Shah & Company through its Proprietor Shafiq Ahmad Shah v. Jammu & Kashmir Power Development Corporation, through its Managing Director
2024-09-10
Tashi Rabstan
body2024
DailyLaw.ai
JUDGMENT : Tashi Rabstan, A.C.J. 1. The instant petition has been filed by the petitioner seeking appointment of an arbitrator by invoking Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short the ' Act ') 2. The case set up by the petitioner is that being a Contractor he executed the work Construction of Junction Structure RD (-17) to 100 M of Sumbal Link Channel of USHP-II Kangan on the strength of the allotment letter bearing No.USHP-II/CE/7-Works of 1989 dated 17.06.1989. It is stated that the work was required to be completed within one year i.e. till 31.10.1990 but due to militancy activities and non-cooperation of the department in providing the requisite drawings and the material in time, the work got delayed and was completed on 31.08.2000. It is further stated that after completion of the work, final bill for an amount of Rs.49,37,599/- was submitted in the month of March, 2006, out of which an amount of Rs.27297/- was paid to the petitioner and the balance amount was assured to be released in favour of the petitioner shortly. It is stated that the respondents having failed to release the balance amount in favour of the petitioner, the petitioner through his counsel issued a legal notice dated 01.01.2011 to the respondents. It is stated that respondents having failed to act in the matter, the petitioner again, through his counsel, approached the respondents and issued another legal notice dated 25.01.2022 for release of the legitimate payment and reference of the dispute to arbitrator but the respondents failed to release the same and thus, a dispute is alleged to have arisen between the parties. The petitioner has further submitted that till date neither the payment has been released in his favour nor any arbitrator, as was sought to be appointed in the matter, has been appointed by the respondents in terms of Clause 54 of the agreement entered between the parties. 3. On notice of the petition to the respondents, the respondents appeared and filed their objections. In the objections, amongst other grounds, the respondents have disputed the claim of the petitioner on the ground that the claim raised by the petitioner is time barred. It is stated that final payment on account of the work done along with necessary escalation was made to the contractor in terms of the conditions of the contract agreement.
In the objections, amongst other grounds, the respondents have disputed the claim of the petitioner on the ground that the claim raised by the petitioner is time barred. It is stated that final payment on account of the work done along with necessary escalation was made to the contractor in terms of the conditions of the contract agreement. It is further submitted that the defect liability period as per the conditions of the contract agreement was one year from the date of completion of the work and since the work was completed on 31.08.2000, therefore, the said period has expired on 31.08.2001. The allegation of the petitioner that completion of the work got delayed because of the non- cooperation of the respondents is refuted by the respondents and it is stated that all the necessary drawings and material was provided to the petitioner in line with the conditions of the contract agreement. It is stated that though there was a huge delay in completion of the work but the same was adjusted by giving extension in time from time to time without imposing any penalty and the work got completed on 31.08.2000. The respondents submit that since all the due payment to the petitioner has been made, thus there exists no dispute between the parties. It has accordingly been prayed that the petition may be dismissed. 4. In rebuttal, the petitioner has filed his response to the objections filed by the respondents and it has been pleaded therein that the respondents are admitting that only the last payment of Rs.28439/- and Rs.11477/- was paid in the month of March, 2006 against the work done and escalation and not the final payment and the same is stated to be still pending with the respondents. It has further been submitted that the plea taken by the respondents that notice of existence of any dispute is to be served within 30 days of the expiry of the defect liability period, has no relevance for the reason that during the said period there was no dispute and the dispute arose only after the submission of the final bill in March, 2006 . It is claimed by the petitioner that the final bill to the tune of Rs.49,37,599/- is still pending with the respondents.
It is claimed by the petitioner that the final bill to the tune of Rs.49,37,599/- is still pending with the respondents. It is also stated that while exercising powers under Section 11(6) of the Act, the Court is not an adjudicatory authority and the issue with regard to limitation can be raised and adjudicated upon by the arbitrator. 5. Having heard the learned counsel for the parties and perused the materials on records, it is an admitted position that works “Construction of Junction Structure RD(-17) to 100M of Sumbal Link Channel of USHP-II Kangan in the year 1989”, was allotted in favour of the petitioner in the year 1989 and the same was completed on 31.08.2000. After completion of the work, final bill for an amount of Rs.49,37,599/- was submitted by the petitioner in the year 2006 and an amount Rs.28439/- and Rs.11477/- was paid against the work done and escalation. 6. The petitioner claims that respondents having failed to release the balance amount in his favour, he served a legal notice on respondent no.2 on 08.01.2011 demanding him to intervene in the matter or in the alternative appoint an arbitrator to settle the dispute within a period of thirty days from the date of notice. 7. Perusal of the records reveal that after submission of the final bill in the year 2006, the petitioner slept over the matter and woke up in the year 2011 and served a legal notice on respondent no.2 seeking to intervene in the matter or in the alternative appoint an arbitrator to settle the dispute within a period of thirty days from the date of notice. 8. Thereafter, the petitioner again slept over the matter and no action was taken by the petitioner and finally on 25.01.2022, after a lapse of eleven years, the petitioner served another legal notice on respondent no.2 nominating Sh. S. R. S. Madni, Retd. Chief Engineer as arbitrator on his behalf in terms of the arbitration clause and called upon the respondent no.2 to nominate their arbitrator within a period of one month. 9. Keeping in view the rival contentions of the parties and the material on record, the foremost question which arises for consideration before this Court is whether the petition in hand is ex-facie barred by limitation or otherwise? 10. In order to appreciate the controversy, it is apt to go through the relevant provisions of law.
9. Keeping in view the rival contentions of the parties and the material on record, the foremost question which arises for consideration before this Court is whether the petition in hand is ex-facie barred by limitation or otherwise? 10. In order to appreciate the controversy, it is apt to go through the relevant provisions of law. 11. Sections 21 and 43 of the Act, provides as under: “ 21. Commencement of arbitral proceedings. — Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 43. Limitations. — (1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in court. (2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in Section 21. (3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, an notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper. (4)……………………” 12. From perusal of the aforesaid provisions of law, it is manifestly clear that limitation period starts to run from the date a request for referring the disputes to arbitration is made and for purposes of limitation, The Limitation Act, 1963 shall be applicable to arbitrations as it applies to proceedings in court. 13. In the present case while going through the records, it is manifestly clear that final bill was submitted by the petitioner in the year 2006 and thereafter legal notice seeking appointment of arbitrator was served upon respondent no.2 on 08.01.2011 i.e. after a delay of five years. The petitioner has failed to explain the delay of five years occurred in serving a notice seeking appointment of arbitrator. 14.
The petitioner has failed to explain the delay of five years occurred in serving a notice seeking appointment of arbitrator. 14. As referred to above, Section 21 of the Act, provides that arbitral proceedings commences from the date a request for referring the disputes, so arisen between the parties, is made. In the present case the request for arbitration has been made by the petitioner on 08.01.2011 though after a delay of five years after submission of the final bill and thereafter, the petitioner slept over the matter for more than eleven years and woke up from the deep slumber in the year 2022 and served another legal notice dated 25.01.2022 on respondent no.2. 15. In terms of Article 137 of the Limitation Act, 1963, the period of limitation to file an application under Section 11 is three years from the date of refusal to appoint the arbitrator or on expiry of thirty days from the date of notice/letter of request for appointment of an arbitrator. In the present case, the cause of action to file the petition under Section 11 of the Act, seeking appointment of arbitrator, has accrued to the petitioner after expiry of one month from the date the first legal notice dated 08.01.2011 was served upon respondent no.2. The petitioner in his response to the objections has also admitted that dispute between the parties has arisen after submission of the final bill in the year 2006, but still the petitioner slept over the matter for a long period of more than eleven years and filed the petition at hand on 15.03.2023. In the circumstances, I have no hesitation in holding that the present petition is ex-facie barred by limitation as has been held by the Hon'ble Supreme Court in case Geo Miller & Co. Pvt. Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd. : AIR 2019 SC 4244 . Relevant portion of para-8 of the said judgment reads thus: “8. …………..Applying the aforementioned principles to the present case, we find ourselves in agreement with the finding of the High Court that the appellant's cause of action in respect of Arbitration Applications Nos. 25/2003 and 27/2003, relating to the work orders dated 7.10.1979 and 4.4.1980 arose on 8.2.1983, which is when the final bill handed over to the respondent became due.
…………..Applying the aforementioned principles to the present case, we find ourselves in agreement with the finding of the High Court that the appellant's cause of action in respect of Arbitration Applications Nos. 25/2003 and 27/2003, relating to the work orders dated 7.10.1979 and 4.4.1980 arose on 8.2.1983, which is when the final bill handed over to the respondent became due. Mere correspondence of the appellant by way of writing letters/reminders to the respondent subsequent to this date would not extend the time of limitation. Hence the maximum period during which this Court could have allowed the appellant's application for appointment of an arbitrator is 3 years from the date on which cause of action arose i.e. 8.2.1986……….” 16. The Hon'ble Supreme Court while considering the similar issues, as has been raised in this petition, in case B and T AG v. Ministry of Defence : (2024) 5 SCC 358 , has held as under: “53. This Court in Nortel Networks [BSNL v. Nortel Networks (India) (P) Ltd., (2021) 5 SCC 738 ] observed that the Act 1996 has been framed for expeditious resolution of disputes and various provisions have been incorporated in the Act 1996 to ensure that the arbitral proceedings are conducted in a time bound manner. The Act 1996 does not prescribe any time period for filing an application under Section 11(6). Since there is no provision in the Act 1996 specifying the period of limitation for filing an application under Section 11, one would have to take recourse to the Act 1963, as per Section 43 of the Act 1996 which provides that the Limitation Act shall apply to arbitrators, as it applies to proceedings in Court. Since none of the articles in Schedule to the Limitation Act provide a time period for filing an application for appointment of arbitrator under Section 11, it would be covered by the residual provision under Article 137 of the Limitation Act which provides that the period of limitation is three years for any other application for which no period of limitation is provided elsewhere in the division. The time limit starts from the period when the right to apply accrues. 54. This Court in Nortel Networks (supra) relied on its various other decisions including few High Court decisions.
The time limit starts from the period when the right to apply accrues. 54. This Court in Nortel Networks (supra) relied on its various other decisions including few High Court decisions. This Court held that an application under Section 11 is to be filed in a Court of Law, and since no specific Article of the Act 1963 applies, the residual Article would become applicable. The effect being that the period of limitation to file an application under Section 11 is three years from the date of refusal to appoint the arbitrator or on expiry of 30 days whichever is earlier. In the said case the respondent had issued the notice of arbitration on 29.04.2020 which was rejected by the appellant on 09.06.2020. The respondent filed an application under Section 11 before the High Court on 24.07.2020, i.e., within the period of three years of rejection of the request for appointment of arbitrator. 55. This Court allowed the appeals filed by the BSNL holding as under: “48. Applying the law to the facts of the present case, it is clear that this is a case where the claims are ex facie time- barred by over 5½ years, since Nortel did not take any action whatsoever after the rejection of its claim by BSNL on 4-8-2014. The notice of arbitration was invoked on 29-4-2020. There is not even an averment either in the notice of arbitration, or the petition filed under Section 11, or before this Court, of any intervening facts which may have occurred, which would extend the period of limitation falling within Sections 5 to 20 of the Limitation Act. Unless, there is a pleaded case specifically adverting to the applicable section, and how it extends the limitation from the date on which the cause of action originally arose, there can be no basis to save the time of limitation. 49. The present case is a case of deadwood/no subsisting dispute since the cause of action arose on 4-8-2014, when the claims made by Nortel were rejected by BSNL. The respondent has not stated any event which would extend the period of limitation, which commenced as per Article 55 of the Schedule of the Limitation Act (which provides the limitation for cases pertaining to breach of contract) immediately after the rejection of the final bill by making deductions. 50.
The respondent has not stated any event which would extend the period of limitation, which commenced as per Article 55 of the Schedule of the Limitation Act (which provides the limitation for cases pertaining to breach of contract) immediately after the rejection of the final bill by making deductions. 50. In the notice invoking arbitration dated 29-4-2020, it has been averred that: “Various communications have been exchanged between the petitioner and the respondents ever since and a dispute has arisen between the petitioner and the respondents, regarding nonpayment of the amounts due under the tender document.” 51. The period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters, [S.S. Rathore v. State of M.P., (1989) 4 SCC 582 : 1990 SCC (L&S) 50; Union of India v. Har Dayal, (2010) 1 SCC 394; CLP (India) (P) Ltd. v. Gujarat Urja Vikas Nigam Ltd., (2020) 5 SCC 185 ] or mere settlement discussions, where a final bill is rejected by making deductions or otherwise. Sections 5 to 20 of the Limitation Act do not exclude the time taken on account of settlement discussions. Section 9 of the Limitation Act makes it clear that:“where once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it.” There must be a clear notice invoking arbitration setting out the “particular dispute” [Section 21 of the Arbitration and Conciliation Act, 1996.] (including claims/amounts) which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail. 52. In the present case, the notice invoking arbitration was issued 5½ years after rejection of the claims on 4-8- 2014. Consequently, the notice invoking arbitration is ex facie time-barred, and the disputes between the parties cannot be referred to arbitration in the facts of this case.” 73. Negotiations may continue even for a period of ten years or twenty years after the cause of action had arisen. Mere negotiations will not postpone the “cause of action” for the purpose of limitation. The Legislature has prescribed a limit of three years for the enforcement of a claim and this statutory time period cannot be defeated on the ground that the parties were negotiating. 76.
Mere negotiations will not postpone the “cause of action” for the purpose of limitation. The Legislature has prescribed a limit of three years for the enforcement of a claim and this statutory time period cannot be defeated on the ground that the parties were negotiating. 76. The case on hand is clearly and undoubtedly, one of a hopelessly barred claim, as the petitioner by its conduct slept over its right for more than five years. Statutory arbitrations stand apart. ……” 17. The Hon'ble Supreme Court in M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd. : AIR 2024 SC 1347 , while considering the similar issues has been pleased to held as under: “50. Having traversed the statutory frame-work and case law, we are of the clear view that there is no doubt as to the applicability of the Limitation Act, 1963 to arbitration proceedings in general and that of Article 137 of the Limitation Act, 1963 in particular. Having held thus, the next question that falls for our dtermination is whether the present petition seeking appointment of an arbitrator is barred by limitation. 51. The determination of the aforesaid question is an exercise involving both law and facts. As is evident from Article 137 of the Limitation Act, 1963, the limitation period for making an application under Section 11(6) of the Act, 1996 is three years from the date when the right to apply accrues. ………” (Emphasis supplied) 18. Thus keeping in view the ratio laid down by the Hon'ble Supreme Court in the aforesaid decisions, it is emphatically clear that the period of limitation to file an application under Section 11(6) seeking appointment of arbitrator is three years from the date of refusal to appoint the arbitrator or on expiry of thirty days from the date of service of notice. However, in the present case, as discussed above, the petitioner firstly served the notice after a period of five years from the date of submission of the final bill and after serving the notice invoking arbitration clause on 08.01.2011 filed the present petition on 15.03.2023 after a lapse of more than twelve years. 19. In the aforesaid backdrop and keeping in view the ratio laid down by the Hon'ble Supreme Court in the aforesaid decisions, this petition is held to be ex-facie barred by time and merits dismissal. 20.
19. In the aforesaid backdrop and keeping in view the ratio laid down by the Hon'ble Supreme Court in the aforesaid decisions, this petition is held to be ex-facie barred by time and merits dismissal. 20. It is apt to note that mere correspondence of the petitioner by way of serving another notice on respondent in the year 2022, would not extend the period of limitation being three years from the date of cause of action, under Article 137 of the Limitation Act, 1963. The same view has been taken in the judgments quoted above. 21. Now coming to the decisions relied upon by the petitioner in support of his case. In so far as the decision of this Court in Jaguar Overseas Ltd v. J&K state Power Development Corporation being Arb P. No.12/2022 decided on 19.10.2023, relied upon by the petitioner is concerned, the same is not applicable to the facts and circumstances of the present case for the reason that in the cited case, the petitioner was informed in writing on 26.07.2018 that his claim is not tenable and the petitioner invoked the arbitration clause on 05.03.2021 i.e., within three years of the letter dated 26.07.2018 and with regard to the decision relied upon by the petitioner in case Vinod Sharma v. Mohd. Sharief being AA No.42/2015 decided on 03.02.2017 , the same is of no help to the petitioner for the reason that it has been the consistent view of the Hon'ble Supreme Court that the period of limitation to file an application under Section 11(6) of the Act, is three years. 22. In view of the above, this petition is held to be ex-facie time barred and, as such, is dismissed.