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PETITIONER: MAJOR (RETD.) INDER SINGH REKHI

       Vs.

RESPONDENT: DELHI DEVELOPMENT AUTHORITY

DATE OF JUDGMENT24/03/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR 1007            1988 SCR  (3) 351  1988 SCC  (2) 338        JT 1988 (2)     6  1988 SCALE  (1)612  CITATOR INFO :  R          1988 SC1172  (8)  R          1992 SC1918  (8)

ACT:      Arbitration  Act,  1940:  Sections  8  and  20-Dispute- Existence of-Essential  for appointment  of  arbitrator-What constitutes a  dispute-Whether a  dispute has arisen or not- Depends on facts and circumstances of a case.      Limitation Act,  1963: Article 137-Petition/application filed in a civil court-Applicability to-Application under s. 20 of  the Arbitration  Act-Period  of  limitation-What  is- Accrual of cause of action-When arises.

HEADNOTE: %      The appellant  undertook construction of certain houses for the  respondent-Development Authority  and completed the same on 2nd April, 1980.      The appellant  sent several  letters to  the respondent requesting for  finalisation of  the bills; the first one on 28th February,  1983 and  the last  on 4th  September, 1985. Ultimately, the appellant served notice, through his counsel requesting the respondent to release the security amount and refer the dispute to arbitration. On respondent’s failure to do so,  the appellant  filed an  application in  the  Court, under section  20 of  the Arbitration  Act, 1940  seeking  a direction for  filing the arbitration agreement in the court and referring  the dispute to arbitration. A Single Judge of the High  Court dismissed the application as barred by time. This decision was upheld by the Division Bench.      Allowing the appeal, ^      HELD: 1.1 Article 137 of the Limitation Act, 1963 would apply to any petition or application filed in a civil court. [353E-F]      Kerala State  Electricity Board, Trivandrum v. T.P.K.K. Amsom and Bensom, Kerala, [1977] 1 S.C.R. 996 relied on.      1.2 In  order to  be entitled  to an order of reference under s. 20, it 352 is necessary  that there  should be an arbitration agreement

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and secondly,  difference must arise to which this agreement applied. The existence of a dispute is, therefore, essential for appointment  of an  Arbitrator under s. 8 or a reference under s. 20 of the Act. [353H, 354A]      1.3 Dispute entails a positive element and assertion in 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. [354F]      1.4 A  right to  get payment  would normally  arise  on completion of  the work  and a party cannot postpone accrual of  cause   of  action   by  writing  reminders  or  sending reminders. But  where a  bill had not been finally prepared, the claim  made by  the claimant is the accrual of the cause of action. [354C-D]      In the instant case 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 the respondent. Therefore,  a dispute  has arisen regarding non- payment of  the alleged  dues of  the appellant. Since final bills had  not been  prepared, and  there was  assertion  of claim on  28th February, 1983 and there was non-payment, the cause of action arose on that date. [354A-B, D]      The application  under s.  20 of  the Act  having  been filed in  the Court in January, 1986, i.e. within the period of three  years from  the date  of cause  of action,  it was within time and the High Court was in error in dismissing it on the ground of limitation. [354G]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1178 of 1988.      From the  Judgment and  Order dated  5.11.1986  of  the Delhi High Court in F.A.O. (OS) No. 231 of 1986.      Hardev  Singh  and  Miss  Madhu  Moolchandani  for  the Appellant.      S.B. Saharya,  V.B. Saharya  and  Ratna  Nair  for  the Respondent.      The Judgment of the Court was delivered by      SABYASACHI MUKHARJI, J. Special Leave granted. 353      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  February  1983  to December 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  February,  1983.  Thereafter  the  appellant  wrote several letters  and finally  on 4th  September, 1985 to the respondent to  finalise the  bills and ultimately served the notice through  his counsel  requesting it  to  release  the security of  Rs.1 lakh and refer the dispute to arbitration. The respondent  failed  to  do  so.  In  January,  1986  the appellant filed  an application  under  section  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

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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.      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,  Trivandrum  v. T.P.K.K. Amsom  and Bensom,  Kerala, [1977] 1 S.C.R. 996, 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.  Sub-section (1)  of  section  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           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 to  which  the           agreement relates,  that the agreement be filed in           Court."      Therefore,  in   order  to  be  entitled  to  order  of reference under 354 section  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 article 137 arose from that date. But in order to be entitled to ask for a reference  under section 20 of the Act there must not only be an entitlement to money but there must be a difference or 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  February, 1983 and there was non-payment, the cause  of action  arose from  that date, that is to say, 28th of  February, 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  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, 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. Whether in a  particular case  a dispute has arisen or not has to be

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found out from the facts and circumstances of the case.      The application  under section  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 section  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. N.P.V.                                       Appeal allowed. 355