Basu And Co. v. Bihar State Electricity Board — 1996 DIGILAW 736 (PAT)

Judgment N. Pandey, J. 1. - This is a defendants appeal under Sec.39 (1) (iv) of the arbitration Act, 1940 (hereinafter referred to as the Act), against a judgment dated 26th April, 1989, in title suit No.1/81/8/89 whereby the Subordinate Judge, Begusarai, has ordered the agreement to be filed under Section 20 (2) of the Act and also appointed Shri rohit Kumar Agrawal, Advocate, as a sole Arbitrator to arbitrate the dispute between the parties. 2. Before coming to the crucial contention of the parties, it would be appropriate to have a brief survey of some of the facts leading to this case. Admitted case of the parties is that the defendant (appellant)entered into an agreement with the plaintiff for transportation of two dismantled cranes from Patratu Thermal Power Station to barauni Thermal Power Station and also for erection and commission at the latters site on the terms and conditions as set out in the agreement. But in course of erection of the Gantry cranes, an accident took place on 20th March, 1977, resulting in complete damage to one of the cranes. According to the plaintiffs such incident took place due to negligence and carelessness of the defendants. Therefore, demand was made to make good of the loss in terms of clause 12 of the agreement vide letter dated 25th March, 1977, but in spite of that defendant failed to compensate the damage. 3. The defendants in response to the aforesaid letter of the plaintiff, denied the responsibility through letter dated 31st March, 1977, but in view of certain negotiations between the parties, the defendant agreed to do the rectification work of the damaged crane on payment of additional charges. However, after some time, the defendants stopped work on the ground that no payment was made by the plaintiff inspite of a reminder through letter dated 5th July, 1978. 4. Thereafter in terms of clauses 19 and 23 of the agreement, which provides that a dispute arising between the parties, would be referred to an arbitrator, the plaintiff sent a notice to the defendant on 24th April, 1979, vide memo no.431 to concur for appointment of an arbitrator to settle the dispute. 4. Thereafter in terms of clauses 19 and 23 of the agreement, which provides that a dispute arising between the parties, would be referred to an arbitrator, the plaintiff sent a notice to the defendant on 24th April, 1979, vide memo no.431 to concur for appointment of an arbitrator to settle the dispute. But ultimately, when in spite of repeated requests, defendant failed to concur for appointment of arbitrator, the plaintiff filed a petition on 3rd January, 1981 under provisions of Sec.20 of the arbitration Act before the Subordinate judge, Begusarai, for referring the dispute between the parties to the arbitrator. 5. The defendant filed a written statement denying complete liability of the loss and damages and also took a plea that the application under Section 20 of the Act was barred by limitation since the alleged loss or damage occurred on 28th October, 1977, and in view of Article 137 of the Limitation act, such an application should have been filed within three years from the date on which. the dispute arose. Apart from the said objection, a plea was also taken, since the plaintiff at the initial stage had taken recourse to the provisions of Chapter II, Sec.8 of the Act, the proceeding under Section 20, Chapter III had to be declared illegal and without jurisdiction. 6. The Court below has answered all the issues in favour of the plaintiff. It has been held that the application under section 20 was well within time, either the period of limitation is counted from 5th July, 1978 when the defendant wrote a letter to the plaintiff regarding stoppage of work or even from the date of notice, sent by the plaintiff under memo no.431 dated 24th April, 1979 to the defendant. He has furthe : held that claim of the plaintiff for appointment of arbitrator was fully justified in view of the provisions as made out in clause 19 of the agreement. Similarly, the objection of the defendant regarding maintainability of the proceeding under chapter III of the Act was also turned down on the ground that no material was produced by the defendant to show that any step was taken by the plaintiff under Chapter II of the Act. 7. Mr. Similarly, the objection of the defendant regarding maintainability of the proceeding under chapter III of the Act was also turned down on the ground that no material was produced by the defendant to show that any step was taken by the plaintiff under Chapter II of the Act. 7. Mr. CHATTERJEE, Senior Counsel for the appellant, in course of his argument, basically raised three grievances for consideration, namely, since the period of limitation as per Article 137 of the Limitation Act starts from 31st october, 1977, when the defendant repudiate the claim, the Court below has erred in holding that dispute between the parties arose for the first time when the plaintiff served a notice to be defendants on 24th April, 1979, secondly, the step taken by the plaintiffs vide letter dated 25th March, 1977, asking the defendants to compensate the damages for the loss of the damage crane would amount to taking steps under Sec.8 Chapter II of the Act, therefore, the subsequent proceeding under Chapter III on the basis. of the notice dated 24th April, 1979, and/or an application under Sec.20 of the Act dated 3rd January, 1981, was not maintainable and lastly, that the findings of the Court beow are vitiated by error of record committed by him. 8. As regards the point of limitation, raised by Mr. Chatterjee, there cannot be any dispute that in terms of article 137 of the Limitation Act, an application under Sec.20 of the Act is required to be filed within three years from the date of the cause of action for the dispute. According to the defendants, such period would commence either from 25th March, 1977, when plaintiffs claimed damages or with effect from 31st March, 1977, the day defendant repudiated the claim. Mr. Chatter-jee contended that there can be no right to sue until there is an accrual of the right asserted in the suit. In other words, when the defendant clearly and unequivocally threatened to infringe the right asserted by the plaintiff. In support of such a submission, he placed reliance to a decision of the Delhi High Court in the case of Shah Construction Company ltd. , Bombay V/s. Municipal Corporation of Delhi, AIR 1985 Delhi 358. In other words, when the defendant clearly and unequivocally threatened to infringe the right asserted by the plaintiff. In support of such a submission, he placed reliance to a decision of the Delhi High Court in the case of Shah Construction Company ltd. , Bombay V/s. Municipal Corporation of Delhi, AIR 1985 Delhi 358. Whereas according to the plaintiffs such a period would start from 5th July, 1978, when the defendants issued a letter to the plaintiffs regarding stoppage of work, or with effect from 24th April, 1979, when the plaintiffs sent notice under registered cover to the defendants for arbitration. There is no dispute that the application under Sec.20 of the Act was filed before the Court on behalf of the plaintiffs on 3rd January, 1981. The court below has also held that no material whatsoever was produced on behalf of the defendants to prove that any recourse to the provisions of Chapter II was even taken by the plaintiffs. Admittedly, the accident in this case took place on 28th March, 1977. Thereafter, in view of certain negotiations between the parties, defendants started rectification work, which was ultimately, stopped on 5th July, 1978, due to non-payment ofdues by the plaintiffs. Thus in view of the subsequent development, it will not be proper to urge that period of limitation would start from the date, the defendants first repudiated the claim of the plaintiffs. Because admittedly till 5th july, 1978, defendants had undertaken repair works, as per the subsequent negotiation between the parties. Therefore, there was no occasion for the plaintiffs to take recourse to the provisions of Chapter II or to file application under Sec.20, Chapter III of the Act. Accordingly I affirm that part of the finding of the lower court whereby he has held that application under Sec.20 of the Act filed by the plaintiffs was not barred by limitation. 9. While elaborating the second proposition, Mr. Chatterjee contended that there cannot be any dispute that in view of clauses 19 and 23 of the agreement, in case of any dispute either of the parties were entitled to give notice to other party of such dispute for referring the matter to the Superintending engineer of the circle for arbitration and his decision shall be construed final and conclusive. In that view of the matter, the plaintiffs had already claimed damages by a letter dated 24th March, 1977, which was of course repudiated by the defendant on 31st March, 1977. The said notice for all practical purposes would be construed a notice under Sec.8 Chapter II of the Act. Therefore, the application of the plaintiffs filed subsequently under Sec.20 of the act was barred in view of the provisions of Sec.8 of Chapter II. 10. The validity of the order, therefore, depends upon the scope of Section 8 (1) (2) Chapter II as well as Sec.20 of Chapter III of the Act. Sec.8 deals with the power of the Court to appoint an arbitrator or umpire. Sub-section (1) of section 8, so far as it is relevant for the present purpose, provides that any party to the agreement may serve the other party with a written notice to concur on the point of appointment of arbitrator. Sub-section (2) lays down, if no appointment is made within 15 days, after service of notice, the Court may also make an order of reference to the arbitrator. 11. Section 20 of Chapter III prescribes a provision for arbitration on intervention of the Court, where there is no suit pending. In other words, this section confers power on a court to order an agreement to be filed and further to make an order of reference to the arbitrator appointed by the parties, or where parties failed to agree upon an arbitrator the appointment of such arbitrator shall be made by the Court. Sub-section (1) shows that provisions of this section can be availed only, if no proceeding under Chapter II has been initiated. 12. Sub-section (1) shows that provisions of this section can be availed only, if no proceeding under Chapter II has been initiated. 12. As noticed by Hon ble Justice guota, in the case of Union of India V/s. Om Prakash, AIR 1976 SC 1745 , the act contemplates three kinds of arbitration (a) where any arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties and all the parties do not alter differences have arisen, concur in the appointment or appointments or, (b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or (c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him; any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy. 13. It is clear from the provisions of Chapter II that after the appointment of arbitrator, the proceedings are to be kept out of the Court upto the stage of filing the award, intervention of the court is not necessary, unless any occasion arises requiring the Court to remove the arbitrator under Sec.11 of the Act. Sec.2 (2) only empowers the Court to appoint an arbitrator, if the party do not concur for the appointment within 15 (fifteen) days from the service of notice under Sec.8 (1) of the Act. 14. It will be apt to notice a passage from the judgment in the case of union of India V/s. Om Prakash (supra) in these words - "sub-section (1) of Sec.20 makes it plain that the provisions of the section can be availed of only if no proceeding under Chapter II has been initiated. Sec.8 does not contain any provision empowering the Court to make an order of reference to the arbitrator as one finds in sub-section (4) of Sec.20. Thus it seems clear that the Court in the instant cases had no jurisdiction, after appointing an arbitrator under Sec.8 (2) to proceed further to make an order referring the disputes to the arbitrator" 15. Thus it seems clear that the Court in the instant cases had no jurisdiction, after appointing an arbitrator under Sec.8 (2) to proceed further to make an order referring the disputes to the arbitrator" 15. From a plain reading of the aforesaid judgment, there cannot be any doubt that in a case where recourse to the provisions of Chapter II was taken, the Court will have no jurisdiction to entertain an application under Section 20 or to interfere with the proceeding until the award was filed or any such occasion arises requiring the Court to remove the arbitrator under Sec.11 or to extend the period of arbitration in appropriate cases. 16. But in the instant case, no proceeding was ever undertaken by the court under Chapter II nor the letter given by the plaintiffs on 25th March, 1977, would amount to a notice under sub-section (1) of Sec.8. Because, in view of the subsequent development, i. e. the negotiations between the parties and rectification work, the cause of action for raising the dispute could only arose when the defendants by the letter dated 5th July, 1978, informed the plaintiffs about stoppage of work. The previous denial of the defendants became ineffective and innocuous. 17. Accordingly, I hold that in the facts and circumstances of the case, the proceedings initiated by the Court below in view of application of the plaintiff filed under Sec.20 was not barred by the provisions of Chapter II. 18. Coming to the last contention, regarding errors of record committed by the Court below, there is no doubt that in paragraphs 13, 16 and 42 of the judgment, certain errors have been committed regarding statement of the defendants in the written statement. But even findings recorded in those paragraphs are set aside, it will not improve the case of the defendants nor affect the findings recorded in favour of the plaintiffs. 19. Accordingly, having regard to the entire facts and circumstances of the case. I am constrained to hold that the impugned order of the Learned Subordinate Judge is quite justified hence requires no interference. In result, I affirm the impugned order and dismiss the appeal, as devoid of any merit. But in the circumstances of the case, there shall be no order as to costs. Appeal Dismissed.