THE HONOURABLE SRI JUSTICE N.V. RAMANA AND THE HONOURABLE SRI JUSTICE V. SURI APPA RAO Civil Miscellaneous Appeal No. 1006 of 2010 Judgment: (Per N.V. Ramana, J.) This civil miscellaneous appeal, under Section 37 (1-B) of Arbitration and Conciliation Act, is directed against the order dated 12.07.2010 passed by the XII Additional Chief Judge (Fast Track Court), City Civil Court, Hyderabad, dismissing the Arbitration O.P. No. 1387 of 2004 filed by the appellant herein, against the award dated 31.03.2003 passed by the 3rd respondent herein in favour of the 1st respondent herein for a sum of Rs. 23,24,404/- with interest at 18% per annum from the date of award till the date of payment. Brief facts, which are necessary for the purpose of the present appeal, are as follows: The appellant herein namely M/s. Trimex Industries Limited, Hyderabad, obtained the premises of barytes pulverizing mill of the 1st respondent herein namely M/s. Shravanthi Minerals, situated at Sattupally, Tirupathi, on lease, for its business purposes, under a lease agreement dated 17.03.1989, on a monthly rent of Rs. 45,000/-, for a period of five years. The lease was terminated after the lapse of five years. The 1st respondent obtained possession of the premises from the appellant on 05.01.1995. Thereafter, the 1st respondent claimed certain amounts from the appellant towards arrears of rent, the payment of which the appellant denied. Thereupon, the 1st respondent filed Arbitration Application No. 48 of 1999 before this Court, praying for appointment of an arbitrator to resolve the disputes that have arisen between them and the appellant, out of the lease agreement dated 17.03.1989 entered into by them. This Court, by order dated 16.07.2001, appointed the 3rd respondent herein namely Sri D. J. Jagannadha Raju, retired Judge of this Court, as sole arbitrator. Before the 3rd respondent-arbitrator, the appellant denied its liability to pay the amounts as claimed by the 1st respondent and contended that it has spent huge amounts to an extent of Rs.7,75,493- 41 ps., for clearing the dues by the 1st respondent, to Bank and APSEB and getting the power supply restored to the leased premises and for carrying out the repair works to the mill and machinery. He further contended that, as per the lease agreement, the monthly rent was credited to the Term Loan Account, obtained by the 1st respondent from the Bank. He mainly contended that the arbitration application is time-barred and hence the 1st respondent is not entitled to any amounts claimed by them. The 3rd respondent- arbitrator, having considered the rival contentions of the parties and the material placed before him, held that the claim of the 1st respondent, is not barred by time and the arbitration application filed by the 1st respondent is within time and that the 1st respondent is entitled to a sum of Rs. 23,24,404/-, which is payable by the appellant. Accordingly, he passed an award on 31.03.2003 in favour of the 1st respondent for the said sum of Rs. 23,24,404/- with interest at 18% per annum from 31.03.2003 till the date of payment. Aggrieved by the said award, the appellant filed Arbitration O.P. No. 1387 of 2004 before the Hon’ble XII Additional Chief Judge, Fast Track Court, City Civil Court, Hyderabad, who refused to interfere with the award passed by the arbitrator, but however, considering the circumstances of the case and the principles laid down by the Hon’ble Supreme Court, reduced the future interest on the amount awarded by the arbitrator, to 6% per annum, payable from the date of orders till the date of final payment, while confirming the interest granted @ 18% per annum from the date of award till the date of orders, and accordingly dismissed the O.P. filed by the appellant with costs, by order dated 12.07.2010. Assailing the said order, the present civil miscellaneous is filed. The main contention of the learned counsel for the appellant submitted that as per the provisions of Article 52 of the Limitation Act, the period of limitation for claiming rent is three years and, and the limitation starts from the date the rent becomes due and payable, but both the Arbitrator as well as the trial Court, without considering this aspect, have erroneously passed award for the amounts that are barred by limitation, and therefore, the award passed by the Arbitrator, as confirmed by the Court below in the O.P., by reason of the order under appeal, is liable to be set aside. Learned counsel for the 1st respondent, on the other hand, supported the order under appeal and submitted that the arbitrator and the trial Court have considered the aspect of limitation in right perspective, and rightly came to the conclusion that the limitation for recovery of the arrears of rent, commenced from 20.04.1995 when the appellant, issued reply-notice repudiating the claim of the 1st respondent, and no exception can be taken thereto. He further submitted that since the accounts between the appellant and the 1st respondent, are in the nature of a running account, the limitation for recovery would start from the date the dues payable are determined. Hence, he submitted that order under appeal passed by the Court below, which confirmed the award passed by the Arbitrator, does not call for any interference by this Court. Heard the learned counsel for the appellant and the learned counsel for the 1st respondent and perused the order under appeal and other material available on record. Admittedly, the appellant filed the Arbitration O.P. under Section 34 of the Arbitration and Conciliation Act, praying to set aside the award passed by the Arbitrator. An award passed by the Arbitrator can be set aside only in accordance with the provisions of and the grounds mentioned in sub-sections (2) and (3) thereof, and not any other. In that the award of the Arbitrator can be set aside, if a party was under some incapacity; the arbitration agreement is not valid under law to which the parties are subjected to; the party making application was not given proper notice of appointment of arbitrator or was unable to present his case; the arbitral award dealt with a dispute not contemplated by or not falling within the terms of submission to arbitration or the arbitration was beyond the scope of submission to arbitration; the composition of arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties; if the court finds that subject matter of dispute is not capable of settlement under the law or the arbitral award was in conflict with public policy of India and if the application for setting aside the award is made within time. Therefore, the scope and power of this Court to interfere with the award passed by the Arbitrator, is limited only to the grounds mentioned in Section 34(2) and (3) of the Arbitration and Conciliation Act. Therefore, it may be noticed whether the appellant has made out any of the grounds mentioned in Section 34(2) and (3) of the Arbitration and Conciliation Act, for setting aside the award of the Arbitrator. Admittedly, the appellant, as the lessee, obtained barytes pulverizing factory and premises of the 1st respondent on lease, for a period of five years, under agreement of lease dated 17.03.1989, at a monthly rent of Rs.45,000/-. A perusal of the award as well as the order under appeal makes it clear that the said agreement of lease came into operation in the month of December, 1989 and the lease expired in the month of December 1994. After expiry of the lease, the 1st respondent took possession of the factory and premises from the appellant on 05.01.1995. Thereafter, the 1st respondent, got issued legal notice dated 07.01.1995, raising a claim for recovery of rents from the appellant, for the period from December, 1989 to December, 1994, to which the appellant issued reply notice dated 20.01.1995, repudiating the claim. The 1st respondent again issued another notice dated 27.01.1995, demanding the due amount, to which the appellant issued reply notice dated 04.02.1995, making a counter-claim for Rs.1,31,631/-. Thereupon, the 1st respondent issued another notice dated 20.03.1995, claiming Rs. 13,43,785- 45 ps., to which the appellant issued reply notice dated 20.04.1995, repudiating the claim of the appellant. Thereafter, the 1st respondent issued notice dated 21.05.1997 to the appellant, by invoking the arbitration clause and sought appointment of Sri K. Ramachandra Rao as arbitrator, to resolve the dispute. But, as there was no response from the appellant, the 1st respondent filed Arbitration Application No. 48 of 1999 before this Court, upon which this Court, having regard to the consent given by the appellant, appointed Sri D. Jagannadha Raju, as sole arbitrator in the matter. Though the appellant mainly contends that as per Article 52 of the Limitation Act, the three year period of limitation for recovery of arrears of rent would commence from the date the arrears of rent become due and payable, the fact remains, it is the case of the 1st respondent and as is evident from the respective contentions, the account between the parties by practice is in the nature of running account in continuity and not in segregation or isolation, because in the payment of rent, there are certain adjustments to be made, in that the appellant was required to pay some amounts towards various expenses from the monthly rents, by appropriating the amounts paid by him towards payment of rents. Since the material on record disclosed that there was a running account between the parties, it has to be seen as to when the accounts between the parties were reconciled, so as to reckon the three-year period of limitation, for recovery of the arrears of rent. The arbitrator, appointed by this Court, has dealt with the question as to when the cause of action arose and considering the fact that on 20.04.1995, the appellant repudiated the claim, the 1st respondent had the right to file suit for recovery of the amounts as mentioned in the notice and had also had the right to invoke arbitration clause contained in the agreement of lease, but however, for the reasons best known to the 1st respondent, they neither filed civil suit nor invoked the Indian Arbitration Act, 1940 and in the meantime the new Arbitration and Conciliation Act, 1996, came into force with effect from 20.08.1996. Having regard to the fact that under the new Act, the arbitral proceedings would commence with the issuance of notice under Section 21 of the Act and considering the fact that the 1st respondent issued notice dated 25.05.1997 for appointment of arbitrator, the learned Arbitrator came to the conclusion that the claim made by the 1st respondent was within the period of three years’ limitation, as the right of the 1st respondent to recover the amounts from the appellant commenced on 20.04.1995, when the claim of the 1st respondent was repudiated by the appellant. Inasmuch as the claim of the 1st respondent was repudiated by the appellant on 20.04.1995 and if the three-year limitation period is calculated from the said date, it would come to an end on 19.04.1998, and inasmuch as the 1st respondent issued notice for appointment of arbitrator on 25.05.1997, and considering the provisions of Section 21 of the Arbitration and Conciliation Act, 1996, we are of the considered opinion that both the Arbitrator as well as the Court below have rightly held that the period of limitation would run from 20.04.1995 and in view of the provisions of Section 21 of the Arbitration and Conciliation Act, the application filed by the 1st respondent was within time. The Arbitrator further noted that the parties did not reconcile their accounts and did not conduct themselves as seasoned businessmen, proceeded to adjudicate the claim and passed the award. The Arbitrator found that the 1st respondent handed over the factory to the appellant without finalizing the accounts, and proceeded to ascertain as to what were the dues payable by the appellant to the 1st respondent after expiry of the five year lease period in the month of December, 1994. A perusal of the award would disclose that under Ex.B6, the appellant was required to pay Rs. 27,00,000/- to the 1st respondent towards rent at the rate of Rs. 45,000/- per month for five years. Apart from that, the appellant was required to pay electricity consumption charges of Rs. 29,882/- for the month of December 1994 to the APSEB and telephone charges of Rs. 15,000/-. Thus, in all, the appellant was required to pay Rs. 27,44,888/-. According to the 1st respondent, the appellant paid Rs. 4,39,175-55 ps., to APSEB, towards electricity consumption charges, Rs. 26,052/- to Bajaj Engineers, Rs. 43,000/- to Ramaiah Transport Contract, Rs., 6,175/- towards insurance premium. Thus, in all, the appellant paid an amount of Rs. 15,59,402-55 ps. If the said amount is deducted from the claim of Rs. 27,44,888/-, the amount payable by the appellant to the 1st respondent would be Rs. 11,85,485-45 ps., and further if the sum of Rs. 1,27,133-35 ps. spent towards repair works by the appellant for bringing the factory into working condition is deducted, they would still be liable to pay to the 1st respondent an amount of Rs. 10,58,352/-. And even though, the appellant in the repudiation notice made a counter-claim against the 1st respondent, the Arbitrator noted that the appellant conceded that he is not inclined to make any counter-claim against the 1st respondent. Thus, the Arbitrator awarded the said amount with interest, as confirmed by the Court below. Thus from the above factual aspects, it is clear that 1st respondent handed over the factory to the appellant on five year lease without finalizing the accounts, and after expiry of the lease, he sent the statement of account on 20.01.1995, which the appellant repudiated. Considering these facts, the Arbitrator noted that the dispute between the parties is peculiar, because neither the appellant nor the 1st respondent conducted themselves as seasoned businessmen and during the course of arbitration proceedings, they never reconciled their accounts nor the appellant determined the amounts paid by them to the bank, APSEB and to the 1st respondent. This apart, they have not exchanged any regular statements of accounts and they never followed the terms of lease agreement dated 17.03.1989, and observed them more in breach. Even though the appellant filed few account books, the Arbitrator found that they appear to have not been maintained in the regular course of business and that they did not produce any year-wise accounts and that they haven not placed any cogent evidence to show what exactly are the outstanding amounts due to the bank towards principal amount of the term loan and the interest payable to the bank and the penalties if any payable either on the date of lease agreement or when the lease came into operation. However, having regard to the fact the appellant repudiated the claim of the 1st respondent on 20.04.1995, the arbitrator fixed the said date as the cutoff date for reckoning the period of limitation. As there is a running account between the parties, as noted above, it must be held that unless and until the amounts due and payable by the appellant to the 1st respondent are determined and reconciled and become due and liable for payment on a particular date, it cannot be conclusively said that the limitation of three years in the instant case would start to run from the date the rent for a particular month became due and liable for payment. In Rangayya Appa Rao v. Bobba Sriramulu[1], the Privy Council considered the question as to when the period of limitation would start to run for recovery of arrears of rent, and held as under: “The point of time from which, under the Limitation Act, the period of limitation is to run is that at which the arrear became due. In most cases no doubt the point of time at which rent becomes due is the close of the period in respect of which it is to be paid. But this is not necessarily always the case in India, and the Limitation Act is an Act for all India. Legislation, or custom, or express contract, or the special circumstances of any case may make rent become due at a point of time different from the close of the period in respect of which is to be paid. The case of Mussumat Ranee Surno Moyee v. Shooshee Mokhee Burmonia (12 Moo. I.A., 244, 2 B.L.R.P.C., 10), heard before this Board, is an example of a suit for rent, governed by a law of limitation substantially the same as that now before their Lordships, in which the date at which the rent became due was held to be an entirely different date from the close of the period in respect of which that rent was payable. The object of a Limitation Act is presumably to compel people who have actionable claims to sue upon them with due promptitude or to forfeit the right to do so at all. In such an Act the falling due of rent naturally means the falling due of an ascertained rent, which the tenant is under an obligation to pay, and which the landlord can claim and, if necessary, sue for.” From the above judgment, it is clear that legislation, or custom, or express contract, or the special circumstances of any case may make rent become due at a point of time different from the close of the period in respect of which it is to be paid. Since in the instant case, though the rent payable is at the rate of Rs.45,000/- every month for a period of five years, the fact remains, during the said period of five years, certain amounts were adjusted towards various other liabilities, and unless and until the amounts paid by the appellant towards statutory dues and other liabilities were adjusted against the total rent payable by them to the 1st respondent, what exact amount the appellant was still due and liable to pay to the 1st respondent cannot be ascertained and therefore the limitation of three years would start from the day the amounts due and payable are determined and not as provided in Article 52 of the Limitation Act. That being so reliance placed by the learned counsel for the appellant on the judgment of the Kerala High Court in Sundaram v. Rajeev[2] in support of his argument that the period of limitation for recovery of rent arrears will not extend beyond three years and three-years limitation period should be computed for each month’s arrear of rent, will be of no assistance to the appellant, because it is a case arising under the Rent Control Act, where the rents due and payable were from month to month, and considering the provisions of Article 52 of the Indian Limitation Act, the Kerala High Court held that the plaintiff was entitled to recover arrears of rent of three years prior to the institution of the suit and not for the period prior thereto. Since in the instant case, the appellant repudiated the claim of the 1st respondent on 20.04.1995, no exception can be taken to the award passed by the arbitrator, as confirmed by the Court below, taking the said date as the cutoff date, to reckon the three year period of limitation, for considering whether the claim of the 1st respondent for recovery of rents, was barred by limitation or within limitation. Except the above plea of misconceived limitation, the appellant has not made out any ground, much less those mentioned in Section 34(2) and (3) of the Arbitration and Conciliation Act, and as such, no exception can be taken to the order passed by the Court below, refusing to set aside the award passed by the Arbitrator. For the foregoing reasons, we find no merit in the C.M.A., and the same is accordingly dismissed. No costs. _____________ N.V. RAMANA, J. _________________ V. SURI APPA RAO, J. Dated: 28th January, 2011 IBL [1] 1903 ILR (27) 143 [2] 2004 (4) CCC 157 (Ker.)