The cause of action in a claim for an increase in the price of goods supplied under a contract arises on the date when the claim is rejected by the other party, and not on the date of the last supply of goods.

( 1 ) THE contention of U. O. I, is that when the supplies were lastly made in August, 1955, the claim had already become barred by limitation when notice for referring the disputes for arbitration was given. Reference in this connection may be made to S. 37 (3) of the Act which says that for the purposes of S. 37 and of Limitation Act, an arbitration shall be deemed to be commenced when one party to the arbitration agreement serves on the other parties thereto, a notice requiring the appointment of an arbitrator. The respondent, however, contends that cause of action would arise only on 17. 1. 1968 when U. O. I, finally rejected the claim for increase in price. Mr. Gupta said his claim was outside the contract for supply of hosiery goods. If that be so, how could the disputes be subject matter of arbitration, is not clear to me. But, then this is not the objection by the UOI. Mr. Gupta strongly relied on Cannon Dunkerly Co. vs. U. O. I. AIR 1970 SC 1433. In this case a contract was executed on 26. 11. 1948 for construction of certain works at Sindri Fertilizer Factory to be completed by 26. 2. 1950. The appellant company made certain demands by letter dt. 20. 9. 1950 which were, however, rejected by the Additional C. E. In Sept. 1954, certain disputes were referred to arbitration under the contract. The company, however, instituted a suit against the U. O. I, on 9. 8. 56 for enhanced rate in respect of work not covered by the contract but which though carried out under the instructions of the Engineer-in-charge did not arise out of the contract. It was not disputed that the claim in the suit was not covered under the arbitration clause and could not be the subject-matter of the reference. It was contended on behalf of U. O. I. that the suit was barred by limitation under Cls. 56 and 115 of the First Schedule to the Limitation Act, 1908. The Supreme Court held that the suit was covered u/art. 120 and the period of limitation was 6 years. It was then contended that even if the claim fell within the terms of Art. 120, it was barred, for the appellant company had in the suit made a claim for the work done more than 6 years before the institution of the suit and that the period of limitation commenced to run from the date on which the defendant (U. O. I.) obtained the benefit of the work done by the appellant company. The Supreme Court negatived the contention and observed :

"but under Art. 120 of the Lim. Act the period of six years for suits for which no period of limitation is provided elsewhere in the Schedule commences to run when the right to sue accrues. In our judgment, there is no right to sue until there is an accrual of the right asserted in the suit, and its infringement, or at least a clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted. . . . . . " Thus, according to the Supreme Court, the cause of action arose when the rejection was communicated to the party, and on this date the right to sue accrued.

( 7 ) MR. Rajinder Dutt, appearing for the Union of India, however, referred to another decision of the Supreme Court in Sita Ram Goel vs. Municipal Board AIR 1958 SC 1036. It was his argument that once right to claim the excess price accrued on the supply of hosiery goods, the cause of action will arise in favour of the respondent from that date and there could be no stopping of the cause of action. Thus, according to him, last supply was made in August, 1965. The day on which reference to arbitration was made, i. e. , 22. 9. 1969 the claim towards excess price of the goods had become barred by limitation. Mr. Dutt also got support from other decision of the Supreme Court in Major (Retd.) Inder Singh Rekhi vs. D. D. A. JT 1988 (2) SC 6=1988 Rajdhani L. R. 347. This was, however, a case u/s. 20 of the Act. The Court held that in order to be entitled to ask for a reference u/s. 20, there must not only be an entitlement to money but there must be a difference