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Union of India Vs. Rishi Raj and Co., Delhi - Court Judgment

LegalCrystal Citation
SubjectArbitration;Limitation
CourtDelhi High Court
Decided On
Case NumberF.A.O. No. 3 of 1972, against order of R.K. Sain, S.J., 1st Class, Delhi, 10.11.1971
Judge
Reported inAIR1973Delhi15
ActsLimitation Act, 1963 - Schedule - Article 137; Arbitration Act, 1940 - Sections 20; ;Evidence Act - Sections 115
AppellantUnion of India
RespondentRishi Raj and Co., Delhi
Appellant Advocate A.B. Saharia, Adv
Respondent Advocate J.P. Gupta, Adv.
Cases ReferredGyarsi Bai v. Dhansukh Lal
Excerpt:
in the instant case, the respondent had filed an application in order to refer the disputes for the arbitration under section 20 of the arbitration act, 1940 - in this lieu, the appellant opposed the application - it was found that the said application was barred by time - further, no period of limitation was prescribed under article 137 of the limitation act for filing the application under section 20 of the act - although, the parties could prescribe or restrict the period of limitation - in this view a counter claim was made by the respondent for admitting the liability and agreeing to the recover of amount from the security deposit - hence, it was held that the as the respondent had admitted the liability thereforee, the agreement would not operate as estoppel against the respondent -.....1. the respondent therein m/s. rishi raj and company filed an application in the court of the subordinate judge, 1st, class, delhi, under section 20 of the indian arbitration act, 1940 (hereinafter referred to as the act) for referring certain disputes between the respondent and the appellant to arbitration of the arbitrator named in the agreement dated 5-11-1963. according to the averments in the application, the regional director (food), northern region, had issued an invitation to tender dated 21-9-1963 for the appointment of loading/unloading and transport contractors at government of india godowns and railway heads at agra. the tender submitted by the respondent was accepted by the government by its letter of acceptance dated 11-10-1963. the respondent commenced the work but before.....
Judgment:

1. The respondent therein M/s. Rishi Raj and Company filed an application in the Court of the Subordinate Judge, 1st, Class, Delhi, under Section 20 of the Indian Arbitration Act, 1940 (hereinafter referred to as the Act) for referring certain disputes between the respondent and the appellant to arbitration of the arbitrator named in the agreement dated 5-11-1963. According to the averments in the application, the Regional Director (Food), Northern Region, had issued an invitation to tender dated 21-9-1963 for the appointment of loading/unloading and transport contractors at Government of India Godowns and Railway Heads at Agra. The tender submitted by the respondent was accepted by the government by its letter of acceptance dated 11-10-1963. The respondent commenced the work but before the work was completed and before the expiry of the period of the contract, the Regional Director (Food) cancelled the contract on 25-6-1964. The Regional Director further claimed a sum of Rs.21,314.15 paise from the respondent by way of damages and loss alleged to have been sustained by the Government as a result of getting the work completed by other contractors. The respondent repudiated the claim of the Government and, on the other hand, made a counter-claim against the Government for Rs.5,000/- by way of damages for the wrongful termination of the contract by the Government. the respondent called upon the appellant to refer the disputes between them to the sole arbitration of a person nominated by the Secretary to the Government of India, Ministry of Food and Agriculture according to the arbitration clause contained in the agreement dated 5-11-1963. The appellant, however, declined to refer the disputes to arbitration. The respondent thereforee, prayed that the Court should call upon the appellant to file the arbitration agreement and that the disputes be referred to arbitration in terms of the arbitration clause contained in the said agreement.

2. The appellant opposed the application various grounds, the main ground being that the application filed by the respondent was barred by limitation. the following issues were framed by the learned Subordinate Judge :--

1. Whether the application is not within time?

2. Whether the applicant is estopped by his act and conduct to seek arbitration?

3. Whether the petition is filed verified by a competent person?

4. Relief.

Only one witness was examined on behalf of the respondent and no witnesses were examined on behalf of the appellant. Both sides filed a number of documents. On a consideration of this evidence, the learned Subordinate Judge held all the issues against the appellant and in favor of the respondent and referred the disputes between the parties to the arbitration of the arbitrator to be appointed by the Secretary, Government of India, Ministry of Food and Agriculture. The appellant has preferred the present appeal against the said judgment of the learned Subordinate Judge.

3. The learned lower Court following the decision of the Supreme Court in Mohd. Usman v. Union of India, : [1969]2SCR232 has held that no period of limitation was prescribed under the Limitation Act for an application under Section 20 of the Act. The learned counsel for the appellant, Shri A.B. Saharia, has disputed the correctness of this finding and he has contended that whatever the position might have been under the Limitation Act, 1908, an application under Section 20 of the Act was now governed by Article 137 of the Limitation Act, 1963 and such an application had to be filed within three years from the date when the right to file the application accrues. The learned counsel referred to the entire case law as well as the history of the legislation on this subject in support of his contention. But it will not be necessary to consider this contention in detail because the application filed by the respondent under Section 20 of the Act so far as it relates of the claim of the appellant against the respondent is filed within the period of limitation Act, 1963. I shall, however, briefly counsel, because, I am of the view that these points do require serious consideration even if such consideration may not be necessary for the present appeal.

4. Before the passing of the Act in 1940, the filing of application, which now fall within the scope of Sections 14, 17 and 30 of the Act, was provided under the Code of Civil Procedure itself before its amendment in 1940. Paragraph 17 of the Second schedule to the Code of Civil Procedure provided for the filing of such application. Article 181 of the Limitation Act, 1908 prescribed a period of limitation of 3 years for 'applications for which no period of limitation is provided elsewhere in this schedule or by Section 48 of the Code of Civil Procedure, 1908'. The scope of this Article was examined by Westropp, C.J. , in Bai Manekbai v. Manekji Kavasji (1883) 7 Bom 213, and after referring to the corresponding Article 178 in the second schedule to the Limitation Act, 1877, the learned Chief Justice observed as follows :--

'An examination of all the other articles in the second schedule relating to 'applications' that is to say, of the third division of that schedule, shows that the applications therein contemplated are such as are made under the Code of civil Procedure. Hence it is natural to conclude that the application referred to in Article 178 are application ejusdem generis, i.e., applications under the Code of civil Procedure. The preamble of the Act, moreover, purports to deal with 'certain applications' only, and not with all applications.'

It may be noted that when this decision was given, Articles 158 and 178 of the Limitation Act, 1908 stood thus : --

'Article 158. Under the Code of Civil procedure, 1908 , to set aside an award.

Article 178. Under the same Code for the filing in Court of an award in a suit made in any matter referred to arbitration by order of the Court, or of an award made in any matter referred to arbitration without the intervention of a Court.'

This interpretation of Article 181 of the Limitation Act, 1908 was approved by the Privy Council in Hansraj Gupta v. Official Liquidator .

5. In 1940, Articles 158 and 178 were amended by the Arbitration Act, 1940 and the amended Articles read as follows :--

'Article 158. Under the Arbitration Act, 1940, to set aside an award or to get an award remitted for reconsideration.

Article 178. Under the Arbitration Act 1940 for the filing in Court of an award. By the same amendment, the corresponding provisions of the Code of Civil Procedure were deleted. The Arbitration Act, 1940, however, did not touch Article 181 of the Limitation Act, 1908. But in spite of the amendment of Articles 158 and 178, the rule laid down by Westropp, C. J., in Bai Manekbai's case (1883) 7 Bom 213 was still held to be applicable to Article 181 and the Supreme Court held in Sha Mulchand and Company Ltd. v. Jawahar Mills Ltd. : [1953]4SCR351 , that

'This long catena of decisions may well be said to have as it were, added the words 'under the Code' in the first column of that Article.' It was further held that the amendment of Articles 158 and 178 ant the insertion of the words 'under the Arbitration Act, 1940' in place of the words 'under the Code of Civil Procedure, 1908' did not alter the settled meaning of Article 181. It is contended by the learned counsel for the Union of India firstly that the rule laid down by Westropp, C. J. was no longer applicable after the amendment of Articles 158 and 178 in 1940 and secondly that even if the rule of ejusdem generis were to be applied, the reference to the Arbitration Act, 1940 in Article 158 and 178 would being all other applications under the Act within the scope of Article 181. It is the further contention of the learned counsel that the observations of the Supreme Court in the case of Sha Mulchand, : [1953]4SCR351 . namely, that this long catena of decisions may well be said to have as it were, added the words 'under the Code' in the first column of the Article, not, only amounted to the usurpation by the Court of the powers of the Legislature but also that if did not correctly interpret the intention of the Legislature by the amendment of Articles 158 and 178. In support of these contentions, the learned counsel referred to the following observations of the Supreme Court in Wazir Chand Mahajan v. The Union of India, : [1967]1SCR303 .

'It is true that in the limitation Act originally enacted in 1908, by the group of Arts. 158 to 180 only applications under the Code of Civil Procedure were dealt with. By the amendment made by the Arbitration Act 10 of 1940, Arts. 158 and 178 were modified and in the Articles for the expression 'under the Code of Civil Procedure, 1908' the words 'under the Arbitration Act, 1940' were substituted. The reason which persuaded the Courts from time to time to hold that the expression 'under the Code' must be deemed to be added in Art. 181 did not continue to apply after the amendment of Arts. 158 and 178. It may be recalled that the law relating to consensus arbitration, except in respect of cases governed by Arbitration Act, 1899, was enacted in Sch. Ii of the Code of Civil Procedure and the Indian Arbitration Act, 1899, were repealed and an Act dealing with all arbitrations was enacted, and it was found necessary on that account to amend Arts. 158 and 178 so as to made them consistent with the legislative changes. The reason which persuaded the Courts to hold that the expression 'under the Code' was deemed added to Art. 181 has now disappeared xx xx' But in spite of the above observations, the Supreme Court still held that the rule laid down in the case of Sha Mulchand : [1953]4SCR351 , still applied to Article 181 even after the amendment of Articles 158 and 178 in 1940. After making the observations quoted above, the Supreme Court proceeded to observe as follows:-

'But on that account the expression 'applications for which the period of limitation is provided elsewhere in this Schedule' in Art. 181 cannot be given a connotation different from the one which prevailed for nearly 60 years before 1940.

If Art. 181 of the Limitation Act only governs applications under the Code of Civil Procedure for which no period of limitation is provided under the Schedule, an application under the Arbitration Act, 1940 not being an application under the Code of Civil Procedure, unless there is some provision, which by express enactment or plain intendment to the contrary in the Arbitration Act, will not be governed by that Article.'

6. The same rule was reiterated by the Supreme Court in a later case in : [1969]2SCR232 and the Supreme Court gave the following reasons for adhering to its earlier view:

'In amending Arts. 158 and 178 the Legislature acted upon the view that the references to the Code of Civil Procedure, 1908 in the second schedule to the Limitation Act could not in the absence of the amendment be construed as references to the Arbitration Act, 1940. At the same time the legislature refrained from amending Art. 181 and providing that the article will apply to other applications under the Arbitration Act, 1940. It is manifest that the legislature intended that save as provided in Articles 158 and 178 there would not be any limitation for other applications under the Act.'

7. All the decisions referred to above were under the Limitation Act, 1908. The said Act was repealed by the Limitation Act, 1963 and Article 119 has taken the place of Articles 158 and 178 of the old Limitation Act and Article 137 took the place of the old Article 181. Article 119 (a) prescribes a period of limitation of 30 days for the filling in Court of an award from the date of service of the notice of the making of the award and Article 119 (b) prescribes the same period of limitation for setting aside an award or getting an award remitted for reconsideration from the date of service of the notice of the filing of the award Article 137 prescribes a period of limitation of three years for the filing of 'Any other application for which no period of limitation is provided elsewhere in this Division' from the date '{when the right to apply accrues'. It may be noted that Articles 118 to 137 appear in the Third Division of the Schedule to the Limitation Act. But the Third Division is divided into two parts and while Articles 118 and 136 appear in that 1st Part, Article 137 alone appears under Part II. It may also be noticed that apart from Article 118 appearing in the Third Division which is in respect of certain applications under the Arbitration Act, 1940, there are certain other Articles, like article 131 which is in respect of certain applications under the Code of Criminal Procedure. The contention of the learned counsel is that by these changes which have been introduced in the Limitation Act, 1963, the legislature had intended that Article 137 should apply not only to applications under the Code of Civil Procedure which have not been otherwise provided for in the Third Division but also to applications under the Arbitration Act as well as the Code of Criminal Procedure which have not been otherwise provided for in Third Division. It is his further contention that even applying the rule of ejusdem generis to Article 137, applications under the Arbitration Act other than those governed by Article 119 come within the scope of Article 137 and that there is no longer any justification for restricting the scope of Article 137 to applications under the Code of Civil Procedure. Although this contention does appear to be plausible, it cannot be accepted in view of the decision of the Supreme Court in the case of Town Municipal Council, Athani v. Presiding Officer, Labour Court, : (1969)IILLJ651SC , which was a case under the Limitation Act, 1963 and in which the Supreme Court again examined the scope of Article 137 in relation to Article 181 of the old Limitation Act. After referring to the case law under Article 181 of the old Limitation Act, the Supreme Court held that the scope of Article 137 of the new Limitation Act was not materially different from that of Article 181 of the old Limitation Act. The reasons for this view have been given in paragraphs 10 and 11 of the reported judgment and they are reproduced below:--

'It appears to us that the view expressed by this Court in those cases must be held to be applicable, even when considering the scope and applicability of Article 137 in the new Limitation Act of 1963. The language of Article 137 is only slightly different from that of the Article 181 inasmuch as, when prescribing the three years' period of limitation, the first column giving the description of the application reads as 'any other application for which no period of limitation is provided elsewhere in this division'. In fact, the addition of the word 'other' between the words 'any' and 'application' would indicate that the legislature wanted to make it clear that the principle of 'Interpretation of Article 181 on the basis of ejusdem generis should be applied when interpreting the new Article 137. This word 'other' implies a reference to earlier articles and, consequently, in interpreting this Article, regard must be had to the provisions contained in all the earlier Articles. The other Articles in the third division to the schedule refer to applications under the Code of Civil Procedure. The effect of introduction in the third division of the schedule of reference to application under the Arbitration Act in the old Limitation Act has already been considered by this Court in the case of Sha Mulchand & Co. Ltd., : [1953]4SCR351 . We think that, on the same principle, it must be held that even the further alteration made in the articles contained in the third division of the schedule to the new Limitation Act containing references to applications under the Code of Criminal Procedure cannot be held to have materially altered the scope of the residuary Article 137 which deals with other applications. It is not possible to hold that the intention of the legislature was to drastically alter the scope of this article so as to include within it all applications, irrespective of the fact whether they had any reference to the Code of Civil Procedure.

This point, in our opinion, may be looked at from another angle also. When this Court earlier held that all the articles in the third division to the schedule, including Article 181 of the Limitation Act of 1908 governed applications under the Code of Civil Procedure only, it clearly implied that the applications must be presented to a Court governed by the code of Civil Procedure. Even the applications under the Arbitration Act that were included within the third division by amendment of Articles 158 and 178 were to be presented to Courts whose proceedings were governed by the Code of Civil Procedure. At best the further amendment now made enlarges the scope of the third Division of the schedule so as also to include some applications presented to Courts governed by the Code of Criminal Procedure. One factor at least remains constant and that is that the applications must be to Courts to be governed by the Articles in this division. The scope of the various Articles in this division cannot be held to have been so enlarged as to include within them applications to bodies other than Courts, such as a quasi-judicial tribunal, or even an executive authority. An Industrial Tribunal or a Labour Court dealing with applications or references under the Act are not Courts and they are in no way governed either by the Code of Civil Procedure or the Code of Criminal Procedure. We cannot, thereforee, accept the submission made that this Article will apply even to applications made to an Industrial Tribunal or a Labour Court. The alternations made in the Article and in the new Act cannot, in our opinion, justify the interpretation that even applications presented to bodies other than courts, are now to be governed for purposes of limitation by Art. 137'.

8. The correctness of the first reason given by the Supreme Court in paragraph 10 of its reported judgment appears to have been doubted by the Supreme Court in a later decision, namely, Nityanand M. Joshi v. The Life Insurance Corporation of India, : (1969)IILLJ711SC and Sikri, J., (as his Lordship then was ) made the following observations:--

'It is not necessary to express our views on the first ground given but this Court in Civil Appeals Nos. 170 to 173 of 1968, D/20-3-1969, : (1969)IILLJ651SC . It seems to us that it may require serious consideration whether applications to courts under other provisions, apart from Civil Procedure Code, are included within Article 137 of the Limitation Act, 1963, or not.'

But until the rule laid down in Athani Municipality's case is actually re-considered by the Supreme Court and modified the rule will be binding on this Court and it does not appear that so far there has been any such re-consideration or modification of the rule laid down in Athani Municipality's case. That was why in F. A. O. No. 63 of 1986, M/s. R.C. Sood & Co., Pvt. Ltd. v. Smt. Chawali Devi Chaudhan, decided on 15-9-71 a Division Bench of this Court to which I was party laid to hold that Article 137 of the new Limitation Act, 1963 did not prescribe any period of limitation for filing applications under Section 20 of the Act. The contention of the learned counsel that applications under Section 20 of the Act fall within the scope of Article 137 of the Limitation Act, 1963 cannot be accepted.

9. But, as already stated, even, if the contention of the learned counsel is accepted that Article 137 applies to applications under Section 20 of the Act, the application filed by the respondent cannot be said to be barred by limitation. Clause 19 of the agreement, which is the arbitrations clause, is in the following terms:--

'All disputes and differences arising out of or in any way touching or concerning this agreement whatsoever (except as to any matter the decision of which is expressly provided for in the contract) shall be referred to the sole arbitration of any person appointed by the Secretary of the Ministry of the Government of India administratively dealing with the contract at the time of such appointment or if there be no Secretary, the administrative head of such Ministry at the time of such appointment. There will be no objection to any such appointment that the person appointed is a Government servant, that he has to deal with the matters to which the contract relates, and that in the course of his duties as such Government servant he had expressed views on all or any of the matters in dispute or difference. The award of such Arbitrator shall be final and binding on the parties to this contract. It is a term of this contract that in the event of such Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Secretary or administrative head as aforesaid at the time of such transfer, vacations of office or inability to act, shall appoint another person to act as Arbitration in accordance with the terms of contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of the contract that no person other than a person appointed by the Secretary or administrative head of the Ministry as aforesaid should act as Arbitrator and if for any reason that is not possible, the matter is not to be referred to Arbitration at all.

Provided further that any demand for arbitration in respect of any claim(s) of the contractors, under the contract, shall be in writing and made within one year of the date of termination or completion (expiry of the period) of the contract and where this provision is not complied with, the claim(s) of the contractors shall be deemed to have Government shall be discharged and released of liabilities under the contract.

It is further provided that the Arbitrator may, from time to time, with the consent of the parties, enlarge the time, for making and publishing the award.

Subject as aforesaid the Arbitration Act, 1940, shall apply to the arbitration proceedings under this clause.'

The effect of the first proviso to Clause 19 which restricts the period of limitation to one year for any demand for arbitration applies only to cases where the demand for arbitration is in respect of any claim(s) of the contractors under the contract. This proviso will not apply to any demand for arbitration in respect of any claims made by the Government against the contractors. In the present case, it is the Government that made a claim against the respondent for Rs. 21,314.15 paise and to the extent that the respondent denied its liability to pay this amount to the Government and made a demand for arbitration in respect of the claim made by the Government, the first proviso does not apply and it is the main arbitration clause which will apply. No period of limitation is prescribed for the reference of disputes to the arbitrator under the main clause and even if, according to the learned counsel for the appellant, applications for arbitration under the main clause are governed by Article 137 of the Limitation Act, 1963, the period of limitation for filing such applications starts from the date when the Government made the claim against the respondent. The Government made the claim against the respondent for the first time by its letter Ex. R-1 dated 19-9-1966 and the application under Section 20 of the Act was filed by the respondent on 19-9-1966. The application is, thereforee, within the time prescribed under Article 137 of the Limitation Act, 1963.

10. But it is to be noted that in the application filed by the respondent under Section 20 of the Act, it has demanded arbitration not only in respect of the claim made by the Government against it but also in respect of the claim made by it against the Government. In the notice issued by the respondent to the Government under Section 80, Civil Procedure Code, which is dated 26-9-1968 and which is marked as Ex. R/9, the respondent not only denied its liability in respect of the claim of the Government for Rs. 21,314.15 paise but also made a counter-claim against the Government for Rs. 50,000/- by way of compensation for illegally terminating the contract. He also claimed interest at 12% on the said amount. In the application filed by the respondent under Section 20 of the Act. the counter-claim of the respondent against the Government is stated to be Rs. 5,000/-. It is not clear whether this amount has been stated by mistake and whether the correct amount of the counter-claim made by the respondent against the Government is Rs. 50,000/-. But whatever the amount of the counter-claim might be, it will clearly come within the scope of the 1st proviso to Clause 19 of the agreement and according to the 1st proviso. This counter-claim or any demand for arbitration in respect of this counter-claim has to be made within one year of the date of the termination of the contract. Even if no period of limitation is prescribed under the Limitation Act 1963 for filing an application under Section 20 of the Act or even if Article 137 of the Limitation Act, 1963 allows a period of 3 years for filing such an application, it is open to the parties to prescribe the period of limitation or to restrict such period by mutual consent. That such a restriction which is willingly placed by consent of both the parties is not opposed to public policy and is not void has been held by a Full Bench of the Punjab High Court in Pearl Insurance Co. v. Atma Ram, . thereforee, the counter-claim made by the respondent against the Government is barred by limitation by virtue of the first proviso to Clause 19 of the agreement and the only dispute in respect of which the respondent can demand reference to arbitration under the main arbitration clause of the agreement is the claim made by the Government against the respondent. It is only this dispute that the Court can refer to arbitration under Section 20 of the Act.

11. It is, however, contended by the learned counsel for the Union of India that even this dispute cannot be referred to arbitration under the principles of waiver or estoppel. Reference in this connection is made to certain correspondence which passed between the appellant and the respondent in this regard. Ex. R/8 is the letter dated 25-6-1964 written by the Regional Director (Food), Ministry of Food and Agriculture, Government of India, to the respondent terminating the contract. The relevant portion of this letter is in the following terms:--

'In spite of repeated notices of your failure to perform your obligations under the contract cited above in particular, to perform the quota of work allotted to you from day to day, whereby much loss was occasioned to Government you have failed to duly carry out duties and obligations under the said contract and have thus committed breach of the terms and conditions of the contract. Accordingly, I hereby terminate the said contract with immediate effect at your risk and cost under Clause X (b) of your tender dated 23-9-1963 accepted by us vide our acceptance letter No. 1 (3) /63-Accts. Ii (A) dated 5-11-1963.

2. The extra expenditure, loss or damage sustained by the Government in consequences of the breach of contract committed by your will be intimated to you in due course and recovery thereof effected from the security deposited by your, so far as may be, and unrecovered balance shall be realised from you.'

This was followed by the demand notice dated 19-9-1966 which has been marked as Ex. R/1 and by this notice, the respondent was informed that by reason, if getting the work done by other contractors, the Government had incurred an extra expenditure of Rs. 21,314.15 paise. The Regional Director has further informed the respondent by this notice that an amount of Rs. 20,574.64 paise had already been recovered from the respondent's pending bills and the respondent was requested to deposit the remaining amount of Rs. 739.51 paise within one week of the receipt of the notice. This notice was acknowledged by the respondent by its letter dated 22nd September, 1966. It is necessary to reproduce the relevant portions of this letter and they are as under:--

'I hereby acknowledge the receipt of your letter No. 1 (3) 63-Contract (A) dated the 19th September, 1966, on the above subject sent under Registered A. D. cover and signed as for and on beheld of the President of India.

The sum of Rs. 739.51 paise (Rupees Seven hundred and thirty nine and paise fifty one only) still remaining as claimed therein, may kindly be recovered out of the amount of our security deposit lying with you.

I would further request you to kindly refund to the undersigned the balance amount of the security as well as other dues under your consideration at your earliest convenience, as the matter has already been delayed far beyond the reasonable period.'

It is only by the notice dated 26-9-1968 Ex. R/9 sent to the Government under Section 80 of the Civil Procedure Code that the respondent repudiated the claim of the Government made under Ex. R/1.

12. On the basis of the above correspondence, the learned counsel for the Union of India contends that the respondent had by its letter Ex. R/2 admitted its liability and had also agreed to the recovery of the amount from the security deposit. The question is whether by reason of this letter Ex. R/2, the respondent is precluded form disputing the Government's claim at this stage and form asking the Court to refer the dispute to arbitration.

13. The principle of estoppel was explained by the Supreme Court in Gyarsi Bai v. Dhansukh Lal : [1965]2SCR154 , in the following terms'--

'To invoke the doctrine of estoppel three conditions must be satisfied: (1) representation by a person to another (2) the other shall have acted upon the said representation, and (3) such action shall have been detrimental to the interests of the person to whom the representation had been made.'

Applying these principles to the present case, can it be said that by admitting its liability to the Government's claim in its letter Ex. R/2 and in agreeing to the recovery of the amount from the security deposit, the respondent had made a representation to the Government or that the Government had acted upon the said representation and that such action was detrimental to the interests of the Government? By the notice Ex. R/1, the Government merely informed the respondent that it had recovered a part of its claim from the security deposit of the respondent and called upon the respondent to pay the balance within a particular time. There was nothing further which the Government could have done even if the respondent had not admitted its liability or even if the respondent had not agreed to the recovery of the amount from the security deposit. If the respondent had denied its liability, it was open to it to seek arbitration on the dispute under the arbitration clause in the agreement. The fact that the respondent did not seek arbitration immediately but has sought arbitration in the dispute after some delay is not in any way detrimental to the Government. Further, the respondent has a very good Explanationn for the delay in seeking arbitration. Until it received the notice Ex. R/1 it did not know whether the Government had in fact incurred any extra expenditure by having the work carried out by other contractors. It did not know the extent of the extra expenditure incurred by the Government. It sent its reply Ex. R/2 within two days form the receipt of the notice Ex. R/1 and it cannot be expected that the respondent had within such a short period ascertained or verified the extra expenditure alleged to have been incurred by the Government. It was only after making necessary enquiries that it could ascertain whether any extra expenditure was in fact incurred and if so, the extent of that extra expenditure. thereforee, the mere fact that within two days of the receipt of the notice, the respondent had admitted its liability will not operate as an estoppel against the respondent and will not prevent it from challenging the claim of the Government. thereforee, the respondent is entitled to seek arbitration with regard to the claim raised by the Government against it in Ex. R/1.

14. The entire dispute raised by the respondent cannot be referred to arbitration. The only dispute that can be referred to arbitration. The only dispute that can be referred to arbitration is in respect of the claim made by the Government against the respondent. The dispute raised by the respondent in respect of its counter-claim against the Government cannot be referred to arbitration as it is barred by limitation. The judgment of the learned Subordinate Judge referring the entire dispute to arbitration is, thereforee, modified accordingly and the appeal is allowed in part to that extent. The parties will bear their own costs in this appeal.

15. Appeal partly allowed.


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