1999(4) ALL MR 78
IN THE HIGH COURT OF JUDICATURE AT BOMBAY (PANAJI BENCH)

R.M.S. KHANDEPARKAR, J.

M/S. R.P. Souza & Co. Vs The Chief Engineer, P.W.D. Altinho, Goa & Ors.,

Appointment of Arbitrator Nos.1 of 1999,Appointment of Arbitrator Nos.2 of 1999

16th April, 1999

Petitioner Counsel: Shri S.S USGAONKAR
Respondent Counsel: Shri H.R. BHARNE

Arbitration and Conciliation Act (1996) S.11(6) - Application for appointment of arbitrator - Limitation - Completion of work by contractor - It is the duty of Government to prepare final bill expeditiously and make payment - Work completed in October 1994 - Final Bill prepared by Govt. only in Jan. 1996 - Contractor asserting its claim on 8.10.1998 i.e. within three years from date of Bill - Held application for appointment dt.3.3.1999 could not be said to be time barred.

In this case the Agreement was entered between the parties on 30th January, 1992. The work was to be commenced on 18th January, 1992 and was to be completed on October, 1994. The final bill was prepared by the respondents only on 16th January, 1996. In other words, it took nearly two years for the respondents to prepare the final bill in respect of the work carried out by the applicants. While raising the plea of bar of limitation, the respondents have not explained as to why the respondents themselves took two years two prepare the final bill in relation to the amount payable to the applicants. It is not permissible for the respondents, who are otherwise duty bound to prepare such bill and to pay the amount to a contractor within reasonable time from the date of completion of the work, to raise the plea of limitation and to defeat right of the applicants to have their grievance adjudicated by following due process of the law.

The applicants have admittedly asserted their claim on 8th October, 1998 which date was certainly within a period or three years from the date of the final bill. The application under section 11(6) of the said Act was filed on 3rd March, 1999. Being so, it cannot be said that the application is barred by the Law of Limitation. 1999 AIR SCW 421 Rel. on. [Para 15,16]

Cases Cited:
Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, AIR 1998 SC 1007 [Para 7]
State of Orissa Vs. Sri Damodar Das, AIR 1996 SC 942 [Para 8]
Nyaneshwar Bhiku Dhargalkar Vs. Executive Engineer in Arbitration App., No.8/98 Dt.26.2.99 [Para 8]
Utkal Commercial Corpn. Vs. Central Coal Fields Ltd., 1999 AIR SCW 421 [Para 14]
The Madras Port Trust Vs. Hyamanshu International by its Proprietor Vs. Venkatadri (dead) by L.Rs., , AIR 1979 SC 1144 [Para 14]


JUDGMENT

JUDGEMENT :- Since common questions of law and fact arise in both the applications, the same are heard together and are being disposed of by this common judgment and order.

2. Heard the Advocates for the parties and perused the records.

3. These are applications for the appointment of Arbitrator in terms of Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter called "the said Act").

4. It is the case of the applicants that the second respondent awarded work of construction of B Type Quarters at Sada, Vasco-da-Gama to the applicants under Work Order dated 7th January, 1992. Though the work was completed in all respects by October, 1994, the final bill was not prepared and paid till October, 1998. Under the agreement between the parties in relation to the said work, in terms of clause 25 thereof, all disputes arising under the agreement are required to be settled by way of arbitration. The applicants, by letter dated 8th October, 1998, called upon the respondents to finalise the account between the parties and to pay the amount claimed by the applicants within fifteen days from the date of receipt of the said letter. It was also made clear in the letter that in the event of failure on the part of the respondents to pay the dues claimed by the applicants, the dispute will have to be referred to arbitration and in that event the applicants would be entitled to claim the interest on the amount due as well as costs of the arbitration. On account of failure on the part of the respondents to pay the dues, the applicants, by letter dated 30th November, 1998 requested the respondents to appoint an Arbitrator within a period of 30 days from the date of receipt of the said letter. The respondents having failed to appoint Arbitrator in terms of clause 25 of the said agreement, despite of existence of differences between the parties, the applicants have approached this Court by the present applications.

5. On the other hand, it is the case of the respondents that the applications for appointment of Arbitrator is grossly barred by the law of limitation and on that count alone, the same are liable to be rejected. According to the respondents, the work Order was issued on 7.1.1992 and the work was required to be completed on 16th January, 1993. It was only on 8th October, 1998 that for the first time the applicants sought to raise certain claims against the respondents and requested for appointment of Arbitrator. The applicants having failed to raise any dispute or demand or the claim within three years from the date of completion of the work and the request for such claim having been made after the expiry of three years of the completion of the work, the application are barred by the Law of Limitation. The fact that the work was actually completed in October, 1994 is not denied.

6. It is the contention of the respondents that the applicants did not have any dispute with the Department and that as and by way of an afterthought, they have made the claim for the first time on 8th October,1998. The Applicants have filed a copy of their letter dated 8th October, 1998 addressed to the Executive Engineer, Margao. Perusal of the said copy of the letter, discloses that the applicants have claimed a sum of Rs. 2,00,000/- on account of various extra items, substituted items, deviated items, for discharge of Bank Guarantee submitted by the applicants initially at the time or assignment of the work, as also a claim of Rs. 3,02,400/- on account of some extra expenditure incurred by the applicants for completion of the work, a claim for Rs.4,20,000/- towards some materials used in construction work as well as some other claims on various other counts stipulated in the said letter. The reply filed by the respondents also discloses that the fact that the applicants have raised certain claims and pursuant to which dispute has arisen between the parties is not denied, but only defence sought to be raised is that the same is barred by the law of limitation. Being so, the only point which requires to be considered is whether the applications filed by the applicants under Section 11(6) of the said Act are barred by the law of limitation.

7. The contention of the respondents is that the cause of action for filling the applications under Section 11(6) of the said Act arose in favour of the applicants on the date of completion of the work entrusted to them. In that regard, the respondents have sought to rely upon the Judgment of the Apex Court in the matter of Major (Retd.) Inder Singh Rekhi V. Delhi Development Authority reported in A.I.R. 1998 S.C., 1007. Drawing my attention to para 2 of the said Judgment, Shri H.R. Bharne, learned Govt. Advocate submitted that the Apex Court therein has observed that the initial letter making assertions of claim was addressed to the Delhi Development Authority within a period of three years from the date of completion of the work and therefore the Apex Court had observed in the said judgment that the application for reference of dispute for settlement by way of arbitration was filed within the period of three years from the date of assertion of claim by the applicants therein. In other words, it is the contention of the respondents that as per the decision of the Apex Court in the said case the cause of arbitration for the filing the application for the arbitration arises on the date of completion of the work.

8. On the other hand, Shri S.S. Usgaoncar, learned Advocate appearing for the applicants, placing reliance upon the Judgment of the Apex Court in the matter of State of Orissa and another V. Sri Damodar Das reported in A.I.R. 1996 S.C., 942 and referring to the unreported Judgment of this Court in the matter of Shri Nyaneshwar Bhiku Dhargalkar V. Executive Engineer in Arbitration Application No.8/98 passed on 26th February, 1999, submitted that the cause of action for filing the application under Section 11 of the said Act would arise within three years from the date of assertion of claim or finalisation of final bill. Considering the law laid down by the Apex Court in the matter of State of orissa V. Sri Damodar Das (supra) as well as in the decision relied upon by the respondents, the cause of action for filing the application would not arise unless there is an assertion of claim by the applicants after the completion of the work and the cause of action for assertion of the claim cannot arise unless either final bill is prepared or the respondent disputes or denies the right of the applicant for the dues payable to the applicant in respect of the work done by the applicant for the respondents.

9. Indeed, it has already been held in Nyaneshwar Bhiku Dhargalkar's case that the period of limitation applicable to matters pertaining to the application required to be filed under Section 11 of the Arbitration Act, is of three years from the date of cause for arbitration. The cause for arbitration arises when the claimant becomes entitled to raise the question, i.e. when the claimant acquires the right to require arbitration.

10. It cannot be disputed that once the work of construction entrusted by the respondents to contractor is completed, it would be the duty of the respondents themselves to see to it that the final bill in relation to the dues payable to such contractor in respect of the work is prepared and paid within reasonable time from the date of completion of such work, unless otherwise there are justifiable reasons for delaying the preparation and/or payment of the final bill. It has been clearly observed in the matter of Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority's case (supra) that on completion of work, a right to get payment would normally arise in favour of the contractor. In other words, it is not the duty of the contractor to raise a claim against the respondent on completion of the work by him, but it is the duty of the respondents themselves to finalise the account by preparation of the final bill on completion of the work and not to expect and wait for the contractor to put forth his claim regarding dues in respect of the work completed by him in terms of the agreement. The respondents by themselves should come forward within reasonable time from the date of completion of the work to prepare the final bill in relation to the work to prepare the final bill in relation to the work carried out by the contractor. In case the respondents unreasonably and without any justification prolong the preparation of final bill for the work carried out by the contractor for the respondents, it would not be permissible for the respondents thereafter to raise a point of limitation merely because the contractor had not asserted his claim in respect of the work carried out for the respondents within three years from the date of completion of the work. The respondents cannot claim a bonanza for the Government from unjustifiable delay caused on account of lethargy and negligence exhibited by its officers. Certainly, if such a lethargy or negligence has resulted in causing inconvenience or prejudice or loss in any manner to the Government, the latter would be entitled to take appropriate steps against its officers who are responsible for such delay in finalising the bill and causing inconvenience or prejudice or loss to the Government.

11. The contention of the learned Government Advocate that the Apex Court in the matter of Major (Retd.) Inder Singh Rekhi v. Delhi D. Authority (supra) has held that the cause of action would arise from the date of assertion only because in the said case such assertion was made within three years from the date of completion of the work is devoid of substance. It is true that in the said case the assertion was made within three years from the date of the work. But mere assertion on the part of the contractor cannot extend any period of limitation. The Apex Court has not laid down the law to say that assertion will extend the limitation. On the other hand, the Apex Court therein has held that the denial of claim will itself be a cause for arbitration. Admission of the liability within the period of limitation certainly can extend the period of limitation, but the assertion of the claim cannot extend the liability on the opposite party against whom the claim is sought to be made. Being so, it cannot be said that only because the assertion is made within three years from the date of completion of the work, that would lead to extended time of the period of limitation from the date of assertion.

12. The Apex Court in the said judgment of Major (Rdtd.) Inder Singh Rekhi as well as in Sri Damodar Das (supra) has clearly held that the right to apply for arbitration would not arise until there is a clear and unequivocal denial of the right by the respondents. The relevant observation in that regard by the Apex Court in the State of Orissa v. Sri Damodar Das (supra) reads thus :-

" 6. In Law of arbitration by Justice Bachawat at page 549 commenting on Section 37, it is stated that subject to the Limitation Act, 1963, every arbitration must be commenced within the prescribed period. Just as in the case of action the claim is not to be brought after the expiration of a specified number of years from the date when the cause of action accrues, so in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues. For the purpose of section 37(1) 'action ' and 'cause of arbitration' should be construed as arbitration and cause of arbitration. The cause of arbitration when the claimant becomes entitled to raise the question, that is, when the claimant acquires the right to require arbitration. An application under Section 20 is governed by Articles 137 of the schedule to the Limitation Act, 1963 and must be made within 3 years from the date when the right to apply first accrues. There is no right to apply until there is a clear and unequivocal denial of that right by the respondent. It must, therefore, be clear that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of cause of action arises in a civil action."

13. In Major (Retd.) Inder Singh Rekhi's case the Apex Court has held thus:-

" The question is for the present case when did such dispute arise. The High Court proceeded on the basis that the work was completed in 1980 and, therefore, the appellant became entitled to the payment from that date and the cause of action under Art. 147 arose from that date. But in order to be entitled to ask for a reference under S.20 of the Act there must not only be an entitlement to money but there must be on difference or a dispute must arise. It is true that a completion of the work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claim was made on 28th Feb. 1983 and there was non-payment, the cause of action arose from that date, that is to say, 29th of Feb. 1983. It is also true that a party cannot postpone the accrual of cause of action by writting reminders or sending reminders but the 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 an arbitrator under S. 8 or a reference under S.20 of the Act."

14. The above referred decision has been consistently followed by the Apex Court in the later judgment and one of them is in the matter of Utkal Commercial Corporation v. Central Coal Fields Ltd. reported in 1999 AIR SCW, 421. Moreover, it was as long back as in 1979 that the Apex Court while expressing displeasure over the public authorities taking up the plea of limitation to defend a just claim of citizens, in the matter of The Madras Port Trust v. Hyamanshu International by its Proprietor V. Venkatadri (dead) by L.Rs. reported in A.I.R. 1979 S.C.1144 had observed that :-

" It is high time that governments and public authorities adopt the parctice of not relying upon technical pleas for the purpose of defeating legitimate claims of citizens and do what is fair and just to the citizens."

15. Reverting to the facts of the case, undisputedly, the Agreement was entered between the parties on 30th January, 1992. The work was to be commenced on 18th January, 1992 and was to be completed on October, 1994. The final bill was prepared by the respondents only on 16th January, 1996. In other words, it took nearly two years for the respondents to prepare the final bill in respect of the work carried out by the applicants. While raising the plea of bar of limitation, the respondents have not explained as to why the respondents themselves took two years to prepare the final bill in relation to the amount payable to the applicants. It is not permissible for the respondents, who are otherwise duty bound to prepare such bill and to pay the amount to a contractor within reasonable time from the date of completion of the work, to raise the plea of limitation and to defeat right of the applicants to have their grievance adjudicated by following due process of the law.

16. The applicants have admittedly asserted their claim on 8th October, 1998 which date was certainly within a period of three years from the date of the final bill. The application under section 11(6) of the said Act was filed on 3rd March, 1999. Being so, it cannot be said that the application is barred by the Law of Limitation. The objection regarding bar of limitation by the respondents is therefore rejected.

17. Considering the various claims put forth by the applicants and disputed by the respondents, there is a clear case of dispute between the parties which is required to be decided by way of arbitration in terms of clause 25 of the agreement between the parties. Needless to say, it is open to the parties to raise all contentions, factual and legal available under the law before the Arbitrator.

18. Hence the applications are allowed. Justice G.D. Kamat (Retd.), Goa, is therefore, hereby appointed as the Arbitrator to decide the dispute between the parties. The parties are left to bear their own costs.

Application allowed.