1 mpt IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 411 of 2006 Tanga Distribution Ltd. .. Petitioner versus Sealander Freight(I) Pvt.Ltd. .. Respondent ... Mr.Janak Dwarkadas, Sr.Counsel, Mr.Rahul Narichania, Mr.Gautam Bhatikar, Mr.K.Thevar and Mr.Vishal Muglikar i/b Mulla & Mulla for the petitioner. Mr.S.K. Sen with Mr.Ashwin Shankar i/b R.A. Fernandes for respondent. CORAM : D.G. KARNIK, J DATED : 18th June 2009 P.C:- 1. By this Petition under section 34 of the Arbitration and Conciliation Act 1996 (for short "the Arbitration Act"), the petitioner impugns the award dated 19th April 2006 passed by the Arbitral Tribunal in a dispute between the respondent and the petitioner. 2 2. At the outset, it may be stated that though number of grounds have been raised in the memo of the petition challenging the award, learned counsel for the petitioner confined the challenge only to the issue of limitation. It is therefore not necessary to set out in detail all the facts but only the facts necessary for the purpose deciding the issue of limitation, are stated below. 3. Two Charter Party agreements were executed between the respondent and the petitioner on 2nd February 1996 under which the petitioner agreed to take on time charger(hire) two barges M.V. viola and M.V. Bluebell, from the respondent. Both the agreements are almost identical and learned counsel for the parties stated that a decision on the contract dated 2nd February 1996 relating to M.V. Viola would apply to the other barge also. 4. Under the Charter Party agreement dated 2nd February 1996, the respondent provided to the petitioner on time charter the barge M.V. viola to the respondent for a period of 12 months from the date of delivery on hire charges of Rs.26,400/- per day. Though the hire was calculated daily, it was to be paid 3 monthly at the end of the month except in case of first and last two months. In respect of the first month, the amount was to be paid before the sixth day of the month. The hire for the last two months was to be paid by adjustment of the advance paid by the petitioner before the delivery, 5. The respondent sent to the petitioner bills/debit notes in respect of the hire charges every month. Though the hire charges were to be paid every month as per the Charter Party agreement, the petitioner did not make payment of any hire except the advance of two months to be adjusted against the hire of last two months. The petitioner, for its own reasons, was not able to use the barges. The petitioner therefore permitted the respondent to let out the barges to third party wherever possible and adjust the receipts towards part of the hire charges under the Charter Party agreement. Accordingly, the barges were let out by the respondent and charges received from the third parties and debit notes for the hire charges were sent by the respondent after adjusting the rent received from third parties. 6. As the petitioner did not pay the hire charges to the respondent, by a notice dated 7th April 1999 4 the respondent demanded payment as per the debit notes sent by it to the petitioner. On petitioners neglect and refusal to pay, the respondent by a letter dated 11th January 2000 invoked the arbitration. 7. Before the Arbitral Tribunal, petitioner inter alia contended that the claim of the respondent was barred by limitation. That contention as also the other contentions/defences of the petitioner were negatived by the Arbitral Tribunal by an award dated 19th April 2006. That award is impugned in this petition. 8. Learned counsel for the petitioner submitted that the claim of the respondent was barred by limitation. The decision of the Arbitral Tribunal that the claim was not so barred is contrary to law and therefore the award needs to be set aside. 9. Clause nos.31 and 32 of the Charter Party agreement relate to the quantum and manner of payment of hire charges for the barge and read as under:- Clause 31 : Time Charter Hire The time charger hire is Indian Rupees 26,400/- daily, 5 to be paid monthly by telegraphic transfer to Owners nominated bank account. Clause 32 : Payment of Time Charter Hire Charterers shall pay an advance to Owners equivalent to two months hire to cover expenses and settling of dues of Barge Crew on signing this C/P. This advance to be repaid by the Owners, by adjusting from the Charter hire in the last two monthly installments of the time charter period. 10. Reading of clause nos.31 and 32 clearly shows that though the hire was to be calculated daily, it was to be paid monthly. The hire charges for the first month were to be paid within six days of the delivery of the barge and hire charges for the subsequent months except the last two months were to be paid at the end of the respective month. The petitioner was to pay to the respondent advance equivalent to the two months hire which was to be adjusted towards the last two months hire charges. The barges were delivered by the respondent to the petitioner in February 1996. The hire for the month of March was to be paid by 30th March 1996, hire for the month of April was to be paid by 31st May 1996 and so on. Hire for the last two months i.e. 6 December 1996 and January 1997 was to be adjusted against the advance. 11. Article 12 of the Limitation Act which has been relied upon the Arbitral Tribunal for computing the period of limitation states that the suit for hire of animals, vehicles, boats or houseboats would be three years from the date when the hire becomes payable. In the present case, hire was payable monthly at the end each month except in case of first and last two months. The suit for the hire of charge for March 1996 therefore had to be filed on or before 31st March 1999. The suit for recovery of hire charges in the month of April 1996 could be filed on or before 30th April 1999 and so on. By virtue of section 43 of the Arbitration Act, the provisions of the Limitation Act 1963 apply to the Arbitration as they apply to proceedings in a suit. Sub-section (2) of section 43 provides that for the purpose of Limitation Act 1963, the arbitration shall be deemed to be commenced on the date referred to in section 21. Section 21 of the Arbitration Act provides that unless otherwise agreed by the parties, the Arbitral Proceedings in respect of a dispute shall commence on the date on which a request to refer a dispute to arbitration is received by the respondent. The respondent made a demand for reference of the 7 dispute to arbitration for the first time by its letter dated 11th January 2000, which in the ordinary course must have been received by the petitioner on or about 12th or 13th January 2000. The respondent would be entitled to claim hire charges only for the period on or after 12th January 1997. ie. for a period immediately preceding the reference for three years. Hire charges for the period between March 1996 to November 1996 were claimed before the Arbitral Tribunal. That claim made in January 2000 was, therefore clearly barred by limitation. In my view, the Arbitral Tribunal erred in law in holding that the claim was not barred by limitation. 11. Learned counsel for the respondent however however that the claim was within limitation in as much as prior to April 1999 the petitioner had never disputed the liability to pay the rent and therefore, the dispute had not arisen between the parties till April 1997. He submitted that dispute arose between the parties only when the petitioner by its letter dated 22nd April 1999 denied the liability to pay and therefore the starting point of limitation would be 22nd April 1999. The reference of the arbitration made by the respondent vide its letter dated 11th January 2000 was within three years of arising of the dispute and 8 therefore, the claim was within limitation. In support of his submission, learned counsel referred to and relied upon the decision of the Supreme Court in Major (Retd) Inder Singh Rekhi Vs. Delhi Development Authority, 1988 SC 1007 which has been followed in McDermott International Inc. Vs. Burn Standard Co.Ltd. & ors, (2006) 11 SCC 181. 12. In the case of Rekhi (Supra) the Supreme Court was required to consider whether an application made by the appellant therein under section 20 of the Arbitration Act, 1940 (for short the Old Act ) was barred by limitation. The Court observed that section 20 of the Old Act provided that where any persons had entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference had arisen to which the agreement applied they or any of them instead of proceeding under Chapter II, could apply to a Court having jurisdiction in the matter to which the agreement related, that the agreement be filed in the Court. Period of limitation for making such application was held to be governed by Article 137 (residuary article) of the Limitation Act. In that connection, the Supreme Court observed that the dispute would not arise until there was an assertion of claim 9 by the appellant and refusal by the respondent. The Supreme Court further held that unless the dispute arose there was no occasion for making of an application u/s.20 of the Old Act. In my view, the decision does not apply to the facts of the present case. This is not a case where an application was to be made to the Court for filing of a arbitration agreement in the court. The old Act did not contain a provision similar to the one in Section 21 of the arbitration Act of 1996 which specifically provides that the arbitration proceedings in respect of a dispute would commence on the date on which a notice to refer the dispute to arbitration is received by the respondent. Furthermore, in the very Rekhi s case, the Supreme Court has observed in paragraph no.4. It is also true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by the claimant is the accrual of the cause of action. In the present case, the debit notes for the hire charges were prepared and sent by the respondent to the 10 petitioner every month. Under the Charter Party agreement, the amount of the hire charges were to be paid at the end of every month. The amount became due every month and period of limitation for a suit or proceeding for recovery of that amount could be instituted within three years. Since there was an arbitration agreement, if the amount was not paid, the arbitration proceedings for recovery of that amount had to be instituted within 3 years from the date on which amount became due. The decision of the Supreme Court in the case of McDermott International Inc. (Supra) has no application to the facts of the present case. In paragraph nos.117 and 118 of the decision, Supreme Court has only referred to with approval the observations made by it in its earlier decision in McDermott International s case. It does not in any way further the case of the respondent. 13. For these reasons, award needs to be set aside and is hereby set aside. The claim of the respondent before the Arbitral Tribunal is dismissed as barred by limitation. 15. Parties shall pay and bear their own costs. (D.G. KARNIK, J)