1988 JTR(SC) 235
1988 AIR(SC) 1007 ; 1988 2 ArbLR 270 ; 1988 CivCC 374 ; 1988 1 CurCC(SC) 1032 ; 1988 34 DLT 362 ; 1988 2 JT 6 ; 1988 RLR 347 ; 1988 1 Scale 612 ; 1988 2 SCC 338 ; 1988 3 SCR 351 ; 1988 1 UJ 692 ; 1988 KHC 948
SUPREME COURT OF INDIA
SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.
Major (Retd.) Inder Singh Rekhi, Appellant
Versus
Delhi Development Authority, Respondent.
Civil Appeal No. 1178, of 1988, D/- 24-3-1988.
Advocates appeared
Mr. Hardev Singh, Sr. Advocate and Miss Madhu Moolchandani, Advocate with him, for Appellant; Mr. S. B. Saharya, Mr. V. B. Saharya and Mr. Ratna Nair Advocaters, for Respondent.
Act
Referred
:ARBITRATION ACT : S.8, S.20
LIMITATION ACT : Art.137
(A) The Arbitration Act, 1940 (S.8 and S.20) and the Limitation Act, 1963 (Art.137) apply to this dispute. Art.137 incorporates limitation principles into arbitration applications, while S.20 governs applications to file arbitration agreements and order reference. The applicability of limitation periods to such applications is determined under these statutory frameworks.
(B) Key principles include: (i) an application under S.20 must be based on an arbitration agreement and a dispute that has accrued; (ii) the cause of action accrues when a claim is asserted and denied, not merely upon completion of work; (iii) Art.137 ensures limitation periods apply to civil court applications including arbitration petitions; (iv) delay must be assessed against the limitation period from the date the cause of action accrued.
Facts of the case:
The appellant entered a contract with the respondent for construction work in 1976, which was delayed and completed in 1980. Bills were not finalized, and the appellant asserted a claim in February 1983 with non-payment, followed by a demand to finalize bills and refer to arbitration in September 1985. An application under S.20 was filed in January 1986, dismissed for limitation, and the present appeal challenges this dismissal.
Findings of Court:
The High Court erred in holding the application time-barred. The cause of action arose in February 1983 upon assertion and denial of the claim, not upon completion of the work. The application filed in January 1986 was within the limitation period. The appeal was allowed and the case was directed to proceed under S.20.
Issues:
(i) When does the cause of action accrue for limitation purposes in a claim for unpaid sums under an arbitration agreement? (ii) Whether an application under S.20 of the Arbitration Act is barred by limitation if filed after completion of work but before final billing?
Ratio Decidendi:
The court held that the cause of action accrues when a party asserts a claim and the other party denies it, which occurred in February 1983. The application under S.20 filed in January 1986 was within the limitation period, and dismissal on those grounds was incorrect.
Result:
Appeal allowed; set aside the High Court orders; direct the High Court to make an order under S.20 of the Arbitration Act and grant consequential directions; costs to be paid in the arbitration proceeding.
(A) The Arbitration Act, 1940 (S.8 and S.20) and the Limitation Act, 1963 (Art.137) apply to this dispute. Art.137 incorporates limitation principles into arbitration applications, while S.20 governs applications to file arbitration agreements and order reference. The applicability of limitation periods to such applications is determined under these statutory frameworks.
(B) Key principles include: (i) an application under S.20 must be based on an arbitration agreement and a dispute that has accrued; (ii) the cause of action accrues when a claim is asserted and denied, not merely upon completion of work; (iii) Art.137 ensures limitation periods apply to civil court applications including arbitration petitions; (iv) delay must be assessed against the limitation period from the date the cause of action accrued.
Facts of the case:
The appellant entered a contract with the respondent for construction work in 1976, which was delayed and completed in 1980. Bills were not finalized, and the appellant asserted a claim in February 1983 with non-payment, followed by a demand to finalize bills and refer to arbitration in September 1985. An application under S.20 was filed in January 1986, dismissed for limitation, and the present appeal challenges this dismissal.
Findings of Court:
The High Court erred in holding the application time-barred. The cause of action arose in February 1983 upon assertion and denial of the claim, not upon completion of the work. The application filed in January 1986 was within the limitation period. The appeal was allowed and the case was directed to proceed under S.20.
Issues:
(i) When does the cause of action accrue for limitation purposes in a claim for unpaid sums under an arbitration agreement? (ii) Whether an application under S.20 of the Arbitration Act is barred by limitation if filed after completion of work but before final billing?
Ratio Decidendi:
The court held that the cause of action accrues when a party asserts a claim and the other party denies it, which occurred in February 1983. The application under S.20 filed in January 1986 was within the limitation period, and dismissal on those grounds was incorrect.
Result:
Appeal allowed; set aside the High Court orders; direct the High Court to make an order under S.20 of the Arbitration Act and grant consequential directions; costs to be paid in the arbitration proceeding.
HARDEV SINGH, MADHU MULCHANDANI, RATNA NAIR, S.B.SAHARYA, V.B.SAHARYA
Judgment
SABYASACHI MUKHARJI, J. :- Special Leave granted.
2. The Delhi Development Authority vide its letter dated 5th October, 1976 accepted the tender of the appellant for construction of 240 Janta Houses at the estimated cost of Rs. 24,49,262/-. The work was to commence on 15th October, 1976 and was required to be completed by 14th July, 1977. By a subsequent extension of time the work was finally completed on 2nd April, 1980 and the houses so constructed have been allotted to several people. Between Feb. 1983 to Dec. 1985 the appellant sent several letters to the respondent requesting them to finalise the bills. It appears, however, that the first of such letters was written on 28th Feb. 1983. Thereafter the appellant wrote several letters and finally on 4th Sept. 1985 to the respondent to finalise the bills and ultimately served the notice through his counsel requesting it to release the security of Rs. one lakh and refer the dispute to arbitration. The respondent failed to do so. In Jan. 1986 the appellant filed an application under S. 20 of the Arbitration Act, 1940 (hereinafter called the Act) seeking a direction from the Court that the respondent be directed to file the arbitration agreement in the Court and the dispute be referred to the arbitration. The learned single Judge of the High Court of Delhi dismissed the application as barred by time. There was an appeal to the Division Bench of the High Court of Delhi. The Division Bench upheld the decision of the learned single Judge. Hence this appeal to this Court.
3. The question is, whether the High Court was right in upholding that the application under S. 20 of the Act was barred by limitation. In view of the decision of this Court in Kerala State Electricity Board, Trivendrum v. T.P.K.K. Amsom (1977) 1 SCR 996, it is now well-settled that Art. 137 of the Limitation Act, 1963 would apply to any petition or application filed in a Civil Court. Sub-sec. (1) of S. 20 of the Act provides as follows :
"Application to file in Court arbitration agreement : - Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a defence 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 to which the agreement relates, that the agreement be filed in Court."
4. Therefore, in order to be entitled to order of reference under S. 20, it is necessary that there should be an arbitration agreement and secondly, difference must arise to which this agreement applied. In this case, there is no dispute that there was an arbitration agreement. There has been an assertion of claim by the appellant and silence as well as refusal in respect of the same by respondent. Therefore, a dispute has arisen regarding non payment of the alleged dues of the appellant. The question is for the present case when did such dispute arise. The High Court proceeded on the basis that the work was completed in 1980 and, therefore, the appellant became entitled to the payment from that date and the cause of action under Art. 137 arose from that date. But in order to be entitled to ask for a reference under S. 20 of the Act there must not only be an entitlement to money but there must be a difference or a dispute must arise. It is true that on completion of the work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claim was made on 28th Feb. 1983 and there was non-payment, the cause of action arose from that date, that is to say, 28th of Feb. 1983. It is also true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action. A dispute arises where there is a claim and a denial and repudiation 1009 of the claim. The existence of dispute is essential for appointment of an arbitrator under S. 8 or a reference under S. 20 of the Act. See Law of Arbitration by R.S. Bachawat, 1st 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 in denying, not merely inaction to accede to a claim or a request. When in a particular case a dispute has arisen or not has to be found out from, the facts and circumstances of the case.
5. The application under S. 20 of the Act was filed in court in January, 1986, that is to say, within the period of three years therefore the application was within time. The High Court was in error in dismissing the application on the ground of limitation. The judgment and order of the High Court are, therefore, set aside. The High Court is directed to make an order under S. 20 of the Act and give consequential directions in respect of the same. The costs of this appeal would be costs in the arbitration proceeding. The appeal is thus allowed and disposed of as aforesaid.
Appeal allowed.
For Citation : AIR 1988 SC 1007 = (1988) 2 J.T.6.