Bhartiya Const. Co. vs Delhi Development Authority

Shiv Narayan Dhingra, J.—The matter is taken up after remand back by the Division Bench for addressing the maintainability of the petition inter alia under Order 2 Rule 2 CPC, on limitation and cause of action. None has appeared for the respondent despite service of the Court notice.

The present petition was filed u/s 20 of Arbitration Act for directions to DDA to appoint an Arbitrator. A contract for construction of 504 SFS category flats in Sukhdev Vihar was awarded by DDA to the petitioner in 1982. During the continuation of the contract a dispute arose between the parties and this dispute in terms of the arbitration agreement was referred for adjudication to the Arbitrator in 1983. The work under the contract continued irrespective of the dispute being adjudicated by the Arbitrator. The work got completed on 24th June, 1988. The award on the dispute arisen at the initial stage of the contract was rendered by the Arbitrator on 31.10.1988. This award was affirmed by the Court and was made a Rule of the Court on 8.8.97. The present petition has been filed by the petitioner seeking appointment of an Arbitrator after completion of the work because the final bill of the petitioner has not been prepared and paid, neither the security deposit made by the petitioner has been returned. The petitioner has also raised other disputes seeking escalation in price etc.

I consider that the earlier award passed by the Arbitration would not either amount to resjudicata or would bar the invocation of the arbitration clause in respect of the disputes arisen between the parties after completion of the work. Principles of Order 2 Rule 2 CPC would have been attracted if the petitioner had failed to raise the present dispute at the time when earlier dispute was raised by the petitioner. The present dispute was not even in existence at the time when earlier dispute was raised in 1983. The present dispute arose only after completion of work, because of non-payment of the final bill, non-return of the security deposit and other connected matters after completion of the work. These disputes had not arisen in 1983 and could not have been referred to the Arbitration in 1983. Thus, this petition would not be barred under Order 2 Rule 2 CPC.

It is settled law that only a living dispute can be referred for adjudication to the Arbitrator. There is no doubt that in the present case, the work was completed on 24.6.1988. After completion of work, the final bill of the petitioner was to be finalized by the respondent. It is not the case of the respondent that respondent had finalized the final bill. As late as on 24th October, 1994, the respondent had written to the petitioner that its challenge to the earlier award was pending before the High Court therefore respondent would not comment or discuss the merits of the claim raised by the petitioner. Respondent restricted its reply to the extent of renewal of bank guarantee and renewal of FDR (security provided by the petitioner to the respondent) for completion of work. In this letter, it is stated by the respondent that completion was recorded on 24.6.1988 and the counter claim of the department against the petitioner was rejected by the Arbitrator in award published on 31.10.1988. Since the respondent has challenged this rejection of counter claim by way of suit No. 2816/88, the respondent only wanted that petitioner should get the bank guarantee renewed without further delay and in case the bank guarantee was not renewed, the respondent would be forced to invoke it. The respondent made it clear to the petitioner that bank guarantee was required to be kept in force till the decision of the High Court.

The High Court ultimately dismissed the petition filed by the respondent against rejection of its claim by Arbitrator. Thereafter, instead of finalizing the bill of the petitioner, the respondent encashed the bank guarantee which forced the petitioner to file the present petition. Until and unless final bill of the petitioner was prepared/approved by the DDA and DDA had given intimation to the respondent that it was forfeiting the bank guarantee, no cause of action had accrued in favour of the plaintiff. Cause of action accrued in favour of the plaintiff only when DDA showed its inclination to invoke the bank guarantee and did not finalize the bill. This happened only after rejection of the petition of the respondent. This Court vide order dated 3rd January, 1997 had observed that the question of appointment of Arbitrator would be considered only after decision in the suit filed by the respondent. The present petition which was filed in 1995 cannot be said to be beyond period of limitation since the limitation is of 3 years and cause of action had not even arisen in 1994 when respondent informed the petitioner that it would not consider the finalization of the bill until and unless its objection pending before the High Court against rejection of its counter claim was not decided. I therefore consider that the present petition was very much maintainable.

In Hari Shankar Singhania and Others Vs. Gaur Hari Singhania and Others, Supreme Court had observed that the cause of action for filing petition u/s 20 would arise only on the date of last correspondence between the parties showing that the claim was still unsettled. The period of limitation commences from the date of last communication between the parties regarding the dispute being under consideration. The present petition was therefore well within the period of limitation.

It cannot be said that the present petition was filed without cause of action. Petitioner gave its final bill to the respondent for payment on completion of work but the respondent did not make the payment under this final bill and asked him to continue the bank guarantee and security deposited with the respondent. The petitioner continued renewing bank guarantee from time to time on the assurance of the respondent that they would release the amount due to the petitioner under final bill after waiting for the result of the challenge to earlier award made by the respondent. I therefore consider that there was sufficient cause of action for the petitioner to file the present petition.

There is no dispute that there is an arbitration clause between the parties. It is also settled law that non-invocation of the arbitration clause by a separate notice is no ground to deny a petition u/s 20. In Anand Kumar Jain v. UOI 1984 RLR 438 this Court had observed that filing of an application u/s 20 itself amounts to invocation of the Arbitration Clause and if the amount as claimed in the petition u/s 20 is not paid, the Court can ask the respondent to refer the matter to the arbitration in accordance with the contract. I therefore allow this petition. DDA is directed to appoint an Arbitrator within a period of 60 days from today in terms of the Arbitration Clause and make reference of the dispute to the Arbitrator.