C. Rai vs Union of India

Kilam, J.—This first appeal against an order of our brother Wazir C. J. (dated 11th Phagon 2011) has arisen out of the following facts:

The Indian Military authorities took on lease two houses belonging to the petitioner-appellant situate at Srinagar by means of two lease deeds

dated 29-9-1948 and 7-10-1948. On 21-9-1950 both these houses caught fire and were completely gutted. The petitioner-appellant by means of

letter dated 23-12-1930 claimed compensation from the military authorities' for the loss sustained by him. The ground taken by him was that the

houses had caught fire, as a result of wilful negligence of ""the respondent's servants"" -- the army personnel -- residing there.

In reply to his letter dated 23-12-1950, the appellant was informed by means of letter No. 2022/AK/BS dated 12/13 January '51 that the

question of ""damages was under investigation and reference to the higher authorities"" and that ""the appellant would be informed of the decisions in

due course."" A Board of officers was constituted somewhere in September 1951, to go into this question as become evident from letter No.

4007/'4/Q D/- 27-9-1951 issued by the Station Commander.

The deliberations of the Beard finally Culminated in the rejection of the appellant's claim which was communicated to him on 13-3-1952.

Thereupon the appellant sent a notice (through his counsel Mr. Avasthy) on 1-3-1953 in which it was stated:

Now that the Government has finally refused to pay any compensation either on account of fire or the unauthorized removal of goods from these

bungalows by the Army Personnel, a dispute has arisen between my client and the Government which has under cl. 18 of the lease-deed to be

referred to an arbitrator to be appointed by the Government of India.

It was further stated in the notice that an arbitrator may be appointed in terms of cl. 18 of the lease-deed within thirty days from the receipt of the

said notice. After about a year, the Government of India by means of its order No. 3005/45/Q-1 dated 23-2-1954 made the appointment of an

arbitrator as is stated in the said order, to go into ""the dispute arising between the Government of India and Shri C. Rai..........."" The appointment of

the arbitrator was made by the Government of India evidently in pursuance of cl. 18 of the lease-deed which runs as:

Should any dispute or difference arise out of or concerning the matter of these presents or any Covenant, clause or thing therein contained or

otherwise arising out of this lease the same shall be referred to an arbitrator to be appointed by the Government of India and the decision of such

arbitrator shall be conclusive and binding on the parties .............

But in the meanwhile, that is before the Government of India had made the appointment of the arbitrator and about four months after 1-3-1953

i.e., the date on which notice was given to the Government of India on behalf of the appellant. Mr. C. Rai, for the appointment of the arbitrator

within thirty days, the appellant made an application under S. 20, Arbitration Act to this Court with the prayer that orders may be passed for the

filing of the arbitration agreement and also for making the appointment of an arbitrator to adjudicate upon the dispute between the parties, the

dispute being the claim for compensation made by the appellant on account of the destruction of the leased property by the alleged negligence of

the servants of Union of India and its rejection by the army authorities. The application was heard by our learned brother Wazir C. J. who after

hearing it ordered its dismissal. The appellant has now come up in appeal to a Division Bench of this Court against the order of Wazir C. J. The

learned single Judge (Wazir C. J.) had framed the following points for determination:

(1) Whether the matters mentioned in the application are matters covered by the lease-deed and, therefore, should be referred to arbitration?

(2) Whether or not the claim is barred by limitation? If the answer to this be in the affirmative, can there be a reference to arbitration?

(3) Whether or not the notice given by the petitioner in the present case is valid and was it necessary to give notice as envisaged under Cl. 17 of

the lease-deed?

The learned Judge found that the appellant's claim for compensation was barred byLimitation on the day, i.e., 1-3-1953 when notice was given by

the appellants to the opposite party for the appointment of an arbitrator, and as there was no subsisting claim enforceable at law, ""his (appellant's)

prayer for filing the arbitration agreement and making appointment of an arbitrator cannot be granted."" To support this finding, the learned Single

fudge has relied on -- 'Official Receiver v. Kesordas Mavji', AIR 1926 Sind 209 (A) and -- 'Uttamchand Brijlal v. Balmokand'. AIR 1929 Sind

55 (B). These two authorities will be referred to at their proper place.

The learned Single Judge has started with the premises that Art. 36, Limitation Act which lays down that for compensation for any malfeasance,

misfeasance or non-feasance independent of contract and not specially provided for is two years from the day when malfeasance, misfeasance or

nonfeasance takes place, will apply to a suit for enforcement of a claim for compensation for any malfeasance etc. The learned Judge has further

found that the cause of action for enforcement of the claim to compensation in the present case arose on 21-9-1950 when the two houses were

gutted and that on 1-3-1953 when a notice was given by the appellant to the Government of India for filing of the arbitration agreement and

appointment of an arbitrator, the claim was time barred and as such there was no subsisting dispute on 1-3-1953 when the aforesaid notice was

given.

Before discussing the other aspects of the case, it might be forthwith stated that the learned Single Judge has missed the words ""independent of

contract"" which occur in Art. 36, Limitation Act. Obviously Art. 36 will apply only if the malfeasance etc., is independent of contract. If it is not

independent of contract, the Article has no application. (Sec Chitaley's Limitation Act, p. 1150). In -- Ajitkumar Basu Thakur Vs. Chairman of the

Commissioners of Dacca Municipality, Art. 36 was held not applicable to a suit for damages against a Municipal Committee for broach of

conditions in a Kabuliat. Reference may also be made in this connection to -- AIR 1933 518 (Oudh) where a similar view has been taken.

Now let us see if the malfeasance or misfeasance in the present case has been independent of contract or otherwise. For this we shall have to refer

to the terms of the lease-deed. According to para. 4 of the lease-deed the Government upon the expiration of the term of tenancy, was bound to

yield up the leased property in as good condition as it was received by them.

An exception was, however, made for fair wear and tear, damage by fire, acts of God, enemy action or any other cause not within the control of

the Government of India. From Para. 4 of the lease-deed it can be easily gathered that the Government of India having undertaken to yield the

leased property in the same condition in which it was received, it can in no case escape liability for any damage caused by any happening or act

which was within the control of the Government to prevent. The point shall become further clear by referring to para. 11(2) of the lease-deed

wherein an obligation is laid on the landlord (appellant)

to keep the said premises in good sanitary repair and condition provided that such repairs or works shall not have been necessitated by any act of

negligence by the Government of India or its servants.

Reading paras. 4 and 11(2) of the lease-deed together, it would follow as a necessary corollary that the landlord would not be bound to effect any

repairs in the leased property if the damage is caused by any act of negligence by the Government of India or its servants, and that such damage is

to be repaired by the Government of India, since they had undertaken in clear terms in para. 4 to return the property back to the lessee in the same

condition in which it was received.

A tort may certainly arise independent of contract but it can also arise as a result of a breach in the terms of a contract. Reference may in this

connection be made to -- Avaran Kutti by next friend, Kalathingal Ithalukki Vs. Cheriyakkan and Others, in which this principle has been

enunciated with great clarity in the following words:

The distinction in the modern view, for this purpose, between contract and tort may be put thus. Where the breach of duty alleged arises out of a

liability independently of the personal obligation undertaken by contract it is tort and it may be tort even though there may happen to be a contract

between the parties, if the duty in fact arises independently of that contract. Breach of contract occurs where that which is complained of is a

breach of duty arising out of the obligations undertaken by the contract. (Quoted from -- 'Jarvis v. Moy, Davies, Smith, Vanderwell and Co.',

(1936) 1 KB 399 (F).

The question, therefore, is whether the present suits are based on breach of duty arising independent of the contract, or whether they are suits

for recovery of damages for breach of a term of the contract. In the former case Art. 36 would apply in the latter case Art. 115, Indian Limitation

Act (86 of State Act), would govern the case.

Now let us see how far the principle will apply in the present case. As already seen, the Government had clearly undertaken to return the leased

property in the same condition in which it was received with all damage repaired, if such damage was caused by an act of their own negligence or

that of their servants. The undertaking that their servants will not cause any damage by any act of negligence being there, we are of the opinion that

the acts complained of here, are not independent of contract, and as such Art. 36, Limitation Act can by no stretch of imagination be made

applicable to the facts of the present case. The claim to compensation being not independent of contract, the only other Article) l the Limitation Act

which, in our opinion, would apply to the present case would be Art. 86 of the State Act (corresponding to 115 of State Act) which provides a

time-limit of three years or a suit for compensation, for a tort arising out of the breach of a term in an agreement, the time to run from the date when

breach takes place, which in the present case is 51-9-1950, when the houses were burnt as a result of the alleged negligence of the servants of the

Government.

The claim for compensation was quite within time on the day, i.e., 1-3-1953 when the appellant served a thirty days' notice on the Government to

appoint an arbitrator to go into the dispute. The notice having been given well within three years of the breach, we are of the view that the Sind

rulings relied upon by the learned Single Judge do not lead any support to the view taken by him.

Before proceeding further, we think a slight discussion on the two Sind rulings relied upon by the learned Single Judge may not be out of place

here, to see if an authoritative pronouncement on the points involved in the present case can be gleaned from them. AIR 1929 Sind 55 (B) is a

Division Bench judgment to which the learned Judge (Rupchand J.) who decided AIR 1926 Sind 209 (A) sitting as a Single Judge was a party.

The view taken by Rupchand J. in AIR 1926 Sind 209 'A) was reiterated by him in AIR 1929 Sind 55 (B).

But the other learned Judge (Percival J.) did not agree with this view and the case was finally disposed of on a different ground. In view of the

above, the view taken in AIR 1926 Sind 209 (4) which was not subscribed by the other learned Judge in AIR 1929 Sind 55 (B) cannot be treated

as an authoritative pronouncement.

There is yet another point in the present case which in our opinion fully establishes that the claim was quite within time on 1-3-1953. Reference

may in this connection be made to cl. 18 of the lease-deed according to which all disputes and differences arising between the parties were to be

referred to arbitration by an arbitrator to be appointed by the Government of India. It is obvious that as long as such an agreement sibsists, it

would be a bar to a suit by either party according to S. 28, Exception 1, Contract Act. In AIR 1929 Sind 55 (B) which is relied upon by the

learned Single Judge, it is laid down that where an agreement to refer a dispute to arbitration

falls within the four corners of Exception (1) to S. 28, Contract Act, 'no question of limitation can ever arise, for in that case the claimant has no

cause of action for instituting a suit so long as his damages have not been ascertained by recourse to arbitration'. In such a case no question of

limitation arises.

Such being the principle of law laid down by the Sindh Court itself, and with which we are in respectful agreement, even if Art. 36, Limitation Act

were made applicable to the facts of the present case, yet the claim would not be held barred by time on 1-3-1953 for the simple reason that the

cause of action was not active but was in what may he called as a state of suspended animation all through, Taking all this into consideration, we

accept this appeal, set aside the order of the learned trial Judge, & send the case back to him with the direction that the learned trial Judge will now

decide the remaining points raised by him in the case. Costs shall abide the final decision of the case.

Shahmiri J.:

I concur.