The cause of action for filing a petition under Section 20 of the Arbitration Act arises when the respondent disputes liability, and the petition must be filed within the statutory limitation period.

( 1 ) THE appellant herein had filed a petition under section 20 of the Arbitration Act, 1940 (for short "the act ) for appointment of arbitrator and reference of disputes to him as per the arbitration agreement entered into between the parties. This petition was dismissed by the learned Addl. District Judge, Delhi vide judgment dated 21st May, 1985. The present appeal is directed against the aforesaid judgment.

( 2 ) THE facts which were stated by the appellant in the petition filed by it in brief are that the appellant transfers technical know-how and expertise developed by different Government laboratories. The respondent herein approached the appellant for transfer of technical know-how developed by the National Physical laboratory, New Delhi for manufacture of hard ferrites covered by Indian Patent No. 93725. Acceding to the request of the respondent, an agreement dated 8th august, 1967 was entered into between the parties for this purpose which agreement was operative from november, 1965. The agreement was on non-exclusive basis. As per this agreement, in consideration of royalty at the rate of 2 1/2 per cent on the net ex-factory sale price of material manufactured by him in accordance with the said invention , the technical know-how was to be provided by the appellant. The licence was to remain in force for the period of 14 years as provided in clause 1 of the agreement. It was further agreed that in case of default of payment of royalty interest was payable at the rate of 6 per cent from the date of default in making the payment and the respondent was required to file half yearly returns indicating the sale of produces so manufactured. These half yearly returns were to be filed by the appellant by 1st of April and 1st of October every year.

( 3 ) IN case of disputes and difference, clause 12 of the agreement provided for arbitration which is in the following terms:

"12:if any dispute or difference arises between the parties hereto or their representatives or assigns with respect to their rights or liabilities or in regard to any other matter under presents, save as to any matters the decision whereof is hereinbefore expressly provided for, the same shall be referred TO to the sole arbitration of the chairman, National Research Development corporation of India, and if he is unable or unwilling to act, to the sole arbitration or some other person appointed by him and willing to act as such arbitrator. The reference to the arbitration shall be deemed to be as a submission within the meaning of the arbitration Act, 1940 or any statutory modifications or re-enactment thereof and the rules made thereunder for the time being in force shall apply to such reference and this deed shall be deemed to be a submission to such arbitration. It is the condition of this Clause that all hearings of the arbitration will take place at Delhi. "it is the case of the appellant that royalty returns were filed by the respondent in the beginning and till march, 1967 after entering into the agreement indicating the production to be "nil . Thereafter, no such returns were filed on the ground that the royalty was payable only after off-setting the losses suffered by the profits made by the respondent. This plea of the respondent was, however, controverted by the appellant and the respondent was asked to file royalty returns due to the appellant. Instead of doing so, the respondent reiterated his stand by letter dated 20th february, 1971. According to the appellant, various letters were written thereafter being dated 19th december, 1975, 20th January, 13th February, 30th march, 1976, 25th September, 1978, 19th February, 1979, llth January and 24th/25th January, 1980. However, at this stage, the respondent wrote a letter dated 26th september, 1980 stating that M/s power Agents , the business which was being carried out by him as sole proprietor, had been purchased by his father sh. P. N. Kathpalia and since his father died thereafter the