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High Court Of Delhi
SWARAN SINGH - Appellant
Versus
UNION OF INDIA - Respondent
Suit 103A of 1980
Decided On : 08/31/1981
ARBITRATION - APPOINTMENT OF ARBITRATOR - WAIVER OF CLAIM - LIMITATION - INTERPRETATION OF ARBITRATION CLAUSE - SECTION 20 OF THE INDIAN ARBITRATION ACT, 1940.
Fact of the Case:
The petitioner, a sole proprietor of a firm, entered into a contract with the Union of India for the construction of a building. The contract provided that disputes between the parties would be referred to an arbitrator appointed by the Chief Engineer. The work was completed in September 1975, and the petitioner received a letter in May 1977 stating that he was liable to pay a sum of Rs. 3497.00 to the Executive Engineer. The petitioner sent a letter to the Chief Engineer in August 1977 requesting the appointment of an arbitrator, but no arbitrator was appointed. The petitioner then filed an application under Section 20 of the Indian Arbitration Act, 1940, for the appointment of an arbitrator.
Finding of the Court:
The court held that the petition was within limitation, as the starting point for limitation was the date on which the petitioner received intimation of the final bill, which was May 7, 1977. The court also held that the petitioner was not debarred from getting the arbitrator appointed, as the arbitration agreement did not strike at the root of the right to get an arbitrator appointed but struck at the root of the right to have a claim of one party enforced against another. The court further held that there were disputes between the parties which were referable to arbitration, as the Union of India claimed that a sum of Rs. 3,497.00 was due to it from the petitioner, and the petitioner denied the same and claimed certain amounts as mentioned in Annexure A to his letter dated August 1, 1977.
Issues: 1. Whether the petition was within limitation? 2. Whether the respondent (Union of India) had been discharged and relieved of all liabilities under the contract and there could not be any reference to arbitration on account of the petitioner not giving notice in writing within 90 days for reference to arbitration? 3. If issue No. 2 is decided in favor of respondent (Union of India) is the petitioner entitled to the benefit of the provisions of S. 37 (4) of the Arbitration Act? 4. Is there no dispute which is referable to the arbitration as alleged in para No. 5 on merits of W. S. of the respondent (OPR ).
Ratio Decidendi: 1. The limitation period for filing an application under Section 20 of the Arbitration Act, 1940, is three years from the date when the right to apply accrues, which is when disputes arise and the petitioner is given intimation of the final bill. 2. A failure to give a notice in writing within 90 days for reference to arbitration entails waiving of the claim of the contractors and discharge of liabilities of the Government under the Contract. However, the question of whether the Government stood discharged of all liabilities or whether the petitioner had waived his rights under the contract is to be decided by the arbitrator. 3. The court cannot decide the merits of a claim or claims under Section 20 of the Arbitration Act, 1940, as that is the domain of the arbitrator.
Final Decision: The court directed the Chief Engineer to appoint an arbitrator within two months from the date of the order and refer the dispute between the parties to him. The disputes included the claim of the Union of India that it was entitled to a sum of Rs. 3,497.00 and the claims contained in Annexure A to the letter dated August 1, 1977.
( 1 ) THE present application (registered as Suit No. 103-A of 1980) is under Section 20 of the Indian Arbitration Act for filing of original arbitration agreement and appointment of an arbitrator in terms of the same.
( 2 ) THE petitioner is sole proprietor of the firm M/s. Fasion Craft Centre who entered into a contract with the Union of India for the "construction of P. S. E. Building at plot No. 114, Parliament Street, New Delhi- Interior Decoration (Four Committee Rooms, Cafeteria, Banquet Hall, Private Dining rooms and Multipurposes Hall". That contract was signed by the petitioner on one. hand and the Executive Engineer Construction Division of C. P. W. D. , New Delhi (hereinafter referred to as the Executive Engineer) on behalf of Union of India. That contract provided that in the event of disputes between the parties same would be referred to an arbitrator to be appointed by the Chief Engineer/ndz/central P. W. D. Nirman Bhawan, New Delhi (hereinafter referred to as the Chief Engineer ).
( 3 ) THE work was to be completed by July 12, 1974 but the time was thereafter extended and work was actually completed on 27th Sep. , 1975. The petitioner received a letter dated May 5, 1977 to the effect that final bill of the aforesaid work had been adjusted vide transfer entry No. 20 dated May 5, 1977 and that according to the same petitioner was liable to pay a sum of Rs. 3497. 00 to the Executive Engineer Construction Division No. VII. Petitioner says that he did receive such a letter but neither final bill nor copy thereof was along with the same and that, as there were lot of disputes in respect of the said bill, he sent a letter dated Aug. 1, 1977 to the Chief Engineer along with a list of his claims in the form of Annexure A, requesting the Chief Engineer to appoint an arbitrator for deciding disputes between the parties. However, in spite of reminders no arbitrator was appointed and therefore, present petition was brought.
( 4 ) UNION of India contested the application. It was inter alia pleaded that the petition was against Chief Engineer also, that the same did not lie against him and that therefore, petition be dismissed. On Sept. 22, 1980 it was decided that the petition could not be brought against Chief Engineer and that his name should be removed from the list of the respondents.
( 5 ) IN the written statement Union of India relied upon following portion of the arbitration agreement (copy of which admittedly is Ex. P-l) between the parties:-
"it is also a term of the contract that it the contractors) do/does not make any demand for arbitration in respect of any claims in writing within 90 days of receiving the intimation from the Government, that the bill is ready for payment, the claim of the contractors) will be deemed to have been waived and absolutely barred and the Government shall be discharged and relieved of all liabilities under the contract in respect of these claims. "it was pleaded by Union of India that the petitioner failed to make demand for arbitration within 90 days of receiving of the intimation from the Government that the final bill was ready for payment and that, therefore, petitioner had lost all rights and claims against the former. Respondent, Union of India, explained that it was by means of letter dated Jan. 19, 1977 that the petitioner wag intimated that the final bill was ready in all respect, that petitioner should have made his demand for appointment of arbitrator within 90 days from the said date, but that that wa not done and that actually it was on 1st Aug. , 1977 that such a demand was made on account of which petitioner had lost all rights for claiming any amount from Union of India and there could not be any appointment of arbitrator. In. the alternative it was pleaded that in cae 19th Jan. , 1977 was not starting point of those 90 day, the tame started from April 30, 1977 on which date petitioner signed the final bill It is admitted that letter dated May 5, 1977 w
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