Union of India and others v. Bimal Kumar Kar — 1973 DIGILAW 3 (GAU)

Judgement GOSWAMI, C. J. :- This is a first appeal by the defendants and is directed against an order passed by Sri R. C. Bora, Assistant District Judge No. 2, Gauhati, ordering an agreement to be filed for arbitration under Section 20 of the Arbitration Act, 1940 (briefly the Act). 2. The plaintiff is a registered contractor of the N. F. Railway and he took various contracts for doing miscellaneous works at Pandu under the aforesaid Railway. In the instant case the plaintiffs contract was in connection with the preliminary works of the Brahmaputra Bridge construction at Adabari colony. A deed of agreement was executed between the parties and later a subsidiary contract was also executed adding to the volume of the works. The plaintiff completed the works and a final bill was submitted. The defendant-railway paid the amount of the bill in full in December, 1958. The plaintiff had however several other bills pending in connection with other contracts under the Railway. On 27th January, 1961, the plaintiff was intimated by the Executive Engineer II, Brahmaputra Bridge Project, Pandu, that an amount of Rs. 21,056/- was paid to him in excess of the dues for the works done in connection with the aforesaid two contracts and that it was proposed to withhold the payment of other bills to the extent of that amount. The plaintiff objected to this, but the Railways actually withheld the abovesaid amount from the other bills of the plaintiff. It is common ground and is apparent from the agreement dated 30th January, 1958 (Ext. 1) that the contractor has agreed for the performance of the works in accordance with the General Conditions of Contract and Standard Specifications (1956 Edition) of the Engineering Department of the North-Eastern Railway (briefly the Regulations) By a letter dated 29th January 1961 (Ext. 3) the plaintiff requested the Executive Engineer to "reconsider your decision and exempt me from any such recovery for the reason as stated above". This letter was in reply to the Executive Engineers letter dated 27th January, 1961 (Ext. 2). By Ext. 4, the plaintiff again on 30th January, 1961 reiterated his objections and requested the Chief Engineer this time for a decision. This letter was in reply to the Executive Engineers letter dated 27th January, 1961 (Ext. 2). By Ext. 4, the plaintiff again on 30th January, 1961 reiterated his objections and requested the Chief Engineer this time for a decision. In this letter, he concluded as follows : "If my contentions are not agreed upon an early reply communicating your decision may kindly be given in order to enable me to take further action." There was no response from the Railway and the plaintiff, through his lawyer, gave a notice under Section 80, C.P.C. to the General Manager, N. F. Railway at Pandu, on 15th March, 1961 (Ext. Ka). This evoked a reply from the General Manager to the plaintiff dated 14th June, 1961 (Ext. Kha), whereby it was pointed out that "the Railway Administration has acted according to provisions of the agreement, thus no liability attaches to it for the deductions made". Since Ext. Ka dated 15th March, 1961 referred to the previous letters of the plaintiff of 29th January, 1961 and 30th January, 1961, the General Managers reply dated 14th June, 1961 can be taken as answer to all these letters. The plaintiff again on 6th September, 1961 served another notice (Ext. Ga) upon the General Manager through his advocate requesting "to consider the matter and pass orders for payment.........". The General Manager replied by Ext. Gha dated 18th January, 1962 to the plaintiffs advocate that "recovery was made in terms of clause 52 of the General Conditions of Contract amended by North Eastern Railway in correction slip No. 2." 3. Finally the plaintiff on 30th March, 1963 made an application to the General Manager, North-Eastern Railway, representing the railway at Maligaon, Pandu (Ext. Unga) "an application demanding reference to arbitration, the matter in question, dispute or difference". The plaintiff made another demand for reference to arbitration on the same terms by Ext. Cha, which bears no date, but is now admitted by both sides to have been given on 30th September, 1966 and received by the defendant on 3rd October, 1966. The defendant attempted to prove by producing a document marked X that it had replied rejecting the plaintiffs demand. The plaintiff in the above background submitted his application under Section 20 of the Act in the court of the Assistant District Judge. The defendants resisted the claim by filing a written statement denying liability. The defendant attempted to prove by producing a document marked X that it had replied rejecting the plaintiffs demand. The plaintiff in the above background submitted his application under Section 20 of the Act in the court of the Assistant District Judge. The defendants resisted the claim by filing a written statement denying liability. Amongst other points taken, was the question of limitation. 4. Apart from the documentary evidence to which we have already made reference, the plaintiff examined himself and no other oral evidence was adduced by him. The defendants also did not examine any witness. 5. Two issues were framed by the court below : (1) Whether the application is barred by limitation? (2) Whether there is sufficient ground for referring the matter for arbitration? Both the issues were decided in favour of the plaintiff. The court held that the application was not barred by limitation and that no sufficient cause was shown for not ordering for the agreement to be filed. 6. The only question that is canvassed before us on behalf of the appellants is that of limitation. According to the learned counsel Mr. D. C. Choudhury, the application under Section 20 of the Act is barred under Article 137 of the Limitation Act, 1963. It is admitted that the New Act applies to this case. But Mr. B. Das, the learned counsel for the respondent, contends that the application is not barred by limitation. He, however, candidly admits that the right to apply under Section 20 of the Act would arise On 14th June, 1961, the date of the reply of the General Manager by Ext. Kha, if it can be held by that that a decision has been communicated by the General Manager, under clause 62 of the Regulations. According to the learned counsel, no decision has been notified by the Railway in conformity with clause 62. We may, therefore, read that clause : "All disputes or differences of any kind whatever arising out of or in connection with the Contract, whether during the progress of the works or after their completion and whether before or after the determination of the contract, shall be referred by the Contractor to the Railway and the Railway shall within a reasonable time after their presentation make and notify decisions thereon in writing. The decision, directions and certificates with respect to any matters decision of which is specially provided for by these conditions, given and made by the Railway or by the Engineer on behalf of the Railway, which matters are referred to hereinafter as Excepted Matters shall be final and binding upon the Contractor and shall not be set aside or be attempted to be set aside on account of any informality, omission, delay or error in proceeding in or about the same or on any other ground or for any other reason and shall be without appeal." We may refer to Clause 63 (1) of the Regulations, to which also our attention has been drawn by Mr. Das : "If the Contractor be dissatisfied with the decision of the Railway, on any matters in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the Contractor may claim to be entitled to or if the Railway fails to make a decision within a reasonable time then in any such case but except in any of the Excepted Matters referred to in Clause 62 of these conditions the Contractor shall within 10 days of the receipt of the communication of such decision or after the expiry of the reasonable time as the case may be, demand in writing that such matters in question, dispute or difference be referred to arbitration. Such demand for arbitration shall be delivered to the Railway by the Contractor and shall specify the matters which are in question, dispute or difference and only such dispute or difference of which the demand has been made and no other shall be referred to arbitration." 7. Mr. Choudhury submits that since the plaintiff did not comply with clause 63 (1) in making a demand within ten days of the receipt of the communication of the decision made under clause 62, he cannot make any application to the court under Section 20 of the Act. We are not required to consider whether clause 63 (1) can be a total bar to the institution of the application under Section 20 of the Act, since the matter can be disposed of on the question of limitation. 8. With regard to the question of limitation, Mr. We are not required to consider whether clause 63 (1) can be a total bar to the institution of the application under Section 20 of the Act, since the matter can be disposed of on the question of limitation. 8. With regard to the question of limitation, Mr. Das submits that Article 137 of the limitation Act, 1963, which corresponds to Article 181 of the previous Act, does not apply to an application under Section 20 of the Act. In support of his submission, he relies upon two decisions of the Supreme Court reported in AIR 1967 SC 990 (Wazir Chand v. Union of India) and AIR 1969 SC 474 (Mohd. Usman v. Union of India). In the first decision ( AIR 1967 SC 990 ), dealing with Article 181 of the Limitation Act, 1908, the Supreme Court observed as follows : "If Art. 181 of the Limitation Act only governs applications under the Code of Civil Procedure for which no period of limitation is provided under the Schedule, an application under the Arbitration Act, 1940 not being an application under the Code of Civil Procedure, unless there is some provision, which by express enactment or plain intendment to the contrary in the Arbitration Act, will not be governed by that Article." With regard to the argument advanced on the score of Section 37 (1) of the Arbitration Act the Supreme Court observed : "There is no doubt that clause (1) of Section 37 of the Arbitration Act deals only with the authority of the arbitrator to deal with and decide any dispute referred to him : it has no concern with an application made to the Court to file an arbitration agreement and to refer a dispute to the arbitrator. After an agreement is filed in Court and the matter is referred to the arbitrator, it is for the arbitrator to decide by the application of the law contained in the Limitation Act, whether the claim is barred. After an agreement is filed in Court and the matter is referred to the arbitrator, it is for the arbitrator to decide by the application of the law contained in the Limitation Act, whether the claim is barred. But Section 37 (1) does not confer authority upon the Court to reject the application under Section 20 of the Arbitration Act because the claim is not made within three years from the date on which the right to apply arose." In the second decision ( AIR 1969 SC 474 ), the Supreme Court, following its earlier decision in AIR 1967 SC 990 , observed as follows : "In the circumstances, it is not possible to construe the implied reference in Art. 181 to the Code of Civil Procedure as a reference to the Arbitration Act, 1940, or to hold that Art. 181 applies to applications under that Act." Although Mr. Das has strenuously urged that we should accept the ratio decidendi of the above two cases of the Supreme Court, we are unable to apply the same in the present case. The new Limitation Act, 1963 added a new clause to the definition of "applicant" under Section 2 (a) which now includes (i) a petitioner; (ii) any person from or through whom an applicant derives his right to apply; (iii) any person whose estate is represented by the applicant as executor, administrator or other representative. A new clause 2 (b) was also inserted, which provides that "application" includes a petition. This was made following the recommendations of the Third Report of the Law Commission of India, from which we may quote the relevant paragraph : "Section 2 - Definitions : 9. We recommend that a new definition of the word "application", so as to include any petition, original or otherwise, should be added. The object is to provide a period of limitation for original petitions and applications under special laws as there is no such provision now. Consequential alterations in the definition of the word "applicant" should also be made." It is, therefore, clear that the legal position has changed after the commencement of the new Limitation Act and the provisions of the Limitation Act will be attracted to an application under the Special Act, such as the Arbitration Act. The matter is no longer in dispute about Article 137 applying to any applications. The matter is no longer in dispute about Article 137 applying to any applications. An application under Section 20 of the Act is also an application within the meaning of Section 2 (b) of the Limitation Act, 1963 and the applicant therein is a petitioner within the meaning of Section 2 (a) (i) of the Limitation Act. That being the position, Article 137, which is a residuary Article, will apply to an application under Section 20 of the Arbitration Act and the period will be three years from the time the right to apply accrues. 9. That takes us to the next question as to when the right to apply under Section 20 of the Act accrued to the petitioner in this case. Mr. Das strenuously contends that the railway has, at no point of time, communicated its decision to the reference made by the contractor with regard to the admitted dispute or difference between the parties in connection with the contract. That being the position, he submits that since there was failure on the part of the railway to make a decision under clause 63 (1), the plaintiff was entitled to make an application within a reasonable time under that clause. The plaintiff exercised that right by addressing to the railway two letters dated 30-3-63 (Ext. Unga) and 30-9-1966 (Ext. Cha) and since there is no response from the railway, he submits that the right to make an application under Section 20 of the Act accrued to him only on the ultimate failure of the railway to comply with his notice dated 30-9-1966. Hence the application under Section 20 of the Act is not barred under the law. We are, however, unable to accept this submission. We are clearly of opinion that the railway had communicated its decision on 14th June, 1961 when the General Manager replied to the various notices in answer to the request of the plaintiff for "an early reply communicating your decision". (Vide Ext. 4). Since, therefore, the decision has been communicated, as we have held, by the letter dated 14-6-61, the right to make an application under Section 20 of the Act accrued from that time. That being the position, the application under Section 20 of the Act filed in Court on 10th April, 1967 is barred under Art. 137 of the Limitation Act, being beyond the period of three years. That being the position, the application under Section 20 of the Act filed in Court on 10th April, 1967 is barred under Art. 137 of the Limitation Act, being beyond the period of three years. The learned Judge erred in law in holding that the application was not barred under the law. The application before the Assistant District Judge, therefore, stands dismissed. 10. The appeal is allowed. There will, however, be no order as to costs. 11. BINDRA, J. :- I agree. Appeal allowed.