been affirmed by the Hon'ble Supreme Court.
In M/s Harbans Singh Tuli and sons Builders Private Limited Vs. Union of India (1992) 2 Supreme Court Cases 25, the Hon'ble Supreme Court considered the aforesaid judgment in Om Parkash's case (supra) and found that Section 8 provides a simple machinery for appointment of an Arbitrator as is seen from sub-section 1(a) or for supplying the vacancy under sub-section 1(b). The Court held that:
"21. Sub-section (1) (a) would apply to a case of initial appointment of an arbitrator or arbitrators. The implication is in the arbitration agreement, the arbitrator or arbitrators must not have been named. Where, therefore, they are named, this section will have no application. Similarly, the arbitrator or arbitrators are required to be appointed by all parties to the reference with consent. On the contrary, if there is some other mode of appointment, for example, Section 4, where the parties to the agreement agree that the arbitrator has to be appointed by a person designated in the agreement either by name or hold, for the time being in office, certainly, this section will not apply. It has also been held by this Court in Chander Bhan Harbhajan Lal vs. State of Punjab AIR 1977 SC 1210 that even in cases where by agreement between the parties, one of them alone is given power to make the appointment without consulting others, this sub-section would apply."
In view of the said judgment, the following conditions are necessary before the proceedings under Section 8 of 1940 Act could be initiated:
(i) The Arbitrator or Arbitrators must not have been named in the arbitration agreement.
(ii) The Arbitrator or Arbitrators are required to be appointed by all parties to the reference with consent.Arb. Case No. 37 of 2009 10
(iii) Section 4 of the Act would be applicable where the parties to the agreement agree that the arbitrator has to be appointed by a person designated in the agreement either by name or holding office for the time being.
(iv) If the agreement between the parties gives power to appoint to one of the party, then such party alone can appoint without consulting the others, such appointment would be part of sub-section 1 (a) of Section 8.
(v) Sub-section 1 (b) deals with the situation when vacancy arises in any of the contingencies mentioned. Since the present case does not pertain to filling up of vacancy, reference to such part is not required.
In Dharma Prathishthanam Vs. Madhok Construction (P) Ltd. (2005) 9 Supreme Court Cases 686, the Hon'ble Supreme Court has reviewed the scope of Sections 8 & 9 falling in Chapter II and Section 20 falling in Chapter III of 1940 Act. The issue was whether the contractor could unilaterally appoint an Arbitrator without the consent of the employer. The Court quoted with approval judgment of Allahabad High Court in Om Prakash Vs. Union of India AIR 1963 All 242 and that of Madras High Court in Union of India Vs. Mangaldas N. Verma AIR 1958 Mad 296, that a reference to arbitrator out of court has to be by consent of both the parties. If the parties or either of them was not consented, they must approach to the court by making an application in writing. It was held to the following effect:
"25. Failure to give consent or to appoint an arbitrator in response to a notice for appointment of an arbitrator given by the other party provides justification to the other party for taking action under sub-section(2) of Section 8 of the Act and then it is the Court which assumes jurisdiction to appoint an arbitrator as held by the High Court of Orissa in Niranjan Swain vs. State of Orissa AIR 1980 Ori 142."Arb. Case No. 37 of 2009 11
Therefore, under Section 8 of the 1940 Act, the appointment of the arbitrators is without intervention of the Court falling under Chapter II. The reference to arbitration and appointment of an arbitrator falling under Chapter III is through the intervention of Court. But Section 11 of the Act, is amalgamation of both Chapters in respect of appointment of arbitrators. In an application under Section 8 of the 1940 Act, the conditions precedents for exercising the powers under the Act are delineated whereas Section 11 of the Act empowers the Hon'ble Chief Justice or his designate to appoint an arbitrator having due regard to the agreement if the person or the institution named fails to exercise the jurisdiction to appoint an arbitrator. The intervention of the Court is not envisaged under the Act, if the parties adhere to the terms of the agreement. It is only in the event of failure to appoint an arbitrator in terms of the agreement, the aggrieved party seeks redressal under Section 11 of the Act. None of the principles as culled down by the Hon'ble Supreme Court in Harbans Singh Tuli's case (supra) necessarily arise in an application under Section 11 of the Act. Therefore, it is not correct to state that the provisions of Section 8 are analogous to Section 11. The language, scope and intent of the provisions of two statutes are different.
Thus, the judgments rendered while interpreting Section 8 of the Act would not be relevant for determining the scope of Section 11 of the Act. The provisions of the Act are required to be interpreted independent of the precedents arising out of the Arbitration Act, 1940. Question No. 2
In terms of Section 43 of the Act, the period of limitation contemplated under Article 137 of the schedule to the Limitation Act, 1963 is applicable to the proceedings under the Act. In Major (Retd.) Inder Arb. Case No. 37 of 2009 12 Singh Rekhi Vs. DDA (1988) 2 SCC 338, the question was whether the application to seek appointment of an arbitrator was within period of limitation. The Court held that the limitation for all applications before the civil court is three years in terms of Article 137 of the schedule to the Limitation Act, 1963. It held:-
3. The question is, whether the High Court was right in upholding that the application under Section 20 of the Act was barred by limitation. In view of the decision of this Court in Kerala State Electricity Board v. T.P.K.K. Amsom and Besom, Kerala AIR 1977 SC 282, it is now well settled that Article 137 of the Limitation Act, 1963 would apply to any petition or application filed in a civil court.
4. .......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, first 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 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 Panchu Gopal Bose Vs. Board of Trustees for Port of Calcutta (1993) 4 SCC 338, it has been held that the provisions of Limitation Act would apply to the arbitrations and cause of arbitration for the purposes of limitation shall be deemed to have accrued to the party in respect of any such matter at the time it should have been accrued, but for the contract. It was held to the following effect:
"7. .... It would, therefore, be clear that the provisions of the Limitation Act 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....
9. In Pegler v. Railway Executive 1948 AC 332, House of Lords held that just as in the case 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 accrued, so 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 claim accrued. While accepting the interpretation put up by Arb. Case No. 37 of 2009 13 Atkinson, J. as he then was in the judgment under appeal, learned Law Lords accepted the conclusion of Atkinson, J. in the language thus: "the cause of arbitration" corresponding to "the cause of action" in litigation "treating a cause of arbitration in the same way as a cause of action would be treated if the proceeding were in a court of law".
11. Therefore, 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. Just as in the case 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 accrued, so 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 claim accrued."
In State of Orissa Vs. Damodar Das (1996) 2 SCC 216, Article 137 of the Schedule to the Limitation Act, 1963 has been applied in relation to an application under Section 20 of the Arbitration Act and it was held that:
"6. In Law of Arbitration by Justice Bachawat at p.549, commenting on Section 37, it is stated that subject to the Limitation Act, 1963, every arbitration must be commenced within the prescribed period. Just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date when the cause of action accrues, so in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues. For the purpose of Section 37(1) 'action' and "cause of arbitration" should be construed as arbitration and cause of arbitration. The cause of arbitration arises when the claimant becomes entitled to raise the question, that is, when the claimant acquires the right to require arbitration. An application under Section 20 is governed by Article 137 of the schedule to the Limitation Act, 1963 and must be made within 3 years from the date when the right to apply first accrues. There is no right to apply until there is a clear and unequivocal denial of that right by the respondent. It must, therefore, be clear that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of cause of action arisen in a civil action."
Therefore, an application to seek intervention of the civil court is required to be filed within three years from the date, when the right to apply accures.
The argument of the petitioner is that in terms of Section 21 of the Act, arbitration proceedings commenced with the serving of notices, Arb. Case No. 37 of 2009 14 therefore, once the arbitration proceedings have commenced, there is no question of bar of limitation.
In State Bank of Patiala vs. Patel Engineering (2005) 8 SCC 618, the Supreme court has held that the power exercised by the Chief Justice or his designate is an judicial power. An application to the Chief Justice is an application to the Civil Court. Such application is governed by the provisions of Code of Civil Procedure.
In Utkal Commercial Corporation Vs. Central Coal Fields Ltd. (1999) 2 SCC 571, the Hon'ble Supreme Court held that the right to apply under Section 8 would accrue when within 15 days of the notice, the other party do not concur in the appointment of an Arbitrator and such application to seek appointment of an arbitrator is required to be filed within three years. The Court has referred to judgment in Major (Retd.) Inder Singh Rekhi Vs. DDA (1988) 2 SCC 338 for returning a finding that limitation in a petition under Section 20 of the Arbitration Act is three years in terms of Article 137 of the Limitation Act. In the said case, the notice to seek appointment of an Arbitrator was served on 12.09.1976 and the application under Section 8 of the Act was made on 09.08.1978 i.e. within three years. In the aforesaid case, the parties entered into contract on 07.09.1974 and the contract was to operate till 22.08.1975. In the said case, the question whether an application for appointment of an arbitrator under section 8 of the 1940 Act is required to be filed within three years of the cause of arbitration or within three years of notice provided under Section 8 was not the issue for consideration, as in either case, the application was within the period of three years.
In my opinion, provisions of Section 21 are in relation to arbitration without the intervention of the Court or to determine the Arb. Case No. 37 of 2009 15 applicability of the 1940 or the Act as required to be examined in certain cases within meaning of Section 85(2) of the Act. But, if intervention of the Court is necessitated, such petition has to be filed within the period of limitation. It has been held that the period of limitation is for all applications filed before the civil court. Since there is no specific period of limitation prescribed for such like application under Section 11 of the Act in Schedule to the Limitation Act, 1963, therefore, the residuary Article 137 would be applicable. As per Article 137, the period of limitation is three years from the date right to apply accrues.
The right to apply accrues when the cause of action accrues. To constitute a cause of action, firstly there has to be existence of right and secondly its infringement or threat of infringement. The cause of action denotes and determines the starting point of limitation. Such cause of action in relation to arbitration proceedings is said to be cause of arbitration as held in Panchu Gopal Bose's case (supra). The question as to when right to sue accrues depends on the facts of each case and as and when the right is asserted or denied or when the right to claim ascertained amount arises.
The cause of action to seek appointment of an arbitrator does not accrue with the issue of the notice. To seek appointment of an Arbitrator, the notice is required to be served in terms of sub clause 4 of Section 11 of the Act. It is step in aid to seek appointment of an arbitrator. The right to apply for cause of arbitration will accrue prior thereto and in pursuance of such right, a notice is required to be served. Therefore, the starting period of limitation in terms of Article 137 of the Limitation Act would be prior to the serving of notice. It is from the said date, the aggrieved party has to seek intervention of the Court within three years. Since, the right to apply to the Court in terms of sub-section 6 arises only Arb. Case No. 37 of 2009 16 after expiry of 30 days of serving of a notice, therefore such 30 days are required to be excluded while determining the period of limitation in terms of Section 15(2) of the Limitation Act, 1963. Such interpretation is by harmonious construction of Section 21, Section 43 and Section 11 of the Act.
The argument that only notice is required to be served when the cause of arbitration arises and subsequently such aggrieved party can seek intervention of the Court for appointment of an Arbitrator at any point of time is not tenable. The cause of action if once arisen cannot be interrupted and give rise to another period of limitation. Once limitation begins to run, it cannot be stopped. Therefore, once the cause of arbitration has accrued to a party, such party must invoke the jurisdiction of the Court to seek appointment of an Arbitrator within three years, but by excluding 30 days from the receipt of notice.
It would be matter of determination as to when cause to seek appointment of an arbitrator would arise. It would be cause of action to invoke the jurisdiction of the civil court under section 11 of the Act, which would be relevant to determine the period during which, the aggrieved party can approach civil court. But to hold that there would be no period of limitation to invoke jurisdiction of civil court is not acceptable after serving of notice contemplated under Section 11 (4) of the Act. To say, there is no period of limitation to seek appointment of an arbitrator is not correct.
The judgment of this Court in M/s Kartar Singh's case (supra) does not notice Supreme Court judgment reported as Utkal Commercial Corporation's case (supra), wherein it has been held that after notice, an application to seek appointment is required to be filed within three years. The court has also not examined the question that the judgments under the Arb. Case No. 37 of 2009 17 1940 Act may not be wholly applicable to the provisions of the Act. In the aforesaid case, the arbitration clause was invoked on 07.11.1997 and the notice to seek appointment of an Arbitrator was served on 17.08.2004. The argument that the claim is barred by limitation was declined on the basis of Section 43 read with Section 21 of the Arbitration and Conciliation Act, 1996. The said judgment, thus, does not lay down any binding precedent.
Keeping in view the aforesaid principle, the cause of arbitration arose to the petitioner in the present case on 11.10.2004, when final payment was made and the right to dispute the balance claim, if any, arises on the said date. The petitioner has chosen to file the present petition on 25.08.2008. Such petition is much beyond the period of three years even by excluding 30 days period required to be excluded in terms of Section 15 of the Limitation Act, 1963.
Consequently, the present petition is dismissed.
18.05.2011 (HEMANT GUPTA) Vimal JUDGE