HIGH COURT OF UTTARAKHAND, AT NAINITAL Writ Petition No.175 of 2003 (M/S) {Old No.25806 of 1997} Union of India and others … Petitioners Versus The Upper District Judge and another …. Respondents Dated:- 16th July, 2010 Hon’ble Tarun Agarwala, J. Heard Mr. V. K. Kohli, the learned senior counsel assisted by Mr. T. C. Pandey, the learned for the petitioners. No one appears for the respondent even though the list of hearing of cases has been revised. 2. For execution of certain works in the Ministry of Communication, two contracts dated 12.01.1991 and 12.02.1992 were executed between the petitioners and respondent no.2. It is alleged that with regard to non payment of the additional work carried out by respondent no.2, the said respondent gave a notice on 31st July, 1992 requesting the petitioners to pay the amount for the additional work carried out by him and, thereafter, filed an application dated 02.12.1992 under Section 20 of the Arbitration Act before the trial court. The petitioners have alleged that they had paid all the dues according to the terms and conditions of the agreement and that the security money was also returned by the petitioners on 22nd July, 1991 and that before the payment of the bill and even after the payment of the bill, no objection or demand was raised by the contractor. Consequently, as per the provision of clause 25 of the agreement, the claim had become barred by limitation. The trial court, after considering the matter, rejected the application of the opposite party holding that the application filed under Section 20 of the Arbitration Act was barred by limitation and that no dispute could be referred. The respondent no.2, being aggrieved, preferred an appeal before the Additional District Judge, which was allowed by an order dated 05.05.1997. The appellate court held that the claim was within the period of limitation as prescribed under Article 137 of the Limitation Act. The appellate court, accordingly, directed the authority concerned to hold the arbitration or nominate someone and decide the dispute between the parties. The petitioners, being aggrieved by the order of the appellate court, has filed the present writ petition. 3. The learned senior counsel for the petitioners submitted that the claim of the opposite party was barred by limitation, which was provided under clause 25 of the agreement. The learned senior counsel submitted that the period provided under clause 25 of the agreement is ninety days from the date of receiving the intimation that the bill was ready for payment and since the opposite party did not raise any objection with regard to the bill so raised by the petitioners, consequently, the opposite party would be deemed to have waived of all claims and the Government was discharged and released from all liabilities under the contract. The learned senior counsel submitted that since a specific provision was incorporated under clause 25 of the agreement stipulating a time period for raising such claims, the provision of Article 137 of the Limitation Act would not apply. In support of his submission, the learned senior counsel for the petitioners placed reliance upon a decision of the Supreme Court in Himachal Pradesh State Forest Company Limited Vs. United India Insurance Company Limited 2009 (2) SCC 252 in which it was held that if the policy of insurance provided that if a claim was made and rejected and no action commenced within the time stated in the policy, in that case, the benefits falling from the said policy would stand extinguished and any subsequent action would be barred by time. 4. Having heard the learned senior counsel for the petitioners, a reading of Section 20 of the Arbitration Act, 1940 makes it apparently clear that in order to be entitled to ask for a reference under Section 20, there must be an entitlement to money and a difference or dispute in respect of the same. In Union of India and another Vs. M/s L. K. 3 Ahuja & Co. AIR 1988 SC 1172, the Supreme Court held that the Court is only confined as to whether a valid claim for reference under Section 20 of the Act had been made or not and the question as to whether the claim was barred by lapse of time is a question which is required to be adjudicated by the arbitrator unless on admitted facts it was found that the claim was barred by limitation. The Supreme Court held:- “8. In view of the well settled principles we are of the view that it will be entirely a wrong to mix up the two aspects, namely, whether there was any valid claim for reference under Section 20 of the Act and, secondly, whether the claim to be adjudicated by the arbitrator, was barred by lapse of time. The second is a matter which the arbitrator would decide unless, however, if on admitted facts a claim is found at the time of making an order under Section 20 of the Arbitration Act, to be barred by limitation. In order to be entitled to ask for a reference under Section 20 of the Act, there must be an entitlement to money and a difference or dispute in respect of the same. It is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable.” 5. In the Kerala State Electricity Board, Trivandrum Vs. T. P. Kunhaliumma AIR 1977 SC 282, the Supreme Court held that Article 137 of the Limitation Act applies to any petition or application filed under any Act and is not confined to application being filed under the Code of Civil Procedure. On the basis of the aforesaid judgment, the 4 Supreme Court in S. Rajan Vs. State of Kerala & another AIR 1992 SC 1918 held that in an application under Section 20 of the Arbitration Act being filed in a Court, the period of limitation would be governed by Article 137 of the Limitation Act. Similar view was reiterated in Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority AIR 1988 SC 1007. In view of the aforesaid, much stress was led by the learned senior counsel for the petitioners with regard to clause 25 of the agreement. The relevant portion of clause 25 of the agreement is extracted below:- “It is also a term of the contract that if the contractor (s) do / does make any demand for arbitration in respect of any claim (s) in writing within 90 days of receiving the intimation from the Govt. that the bill is ready for payment, the claim of the contractor (s) will be deemed to have been waived and absolutely barred and the Govt. shall be discharged and released of all liabilities under the contract in respect of these claims.” 6. The learned senior counsel for the petitioners submitted that under the aforesaid clause, it was clearly stipulated that if the contractor does not make any demand for arbitration within ninety days from the date of receiving the intimation that the bill was ready for payment, the claim would be deemed to have been waived and that the Government would be discharged and released from all the liabilities arising under the contract. The learned senior counsel submitted that in view of the specific time period given under the agreement, the provision of Article 137 of the Limitation Act was not applicable. The learned senior counsel submitted that, admittedly, the application was filed after the period of ninety days from the date when the final payment was made and, even otherwise, after ninety days from the date when the security money was withdrawn by the opposite party. 7. Upon a perusal of the record, the court finds that no evidence has been filed by the petitioners as to when the opposite party was intimated about the payment of the final bill prepared by them. Nothing has come on record to indicate that the final payment has been made. The only document that has come on record is that the security amount has been withdrawn by the opposite party on 22nd July, 1991. In my opinion, withdrawal of the security amount by the opposite party does not indicate the invocation of clause 25 of the agreement. It does not indicate that there had been a deemed payment of the final bill prepared by the petitioners. In order to invoke clause 25 of the agreement, the petitioners are required to show and prove that they had intimated the contractor in writing that the final bill was ready for payment. Only then the period of limitation prescribed under clause 25 of the agreement would become applicable and the period of limitation would start from the date of such issuance of notice under clause 25 of the agreement. In the present case, no such document has been brought on record either in the writ petition nor was it found from the perusal of the orders of the court below. Consequently, the court is of the opinion that clause 25 of the agreement cannot be invoked by the petitioners. On the other hand, the court finds that opposite party had issued a notice dated 31st July, 1991 and immediately thereafter the application under Section 20 was filed which was within three years from the date of the cause of action and was in consonance with the provision of Article 137 of the Limitation Act. In view of the aforesaid, the court does not find any error in the impugned order passed by the appellate court. The writ petition fails and is dismissed. (Tarun Agarwala, J.) Dated 16.07.2010 LSR