IMPORTANT POINT
Limitation for filing application u/s.20 of Arbitration Act, 1940 is as prescribed under Acticle 137 of the Limitation Act, 1963. In an appropriate case the court can extend the benefit of Section 5 of Limitation Act, 1963. The delay not wilful can be condoned but only upon payment of costs.

Headnote:(i) Arbitration Act, 1940-Section 20-Application under-Limitation Act, 1963-Article 137-Limitation of 3 years-Agreement to provide Ropeway system between parties-Arbitration clause-First reconciliation them reference-Notice dated 17.4.1990 making claims-Reply dated 17.5.1990 repidiating claims-When cause of action arose?-(On 17.5.1990)-Whether limitation extended by later correspondence between parties u/s.18 of Limitation Act? (No)-Result-High Court rightly held application is time barred.
       Held : A perusal of the notice sent by the appellant on 17.4.1990 to the respondent and the reply received from the latter would show that the cause of action had arisen for filing of a petition under section 20 of the Act as early as on 17.5.1990. (Para 11)
       In the absence of any other material, it is difficult to discern whether this correspondence would amount to any effective mutual consultations between the parties. The Division Bench has rightly held that these letters hardly make any acknowledgement under Section 18 of the Limitation Act. There is not much controversy that the residuary article 137 of the Limitation Act applies so far as the period of limitation is concerned for an application under Section 20 of the Arbitration Act, 1940. The residuary article 181 of the Limitation Act, 1908 was replaced by Article 137 in the Limitation Act, 1963 Earlier, Article 181 was applicable only in respect of application to be filed under the Civil Procedure Code. This Article was replaced by Article 137 in the Limitation Act, 1963 in a modified form. By insertion of Article 137, it cast a wider net so as to include any application for which no period of limitation was provided elsewhere in that division. The third division of the Limitation Act, 1963 deals with various applications to be filed under various special statutes. The definitions of applicant and application are also inserted in the Limitation Act, 1963. Therefore, it is clear that the intention of the legislature was to provide a residuary article prescribing period of limitation for filing petitions and applications under the various special laws. (Paras 14 & 15)
       Under Section 20 of the Act, the cause of action for filing an application may arise whenever "a difference has arisen to which the agreement applies". Regard must be had to the relevant arbitration clause in the agreement. If any specific terms are used in the arbitration clause, that would govern the parties as to when a petition for reference of arbitration shall be filed in Court. In the instant case, the arbitration clause states that all parties would resolve such differences by mutual consultation failing which either party must give to the other notice in writing of the existence of such question, dispute or difference and the same shall be referred for the final determination. The appellant issued notice to the respondent and a definite reply was received by the appellant. It is clear that cause of action for filing had arisen, the moment the appellant received the reply notice denying the claims made by the appellant. Therefore, the Division Bench has rightly held that the application was barred by time. (Paras 16 & 17)
       (ii) Arbitration Act, 1940-Section 20-Application under-Time barred-Application for condonation of delay u/s. 5, Limitation Act-Whether applies? (Yes)-Whether delay be condoned? (Yes, subject to deposit of Rs.20,000/- to be paid to respondent)-Appeal disposed of accordingly.
       Held : The appellant herein has filed an application under Section 5 of the Limitation Act praying that the delay in filing the application under Section 20 of the Act be condoned. Section 5 of the Limitation Act says any appeal or any application, other than application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period. The applicant can show sufficient cause for not filing the application in time. It appears that this Court had no occasion to consider whether Section 5 of the Limitation Act, 1963 could be applied in the case of an application to be filed under Section 20 of the Arbitration Act, 1940. The Division Bench of the High Court of Delhi in Union of India and another vs. M/s. Vijay Construction Co. AIR 1981 Delhi 193 held that the benefit of Section 5 of the Limitation can be availed by the applicant for an application under Section 20 of the Arbitration Act. Going by the provision contained in Section 5 of the Act, we are also of the view that in an appropriate case the court can extend the benefit of the said Section. The counsel for the appellant contended that a prayer was made before the High Court for condoning the delay, if any, but the same was rejected. As per the Arbitration clause, the disputes between the parties could be referred to a single arbitrator if agreed to by both the parties but in case of disagreement both the parties can appoint one arbitrator each and in case of disagreement between the said two arbitrators there is a provision that an umpire also could be appointed by the two arbitrators. In the instant case, the learned Single Judge straightaway appointed the arbitrator. Though there was a cause of action for the appellant to initiate proceedings under the Arbitration Act for appointment of an arbitrator, the appellant failed to do so. The letter written by the respondent on 6.4.1993 indicates that the respondent had some proposal for consideration. Having regard to the nature of disputes between the parties, we are of the view that the delay caused in filing the application by the appellant was not willful and hence is liable to be condoned. However, in the facts and circumstances of the case we are also of the view that the delay shall be liable to be condoned only upon payment of costs. Accordingly, the delay in filing the application under Section 20 of the Arbitration Act is condoned on condition that the appellant pays a sum of Rs. 20,000/- to the respondent within a period of one month. The said sum of Rs. 20,000/- shall be deposited with the Registrar General of this Court on or before 1st December, 2001 and on such deposit the respondent would be at liberty to withdraw the same. For payment of cost as stated above, the appeal would stand allowed and the matter would be remitted to the High Court to be proceed with in accordance with the provisions of the Arbitration Act, 1940, read with relevant arbitration clause in the agreement between the parties. In case the appellant fails to deposit the said amount of Rs. 20,000/- within the stipulated period, the appeal would be deemed to have been dismissed without further reference to the Court. (Paras 18, 19 & 20)

JUDGMENT

Balakrishnan, J.-Leave granted.

2. The appellant construed a hotel resort by name "Timber Trail Heights" at Bansaar in Himachal Pradesh. This place is at a high altitude of 5000 feet from sea level and in order to ensure a quick access for the visiting tourists to this resort, the appellant wanted to have a passenger ropeway system and for that purpose, the appellant entered into a contract with the respondent, by name, Usha Breco Limited. The respondent completed the work relating to ropeway system and handed over the same to the appellant on 27.4.1988. Initially, the ropeway system was being operated and maintained by the employees of the respondent, but later on the appellant absorbed those workers as its own employees. According to the appellant, right from the beginning, the ropeway system was not functioning well and it did not meet the specification required by the appellant. The appellant had been making a request to the respondent to rectify the defects but the latter failed to rectify the same. The appellant also alleged that the respondent did not cooperate with the appellant for getting clearance from the Himachal Pradesh Ropeway Inspector. The Inspector did not approve the ropeway system for the installed capacity. The appellant, alleged that the works undertaken by the respondent were defined in the annexure to the agreement and as per the agreement, the ropeway system must have a capacity for carrying on 150 passengers per hour and it was further stipulated that within 8 hours of operation per day, the total capacity of passengers must be 1200 per day and according to the appellant based on such representation, assurance and agreement, the appellant invested huge amount for the ropeway system. The appellant later realized that only 800 passengers would be able to reach the destination through the ropeway system per day and this, according to the appellant, caused heavy financial loss. The appellant issued a notice to the respondent but the latter did not accede to their request. Ultimately, on 16.6.1993. the appellant issued a notice to the respondent intimating that it would be constrained to file a petition under Section 20 of the Arbitration Act, 1940 (for short the Act"). Clause 15 of the agreement provided for arbitration and the appellant filed a petition under Section 20 of the Act on 30 11.1993.

3. The respondent filed a reply contending that the petition filed by the appellant was barred by limitation. The respondent contended that the appellant had issued notice on 17.4.1990 through its advocate intimating the respondent that they would take legal action against them. It was contended by the respondent that the petition filed under Section 20 of the Act on 30.11.1993 was more than 3 years after the issuance of notice. The respondent alleged that the subsequent notice on 16.6.1993 was issued beyond the period of 3 years from the earlier notice. The respondent also contended that there was no subsisting agreement between the parties and all matters relating to the contract were concluded and the minutes also were recorded on 12.4.1988.

4. The learned Single Judge before whom the application under Section 20 was filed rejected the contention urged by the respondent herein and held that the petition under Section 20 was filed in time The learned Single Judge was of the view that parties had made correspondence regarding the disputes till 1993 and therefore, the petition under Section 20 of the Act was within limitation. The learned Single Judge also observed that a letter written on 6.4.1993 by the respondent to the appellant would amount to acknowledgment under Section 18 of the Limitation Act and on that basis also, the petition for arbitration was held to have been filed within time.

5. This order was challenged before the Division Bench. After an elaborate consideration of the whole matter, the Division Bench came to the conclusion that the petition filed by the appellant under Section 2

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2001 Supreme(SC) 1513

Cases Referred (2)