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Shankar Construction Co. Pvt. Ltd. Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectArbitration;Contract
CourtKolkata High Court
Decided On
Case NumberSpecial Suit No. 32 of 1983
Judge
Reported inAIR1984Cal317
ActsArbitration Act, 1940 - Section 20 and 20(1); ;Limitation Act, 1963 - Schedule - Article 137
AppellantShankar Construction Co. Pvt. Ltd.
RespondentUnion of India (Uoi)
Appellant AdvocateSinha Roy, Adv.
Respondent AdvocateSen, Adv.
Cases Referred(Union of India v. Vijay Construction Co.
Excerpt:
- .....the right to move a petition under section 20, arbitration act, arose. in other words, when the right to apply accrued, or when cause of action arose for such a petition. the right to apply accrued on the day when the applicant for the first time became entitled to claim relief. admittedly the firm was dissolved on 31-3-1972, and it was on that date that the petitioner was entitled to claim share in the value of the goodwill of the business of the partnership firm at indian institute of technology, hauz khas, new delhi. it is on that day that the petitioner alleges that the respondent agreed to reimburse the petitioner on account of the petitioner's share in the goodwill'. 6. in air 1981 delhi 193 it was held: 'the right to apply under section 20 accrues to a party to the contract.....
Judgment:
ORDER

Pratibha Bonnerjea, J.

1. This is an application under Section 20, Arbitration Act, for filing the arbitration agreement arising out of tender dated 13th June, 1977 and the letter of acceptance dated 10-1-1978. This contract contained an arbitration clause.

2. It is the petitioner's case that this contract was terminated by the respondent on 16/17th June, 1978 and the petitioner's claim consisting of Rs. 2,25,000/- was submitted to the respondent by letter dated 15th June, 1981 wherein the petitioner requested the respondent to pay the amount within 30 days from the date of receipt of the letter or to refer the disputes to arbitration in accordance with the arbitration agreement. In view of the inactivity of the respondent in the matter the petitioner gave another reminder by its letter dated 14th June, 1982 but no response came from the respondent. Under the circumstances, the petitioner took out this application on 11th May, 1983.

3. In the affidavit-in-opposition filed in this proceeding the respondent raised the point of limitation. Mr. Sen appearing on behalf of the respondent relied on the cases reported in : AIR1957All206 (L. Amarnath v. Union of India), AIR 1980 Delhi 25 (Bhagwat Dayal Galgotia v. Pritam Dayal Galgotia) and AIR 1981 Delhi 193 (Union of India v. Vijay Construction Co., Meerut) in support of his contention that the cause of action for taking out this application arose on the date of termination of the contract on 16/17-6-1978. This application is governed by Article 137, Limitation Act and is barred by limitation as it has been taken out beyond the period of 3 years permitted by the law of limitation.

4. In : AIR1957All206 the contract had been rescinded. It was held:

'It is not the law that no application can be made to a Court under Section 20 unless the other party has refused to refer the dispute to arbitration as provided under Chap. II'.

'A difference arose between them in respect of this supply at the latest on 28th June 1951 when respondent 1 rescinded the contract, forfeited the security furnished by the appellant and informed him that it would receive the supplies from elsewhere in future.

The appellant became entitled to proceedings under Section 20 on receipt of this information from respondent 1; so, that is the date on which the cause of action accrued to him'.

5. In AIR 1980 Delhi 25 it was a case for dissolution of partnership and accounts. It was held (Para 8):--

'The question then is when the right to move a petition under Section 20, Arbitration Act, arose. In other words, when the right to apply accrued, or when cause of action arose for such a petition. The right to apply accrued on the day when the applicant for the first time became entitled to claim relief. Admittedly the firm was dissolved on 31-3-1972, and it was on that date that the petitioner was entitled to claim share in the value of the goodwill of the business of the partnership firm at Indian Institute of Technology, Hauz Khas, New Delhi. It is on that day that the petitioner alleges that the respondent agreed to reimburse the petitioner on account of the petitioner's share in the goodwill'.

6. In AIR 1981 Delhi 193 it was held:

'The right to apply under Section 20 accrues to a party to the contract containing arbitration clause on the date when the contract was rescinded by the other party thereto and the limitation of three years has to be counted from that date and not from the date of notice when that party to arbitration agreement serves a notice on the other party thereto requiring the appointment of an arbitrator.'

7. Mr. Sen submits that the application should have been made within 3 years from 16/17-6-1978. Hence the present application should be rejected.

8. Mr. Sinha Roy appearing in support of the petition relies on 2 cases both reported in : AIR1978Cal228 , in support of his contention that the right to apply under Section 20, Arbitration Act, will arise from the date of first demand of the arbitration under the arbitration agreement.

9. In : AIR1978Cal228 , there was an application for filing of the arbitration agreement under Section 20 Arbitration Act. It was contended on behalf of the respondent in that application that the application was barred by limitation. But on behalf of the petitioner it was argued that the application was not barred by limitation as it was taken out within 3 years from the date of the first demand of the reference. It was held in para. 6 as follows:

'On behalf of the petitioner it was urged that the application in this instant case was not belated because the right to apply to this Court arose on the failure of the General Manager to comply with the request made by the contractor. That request was made by the letter dated 7-4-1975 and this application was made on 9-12-1976. From that point of view it appears to me that the right to apply to this Court under Section 20 had not become barred.'

10. In : AIR1978Cal271 it was held as follows:

'As in this case an application under Section 20, Arbitration Act, 1940, was made within the prescribed period under Article 137, that is, within 3 years from the date on which the right to apply accrued and the right to apply under Section 20, Arbitration Act, 1940, can be said to accrue only after a demand is made to refer the disputes to arbitration under the arbitration agreement.'

11. It appears clearly that the Calcutta High Court has held a completely different view regarding the time of accrual of the right to apply under Section 20, Arbitration Act for the purpose of limitation and has repeatedly held that this eight will accrue only upon demand being made for referring the dispute to arbitration, whereas, the Delhi and Allahabad High Courts have held that the right to apply under Section 20 will arise when the petitioner for the first time becomes entitled to claim the relief. S. 20, Arbitration Act, Sub-section (1) clearly lays down that right to apply will arise where a difference has arisen to which the agreement applies. Unless there is a 'difference' no right to apply arises. In my view, the accrual of the right to have the relief will not entitle a petitioner to apply under Section 20 unless the right to have the relief is disputed or denied. Hence the right to claim the relief and to apply under Section 20, in most of the cases cannot arise, simultaneously as held by the Delhi and Allahabad Courts and I respectfully differ from the view they have taken. When a claim to have a relief arises against the respondent and the respondent does not dispute that right, there will be no occasion for applying under Section 20 of the Act. Unless there is a dispute an agreement cannot be enforced. These two Calcutta decisions have not been considered in the cases cited by Mr. Sen. These two decisions are also binding on me.

12. In that view of the matter there will be an order in terms of prayer (a) for filing the arbitration agreement, and all the disputes raised in the petition are referred to the sole arbitration of the General Manager, South Eastern Railway for adjudication. The General Manager is directed to enter upon the reference within 4 weeks from the date of receipt of the signed copy of the minutes of this order. If, however, the General Manager is unable or unwilling to act for any reason whatsoever he is to appoint another arbitrator for adjudicating upon the dispute between the parties within 4 weeks from the date of receipt of the signed copy of the minutes of this order. The arbitrator so appointed will file his award within 6 months from the date of entering upon the reference. The costs of this application will be costs in the arbitration proceedings. All parties, the General Manager and the arbitrator to act on a signed copy of the minutes of this order. This matter will again appear in my list in the first week of February, 1984 marked 'To Be Mentioned' for ascertaining whether the order has been given effect to by the General Manager or not. If not, then the arbitrator will be appointed by Court.

13. Mr. Sen prays for stay of operation of the order for a fortnight. Stay is granted.


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