Mere non-payment of dues does not constitute a dispute under Section 8(2) of the Arbitration Act, 1940. However, repudiation and denial of the claim can be inferred from the conduct of the party and other circumstances.

R. C. PATNAIK, J.

( 1 ) THE petitioners in this revision contend that the learned Subordinate Judge has erred in law in appointing an arbitrator under Section 8 (2) of the Arbitration Act when there was no dispute between the parties.

( 2 ) THE opposite party No. 1 entered into agreement No. 7 F-2 of 1968-69 for "construction of Drainage Sluice at Dhanua out fall on Kusabhadra right embankment". He filed an application under Section 8 (2) of the Arbitration Act alleging that in course of the execution of the work he was asked to do a lot of extra items. The amount due to him for the work executed had not been paid in spite of repeated reminders. He had issued series of registered letters to the department demanding payment; but the petitioners failed to take any action. He issued a notice as per the arbitration clause for the appointment of an arbitrator. As no appointment was made within the period of 15 days from the date of receipt of the notice, the court might appoint an arbitrator. He filed a copy of the notice sent on 9-1-1982 and received by the Chief Engineer and others on 11-1-1982. In the notice, he alleged that he had repeatedly demanded payment of his dues and in his last notice, he had intimated that unless his legitimate dues were paid, he would invoke the arbitration clause for realisation of the dues.

( 3 ) IT was urged by the petitioners before the learned Subordinate Judge that there was no dispute between the parties which might be referred to arbitration. Mere non-payment of dues did not give rise to a dispute. The learned Subordinate Judge rejected the contentions of the petitioners.

( 4 ) THE existence of a dispute is an essential condition. If there is no dispute, there can be no reference. (See the observation of Rankin, J. in Uttam Chand v. Jewa Mamooji, AIR 1920 Cal 143 ). Lord Halsbury, L. C. observed in London and North Western and Great Western Joint Railway Companies v. J. H. Billington Ltd. , 1899 AC 79 (HL):

"a condition precedent to the invocation of the arbitration whatever grounds is that a difference between the parties should have arisen; and I think that must mean a difference of opinion before the action is launched. . . . . . . . . "

There can be no dispute with regard to this elementary proposition of law. This has been followed in a number of cases which I may simply note : AIR 1920 Cal 898 (2): Balmukund Ruia v. Gopiram Bhotica; AIR 1940 Cal 105 : Ladha Sing Bedi v. Jyoti Prosad Singha Dee and ILR (1950) 1 Cal 407 : Mathuradas Goverdhandas v. Khusiram Banarasilal.

( 5 ) THE learned Government Advocate strenuously urged that failure to pay or non-payment did not constitute a difference or dispute. Mr. S. C. Mohapatra, learned counsel for opposite party No. 1, however, contended that the proposition advanced by the learned Government Advocate was too broadly stated and was not sound in law. According to him, facts and circumstances of the case change the complexion.

( 6 ) THE authorities may now be seen. Russel says :

"mere refusal to pay upon a claim which is not really disputed does not necessarily give rise to a "dispute" calling an arbitration clause into operation. . . . . . . . . . "

(See Russel on Arbitration, 19th Edn. 1880 ). Rightly has the learned Government Advocate urged that a dispute arises when an assertion of a right is made by one party and there is repudiation thereof by the other and relied upon Chandmull v. Nippon (AIR 1321 Cal 342 ). In the said case the appellant in the High Court wanted a variety of information from the respondents to enable him to judge whether the goods supplied were or were not according to the contract. He demanded production of shipment samples. The respondents declined to comply with the requests, Their Lordships observed :-

". . . . . . . . . But there was at no stage an assertion by the buyer that the goods had not been supplied according to the contract and consequently there was not and could not be a repudiation by the sellers of a