2008 (3) TMI 655 - HC - Companies Law

Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - Held that - All the four applications filed for appointment of arbitrator are held to be barred by time and are therefore dismissed on the ground of limitation.

Summary

Issues Involved:
1. Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
2. Limitation period for filing applications for appointment of arbitrator.
3. Interpretation of contract clauses related to final bill submission and arbitration demand.

Detailed Analysis:

1. Appointment of Arbitrator under Section 11(6):
The applicants sought the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. The respondents opposed the applications on the ground of limitation, citing previous court orders where similar petitions were dismissed due to being time-barred.

2. Limitation Period for Filing Applications:
The core issue was whether the applications for appointment of an arbitrator were filed within the limitation period. The court examined the law applicable to ascertain if the applications were within limitation. According to Section 43 of the Arbitration and Conciliation Act, 1996, the provisions of the Limitation Act apply to arbitration in the same manner as they apply to claims before the court. Article 137 of the Limitation Act, 1963, which is a residuary article, prescribes a limitation period of three years from the date of accruing of the cause of action.

The court referred to several Supreme Court judgments to understand when the limitation period starts. In the case of S. Rajan v. State of Kerala, the Supreme Court held that the limitation starts from the date of accrual of cause of action, not from the date of the legal notice demanding arbitration. Similarly, in Major (Retd.) Inder Singh Rekhi v. DDA, the limitation was computed from the date of the first letter requesting finalization of bills, which was within three years of the completion of work.

3. Interpretation of Contract Clauses:
The court analyzed Clauses 7, 9, and 25 of the contract between the parties. Clause 9 required the contractor to submit the final bill within three months of completion of work. Clause 25 stipulated that if the contractor did not demand arbitration within 120 days of receiving intimation that the final bill was ready for payment, the claim would be deemed waived.

The applicants argued that they did not receive any intimation from the Engineer-in-Charge that their final bills were ready for payment, thus the limitation period had not started. However, the court found that the applicants had completed the work within the scheduled time but waited 6-8 years before sending legal notices demanding arbitration. The court held that the applicants could not wait indefinitely and should have filed an application within three years after the expiry of the six months' time stipulated for final payment in Clause 25.

Conclusion:
The court concluded that the applicants had slept over their rights for a long time and their claims had become stale and hopelessly barred by limitation. Consequently, all four applications for the appointment of an arbitrator were dismissed on the ground of limitation. The parties were left to bear their own costs.