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TMI Blog2021 (3) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... any fresh start to a limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 06.11.2013, they were within the limitation period of three years starting from 10.11.2020. On this count, the applications under Section 11 of the Arbitration Act, themselves being hopelessly time barred, no arbitrator could have been appointed by the High Court - Even otherwise, the claim made by the Respondent was also ex facie time barred. It is undisputed that final payments were received latest by the end of March 2003 by the Respondent. Even taking 16.02.2010 as the starting point for limitation on merits, a period of three years having elapsed by February 2013, the claim made on merits is also hopelessly time barred - Appeal allowed. - CIVIL APPEAL NOS. 900-902 OF 2021 ( @ SLP ( CIVIL ) Nos. 27960-62 of 2019 ) - - - Dated:- 15-3-2021 - R. F. NARIMAN And B. R. GAVAI , JJ. For the Petitioner : M/S. Veritas Legis, AOR ( Appearance not given ) For the Respondent : Mr. Nithin Chowda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth parties to the contract 5. Work orders were issued with respect to the aforesaid works. The Appellant argued that the Respondent had failed to complete the work within the stipulated period, but vide its meeting dated 05.10.2002, it resolved to grant an extension of time upto 31.12.2002 on an undertaking from the Respondent that the Appellant would be at liberty to impose penalty as provided in the contracts and as decided by the Appellant in case balance works were not completed by 31.12.2002. On 30.10.2002, the Respondent submitted the required undertaking. 6. It is not disputed that vide the final contract certificates issued by the Appellant on 18.02.2003 and 26.03.2003, final payment was received by the Respondent in respect of the works in question. After a hiatus of about six months, the Respondent then started making demands towards reimbursement on account of variation in prices of material, labour and fuel. These demands were made vide letters dated 08.09.2003, 24.07.2004 and 12.10.2004. 7. After a silence of over two years, the Respondent then issued a letter dated 07.11.2006 by which the Respondent requested for the appointment of an arbitrator in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested by you may not be available as 8 years time has been elapsed after conclusion of the contract. 2. Subsequent to conclusion of the contract and after receipt of final payments, your client has started addressing letters as referred in your notice culminating into the present notice under reply and seeking additional claim towards reimbursement on variation in prices, though there is no such clause in the agreement entered for execution of above referred works to claim amounts on variation of prices. Moreover the contract period is one year from the date of awarding contract and the contract periods were came to an end by 2001 and 2002 respectively. Whereas your client has got issued final notice under reply on 30.01.2010 and insisting appointment of an Arbitrator though no dispute is subsisting between your client and my client and moreover your client's claim is barred under law of limitation. 4. In the above said background the contention in your notice under reply that your client is insisting for the appointment of an Arbitrator for adjudication of the dispute and that appointing authority has not appointed the arbitrator and that arbitration proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of an arbitrator. This was rejected by the Appellant vide a letter dated 10.11.2010, which letter informed the Respondent that the President of the Secunderabad Cantonment Board had rejected the application for appointment of an arbitrator as all payments were made and nothing remained pending. 11. After a three-year long hiatus, the Respondent then filed applications under Section 11 of the Arbitration Act on 06.11.2013. Vide the impugned judgment dated 20.08.2019, a learned Single Judge of the High Court for the State of Telangana held that the Section 11 applications were within time as they were filed within three years from the letter dated 10.11.2010 rejecting the request to appoint an arbitrator. The learned Single Judge also went on to record: 39. Proceedings dt. 07.11.2003 filed by the respondent of a Board Meeting of the respondent no doubt show payment of ₹ 14,06,580/- in addition to ₹ 14,84,000/- but this payment is not on account of claim under Clause 2.2.46 for reimbursement on variation in prices claimed by the applicant. It is a payment sanctioned for actual quantities of the various items of work which had increased, and so the same cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt an arbitrator constituted a failure to perform the function entrusted to the President of the Secunderabad Cantonment Board under Clause 2.2.52 of the General Conditions of Contract [ GCC ], and thus the cause of action under Section 11(6)(c) of the Arbitration Act first arose on 10.11.2010. Till such rejection, the claim would have to be deemed to have been pending and thus, the Respondent s claim was alive at the time of filing the applications under Section 11 of the Arbitration Act. Further, though he pressed the point that the final bill was received under protest since the price variation bill submitted with the final bill had not been cleared by the Appellant, he produced no such document evidencing the same. In addition, he sought to distinguish, on facts, the judgments of this Court in Geo Miller Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd., (2020) 14 SCC 643 and Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 from the appeals before us, by arguing that the GCC between the Appellant and the Respondent specifically provided for a procedure to appoint an arbitrator and that the Appellant was responsible for delaying and sitting on the Respondent s request. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the appointment of an arbitrator before a court only by the end of 2003, his claim is clearly barred by limitation. xxx xxx xxx 23. Turning to the other decisions, it is true that in Inder Singh Rekhi [Inder Singh Rekhi v. DDA, (1988) 2 SCC 338], this Court observed that the existence of a dispute is essential for appointment of an arbitrator. A dispute arises when a claim is asserted by one party and denied by the other. The term dispute entails a positive element and mere inaction to pay does not lead to the inference that dispute exists. In that case, since the respondent failed to finalise the bills due to the applicant, this Court held that cause of action would be treated as arising not from the date on which the payment became due, but on the date when the applicant first wrote to the respondent requesting finalisation of the bills. However, the Court also expressly observed that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders . 24. In the present case, the appellant has not disputed the High Court's finding that the appellant itself had handed over the final bill to the respondent on 8-2-1983. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of limitation for filing a petition seeking appointment of an arbitrator/s cannot be confused or conflated with the period of limitation applicable to the substantive claims made in the underlying commercial contract. The period of limitation for such claims is prescribed under various Articles of the Limitation Act, 1963. The limitation for deciding the underlying substantive disputes is necessarily distinct from that of filing an application for appointment of an arbitrator. This position was recognized even under Section 20 of the Arbitration Act 1940. Reference may be made to the judgment of this Court in C. Budhraja v. Chairman, Orissa Mining Corporation Ltd. [(2008) 2 SCC 444] wherein it was held that Section 37(3) of the 1940 Act provides that for the purpose of the Limitation Act, an arbitration is deemed to have commenced when one party to the arbitration agreement serves on the other party, a notice requiring the appointment of an arbitrator. Paragraph 26 of this judgment reads as follows : 26. Section 37(3) of the Act provides that for the purpose of the Limitation Act, an arbitration is deemed to have been commenced when one party to the arbitration agreement s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear i.e. the court should and need only look into one aspect-the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple-it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. 59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] . This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists-nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected. 25. In Mayavati Trading Company Private Ltd. v. Pradyut Dev Burman [(2019) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve mandate contained in the amended Section 11(6A), the Court is now required only to examine the existence of the arbitration agreement. All other preliminary or threshold issues are left to be decided by the arbitrator under Section 16, which enshrines the kompetenz-komptenz principle. The doctrine of kompetenz-komptenz implies that the arbitral tribunal is empowered, and has the competence to rule on its own jurisdiction, including determination of all jurisdictional issues. This was intended to minimise judicial intervention at the pre-reference stage, so that the arbitral process is not thwarted at the threshold when a preliminary objection is raised by the parties. (emphasis in original) 19. This Court went on to hold that limitation is not a jurisdictional issue but is an admissibility issue. It then referred to a recent judgment of this Court in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, and stated as follows: 36. In a recent judgment delivered by a three-judge bench in Vidya Drolia v. Durga Trading Corporation [(2021) 2 SCC 1], on the scope of power under Sections 8 and 11, it has been held that the Court must undertake a primary first revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the Arbitral Tribunal for decision on merits. Similar would be the position in case of disputed no-claim certificate or defence on the plea of novation and accord and satisfaction . As observed in Premium Nafta Products Ltd. [Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)] , it is not to be expected that commercial men while entering transactions inter se would knowingly create a system which would require that the court should first decide whether the contract should be rectified or avoided or rescinded, as the case may be, and then if the contract is held to be valid, it would require the arbitrator to resolve the issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the Arbitration Act is concerned, it is clear that the demand for arbitration in the present case was made by the letter dated 07.11.2006. This demand was reiterated by a letter dated 13.01.2007, which letter itself informed the Appellant that appointment of an arbitrator would have to be made within 30 days. At the very latest, therefore, on the facts of this case, time began to run on and from 12.02.2007. The Appellant s laconic letter dated 23.01.2007, which stated that the matter was under consideration, was within the 30-day period. On and from 12.02.2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the Respondent and time began running from that day. Obviously, once time has started running, any final rejection by the Appellant by its letter dated 10.11.2010 would not give any fresh start to a limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 06.11.2013, they were within the limitation period of three years start ..... X X X X Extracts X X X X X X X X Extracts X X X X
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