2019 Supreme(SC) 984

SUPREME COURT OF INDIA
N.V. RAMANA, AJAY RASTOGI, MOHAN M. SHANTANAGOUDAR, JJ.
M/s Geo Miller & Co. Pvt. Ltd. – Appellant
Versus
Chairman, Rajasthan Vidyut Utpadan Nigam Ltd. – Respondent
Civil Appeal Nos. 967, 968, 969 of 2010
Decided On : 03-09-2019

IMPORTANT POINTS
(1) Date of commencement of arbitration proceedings for the purpose of deciding which Act applies, shall be regarded as the date on which notice was served to other party requesting appointment of an Arbitrator.
(2) Limitation period for reference of a dispute to arbitration or for seeking appointment of an Arbitrator before a Court under 1940 Act as well as 1996 Act is three years from the date on which cause of action or claim which is sought to be arbitrated first arises.
(3) Mere correspondence of appellant by way of writing letters/reminders to respondent subsequent to this date would not extend time of limitation.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Section 11(6) read with Sections 21, 43 and 85(2)(a) – Limitation Act, 1963 – Section 5 and Article 137 of First Schedule – Arbitration Applications – Bar of limitation – Dispute emanating from work orders for execution of work on a water treatment plant – Date of commencement of arbitration proceedings for the purpose of deciding which Act applies, shall be regarded as the date on which notice was served to other party requesting appointment of an Arbitrator – Limitation period for reference of a dispute to arbitration or for seeking appointment of an Arbitrator before a Court under 1940 Act as well as 1996 Act is three years from the date on which cause of action or claim which is sought to be arbitrated first arises – Mere correspondence of appellant by way of writing letters/reminders to respondent subsequent to this date would not extend time of limitation – Maximum period during which this Court could have allowed appellant’s application for appointment of an Arbitrator is 3 years from the date on which cause of action arose – Right to apply in present case accrued from date on which final bill was raised – Appellant’s own default in sleeping over his right for 14 years will not constitute a case of undue hardship justifying extension of time under Section 43(3) of 1996 Act or show ‘sufficient cause’ for condonation of delay under Section 5 of Limitation Act – Appeals dismissed. (Paras 6, 7, 8, 9, 11 and 12)

(B) Limitation Act, 1963 – Section 14 – Arbitration and Conciliation Act, 1996 – Section 43 – Limitation – Exemption – Arbitration Applications – In a commercial dispute, while mere failure to pay may not give rise to a cause of action, once applicant has asserted their claim and respondent fails to respond to such claim, such failure will be treated as a denial of applicant’s claim giving rise to a dispute, and therefore cause of action for reference to arbitration – It does not lie to applicant to plead that waited for an unreasonably long period to refer dispute to arbitration merely on account of respondent’s failure to settle their claim and because they were writing representations and reminders to the respondent in meanwhile – On a certain set of facts and circumstances, period during which parties were bona fide negotiating towards an amicable settlement may be excluded for the purpose of computing the period of limitation for reference to arbitration under 1996 Act – However, in such cases entire negotiation history between parties must be specifically pleaded and placed on record – Court upon careful consideration of such history must find out what was breaking point at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of dispute for arbitration. (Para 10)

Facts of Case:

Respondent had floated tenders for execution of work on a water treatment plant. Three work orders were assigned in favour of appellant. Instant appeals arise out of common judgement of High Court of Rajasthan at Jaipur Bench dismissing three Arbitration Applications filed by appellant under Section 11(6) of Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator for adjudication of disputes between the common appellant and the respondent in these appeals.

Findings of Court:

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 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.

Result : Appeals dismissed.