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2002 DIGILAW 422 (PNJ)

R. S. Mechanical Engineers v. Mahesh Raikhy

2002-04-22

M.M.KUMAR

body2002
JUDGMENT M.M. Kumar, J. - This is a revision petition directed against the order dated 25.8.2000 passed by the Addl. District Judge, Ludhiana dismissing the appeal of the non-applicants-petitioners in which the order dated 3.2.1999 passed by the Civil Judge (Jr. Division), Ludhiana was challenged. The Civil Judge in his order dated 3.2.1999 allowed the application of the Applicant-respondent filed under Section 20 of the Indian Arbitration Act, 1940 (for brevity the 1940 Act) directing the appointment of Arbitrator with consensus and in case of failure of consensus to submit their respective panel before the Court within the time given. 2. Brief facts of the case unfolded in the pleadings of the parties in the present revision petition are that on 25.7.1979, the appellant-respondent was appointed by the petitioners as their commission agent for selling Polythene Bag making machines described as Jasbir Automatic Polybag Making Machines. The agreement was initially for a period of five years extendable further for another five years and the rate of commission settled between the parties was 20 percent. The applicant-respondent acted as commission agent for the firm and secured large number of orders for the sale of Polythene Bag Making Machines. Although his commission @ 20 percent calculated by him comes to Rs. 6,12,439/- but he was paid only be sum of Rs. 2,62,000/- from time to time. It is claimed that an amount of Rs. 3,50,439/- on account of commission was due. The applicant-respondent issued legal notice on 5.10.1989 making claim that an amount of Rs. 3,50,439/- was due to non-applicant-petitioners. He also claimed that a dispute has arisen and in accordance with the terms and conditions of the agreement dated 25.7.1979, the dispute may be referred to the Arbitrator under Clause 16 of the agreement. The Civil Judge framed the following three issues :- 1. Whether the parties entered into an agreement dated 22.8.1983 and 25.7.1979 to refer the dispute to Arbitrator ? OPA. 2. Whether the application is time barred ? OPR 3. Whether the applicant is estopped by his act and conduct from filing the application ? OPR. Relief. On issue No. 1 the finding returned by the Civil Judge is that clause 16 of the agreement dated 25.7.1979 covers the dispute which has arisen between the parties. The Civil Judge has recorded the following categorical finding : ".. OPR 3. Whether the applicant is estopped by his act and conduct from filing the application ? OPR. Relief. On issue No. 1 the finding returned by the Civil Judge is that clause 16 of the agreement dated 25.7.1979 covers the dispute which has arisen between the parties. The Civil Judge has recorded the following categorical finding : ".. the testimony of petitioner Mahesh Raikhy remains unrebutted on file and implies the fact that there was lateron extended on 22.8.1993 for a further period of five years and the perusal of these agreements reveal the fact that the respondent has appointed the petitioner as an agent for the sale of Jasbir Automatic Polythene Bags making machines at a commission of 20% on the orders booked by the petitioner and the agency was in the year from 1979 to 1988. A further perusal of Ex. P.1 carbon copy of agreement dated 25.7.1979 reveal the fact that there was a clause 16 inserted in the agreement dated 25.7.1979 that in event of any dispute arisen as a result of interpretation of the agreement or any terms and conditions set available herein it shall be referred to Arbitrator under the provisions of Arbitration Act, 1940 and shall be subject to Ludhiana jurisdiction. So I am of the considered opinion that the parties entered into agreement dated 22.8.1983 and 25.7.1979 to refer the dispute to Arbitrator." 3. On issue No. 2 regarding the limitation also the finding recorded by the Civil Judge goes against the non-applicant-petitioners inasmuch as it has been held that cause of action arose to the applicant-respondent on 5.10.1089 when the dispute was raised by sending a registered notice. The finding so recorded by the Civil Judge reads as under : "I have found that the cause of action arose to petitioner on 5.10.1989 when inspite of notice Ex. P.9, the claim of petitioner was not settled by respondents meaning thereby dispute or difference arose between the parties and the respondent was made aware vide notice Ex. P.9. But the claim was not settled and the petitioner was constrained to initiate arbitration proceedings. The contention of ld. P.9, the claim of petitioner was not settled by respondents meaning thereby dispute or difference arose between the parties and the respondent was made aware vide notice Ex. P.9. But the claim was not settled and the petitioner was constrained to initiate arbitration proceedings. The contention of ld. counsel for the respondent that the present petition is not within time as alleged agreement was executed way back on 25.7.1979 is not tenable in view of my said discussion and due to fact that it was the only year 1989 when the differences or dispute between the parties took place and moreover the agency was also to be lasted till 1988. So as per the provision of Article 137 of the Indian Limitation Act petition of the petitioner is well within limitation." 4. The order of the Civil Judge directs the parties to appoint Arbitrator by mutual consent. It was further directed that if the parties fail to appoint Arbitrator with mutual consent then both the parties were to submit their respective panel before the Court. 5. The order passed by the Civil Judge was challenged in appeal before the Addl. District Judge who rejected both the contentions and dismissed the appeal on 25.8.2000. The first contention raised before, and rejected by the Addl. District Judge was that the arbitration clause did not cover the dispute and that the claim made by the applicant-respondent was for specific amount. The second contention with regard to limitation was also rejected. As a consequence of rejection of both the contentions, the order passed by the Civil Judge was upheld. Feeling aggrieved, non-applicant-petitioners have filed the present revision petition. 6. Shri Y.P. Khullar, learned counsel for the non-applicant-petitioners has argued that clause 16 of the agreement dealing with the arbitration is not attracted and the matter cannot be referred to the arbitration. According to the learned counsel, the amount claimed is quantified and thus would not be covered by clause 16. He has further argued that the claim of the applicant- respondent is in respect of the year 1984-85 and the application filed in the year 1989 is clearly beyond a period of three years and is time barred under Article 137 of the Limitation Act, 1963 (for brevity the 1963 Act) which provides a period of three years. 7. He has further argued that the claim of the applicant- respondent is in respect of the year 1984-85 and the application filed in the year 1989 is clearly beyond a period of three years and is time barred under Article 137 of the Limitation Act, 1963 (for brevity the 1963 Act) which provides a period of three years. 7. I have thoughtfully considered the respective submissions made by the learned counsel for the petitioners and am of the view that this revision petition is devoid of merit and is thus liable to be dismissed. 8. Apart from the fact that both the Courts below have examined the submissions made before me in considerable details it has to be kept in view that the power of the revisional Court is extremely limited in so far as the questions of facts are concerned. The first argument of the learned counsel that clause 16 of the agreement does not cover the dispute raised by the applicant-respondent can be considered by referring to the terms of clause 16 of the agreement itself which reads as under: "That in the event of any dispute arising as a result of the interpretation of the agreement or any terms and conditions set forth herein it shall be referred to Arbitration under the provisions of the Arbitration Act, 1940 and shall be subject to Ludhiana jurisdiction." A perusal of clause 16 of the agreement, as reproduced above, would reveal that if there is any dispute on any terms and conditions set out in the agreement, the same shall be referred to the Arbitration in terms of the 1940 Act. In clause 3 of the agreement, it has been provided that a commission of 20 percent on the orders booked by the applicant-respondent is payable. Certain other terms and conditions have also been settled with regard to receipt of advance payment from the prospective buyer of the machines. Clause 3 of the agreement read as under : "That the Manufacturers shall pay to the Agent a commission of 20% (twenty percent only) on the orders booked by the Agent. The expenses made by the Agent for pushing the sale of machines towards, travelling, postage etc. and any commission/discount allowed to any purchaser shall be to the account of the said agent. The expenses made by the Agent for pushing the sale of machines towards, travelling, postage etc. and any commission/discount allowed to any purchaser shall be to the account of the said agent. The advertisement expenses shall be borne by the Agent and the Manufacturer in the ratio of 60% and 40% respectively." Therefore, it is not possible to take a view different than the one taken by both the Courts below. 9. Under Section 20 of the 1940 Act, the duty imposed upon the Court is to examine as to whether the dispute which has arisen between the parties falls within the four corners of the arbitration agreement. Merely because the amount claimed is quantified it could not be said that the claim did not arise out of the agreement dated 25.7.1979. Section 20 of the 1940 Act reads as under : "20. Application to file in Court arbitration agreement. 1. Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court. 2. The application shall be in writing and shall be numbered and registered as a suit between one or more parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise, between the applicant as plaintiff and the other parties as defendants. 3. On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed. 4. Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. 5. 4. Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. 5. Thereafter the arbitration shall proceed in accordance with and shall be governed by the other provisions of this Act so far as they can be made applicable." 10. In R.N. Kumar v. R.K. Soral, AIR 1988 SC 1205, the Supreme Court while dealing with section 20 of the Act has held that as long as there is arbitration clause in a subsisting agreement it is obligatory for the court to direct the filing of the arbitration agreement and refer the matter to the arbitration. Therefore, I am of the considered opinion that both the Courts below have rightly referred the dispute between the non-applicant-petitioners and applicant-respondent to the arbitration considering it to be covered by clause 16 of the agreement. It may further be mentioned that under clause 16 of the agreement even the interpretation of any of the clauses has to be referred to the Arbitration. This view has further been supported by the judgment in S. Rajan v. State of Kerala and another, AIR 1922 SC 1918. 11. The other argument that the application is barred by the provisions of Article 137 of the 1963 Act because the claim is in respect of the year 1984- 85 and the legal notice has been issued on 5.10.1989 also does not require any serious consideration because both the Courts below have found it as a matter of fact that the dispute raised by the applicant-respondent is within three years prescribed by Article 137 of the 1963 Act. Both the Courts below referred in detail to the evidence particularly the notice dated 5.10.1989 and the fact that the agency lasted till 1988. The application which has been filed on 19.12.1989, therefore, cannot be considered to be barred by limitation as it is well within three years because the right to apply under Section 20 of the 1940 Act accrued to the plaintiff-respondent in 1988 because the agency lasted till that date or on 5.10.1989 when he served a legal notice. The application which has been filed on 19.12.1989, therefore, cannot be considered to be barred by limitation as it is well within three years because the right to apply under Section 20 of the 1940 Act accrued to the plaintiff-respondent in 1988 because the agency lasted till that date or on 5.10.1989 when he served a legal notice. The Supreme Court considered the question of limitation in the case of S. Rajan (supra) and concluded that right to apply would arise on the date of service of demand notice and not on the date when the demand notice was rejected. The observations of Their Lordships read as under : "Reading Article 137 and sub-section (1) of Section 20 together, it must be said that the right to apply accrues when the difference arises or differences arise, as the case may be, between the parties. It is thus a question of fact to be determined in each case having regard to the facts of that case. The question in the present case is when should the difference between the parties be said to have arisen. According to the High Court the date on which notice of demand under the Revenue Recovery Act was served upon the appellant namely 30.5.1974 is the date on which difference must be held to have arisen between the parties, if not earlier. Sri Poti, however, says that it is not so and that it must be held to have arisen only when the appellant applied to the Government to refer the disputes between them to the arbitrator in terms of the agreement and the Government refused to do so. We find it difficult to agree with the learned counsel. The agreement was entered into in 1966. It was terminated on 19.12.1968. The work was re-tendered and it was completed through another contractor. The State then worked out the loss suffered by it on account of the appellants failure to carry out the work in accordance with the agreement and called upon the appellant to pay the same through the demand notice dated 30.5.1974. It is relevant to notice that this demand notice was questioned by the appellant by way of writ petition in the High Court of Kerala which was dismissed on 25.11.1978. Thus, the dispute had arisen in 1974 with the service of the demand notice. It is relevant to notice that this demand notice was questioned by the appellant by way of writ petition in the High Court of Kerala which was dismissed on 25.11.1978. Thus, the dispute had arisen in 1974 with the service of the demand notice. Only in the year 1983, did the appellant choose to request the Government to refer the dispute to the arbitrator in terms of the agreement which was rejected in the following year. Neither the arbitration clause nor a copy of the agreement is placed before us. Therefore, we cannot say whether the arbitration clause contemplates that a reference to arbitration can be made only by the Government and not by the appellant. Assuming that such was the requirement of the arbitration clause, even so it must be held that the very request in 1983 was very much belated and cannot, in any event, be treated as the date on which the right to apply accrued. The differences had already arisen between the parties following the service of the demand notice. The challenge to the said demand notice made by the appellant by filing a writ petition in the Kerala High Court is the demonstrable proof of the dispute. Accordingly, we agree with the High Court that 30.5.1974 is the date on which the right to apply accused in terms of Article 137 read with 20(1) and that therefore the application filed in the year 1985 was clearly barred by limitation." Applying the principles laid down in S. Rajans case (supra), no doubt is left that the application filed by the plaintiff-respondent was well within three years. Therefore, even the second contention of the learned counsel is liable to be rejected. For the reasons recorded above, this revision petition fails and is accordingly dismissed with costs of Rs. 2,000/-. Revision dismissed.