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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