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TMI Blog2019 (9) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of computing the period of limitation for reference to arbitration under the 1996 Act. However, in such cases the entire negotiation history between the parties must be specifically pleaded and placed on the record. The Court upon careful consideration of such history must find out what was the breaking point at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This breaking point would then be treated as the date on which the cause of action arises, for the purpose of limitation. The threshold for determining when such a point arises will be lower in the case of commercial disputes, where the party s primary interest is in securing the payment due to them, than in family disputes where it may be said that the parties have a greater stake in settling the dispute amicably, and therefore delaying formal adjudication of the claim. In the present case, the appellant company vaguely stated before this Court that it was involved in negotiation with the respondents in the 14 years preceding the application dated 4.10.1997 before the Settlement Committee. However it did not place o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as follows (relevant part): i. If at any time any question/dispute/difference whatsoever arises between the purchaser and the supplier, upon or in relation to the contract, either party may forthwith give to the other once question(s), disputes or difference and the same shall be referred to the Chairman, Rajasthan State Electricity Board, Jaipur or any person appointed by him for the purpose (hereinafter referred to as Arbitrator). Such a reference to the arbitrator/arbitrators shall be deemed to be a submission to the Arbitrator within the meaning of the Indian Arbitration Act, 1940 and statutory modifications thereof. 3. The appellant s case is that the respondent failed to make the payments due to them under the three contracts. Till 1997, the appellant was involved in discussions with the respondents in respect of the outstanding payments and the respondent kept delaying their decision on the same. On 4.10.1997 the appellant approached the Settlement Committee constituted by the respondent Board for release of the outstanding payment. It is the appellant s case that they were required to have pursued the matter with the Settlement Committee prior to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned judgement held that the appellant had failed to make out any case of hardship or injustice justifying condonation of delay in filing the applications under Section 43(3) of the 1996 Act, and the Arbitration Applications were hopelessly barred by limitation. Hence this appeal. 5. The limited issue which arises for our consideration is therefore, whether the Arbitration Applications, on the facts of this case, are barred by limitation? Learned counsel for the appellant vehemently contended that the cause of action arose not in 1983 or 1989, but by the letters dated 17/18.12.1999 in which the respondents repudiated the appellant s claims. The period prior to 18.12.1999 during which the parties were negotiating and corresponding with each other could not be counted for the purpose of computing the limitation period. It was due to the respondent s delay in responding to the representations sent by the appellant that delay arose in filing the Arbitration Applications. Hence the Arbitration Applications are not barred by limitation. In support of his contention, he relied upon the decisions of this Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1940 Act will apply. If the date of notice was on or after 25.1.1996, the 1996 Act will apply to the arbitral proceedings though the arbitration clause contemplated proceedings under the 1940 Act (See Fuerst Day Lawson Ltd v. Jindal Exports Ltd., (2001) 6 SCC 356: O.P. Malhotra on The Law and Practice of Arbitration, Justice Indu Malhotra ed., 3rd. edn, 2014 at page 1915). In Milkfood Ltd (supra) as well, the arbitration agreement was governed by the provisions of the 1940 Act. The appellant sent a notice to the respondent for appointment of an arbitrator on 14.9.1995. Hence this Court held that the 1940 Act would apply. In the present case, since notice was served to the respondent in 2002, the provisions of the 1996 Act will be deemed to apply to the present Arbitration Applications filed by the appellant. However, it remains to be examined separately whether the aforesaid Applications have been filed within the statutory limitation period. 7. Section 43 of the 1996 Act (relevant part) provides as follows: 43. Limitations.-(1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in court (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties in a court of law, such as the plea of limitation, would be open to the parties for the arbitrator s decision as well. Otherwise, as this Court observed: 8 a claim for breach of contract containing a reference clause could be brought at any time, it might be 20 or 30 years after the cause of action had arisen, although the legislature has prescribed a limit of three years for the enforcement of such a claim in any application that might be made to the law courts This Court further held as follows: 11. Therefore, the period of limitation for the commencement of arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued. Just as in the case of civil actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued. 12. In Russell on Arbitration, At page 80 it is stated thus: An extension of time is not automatic and it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent to this date would not extend the time of limitation. Hence the maximum period during which this Court could have allowed the appellant s application for appointment of an arbitrator is 3 years from the date on which cause of action arose i.e. 8.2.1986. Similarly, with respect to Arbitration Application Nos. 28/2003 relating to the work order dated 3.5.1985, the respondent has stated that final bill was handed over and became due on 10.8.1989. This has not been disputed by the appellant. Hence the limitation period ended on 10.8.1992. Since the appellant served notice for appointment of arbitrator in 2002, and requested the appointment of an arbitrator before a Court only by the end of 2003, his claim is clearly barred by limitation. 9. The decisions relied upon by the appellant are inapplicable to the present facts and circumstances. At the outset, we observe that the decision in Sunder Kukreja (supra) is on a different set of facts. In that decision, the question before this Court was whether the arbitration clause in a partnership deed would continue to subsist in light of a subsequent retirement deed which the appellant denied executing, and wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the specific context of a family settlement. This Court specifically observed that such a settlement is to be treated differently from a formal commercial settlement, and that efforts should be made to promote family settlements without the obstruction of technicalities of limitation, etc. Hence this Court was not dealing with a mercantile dispute such as in the present case. In Shree Ram Mills Ltd (supra), this Court found that the parties were continuously at loggerheads over joint development of certain land. They had entered into a Memorandum of Understanding to settle their dispute, however the respondent cancelled this Memorandum; hence the dispute was referred to arbitration under Section 11(6) of the 1996 Act. This Court, upon considering the complete history of negotiation between the parties which was placed before it, on the facts of that case, concluded that the claim would not be barred by limitation as there was a continuing cause of action between the parties. Having perused through the relevant precedents, we agree that on a certain set of facts and circumstances, the period during which the parties were bona fide negotiating towards an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught of approaching the Settlement Committee. Further, they have not brought anything on record to show that they were required to proceed before the Settlement Committee before requesting the appointment of an arbitrator. The arbitration clause does not stipulate any such requirement. We therefore find that the appellant company s case has a certain element of mala fide in so far as it has made detailed submissions in respect of its communications with the respondents subsequent to 4.10.1997, but has remained conspicuously silent on the specific actions taken to recover the payments due prior to that date. Under Section 114(g) of the Indian Evidence Act, 1872 this Court can presume that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. Hence, in the absence of specific pleadings and evidence placed on record by the appellant with respect to the parties negotiation history, this Court cannot accept the appellant s contention that it was only after the respondent s letter dated 18.12.1999 that the appellant could have contemplated arbitration in relation to the outstanding amounts. Even if we were to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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