SWARAN SINGH v. UNION OF INDIA — 1981 DIGILAW 257 (DEL)

G. R. LUTHRA, J. ( 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. 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 was sent to the petitioner to the effect that a sum of RS. 3,497. 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 was sent to the petitioner to the effect that a sum of RS. 3,497. 00 was payable by the petitioner and that he Should deposit the same. It is however, asserted that that was not intimation of final bill but was confirmation to the effect a sum of Rs. 3,497. 00 was payable by the petitioner and that therefore, period of 90 days could not be counted from the receipt of that letter by the petitioner. ( 6 ) IT was pointed out by Union of India that in response to the request made to the petitioner to attend office and sign final bill he came only in the last week of Aprl. 1977, that after going through details of the bill and satisfying himself about correctness of same he signed the same without any protest and that therefore, he did not have any dispute with the Union of India which could be referred to the arbitration. Union of India further pleaded that present petition was barred by limitation. ( 7 ) IN rejoinder to the written statement it was reiterated by the petitioner that he had made request for appointment of arbitrator within 90 days as per terms of the arbitration clause. In the alternative petitioner pleaded that in case Court came to the conclusion that the demand for the arbitration was not made within period of 90 days this Court may extend the said period under subsection (4) of S. 37 of the Arbitration Act otherwise undue hardship would be cause to the petitioner. ( 8 ) FOLLOWING issues were framed on Nov. 5, 1980: 1. Is the petition within limitation? 2. Has the respondent (Union of India) been discharged and relieved of all liabilities under the contract and there cannot be any reference to arbitration on account of the petitioner not giving notice in writing within 90 days for reference to arbitration? (OPR onus objected to ). 3. If issue No. 2 is decided in favour of respondent (Union of India) is the petitioner entitled to the benefit of the provisions of S. 37 (4) of the Arbitration Act? (OPP) 4. (OPR onus objected to ). 3. If issue No. 2 is decided in favour of respondent (Union of India) is the petitioner entitled to the benefit of the provisions of S. 37 (4) of the Arbitration Act? (OPP) 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 ). 5. Relief. ( 9 ) ISSUE No. 1. It is laid down in B. L. Grover v. Union of India, AIR 1980 Delhi 45 that it is Article 137 of the Limitation Act which applies. That provision is to the effect that an application can be brought within three years from the date when the right to apply accrues. In the present case obviously right to apply accrued when disputes arose and the same was when the petitioner was given intimation of the final bill. Before receipt of such intimation and as to what that bill was petitioner could not raise any dispute which could be referred to an arbitrator. According to Union of India intimation of the final bill was given vide letter dated Jan. 19, 1977. Union of India has placed on record a copy of the letter which is Ex. R-l. Body of that letter reads as under : "it is to inform you that your final bill on the above mentioned works are ready in all respects and are lying pending for the want of your signatures. You are therefore, requested to kindly attend this office on any working day within a week s time for signing these final bills so that the bills may be passed. " ( 10 ) FIRSTLY the letter does not say that any copy of the final bill was sent to the petitioner. Letter also does not speak of as to what final bill was. Therefore, it cannot be said that the petitioner had any intimation about the final bill or that he could raise a dispute or disputes. ( 11 ) SECONDLY, it has not come on record as to on which date aforesaid letter was received by the petitioner. Therefore, even if (for the sake of argument) we take it for granted that the date of receipt of that letter was start of limitation, for want of knowledge of that date it cannot be stated as to when period of limitation started. Therefore, even if (for the sake of argument) we take it for granted that the date of receipt of that letter was start of limitation, for want of knowledge of that date it cannot be stated as to when period of limitation started. ( 12 ) THIRDLY copy of the final bill Ex. R-3 which has been placed on record by the Union of India indicates that the said bill was not complete till April 30, 1977. The reason is that the Executive Engineer is purported to have signed that final bill on 30th Apr. , 1977 in token of authorisation of paymemt. Also there is mention in that bill that some items were sanctioned on Apr. 26, 1977. That being go bill could not be finalised before Apr. 30, 1977. Hence limitation period could not start from a date earlier to Apr. 30, 1977. ( 13 ) FOURTHLY, It appears that petitioner got intimation of final bill on 7-5-1977. Affidavit of the petitioner is to the effect that copy of that final bill was never supplied to him and that he, on May 7, 1977, merely got an intimation of the laid bill vide letter dated 5-5-1977 to the effect that a sum of Rupees 3497. 00 was payable by him to the Union of India. That affidavit finds support from a copy of that letter dated 5-5-1977 Ex. R-2 placed on record by Union of India. That indicates that petitioner did not have any idea of the bill before he received aforesaid letter. According to the petitioner he received the aid letter on May 7, 1977 which is quite probable because two days could be taken in transmission. Hence, under these circumstances, starting point for the limitation should be May 7, 1977. ( 14 ) COMPUTING period of limitation of three years from May 7, 1977 the application under S. 20, Arbitration Act brought on Feb. 20, 1980 was within limitation. But even if we take starting point as Apr. 30, 1977 present petition was brought within 3 years of the said date. Issue is therefore, decided in favour of the petitioner. ( 15 ) ISSUE No. 2 Relevant clause which fixed period of 90 days for making a demand for appointment of arbitrator has already been reproduced above. But even if we take starting point as Apr. 30, 1977 present petition was brought within 3 years of the said date. Issue is therefore, decided in favour of the petitioner. ( 15 ) ISSUE No. 2 Relevant clause which fixed period of 90 days for making a demand for appointment of arbitrator has already been reproduced above. It is clear from the said clause that failure to give a notice in writing within 90 days for reference to arbitration entailed waiving of the claim of the contractors and discharge of liabilities of the Government under the Contract. The question whether Union of India stood discharged of all liabilities or whether the petitioner had" waived his rights under the contract is obviously one which is to be decided by the arbitrator. It is arbitrator who has to decide as to whether there is any inter so liability of any of the parties and if so to what extent. The said matter relates to the merits of the claim of the petitioner or the disputes between the parties. Jurisdiction of the Court under Section 20 of the Arbitration Act is limited to a decision of the question whether disputes or differences have arisen or not. In case Court comes to the conclusion that there are some disputes or differences it has to make a reference of the disputes to the arbitrator. It will be then for the arbitrator to decide whether a particular claim is tenable on merits or not and whether notice of the claim was given within time by the contractor and what its effect is and whether the said claim is time barred or not. A Court acting under S. 20 of the ArbitrationAct cannot decide merits of a claim or claims. ( 16 ) THERE is ample authority for the aforesaid view. Two of the decisions in this respect are of Orissa High Court in Fertiliser Corporation of India Ltd. v. Ravi Kumar Ohri, AIR 1979 Orissa 19 and of this Court in M/s. Vilayati Ram Mital v. Union of India, 1980 Rajdhani LR 312. Judgment of this High Court is on the very interpretation of this very clause. Following observations were made in para 14 (on page 318) "i refer again to the term in question. Judgment of this High Court is on the very interpretation of this very clause. Following observations were made in para 14 (on page 318) "i refer again to the term in question. It states that if the claim or demand for arbitration is not raised within 90 days from the intimate that the bill is ready for payment, then the claim will be deemed to have been waived and absolutely barred and the Government will be discharged and released from liability. It does not say that such a claim will not be adjudicated upon by the arbitrator. It will be for the arbitrator to find out whether the Government has been discharged and released from liability or whether the claim has been waived. These are questions of fact. These are not to be determined by the Court. At this stage, we are only to see that there are disputes and those disputes are to be referred to arbitration and the arbitrator can decide those questions. "under the above circumstances, I find that the petitioner is not debarred from getting the arbitrator appointed and that it is before the arbitrator that Union of India can urge that entire claim of the petitioner stands waived and liability of Union of India stands discharged on account of petitioner having failed to demand appointment of an arbitrator within 90 days in view of agreement between the parties. ( 17 ) LEARNED counsel for the Union of India contends that when the petitioner ceases to have any right or claim against Union of India, his right to have an arbitrator appointed ceased to exist, that it is for the Court to give a finding to that effect and that it should be held that in the present case arbitrator could not be appointed. ( 18 ) BUT the argument has no force. There is distinction between two situations. First one is where the arbitration agreement itself stands discharged, waived, exhausted or superseded on account of lapse of certain period. The very root of the arbitration agreement is struck and in that event the disputes cannot be referred to the arbitration. In that case it is for the Court to decide whether the arbitration agreement ceases to exist or not. That is not a matter relating to the decision of the disputes on merits between parties which belongs to the domain of the arbitrator. In that case it is for the Court to decide whether the arbitration agreement ceases to exist or not. That is not a matter relating to the decision of the disputes on merits between parties which belongs to the domain of the arbitrator. Second situation is when lapse of time does not affect agreement to refer to arbitration and merely affect rights and liabilities under the main agreement as in the present case. In the present case agreement referred to above did not strike at the root of the right to get an arbitrator appointed but struck at the root of right to have claim of one party enforced against another. Arbitration agreement therefore, remains. The matter as to what fights of respective parties are, is to be decided which can be done by an arbitrator. ( 19 ) ISSUE is decided accordingly in favour of the petitioner. ( 20 ) ISSUE No. 3 There is no necessity of deciding this issue on account of decision of issue No. 2. Hence this issue is left undecided. ( 21 ) ISSUE No. 4 Contention of Union of India is that the petitioner himself had signed the final bill showing his liability to pay a sum of Rs. 3497. 00 and that therefore, the same indicated that there was no dispute between the parties at all. It is explained that the aforesaid signing of the petitioner in the last week of Apr. , 1977 and after going through details of Ac final bill and satisfying himself about the correctness of the same, without any protest, obviously indicated that there was no dispute at all between him and Union of India. It is emphasised that when there was no dispute at all between the petitioner and Union of India there was no question of any reference to the arbitration. It is contended by the learned counsel for Union of India that the claims mentioned in Annexure A to the demand dated Aug. 1, 1977 for appointment of arbitrator sent by the petitioner were obviously afterthought and not maintainable. ( 22 ) AS already mentioned it is for the arbitrator to decide if the claims of particular party are without any basis or merit or not. Contention to the effect that a particular claim or claims are afterthought is in cided by the arbitrator. Hence, it is arbitra basis. ( 22 ) AS already mentioned it is for the arbitrator to decide if the claims of particular party are without any basis or merit or not. Contention to the effect that a particular claim or claims are afterthought is in cided by the arbitrator. Hence, it is arbitra basis. That matter, therefore, is to be decided by the arbitrator. Hence, it is arbitrator who has to decide whether petitionersigned the final bill and if so same debarred him from raising any disputes at all at a later stage. It will be for the arbitrator to decide if the aforesaid signing of the bill was agreeing to the correctness of the same and he is liable to pay amounts as mentioned in the said bill instead of claiming anything from Union of India. ( 23 ) OBVIOUSLY there are disputes between (he patties. Union of India claims that a sum of Rs. 3,497. 00 is due to it from the petitioner. Petitioner denies. On the other hand petitioner claims certain amounts as mentioned in Annexure A to his letter dated Aug. 1, 1977. Therefore, liability inter se between the parties is to be determined which is clearly a dispute which must be referred to the arbitrator. Hence it cannot be said that there are no disputes referable to the arbitration. Issue is decided accordingly in favour of the petitioner ( 24 ) ISSUE No. 5 In view of findings on the issues I direct that Chief Engineer should appoint an arbitrator within two months from today and refer the dispute between the parties to him. Disputes which have already come on record is the claim of Union of India that it is entitled to a sum of Rs. 3,497. 00 and the ones in the shape of claim contained in Annexure A to the letter dated 1st Aug. , 1977. The arbitrator will be at liberty to call upon the parties to put in their respective claims and counter claim then proceed further.