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Judgment
S.S. Subramani, J.—Respondent in Arbitration O.P. No. 1 of 1996, on the file of Additional District Court, Karaikal, is the revision
petitioner. The Revision is filed under Art.227 of the Constitution of India. Respondent herein entered into three contracts with the petitioner on
20.7.1990, 8.8.1990 and 17.1.1992. All these agreements provide for arbitration in the event of dispute arising between the parties relating to the
terms and conditions or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the terms and
conditions of the contract. The contracts also provide for the appointment of a sole arbitrator to decide the dispute, who will have to be appointed
by the petitioner on the request made by the party. During the progress of work, dispute arose between the parties in regard to certain matters
and, therefore, as per registered letter dated 18.3.1993, respondent herein requested the petitioner to appoint an Arbitrator as per the arbitration
clause. Petitioner received three separate notices dated 18.3.1993, on 22.3.1993. A reminder was also sent. But the purpose was not achieved.
Petitioners-Oil and Natural Gas Commission refused to'' appoint any Arbitrator as per the clause. For the above reason, respondent herein prayed
for the passing of an order directing the petitioner herein to appoint an Arbitrator to decide the dispute arising under the three contracts within a
specified time.
In the counter filed by the petitioner, the main contention that was raised was regarding question of limitation. It was stated in the counter mat the
application is barred by limitation, and the respondent ought to have come forward with the application within three years from the date when the
cause of action arose. When the petitioner himself has sent a notice admitting that there is a dispute, and wanted the appointment of an Arbitrator,
under Art. 137 of the Limitation Act, the application ought to have been filed within three years thereafter. Other objections were also raised, i.e.,
application was filed u/s 8 of the Arbitration and Conciliation Act, which has no application and, therefore, the application itself could have been
rejected. It was also contended that the Court at Karaikal has no jurisdiction, and the Application should have been filed only at Madras.
By the impugned order, the lower Court rejected all the contentions of the petitioner and allowed the application. The Lower Court found that
after the notice dated 18.3.1993, under Exx.A-30, A-31 and A-32, there was correspondence between the parties upto 9.7.1993 and the
application was filed within three years thereafter, and it is therefore within time. It also held that the District Court, Karaikal has jurisdiction and
regarding provision of law, it held that merely because a wrong provision of law has been quoted, that will not be a ground for rejection of the
application.
The order is challenged under Art. 227 of the Constitution of India.
Before this Court also, learned counsel for petitioner mainly argued that the application is hopelessly barred by limitation.
To consider the same, let us look into the application itself filed before the lower court-In paragraph IV, regarding cause of action, it is stated
thus:-
The cause of action for the petition arose at Neravi, Karaikal District, where the three tenders dated 20.7.1990, 8.8.1990 and 18.1.1992 and
the respective agreements dated 6.4.91, 22.12.92 and 28.8.1992 were executed and signed, and the place where the work was carried on and
completed, where the Commission is having its Office, and where the petitioner has sent his three letters dated 18.3.1993, requesting appointment
of Arbitrator, all within the jurisdiction of this Court.
In the body of the application, it is further stated in para G that the notices dated 18.3.1993 was received by the petitioner on 22.3.1993. Exx.A-
5, A-7 and A-9 are the signed postal acknowledgements, evidencing receipt of notice dated 18.3.1993. It is true that even thereafter there was
correspondence between the petitioner and respondent, and this is how respondent states about it. In paragraph 6, it is further stated thus:-
...This necessitated the petitioner to send several reminders by registered post and ordinary post to the respondent with no result or reply. The
petitioner has also addressed the Regional Director of the Commission at Madras, and the Member Technical of the Commission at Dehradun,
seeking redressal of his grievance in implementing the Arbitration clause for appointment of an Arbitrator by the respondent. In spite of all these
best efforts taken by the petitioner to have an Arbitrator appointed by the respondent, no relief was granted to the petitioner.
Why I am referring to the very allegation in the petition is that there is no reference to Exx.A-30, A-31 and A-32 anywhere in the body of the
petition. The respondent refers only to the notice dated 18.3.1993, signed acknowledgements and the subsequent reminders. The only documents
that were filed alongwith the petition before the lower Court were, the three agreements, followed by three notices dated 18.3.1993 and the three
signed acknowledgements dated 22.3.1993. It is clear from the averments in the application that dispute arose even before 18.3.1993, and that
was the reason why a notice was issued for appointment of an Arbitrator.
The question of limitation will have to be considered on the basis of pleadings. It is not disputed by either party that Article 127 of the Limitation
Act, 1963 applies in view of Section 37 of the Arbitration and Conciliation Act. Sec.37 (3) of that Act provides as to when the limitation
commences in so far as the case before us is concerned. It reads thus:-
For the proposes of this section and of the Indian Limitation Act, 1998 (9 of 1998), an arbitration shall be deemed to be commenced when one
parry to the arbitration agreement serves on the other parties thereto a notice requiring the appointment of an arbitrator, or where the arbitration
agreement provides that the reference shall be to a person named or designated in the agreement, requiring that the difference be submitted to the
person so named or designated.
This question has been considered by the Honourable Supreme Court and also by our Court in various cases.
In (1992-3-SCC 698 S. Rajan v. State of Kerala), their Lordships considered the question on the basis of earlier decisions of the Supreme
Court reported in (1993)-1-SCC 873 (Town Municipal Council, Athani v. Presiding Officer, Labour Court) and (1976)-4- SCC 694 (Kerala
State Electricity Board v. T.P. K.K. Amsom). It may be stated that the decision in Town Municipal Council, Athani (supra) was declared to be
not good law in the subsequent decision referred to above. But both the decisions referred to above were considered in S. Rajan''s case (supra),
wherein their Lordships held thus:-
According to sub-Section (1) where an arbitration agreement has been entered into before the institution of any suit with respect to subject matter
of such agreement, and where difference has arisen. to which the agreement applies, either or both the parties can apply to the court that the
agreement be filed in court. According to the subsection, the occasion for filing the application arises when a difference arise between the parties to
which to agreement applies.
In such a case, it is open to a party to apply under this section instead of proceeding under Chapter II. In other words, an application u/s 20 is an
alternative to the Section (3). Sub-Section (4) provides that after hearing the parties and on being satisfied that the agreement should be filed, ''''the
court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement
or otherwise or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the court.
(Emphasis supplied as in the Original Reports)
Reading Article 137 and sub-Section (1) of Section 20 together, it must be said that the right to apply accrues when the difference arises or
differences arise, as the case may be. between the parties. It is thus a question of fact to be determined in each case having regard to the facts of
that case.
(Emphasis supplied)
In (1993) -4- SCC 33 page 8 (Panchu Gopal Boss v. Board of Trustees for Port of Calcutta), this question was considered in a little more
detailed manner. In paragraph 7 of the judgment, their Lordships have held thus:-
Section 37(1) of the Act provides that all the provisions of the Indian Limitation Act, 1908 (since amended Act came into force in 1963) shall
apply to arbitrations as they apply to the proceedings in court. Sub-Section (2), employing non obstante clause, says that notwithstanding any term
in an arbitration agreement to the effect that no cause of action shall accrues in respect of any matter required by the agreement to be referred until
an award is made under the agreement, a cause of action shall, for the purpose of limitation, be deemed to have accrued in respect of any such
matter at the time when it would have accrued but for that term in the agreement. Sub-Section (3) thereof states that for the purposes of this
section and of the Indian Limitation Act, 1998 an arbitration shall be deemed to be commenced when one party to the arbitration agreement serves
on the other party thereto a notice required the appointment of an arbitrator, or where the arbitration agreement provides that the reference shall be
to a person named or designated in the agreement, requiring that the difference be submitted to the person so named or designated. Sub-Section
(4) and (5) are omitted as being not material. It would, therefore, be clear that the provisions of the Limitation Act would apply to arbitrations and
notwithstanding any term in the contract to the contrary, cause of arbitration for the purpose of limitation shall be deemed to have accrued to the
party in respect of any such matter at the time when it should have accrued but for the contract. Cause of arbitration shall be deemed to have co-
managed when on party serves the notice on the other party requiring the appointment of an arbitrator. The question is, when the cause of
arbitration arises in the absence of issuance of a notice or omits to issue for long time or contract to the contrary?
(Emphasis supplied)
Their Lordship have further said thus in paras 9 to 11 :-
In Pegler v. Railway Executive House of Lords held that just as in the case of actions the claim is not to be brought after the expiration of a
specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after
the expiration of the specified number of years from the date when the claim accrued. While accepting foe interpretation put up by Atkinson, J. as
he then was in the judgment under appeal, learned Law Lords accepted fee conclusion of Atkinson. J. in the language thus: ""the cause of
arbitration"" corresponding to ""the cause of Action"" in litigation, ""treating a cause of arbitration in the same way as a cause of action would be
treated if the proceedings were in a court of law.
In West Riding of Yorkshire County Council v. Huddarsfield Corpon., the Queens Bench Division, Lord Goddard, C.J. (as he then was) held that
the Limitation Act applies to arbitrations as it applies to action in the High. Court and the making, after a claim has become statute-barred, of a
submission of it to arbitration, does not prevent that statute of limitation being pleaded. Russell on Arbitration 19th Edn. reiterates the above
proposition. At page 4 it was further stated mat the parties to an arbitration agreement may provide therein, if they wish, that an arbitration must be
commenced within a shorter period than that allowed by statute; but the court then has power to enlarge the time so agreed. The period of
limitation for commencing an arbitration runs from the date in which the cause of arbitration accrued, that is to say, from the date when the claimant
first acquired either a right of action or a right to require that an arbitration takes Place upon the dispute concerned.
Therefore, the period of limitation for the commencement of an arbitration runs from the date on which, had there been no arbitration clause, the
cause of action would have accrued. Just as in the case of actions the claim is not to be brought after the expiration of a specified number of years
from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the expiration of the
specified number of years from the date when the claim accrued.
(Emphasis supplied)
Their Lordships thereafter extracted a passage from the book ''The Law of Arbitration'' by Justice Bachawat and approved the dictum of the
learned Judge and held thus:-
.....The cause of arbitration, therefore, arises when the claimant becomes entitled to raise the question, i.e.. when the claimant acquires the right to
require arbitration. The limitation would run from the date when cause of arbitration would have accrued, but for the agreement.
(Emphasis supplied)
The said principle was reiterated in (1997)-9- SCC 97 (Union of India v. Monin Construction Co.).
In ''Russell on Arbitration'' - 1997 Edition pages 183 and 184, the learned Authors have said thus:-
Commencement for limitation purposes.- The parties are free to agree when an arbitration is to be regarded as commencing both under the
Arbitration Act 1996 and for limitation purpose. In the absence of agreement, an arbitration is treated as being commenced when a notice in
writing is served on the other party requiring him to agree to the appointment of an arbitration, or, if the parties are each to make an appointment,
requiring him to appoint an arbitration. When however the arbitration agreement specifies the person to be appointed as arbitrator, the arbitration is
treated as being commenced when a notice in writing is served on the other party requiring him to submit the dispute to that person. Finally, if the
arbitration is to be appointed by some one other than a party to the arbitration proceeding, such as ah arbitral institution, the arbitration is treated
as being commenced when notice in writing is given to that other person requesting him to make the appointment. It is prudent to send to the
respondent a copy of the notice addressed to the person requested to make the appointment as this may avoid argument about when the notice is
given.
In this connection, it may be noted that Sections 13 and 14 of the English Arbitration Act, 1995 are similar to Section 37 of our Act.
Learned counsel for respondent submitted that after 22.2.1993, there had been so many reminders and only when the respondent failed to
reply, they were compelled to file the petition, and the documents relied on by the lower Court also have to be taken into consideration for;
considering the question of limitation.
I do not think that the said submission put forward by learned counsel for respondent could be accepted. Even according to respondent, all
these are only reminders. Sending a reminder alone will not extend the period of limitation. I take guidance from the decision reported in (1988)-3-
SCC 338 (Major (Retd.) Inder Singh Rakhi v. Delhi Development Authority) wherein in para 4 of the judgment, Their Lordships have said thus:-
.... It is also true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where that 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 Arbitrator under Sec. 8 or a reference u/s 20 of the Act.......
Most of the above decisions were taken in to consideration by our High Court in the decision reported in 1995-2-Law Weekly 694 The Madras
Metro Water Supply and Sewerage Board v. O. Ramakrishna Reddy),
On the basis of the averments made in the application filed by the respondent before the lower Court, the only conclusion that could be arrived
at is that the application was filed beyond three years from the date when the cause of action arose. The application before the lower Court was
presented on 3.7.1996. Respondent himself has issued notice that there is a dispute which has to be resolved by Arbitrator, on 18.3.1993, and the
same was received by the petitioner on 22.3.1993. The application is, therefore, haplessly barred by limitation, under Article 137 of the Limitation
Act read with Section 37 of the Arbitration and Conciliation Act.
Eventhough the Order of the lower Court is challenged on various other grounds also, I do not think that the same call for discussion. One of
the questions raised was that the lower court has no jurisdiction to consider the same. It is seen from the order of the lower Court mat the question
of jurisdiction was conceded by the petitioner before it and it did not want a decision on that point. Since it is only a question of territorial
jurisdictions, even if there is any defect, the same could be waived. By conceding that the Court has got jurisdiction, it amounts to subjecting to the
jurisdiction of that Court. Therefore, I do not find any ground for interference on that point. It was further contended that the application was filed
u/s 8 of the Arbitration and Conciliation Act. It is a patent mistake, and merely because a wrong provision has been stated, that should not be a
ground for dismissing the application. Petitioner has also understood the scope of the application under the new Act. Since I hold that the
application is barred by time, I set aside the impugned order and Arbitration O.P. 1 of 1996 is dismissed. The Revision Petition is allowed. No
costs. C.M.P. 5038 of 1996 for stay is closed.