1 ARBP 466.06 kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. ARBITRATION PETITION NO.466 OF 2006 ... Maharashtra State Power Generation Co.Ltd. ...Petitioner v/s. M/s.Geo Miller Co.Pvt.Ltd. ...Respondent ... Mr.A.A.Kumbhakoni with Mr.Ashutosh Gavnekar i/b Mr.L.M.Acharya for the Petitioner. Mr.Makrand Adkar with Mr.S.D.Singh i/b S.R.Ganbavale for the Respondent. ... CORAM: D.K.DESHMUKH, J. DATED: 16th December, 2011 P.C.: 1. By this petition filed under Section 34 of the Arbitration & Conciliation Act the Petitioner challenges the award made by the learned Sole Arbitrator directing the Petitioner to pay certain amounts to the Respondent. 2. The relevant facts are, the Petitioner 2 ARBP 466.06 had floated a tender for the design, manufacture, supply, erection, testing and commissioning of the pre-water treatment plant, MSEB Chandrapur Thermal Power Station, Unit 6 and advertisement in that behalf was published by MSEB in the year 1987. The Respondent participated in the bid and the contract was awarded to the Respondent. Dispute arose between the parties with regard to certain claims of the Respondent for extra work carried out by the Respondent. It is an admitted position that the Arbitration clause was invoked by the Respondent by letter dated 27-1-2001. Before the Arbitrator, one of the objections raised on behalf of the Petitioner was that the reference is barred by the law of limitation. It is also common ground before me that so far as the payment for the civil work done by the Respondent is concerned, the payment has been made. The claim which has been awarded by the learned Arbitrator is in relation to the price of the extra work carried out by the Respondent. Before the learned Arbitrator it was claimed on behalf of the 3 ARBP 466.06 Petitioner that the extra work in relation to which the claim has been made was completed on 15-6-1992 and the plant was handed over to the Petitioner on 24-8-1994. Thereafter, the Respondent made claim for the price of the extra work and that claim was rejected by letter dated 10-10-1995. The Respondent invoked arbitration clause and made the claim on 27-1-2001, and therefore, it was claimed that it is barred by the law of limitation. The learned Arbitrator has considered this objection in his award. He accepted that though it is clear that the work was completed on 15-6-1992, that the plant was handed over by the Respondent to the Petitioner on 24-8-1994 and that though the claims were rejected on 10-10-1995, according to the learned Arbitrator as the final bill was not submitted till the year 2000 and as the correspondence between the parties was going on, cause of action for invoking the arbitration would not arise till 16th December, 2000. It is the case of the present Respondent that the final bill was prepared on 16-12-2000. 4 ARBP 466.06 3. The learned Counsel appearing for the Petitioner submits that the learned Arbitrator failed to see that the period of limitation for invoking the arbitration clause will be governed by Article 18 of the Schedule of the Limitation Act. According to the learned Counsel, the cause of action for invoking the arbitration clause will arise when the work for the price of which the arbitration clause has been invoked was done and that was in the year 1992 and therefore, invocation of the arbitration clause in January, 2001 is barred by the law of Limitation. The learned Counsel referring to the provisions of Section 9 of the Limitation Act submitted that once the period of limitation is commence, it will run continuously and therefore, merely because correspondence was going on between the parties in relation to the amount to be paid, running of the period of limitation will not stop. The reference has to be made by the Respondent within a period of three years from the date on which the work was completed. 5 ARBP 466.06 4. The learned Counsel appearing for the Respondent, on the other hand, relying on several judgments including the judgment of the learned signle Judge of this court in the case of Shri Nyaneshwar Bhiku Dhargalkar v/s. Executive Engineer, 1999(3) RAJ (B0m) submitted that it is Article 137 of the Limitation Act which applies in the present case and that the right to apply will accrue when the dispute between the parties arose. According to the learned Counsel till the negotiations between the parties were going on and as there was no denial to make the payment in the year 1992, the cause of action will not accrue and therefore the arbitration clause was invoked within the period of limitation. The learned Counsel also relies on the judgment of the learned single Judge of the Delhi High Court in the case of Prem Power Construction (Pvt) Ltd. v/s.National Hydroelectric Power Corp.Ltd. & Anr.160(2009) Delhi Law Times 610. Perusal of the judgment of the learned single Judge of this court in the case of Nyaneshwar (supra) and the judgment of the 6 ARBP 466.06 learned single Judge of the Delhi High Court in the case of Prem Power Construction Ltd.(supra) shows that both have relied on the judgment of the Supreme Court in the case of Major(Retd.) Inder Singh Rekhi v/s. Delhi Development Authority, (1988) 2 SCC 338. The learned Counsel for the Respondent also submitted that in any case the period of limitation would be governed by Article 113 of the Limitation Act. According to him, the cause of action will arise when the right to sue accrues and the right to sue will accrue when the Petitioner refused to make the payment for the extra work after final bill. Thus, the right to sue accrued in the year 1999 when there was refusal to make the payment. 5. Now in the light of these rival submissions, if the record is perused, it is clear from the award itself that there is no dispute between the parties that the extra work for the payment of which the present reference was made was completed on 15-6-1992. There is also no 7 ARBP 466.06 dispute that the Petitioner rejected the claim made by the Respondent for extra work by letter dated 10-10-1995. The learned Arbitrator has referred to this aspect of the matter in paragraph 21 of the award and has observed thus: “Even if there was rejection of the Claimants’ claim for extra work on 10-10-1995 as submitted by them the limitation cannot be said to have commenced from that date, if regard be had to the fact that even according to the Respondents the final bill was prepared as late as on 16th December, 2000.” Thus, according to the learned Arbitrator the cause of action does not accrue on completion of the work. It does not accrue even on rejection of the claim, but it accrues when the final bill is prepared. 6. On behalf of the Petitioner reliance is placed on Article 18 of the Limitation Act. That Article reads as under: 8 ARBP 466.06 (18)For the price of work done by the plaintiff for the defendant at his request, where no time has been fixed for payment. The Period of limitation is three years and the time begins to run when the work is done. 7. Perusal of the above quoted Article shows that when a suit is to be instituted for recovery of the price of the work done by the Plaintiff for the Defendant, and when there is no time fixed for payment to be made, the cause of action for instituting the suit arises when the work is completed and the suit has to be instituted within a period of three years from the accrual of cause of action. It is clear from the record that the present dispute which was referred to arbitration is for recovery of the price of the extra work done by the Respondent for the Petitioner at the request of the Petitioner and there was no time fixed for making the payment. Therefore, according to this Article, the cause of action will accrue when the work is done. The learned Counsel appearing for the Respondent relied on Article 113 of the Limitation Act. 9 ARBP 466.06 Article 113 reads as under:- “113. Any suit for which no period of limitation is provided elsewhere in the Schedule, the period of limitation is three years and the time begins to run when the right to sue accrues. 8. Perusal of the above Article makes it clear that this Article comes into play only on a finding that for institution of a suit for the claim which is involved in the present matter, there is no period of limitation provided elsewhere in the schedule. Therefore, unless a finding is recorded that Article 18 does not apply, Article 113 cannot apply. I do not see any reason why Article 18 will not apply to the present dispute, because the present dispute is in relation to the price of the work done by the Respondent for the Petitioner. The learned Counsel for the Respondent also could not give any reason why Article 18 will not apply. Thus, as the work was completed in the year 1992, the cause of action in terms of Article 18 will accrue in 1992 10 ARBP 466.06 and therefore the reference will have to be made within a period of 3 years from 1992 unless according to Respondent the time gets extended because of any acknowledgement etc. Admittedly neither arbitration clause is invoked within three years from 1992 nor any extension of the period of limitation is claimed by the Respondent, and therefore the claim will be barred by the law of limitation. What is interesting is that the question before the learned Arbitrator was whether the claim was made within the period of limitation. The learned Arbitrator has recorded a finding that the claim is not barred by the law of limitation, but in the entire award there is no reference to any Article in the Schedule of the Limitation Act, which applies to the present case. In my opinion, this is an impossibility. An argument as to whether a claim is made within the period of limitation has always to be made with reference to some Article in the Schedule of the Limitation Act, without referring to any article in the Schedule of the Limitation Act, a finding 11 ARBP 466.06 either that the claim is barred by limitation or it is not so barred is impossible to be recorded. So far as application of Article 137 is concerned, that Article is in Part-II, relating to applications. For invoking the arbitration clause the limitation provided by the Limitation Act for making application will not apply, the limitation provided by the schedule for institution of a suit will apply. The learned single Judge of this Court in his judgment in Nyaneshwar case (supra) and the learned single Judge of the Delhi High Court in the case of Prem Power Construction Ltd. (supra) have relied on judgment of the Supreme Court in the case of Inder Singh Rekhi, referred to above. Perusal of that judgment of the Supreme Court shows that there the Supreme Court was dealing with the application made under Section 20 of Arbitration Act, 1940, and as under Section 20 of the Arbitration Act, 1940 an application was to be made to the court, obviously Article 137 of the Limitation Act will apply. But in the scheme of the 1996 Act no such application is contemplated 12 ARBP 466.06 to be made to any court for invoking the arbitration clause. Perusal of the provisions of Section 21 of the Arbitration Act shows that Arbitral proceedings commence, unless there is an agreement contrary between the parties, on the date on which a request for reference of the dispute to arbitration is received by the Respondent. The 1996 Act does not contemplate any application to be made to the court for invoking the arbitration application and for commencement of arbitration proceedings. Sub-section 2 of Section 43 of the Arbitration Act lays down that for the purpose of limitation Act an arbitration shall be deemed to have commenced on the date referred to in Section 21. Therefore, it is clear that invocation of the arbitration clause has to be made within the period of limitation provided by the Limitation Act for institution of a suit on the same cause of action. So far as an application to be made under Section 11 is concerned, that application is not for invoking the arbitration clause. That application is for 13 ARBP 466.06 appointment of arbitrator, after invoking the arbitration clause. Invocation of the arbitration clause precedes an application under Section 11. Therefore, when an application under Section 11 is made, that application has to be made within the period of limitation, which is provided by the Limitation Act for institution of the suit on that cause of action. An application under Section 11 cannot be made after expiry of the period of limitation provided for institution of suit for recovery of the claim. The Hon’ble the Chief Justice or his designate will have to make an inquiry to find out whether the appointment of Arbitrator at this juncture would be necessary as a period of limitation is over. The Supreme Court in its judgment in the case of National Insurance Co.Ltd. v/s. M/s.Boghara Polyfab Pvt.Ltd., AIR 2009 SC 170, has referred to the issues which have to be decided by the Chief Justice or his designate under Section 11 and the issues which can be left for decision by the Arbitrator. One of the issues, according to the Supreme Court that 14 ARBP 466.06 has to be decided by the Hon’ble Chief Justice or his designate under Section 11 is whether the claim is a dead claim or a live claim. It means that if an objection is raised, when application under Section 11 is made, that invocation of the arbitration clause in that case has not been made within the period of limitation, then that question has to be decided by the Chief Justice or his designate. The question to be considered at that time is not whether an application under Section 11 is made within the period of limitation, but whether the invocation of the arbitration clause was made within the period of limitation. In my opinion, therefore, there is no question of provisions of Section 137 applying in so far as invocation of the arbitration clause and commencement of the period of limitation is concerned. So far as the present case is concerned, to my mind it is clear that Article 18 of the Limitation Act applies and therefore as the invocation of the Arbitration clause is not within period of three years from the date of completion 15 ARBP 466.06 of the work, which was in the year 1992, the claim was clearly barred by the law of limitation. 9. In the result, therefore, the present petition succeeds and is allowed. The award is set aside. No order as to costs. (D.K.Deshmukh, J.)