Full Judgment Text
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PETITIONER:
UNION OF INDIA & ANR.
Vs.
RESPONDENT:
L.K. AHUJA & CO.
DATE OF JUDGMENT05/04/1988
BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
RANGNATHAN, S.
CITATION:
1988 AIR 1172 1988 SCR (3) 402
1988 SCC (3) 76 JT 1988 (2) 82
1988 SCALE (1)710
ACT:
Arbitration Act, 1940-Whether application for
appointment of Arbitrator under Section 20-Of-Is barred by
limitation-Whether the trial Court is right in dismissing
that application as such.
HEADNOTE:
%
Four agreements were entered into between the
respondent and the appellant Union of India through the
Executive Engineer, Northern Railway, followed by a
supplementary agreement. All the four contracts were
executed and completed by the respondent on diverse dates.
The respondent accepted four final bills and gave no-claim
declaration in respect of the four contracts. Thereafter,
the respondent wrote to the Additional Chief Engineer,
R.E.N.R., that Rs.1,91,137 were due on account of work
executed and asked for a reference of the dispute to the
Arbitrator. A reply was sent to the respondent that there
was no dispute between the parties and no question of
appointment of any Arbitrator arose. The respondent then
filed an application in the Court of Civil Judge for the
appointment of an Arbitrator under Section 20 of the
Arbitration Act, 1940 (‘the Act’). The application was
dismissed as being barred by limitation. An appeal from the
decision of Civil Judge was allowed by the High Court. The
appellants then moved this Court for relief by this appeal.
Dismissing the appeal, the Court,
^
HELD: The sole question involved in this appeal was
whether the Civil Judge was right in dismissing the
application and whether the application under section 20 was
within time. [404H]
It is well-settled in view of the decision of this
Court in Kerala State Electricity Board, Trivendrum v.
T.P.K.K. Amsom and Besom, Kerala, [1977] 1 SCR 996 that
Article 137 would apply to any petition or application filed
under any Act in a Civil Court. The words "any other
application", this Court held under Article 137, cannot be
read on the principle of ejusdem generis to be applications
under the Civil Procedure Code other than those mentioned in
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Part I of the third division. [405A-B]
403
There are two aspects of the matter. 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. To be a valid claim for reference under section 20
of the Arbitration Act, 1940, it is necessary that there
should be an arbitration agreement and secondly, differences
must arise to which the agreement in question applied, and
thirdly, that must be within time as stipulated in section
20 of the Act. In this case, there was an arbitration
agreement as found by the High Court, covering the disputes.
It was also obvious that differences had existed. There was
assertion of claim and denial of it. As such, the dispute
was liable to be referred to arbitration in terms of the
agreements between the parties. The question was whether
there was a valid claim under section 20 of the Act to be
referred in accordance with law. [407C-E, G-H]
In view of the well-settled principles, it would 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 on
admitted facts a claim is found at the time of making an
order under Section 20 of the Act, to be barred by time. To
be entitled to ask for a reference under section 20 of the
Act, there must be entitlement to money and a difference or
a dispute in respect of the same. It is true that on
completion of work the 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,
and the application was filed on December 18, 1976. [408A-D]
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] 3 SCR 351. The appeal
failed. [408D]
Kerala State Electricity Board, Trivandrum v. T.P.K.K.
Amsom and Besom, Kerala, [1977] 1 SCR 996; Wazirchand
Mahajan & Anr. v. Union of India, [1967] 1 SCR 303; Mohd.
Usman Military Contractor, Jhansi v. Union of India,
Ministry of Defence, [1969] 2 SCR 233; Jiwnani Engineering
Works P. Ltd. v. Union of India, [1978] AIR Cal. 228 and
Major (Retd.) Inder Singh Rekhi v. D.D.A., [1988] 3 SCR 351
referred to.
404
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No 757 of
1988.
From the Judgment and Order dated 14.8.1986 of the
Allahabad High Court in F.A. No. 448 of 1978.
G. Ramaswamy, Additional Solicitor General, Pramod
Swarup and P. Parmeshwaran for the Appellants.
R.P. Gupta for the Respondent.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. Special leave granted. The
appeal is disposed of by the judgment hereunder.
It appears that on or about 18th September, 1969, four
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agreements were entered into between M/s. L.K. Ahuja & Co.
and Union of India, represented by the Executive Engineer,
Northern Railway, Allahabad, for the construction of certain
quarters. It was followed by supplementary agreement entered
into sometime in 1972. It is stated that all the four
contracts were executed and completed by the first
respondent on diverse dates. The last one was on 30th May,
1971. Between 29th May, 1972 to 19th June, 1972, the
respondent accepted the four final bills and gave no claim
declaration in respect of the four contracts. The respondent
wrote a letter to the Additional Chief Engineer, R.E.N.R.
Allahabad, stating that Rs.1,91,137 were due on account of
the work executed and requested him to refer the dispute to
the Arbitrator. On 4th June, 1976 a reply was sent to the
above letter stating that there was no dispute between the
parties and, hence, no question of appointment of any
Arbitrator arose. On 13th December, 1976, an application was
filed by the respondent in the Court of Civil Judge,
Allahabad, for appointment of an Arbitrator under Section 20
of the Arbitration Act, 1940 (hereinafter called ‘the Act’).
That application was dismissed on 10th February, 1978 as
being barred by limitation. There was an appeal from the
said decision to the High Court of Allahabad and the High
Court by its impugned Judgment and Order dated 14th August,
1986 allowed the appeal. Hence, this appeal.
The sole question, involved in this appeal, is whether
the High Court was right in dismissing the application. In
matters of this nature, the main question is whether the
application under Section 20 was within time. Though there
was some doubt before but now it is well-
405
settled in view of the decision of this Court in Kerala
State Electricity Board, Trivandrum v. T.P.K.K. Amson &
Beson, Kerala, [1977] 1 SCR 996 that Article 137 would apply
to any petition or application filed under any Act to a
Civil Court. The Words "any other application" this Court
held under Article 137, cannot be read on the principle of
ejusdem generis to be applications under the Civil Procedure
Code other than those mentioned in part I of the third
division.
The aforesaid view has to be harmonised with the view
of this Court in Wazirchand Mahajan & Anr. v. Union of
India, [1967] 1 SCR 303. There this Court found that the
second appellant had purchased from the Himachal Pradesh
Government the right to extract and collect certain
medicinal herbs from the forests of Chamba District. The
period of agreement was one year from September 1, 1960.
Under an arbitration clause in the agreement all disputes
between the parties were to be referred to the Deputy
Commissioner, Mandi District Himachal Pradesh. The second
appellant transferred all his rights under the agreement to
the first appellant with the consent of the State of
Himachal Pradesh. Disputes arose between the parties in
October, 1950. On May 30, 1952 the appellants addressed a
letter to the Chief Conservator of Forests, Himachal Pradesh
requiring that officer to submit the matters in difference
to the arbitration of the Deputy Commissioner, Mandi Distt.
By a letter dated June 23, 1952, the Chief Conservator
declined to agree to a reference contending that the matters
desired to be referred were outside the arbitration clause.
On June 22, 1955 the appellants applied to the District
Court of Chamba for an order that the agreement be filed in
Court and the disputes between them and the State be
referred to the sole arbitration of the Deputy Commissioner
of Mandi Distt. The State of Himachal Pradesh contended,
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inter alia that the application for filing the arbitration
agreement was barred by law of limitation as the right to
apply if any arose in 1950 and not in June, 1952 as alleged.
The Court of First Instance held in favour of the
appellants. In appeal the Judicial Commissioner reversed the
order of the Trial Court. In the view of the Judicial
Commissioner an application for filing an arbitration
agreement under Section 20 of the Act was governed by
Article 181 of the Limitation Act, 1908 and since the period
of three years prescribed thereby commenced to run from the
date on which the differences arose between the parties from
the month of September, 1950 and in any case on September 1,
1951, the application of the appellants was held to be
barred. The Judicial Commissioner was in error, hence,
according to this Court in rejecting the application of the
appellants for filing the arbitration agreement as barred
under Article 181 of the Limitation
406
Act. It was reiterated that the terms of Article 181, though
general and apparently not restricted to applications under
the Code of Civil Procedure have always been interpreted as
so restricted. In the aforesaid background this Court
directed the arbitration agreement to be filed.
This question was again considered by this Court in
Mohd. Usman Military Contractor, Jhansi v. Union of India,
Ministry of Defence, [1969] 2 SCR 233. There the appellant
had entered into a contract with the Government of India.
The contract contained an arbitration clause. For certain
supplies made under the contract the appellant made
representations to the Government for payment and for
arbitration of disputes. On or about July 10, 1958
Government refused to refer the matter for arbitration. On
July 11, 1961 the appellant filed an application in the
Court of District Judge under Sections 8 & 20 of the Act,
for filing the arbitration agreement and for an order of
reference of the disputes to an arbitrator appointed by the
Court. The respondent contended that the application was
barred by Limitation. The learned District Judge allowed the
application, holding that there was no limitation for making
an application under Sections 8 & 20 of the Act. The
defendant’s appeal was dismissed by the High Court as
incompetent insofar as it challenged the order under Section
8 but was allowed insofar as it challenged the order under
Section 20 of the Act. The High Court held that an
application under Section 20 was governed by Article 181 of
the Indian Limitation Act, 1908. In coming to this
conclusion the High Court took into account the settled
judicial view that the operation of Article 181 was limited
to applications under the Code of Civil Procedure and
reasoned that Article 181 should be construed as if the
words ‘under the Code’ were added in it. The Arbitration
Act, 1940 repealed para 17 of the second schedule to the
Code and re-enacted it in Section 70 with minor
modifications. That being so Section 8(1) of the General
Clauses Act, 1897 applied and the implied reference in
Article 181 to para 17 of the second schedule to the Code
should be construed as a reference to Section 20 of the Act.
In the appeal by certificate this Court held that by the
Arbitration Act, 1940 the Legislature amended Articles 158
and 178 of the Limitation Act and made them applicable to
the relevant proceedings under the Arbitration Act but no
similar change was made in Article 181. It was manifest that
save as provided in Articles 158 & 178 there would not be
any limitation for other application. In the circumstances
the Court found it impossible to construe the implied
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reference in Article 181 as a reference to the Arbitration
Act, or to hold that Article 181 applied to applications
under that Act. In the premises the Court held that an
application under Sections 8 & 20 of
407
the Arbitration Act, 1940 was not governed by Article 181 of
the Limitation Act. In that view of the matter the
application was held to be barred by limitation. The
question is now concluded as mentioned hereinbefore vide
this Court’s decision in Kerala State Electricity Board,
Trivandrum v. T.P.K.K. Amsom & Besom, (supra).
It appears that these questions were discussed in the
decision of the Calcutta High Court in Jiwnani Engineering
Works P. Ltd. v. Union of India, [1978] AIR Cal. 228 where
(one of us-Sabyasachi Mukharji) was a party and which held
after discussing all these authorities the question whether
the claim sought to be raised was barred by limitation or
not, was not relevant for an Order under Section 20 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 20 of the Arbitration Act, 1940, it is necessary
that there should be an arbitration agreement and secondly
differences must arise to which the agreement in question
applied and, thirdly, that must be within time as stipulated
in Section 20 of the Act.
In the instant case it appears that there was an
arbitration agreement as found by the High Court covering
the disputes. It is also obvious that differences existed.
There was an assertion of claim and denial of the same. It
is stated in the judgment of the High Court that under the
agreement the appellants had claimed a sum of Rs. 1,91,636
and, as such, the dispute was liable to be referred to
arbitration in terms of the agreements entered into between
the parties. Further, for the purpose of getting an
arbitrator appointed, a letter dated June 4, 1976 was sent
by the appellant to the Additional Chief Engineer,
Allahabad. The respondent did not take any step in time. The
appellant filed an application on 4.6.1976 under Section 20
of the Act. It was contended before the learned Trial Judge
that the work under all the four contracts had been fully
executed by the appellant on different dates and the
respondents claimed that the appellant had accepted full and
final payment of the agreements which had been executed by
it and no claim declaration in respect of the same had been
given by the appellant. It was, therefore, submitted that
since there was no dispute, the application filed under
Section 20 of the Act, was misconceived. The Trial Court
held that the Court had no jurisdiction under Section 20 of
the Act. The respondent came up in appeal before the High
Court. The question, therefore, was whether there was a
valid claim under section 20 of the Act to be referred in
accordance with law.
408
In view of the well-settled principles we are of the
view that it will be entirely a 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
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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
and the application was filed on December 18, 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] 3 SCR
351.
In the aforesaid view of the matter this appeal must
fail and is accordingly dismissed. The costs of this appeal
would be the costs in the arbitration proceedings.
S.L. Appeal dismissed.
409