North Eastern Electric Power Corporation Ltd. v. Texmaco Ltd.
2011-04-29
TINLIANTHANG VAIPHEI
body2011
DigiLaw.ai
JUDGMENT T. Vaiphei, J. 1. This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 ('the Act') for appointment of an arbitrator to adjudicate the disputes raised by the Petitioner in their letter dated 24.8.2009 in terms of the contract agreement executed by and between them and the Respondent and in accordance with the provisions of the Act. 2. The material facts leading to the filing of the application, as projected by the Petitioner, may be noticed immediately. The petitioner is a Government of India enterprise, incorporated under the Companies Act, 1956 with its Registered Office at Brookland Compound, Lower New Colony, Shillong, Meghalaya and undertakes the development of electric power in North Eastern India, whose activities include investigation, planning, design, construction, operation and maintenance of Hydro-Electric and Gas-based Project. The Respondent is, however, a private company with its registered office at Belgharia, Kolkata and one of its workshops is situated at Agarpara, Kolkata. In the year 1996, a contract agreement No. NEEPCO/CE(c)/CONT/RHEP-01 of 1996-97 dated 13.5.1996 ('the agreement') was executed between the Petitioner-Corporation and the Respondent-company for execution of the work for design, fabrication, transportation and erection of Penstock Steel Liners for the Head Race Tunnel of RHEP, Yazali, Arunachal Pradesh. As per section H of Clause 54 of the General Conditions of Contract of this agreement, the Court at Shillong would have the jurisdiction to entertain civil suits pertaining to this contract. Amongst the various items and conditions of the agreement, there is one clause, namely, section H of Clause 66 in the conditions of the contract, which envisages the settlement of disputes and differences between the Petitioner-Corporation and the Respondent-company in the manner provided therein. It may be noted that the agreement, among others, requires the Petitioner-Corporation to supply Boiler Quality (BQ) Plates of ASTM-537 CL-1 and ASTM-517 Gr-F'F description, free of cost to the Respondent-company from its Store Yard at the Project Site while all expenses towards transportation, storage, etc., were to be borne by the Respondent-company.
It may be noted that the agreement, among others, requires the Petitioner-Corporation to supply Boiler Quality (BQ) Plates of ASTM-537 CL-1 and ASTM-517 Gr-F'F description, free of cost to the Respondent-company from its Store Yard at the Project Site while all expenses towards transportation, storage, etc., were to be borne by the Respondent-company. It is also provided therein that the excess-BQ Plates, pieces above 2 metres were to be returned by the Respondent-company in good conditions to the Store Yard/Godown of the Petitioner-company after execution of the agreement; and, in the event of failure of the Respondent-company to do so, they were required to pay double the issue rate of the costs of materials as agreed to by them in the agreement or double the market price at the time of recovery, whichever is higher. The issue rate for BQ Plates, as per the agreement, ASTM-537 CL-1 is Rs. 1,32,000 per metric ton and that of ASTM-517, Gr-'F was Rs. 33,000 per metric ton. The Petitioner-Corporation vide their letter dated 7.12.1994 had intimated to all the bidders including the Respondent-company the sizes and quantities of the BQ plates to be supplied by the Petitioner-Corporation. 3. It is an admitted position of the parties that the BQ plates of various descriptions indicated in the above letter were issued to the Respondent-company at their workshop at Agarpara, Kolkata as per the requisitions made by them from time-to-time, for which an Indemnity Bond bearing dated 31.7.1996 was executed by them in favour of the Petitioner-Corporation. After the execution of the agreement, a reconciliation statement in respect of the said BQ plates full size, above 2 metres and scraps were made on 17.2.2001 between the Petitioner-Corporation and the Respondent-company at Agarpara Workshop, which was communicated by the Respondent-company on 17.8.2001, which is at Annexure F. According to the Petitioner-Corporation, even after this, the Respondent-company refused to return those excess materials, which impelled the Petitioner-Corporation to write the letter dated 24.2.2005 to the Respondent-company to extend necessary assistance to the authorized representative of OMML and JSC-JV to inspect the stock of BQ plates lying in their custody, but the Respondent-company refused to oblige them. Consequently, the Petitioner-Corporation by the office order dated 5.11.2007 and the further order dated 26.11.2007 constituted a Committee, and Members of his Committee visited the Agarpara Workshop of the Respondent-company on 2.9.2008 at Kolkata and submitted their report.
Consequently, the Petitioner-Corporation by the office order dated 5.11.2007 and the further order dated 26.11.2007 constituted a Committee, and Members of his Committee visited the Agarpara Workshop of the Respondent-company on 2.9.2008 at Kolkata and submitted their report. As per the minutes of the meeting held on 2.9.2008 with the representative of the Respondent-company, the Respondent-company expressed its inability to allow the Committee of the Petitioner-Corporation to inspect the BQ plates as the same were not identifiable and were not even available. On the contrary, the Respondent-company made an unilateral offer to dispose of the entire materials to them @ Rs. 5,560 per metric ton as was done in the case of Kopili in the year 2001, but the Petitioner-Corporation did not accept their offer. However, before any decision could be communicated, the Respondent-company by their letter dated 14.1.2009 addressed to HOP, RHEP of the Petitioner-Corporation, intimated to them that they had decided to close the issue after adjustment with their long outstanding (?) with an amount of Rs. 22,64,838 @ Rs. 5,560 per MT (agreed rate of MSTC on Kopili contract) for 407.346 MT. This was not acceptable to the Petitioner-Corporation. As per the agreement (section K), the issue rate for ASTM-537, CL-1 is 32,000 per MT and the rate for ASTM-517, Gr-'F' is Rs. 33,000 per MT, but the prevailing market rates for the same are Rs. 47,000 per MT and Rs. 1,20,000 per MT respectively. Thus, the total amount payable by the Respondent-company to the Petitioner-Corporation at the prevailing market for the said materials is to the order of Rs. 8,25,42,432 as detailed in Annexure L to this application. Besides, the Petitioner-Corporation is entitled to interest @ 18% per annum on the aforesaid amount, i.e., Rs. 5,66,96,675.9p w.e.f. 17.2.2001 (the date on which the reconciliation of the materials was done) to 16.2.2009 and another interest @ 18% per annum after 16.2.2009 till realization of the entire amount. Following the closure of the issue by the Respondent-company by their letter dated 14.1.2009, a dispute has arisen between the Petitioner-Corporation and the Respondent-company over the refusal of the latter to pay the aforesaid amount for the unconsumed/excess BQ plates, which is required to be resolved by taking recourse to arbitration as provided for in the agreement. To this end, the Petitioner-Corporation nominated Shri S.N. Phukan, Ex.
To this end, the Petitioner-Corporation nominated Shri S.N. Phukan, Ex. Chairman and Managing Director of the Petitioner-Corporation as its arbitrator to the Arbitration Board vide the letter dated 18.8.2009. This was followed by the letter dated 24.8.2009 of the Petitioner-Corporation requesting the Respondent-company to nominate their arbitrator within one month from the date of receipt of the letter dated 24.8.2009 to settle their dispute by arbitration. The Respondent-company, however, through their advocates vide the letter dated 19-9-2009 expressed their inability to appoint their arbitrator on the ground that the claim made by the Petitioner-Corporation is barred by limitation. This prompted the Petitioner-Corporation to file this application. 4. The application is resisted by the Respondent-company, who has now filed their written objection. The answering Respondent questioned the propriety of nominating Mr. S.N. Phukan as the arbitrator inasmuch as he was and continues to be actively engaged in the project completed by them in September 2001. On 17.2.2001, a reconciliation statement was made wherein the quantity of BQ plates, which were left over as Full Size plates, cut pieces and scraps was made and the same were to be taken back by the Petitioner-Corporation in terms of the agreement. On 7.8.2001 a meeting was held in which the Respondent-company agreed to the proposal of the Petitioner-Corporation for disposing of the HMS-II scrap as published in the latest MSTC Bulletin of July 2001, which was at Rs. 5,560 per MT. The Petitioner-Corporation took time to formally accept the proposal which has not been done till today, but, despite repeated requests, they refused to remove the same, which were, occupying a considerable storage space of the Respondent-company. The Respondent-company, therefore, raised its invoice dated 25.11.2004 towards the storage charges for a sum of Rs. 31,20,000 under coyer of the letter dated 25.11.2004. these materials have been lying at the storage yard of the Respondent-company since June 2000 and with the passage of time and being exposed to weather condition, these materials have income rusty, unusable and are now in a scrap condition: by reason of long storage for over five years, they have also become unidentifiable. It was at the instance of the Petitioner-Corporation that these materials have been kept at the premises of the Respondent-company by occupying nearly 6,000 square feet of space for which debit note was issued by the Respondent-company to the Petitioner-Corporation.
It was at the instance of the Petitioner-Corporation that these materials have been kept at the premises of the Respondent-company by occupying nearly 6,000 square feet of space for which debit note was issued by the Respondent-company to the Petitioner-Corporation. The Respondent-company ultimately by its letter dated 5.8.2008 claimed the balance amount payable under the contract after adjusting the value of 407.345 MT of scrap at 5,560 per MT as agreed between them on 7.8.2001. It was only in 2009, i.e., after nine long years and seventeen days, that the Petitioner-Corporation raised a claim for Rs. 8,25,42,432, which is clearly barred by limitation. According to the answering Respondent, the agreement having come to an end by performance in September 2001 and the materials not being removed by the Petitioner-Corporation from their factory within a period of three years from the date thereof, the Petitioner-Corporation cannot now invoke the arbitration clause, which does no longer survive after a period of 8 years from the date of completion of the contract agreement. In other words, the arbitration clause in question also perished with the agreement which stood discharged by performance. These are the sum and substance of the contention of the Respondent-company. The Respondent-company, therefore, prays for dismissal of the application, which is false, vexatious and abrasive with exemplary costs. 5. On perusing the pleadings of the parties and after extensively hearing the counsel appearing for the rival parties, it becomes clear that the first point for consideration in this application is whether the application is time-barred under article 137 of the Limitation Act, 1963 read with Section11(4) of the Act? Maintaining that the application is not time-barred, Mr. V.K. Jindal, the learned senior counsel for the Petitioner-Corporation, submits that under article 137, the period of limitation is three years but this period of limitation will start running only on the expiry of the period within which the party who has resorted to Section 11 failed to secure the concurrence of the other party, and in the instant case, the period of limitation of three years will start running only after the expiry of thirty days within which the Respondent-company failed to appoint the arbitrator as requested by the Petitioner-Corporation in their letter dated 24.2.2009.
According to the learned senior counsel, as long as the request for appointment of an arbitrator is not made by the Petitioner-Corporation, time will not run since the right to apply has not accrued and it is only when such a request is made and the same is not complied with by the Respondent-company within the period of thirty days envisaged by section 11(4)(a) of the Act, then and then only time will start running thereafter. In any case, contends the learned senior counsel, no dispute or difference arose between the parties till 14.1.2009 when the Respondent-company wrote the letter informing the Petitioner-Corporation of the closure of the issue and refused to make the payment and as no dispute or difference between them had arisen till then and negotiation had always been going on between them for amicable settlement of the difference, the contention of the Respondent-company that the application for appointment of arbitrator is time-barred, is clearly misconceived and cannot be accepted. He also maintains that the question as to whether the application is time-barred or not, more particularly, when the dispute or difference between the parties arose, on the facts and circumstances of this case projected by the rival parties, cannot be ascertained with ease by this Court, such question is best left for the decision of the Arbitral Tribunal after its appointment. To fortify his various submissions, he refers to the decisions of the top court in (i) Branch Manager, Magma Leasing and Finance Limited and Anr. (2009) 10 SCC 103 ; (ii) Indian Oil Corporation Ltd. and Ors. v. Raja Transport (P.) Ltd., (2009) 8 SCC 520 ; (Hi) National Insurance Company Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 ; (iv) Shri Ram Mills Ltd. v. Utility Premises (P) Ltd., (2007) 4 SCC 599 ; (v) SBP and Company v. Patel Engineering Ltd., (2005) 8 SCC 618 ; (vi) Steel Authority of India Ltd. v. J.C. Budharaja, (1999) 8 SCC 122 ; (vii) Utkal Commercial Corporation v. Central Coal Fields Ltd., (1999) 2 SCC 571 and (viii) Prasar Bharati v. Maa Communication AIR 2011 Del. 26 . 6. Refuting the contentions of the learned senior counsel for the Petitioner-Corporation, Mr.
26 . 6. Refuting the contentions of the learned senior counsel for the Petitioner-Corporation, Mr. S. Singhvi, the Learned Counsel for the Respondent-company, submits that when the contract in question has admittedly been discharged by the Respondent-company by performance, which took place in September 2001, the clause relating to arbitration contemplated in the agreement and the indemnity bond executed by the Respondent-company also perished with it, and, as such, the clause relating to arbitration and the indemnity bond in question have no, nor can they have, an independent existence of their own. Alternatively, he submits that after the agreement has been discharged by performance, any arrangement claimed to be made by the Petitioner-company with the Respondent-company amounts to entering into a new arrangement intended to substitute the original contract by the new contract: this substitution operates to bring about innovation of the original contract. It is also contended by the Learned Counsel that some 47.346 metric tones of scraps have been lying with Respondent-company since 2001 as admitted in the minutes of their meeting dated 7.8.2001, which the Respondent-company offered to return as early as 7.8.2001, but the Petitioner-Corporation failed to remove the same or take any step for accepting the proposal of the Respondent-company to dispose of the scraps as published in the MSTC Bulletin of July 2001 @ Rs. 5,560 per MT till date, there had arisen a difference or dispute between that parties with effect from 2001 onwards. He also maintains that it was only in 2009, i.e., after nine long years and 17 days that the Petitioner-Corporation raised the claim, which is, therefore, hopelessly barred by limitation. The Learned Counsel relies on (i) Union of India v. Kishorilal AIR 1959 SC 1362 ; (ii) Juggilal v. N. International Crediet-En-Handels AIR 1955 Cal. 65 and (iii) Dadri Cement Company and Anr. v. Bird and Company (P.) Ltd. AIR 1974 Del. 223 , in support of his various contentions. Section 11 of the Act deals with the appointment of arbitrators, the relevant provisions whereof are as follows: 11. Appointment of arbitrators. - (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
Section 11 of the Act deals with the appointment of arbitrators, the relevant provisions whereof are as follows: 11. Appointment of arbitrators. - (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in Sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in Sub-section (3) applies and - (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.... In Boghara Poly fab (P) Ltd: (supra), the Apex Court following the decision in Patel Engg. Ltd. (supra) identified and segregated the issues that may be raised in an application under Section 11of the Act into three categories as under: 22.7. The first issues (first category) which the Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long-barred) claim or live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. 22.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration Clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 7.
22.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration Clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 7. The position is, with due respect, succinctly explained with appropriate illustrations by the Apex Court in their recent decision, namely, Indian Oil Corpn. Ltd. v. SPS Engg. Ltd., (2011) 3 SCC 507 , at paragraphs 15 and 16 as under: 15. To find out whether a claim is barred by res judicata, or whether a claim is "mala fide", it will be necessary to examine the facts and relevant documents. What is to be decided in an application under Section 11 of the Act is whether there is an arbitration agreement between the parties. The Chief Justice or his designate is not expected to go into the merits of the claim or examine the tenability of the claim, in an application under Section 11 of the Act. The Chief Justice or his designate may, however, choose to decide whether the claim is a dead (long-barred) claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration agreement survived. When it is said that the Chief Justice or his designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time-barred claim and there is no need for any detailed consideration of evidence. We may elucidate by an illustration: if the contractor makes a claim a decade or so after completion of the work without referring to any acknowledgement of a liability or other factors that kept the claim alive in law, and that claim is patently long time-barred, the Chief Justice or his designate will examine whether the claim is a dead claim (that is, a long time-barred claim).
On the other hand, if the contractor makes a claim for payment, beyond three years of completing the work but say within five years of completion of work, and alleges that the final bill was drawn up and payments were made within three years before the claim, the court will not enter into a disputed question whether the claim was barred by limitation or not. The court will leave the matter to the decision of the Tribunal. If the distinction between apparent and obvious dead claims and claims involving disputed issues of limitation is not kept in view, the Chief Justice or his designate will end up deciding the question of limitation in all applications under Section 11 of the Act. (emphasis supplied) 16. An application under Section 11 of the Act is expected to contain pleadings about the existence of a dispute and the existence of an arbitration agreement to decide dispute. The applicant is not expected to justify the claim or plead exhaustively in regard to limitation or produce documents to demonstrate that the claim is within time in a proceeding under Section 11 of the Act. That issue should normally be left to the Arbitral Tribunal. If the Chief Justice or his designate is of the view that in addition to examining whether there is an arbitration agreement between the parties, he should consider whether the claim is dead one (long time-barred) or whether there has satisfaction of mutual rights and obligation under the contract, he should record his intention to do so and give an opportunity to the parties to place their materials on such issue. Unless the parties are put on notice that such an issue will be examined, they will be under the impression that only questions of jurisdiction and existence of arbitration agreement between the parties will be considered in such proceedings. 8. On reading and re-reading the decision in SPS Engg. Ltd. (supra), there is no room for confusion on the limited power of the Chief Justice or his designate to decide as to whether the claim is time-barred or not. This Court can only examine as to whether, on the facts presented by the rival parties and on the available materials on record, the claim set up by the applicant is evidently and patently long time-barred or not. That is all.
This Court can only examine as to whether, on the facts presented by the rival parties and on the available materials on record, the claim set up by the applicant is evidently and patently long time-barred or not. That is all. If the facts pleaded by the applicant and the facts pleaded by the opposite party taken together reveal a dispute of the nature, which requires detailed examination of evidence, it will be more expedient and appropriate for this Court to refrain from deciding the same and leave it for the decision of the Arbitral Tribunal, which will be better and more-equipped to deal with the dispute. Conversely, if this Court can come to the conclusion without detailed examination of the materials on record that the claim is a dead one (long time-barred), it will have no hesitation to dismiss the application so as to prevent vexation and unnecessary harassment to the other party and refuse to appoint an arbitrator. Dragging a party to arbitration proceedings when the claim is evidently time-barred can certainly affect the right of the other party and, in the words of the Apex court in Patel Engg. Ltd. Case (supra), even on monetary terms, impose on him serious liability for meeting the expenses of the arbitration, even if it be the preliminary expenses and his objection is eventually upheld by the Arbitral Tribunal. Who said there are no expenses involved in the very constitution of Arbitral Tribunal? I think these to be the parameters for exercising the limited jurisdiction of this Court under Section 11 of the Act. 9. This then takes me to the core issue in this case, namely, whether the claim is time-barred or not. It is the common ground of the parties that article 137 of the Limitation Act do apply to an application under Section 11 of the Act as well. According to article 137 of the Limitation Act, such an application must be filed within three years, and the period of three years begins to run from the date when the "right to apply accrues". The question is when can the right to apply be said to accrue? As already noticed, it is the contention of Mr.
According to article 137 of the Limitation Act, such an application must be filed within three years, and the period of three years begins to run from the date when the "right to apply accrues". The question is when can the right to apply be said to accrue? As already noticed, it is the contention of Mr. V.K. Jindal, the learned senior counsel for the Petitioner-Corporation, that the right to apply under Section 11 of the Act accrued to the Petitioner only on the expiry of thirty days' period within which the Petitioner-Corporation invoking Section 11 has failed to secure the concurrence of the Respondent-company and that until and unless the request for appointment of arbitrator is made by the Petitioner-Corporation, no matter how long it takes, limitation will not start running. He further argues that it is only when a dispute or difference arises between the parties warranting arbitration that a request for appointment of an arbitrator is to be made and if no dispute or difference arises, such a request is not called for. In S. Rajan v. State of Kerela, (1992) 3 SCC 608 , the question as to when can the right to apply under Section 20 of the Arbitration Act, 1940 be said to accrue for the purpose of article 137 of the Limitation Act. That was a case where works contract of the State with the Appellant was terminated by the State on the failure of the Appellant to execute the contract in time and the work got completed through another contractor, which resulted in a loss to the State. Demand notice was accordingly issued by the State in 1974 calling upon the Appellant to pay the assessed amount of loss. The Appellant-contractor subsequently filed a writ petition before the Kerala High Court questioning the notice, but the same was dismissed in 1978. In the year 1983, the Appellant requested the State to refer their dispute to arbitration. After the rejection of his request in 1984, he filed an application under Section 20 in 1985. Holding that the right to apply under Section 20 accrued on the date of service of the demand notice in 1974, the Apex Court held at paragraph 11 of the judgment: 11.
After the rejection of his request in 1984, he filed an application under Section 20 in 1985. Holding that the right to apply under Section 20 accrued on the date of service of the demand notice in 1974, the Apex Court held at paragraph 11 of the judgment: 11. 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 act to be determined in each case having regards 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 the notice of demand under the Revenue Recovery Act was served upon the Appellant, namely, May 1974 is the date on which the 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 dispute 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 December 9, 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 Appellant's 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 May 30, 1974. It is relevant to notice that this demand was questioned by the Appellant by way of writ petition in the High Court of Kerala which was dismissed on November 25, 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 arbitration agreement which was rejected in the following year. Neither the arbitration clause nor a copy of the agreement is placed before us.
Only in the year 1983, did the Appellant choose to request the Government to refer the dispute to the arbitrator in terms of the arbitration 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 on 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 difference had already arisen between the parties following the service of the demand notice. The challenge to the said demand notice was 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 30th May, 1974 is the date on which the right to apply accrued in terms of article 137read with Section 20(1) and that, therefore, the application filed in the year 1985 was clearly barred by limitation. 10. In my opinion, in the light of the construction placed by the Apex Court on the expression "the right to apply accrues" used in article 137 of the Limitation Act, albeit in the context of Section 20of the Act, I cannot agree with the learned senior counsel of the Petitioner-Corporation that the period of limitation for filing an application under Section 11 of the Act will accrue only after the expiry of thirty days' period within which the Petitioner-Corporation invoking Section 11 has failed to secure the concurrence of the Respondent-company and that so long as the request for appointment of an arbitrator is not made by the Petitioner-Corporation as in this case, limitation will not start running and that the application filed by the Petitioner-Corporation is, therefore, not time-barred, cannot be accepted. This could not have been the intention of the Legislature. In my opinion, the period of limitation for the purpose of Section 11 of the Act will also start running from the time when a difference or dispute arises or differences or disputes arise between the parties.
This could not have been the intention of the Legislature. In my opinion, the period of limitation for the purpose of Section 11 of the Act will also start running from the time when a difference or dispute arises or differences or disputes arise between the parties. But this is a question of fact and can be decided only by reference to the pleadings of the parties and the documents annexed thereto. However, the Petitioner is not expected to justify the claim or plead exhaustively or produce documents to demonstrate that the claim is within time in a proceeding of this nature as indicated earlier. As already noticed, the determination of this issue will be made without detailed consideration of evidence, and if the issue becomes complicated such as the date when the difference or dispute arises or the differences or disputes arise between the parties cannot be easily determined, this Court should decline to undertake the exercise of elaborate enquiry and must leave such issue for the decision of the Arbitral Tribunal. 11. It is against the backdrop of the above parameters that I now propose to determine the date when the difference between the Petitioner-Corporation and the Respondent-company can be said to have started. In Hari Shanker Singhania case (supra), the case cited by the learned senior counsel, the Apex Court held that till such time as the settlement talks are going on directly or indirectly by way of correspondence, no issue can arise and with the result that the clock of limitation does not start ticking. Thus, according to these observations, it becomes clear that where negotiations are still on, there would be no question of starting of the period of limitation. But when can it be said that a dispute or difference has actually arisen or disputes or differences have actually arisen? In this context, the observations of the Apex Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, (1988) 2 SCC 338 are illuminating as well as instructive. This is what it said: 4. Therefore, in order to be entitled to order of reference under Section20, it is necessary that there should be an arbitration agreement and secondly, difference must arise to which this agreement applied. In this case, there is no dispute that there was an arbitration agreement.
This is what it said: 4. Therefore, in order to be entitled to order of reference under Section20, it is necessary that there should be an arbitration agreement and secondly, difference must arise to which this agreement applied. In this case, there is no dispute that there was an arbitration agreement. There has been assertion of claim by the Appellant and silence as well as refusal in respect of the same by the Respondent. Therefore, a dispute has arisen regarding non-payment of the alleged dues of the Appellant. The question is for the case when did such dispute arise. The High Court proceeded on the basis that the work was completed in 1980 and, therefore, the Appellant became entitled to the payment from that date and the cause of action under article 137 arose from that date. But in order to be entitled to ask for a reference under Section 20 of the Act there must not only be an entitlement to money but there must be a difference or dispute must arise (i). It is true that on completion of the work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claim was made on February 28, 1983. It is also true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by the claimant is the accrual of the cause of action. A dispute arises where there is a claim and a denial or repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under Section 8 or a reference under Section 20 of the Act. See Law of Arbitration by R.S. Bachawat, first edition, page 354. There should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion of denying, not merely inaction to accede to a claim or a request.
Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion of denying, not merely inaction to accede to a claim or a request. Whether in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case. (emphasis supplied) 12. Coming now to the facts of this case, after completion of the work, a reconciliation statement in respect of the BQ plates of full size above 2 metres and scraps were admittedly made on 17.2.2001 between the representatives of the Respondent-company and the Petitioner-Corporation at Agarpara Works at Kolkata-56, which was communicated by the Respondent-company on 17.8.2001. According to the Petitioner-Corporation, even after this reconciliation statement, the Respondent-company failed to return those excess materials to them. On 7.8.2001, a meeting was held between the parties wherein the Respondent-company had already made a proposal to dispose of the scraps at the rate of Rs. 5,560 per MT as they were by then unable to return those scraps. This was not acceptable to the Petitioner-Corporation, and they kept silent till 24.2.2005. Thus, indisputably, from the year 2001 onward, differences or disputes started to arise between the Petitioner-Corporation and the Respondent-company over the disposal of the scraps/BQ plates. Then, what did they do immediately thereafter? Nothing! After the lapse of about 4 years or more, the Petitioner-Corporation vide the letter dated 24.2.2005 requested the Respondent-company to extend necessary assistance to the authorized representative of OMML and JSC-JV to inspect the stock of BQ plates lying in their custody, but the request was apparently turned down. Two years thereafter, the Petitioner-company is said to have constituted a Committee vide the office order dated 5.11.2007 and the further order dated 26.11.2007, and the members of this Committee then visited Agarpara Workshop on 2.9.2008 and submitted their report. The minutes of the meeting held on 2.9.2008 with the representative of the Respondent-company was drawn wherein the Respondent-company expressed its inability to allow the Committee members of the Petitioner-Corporation to inspect the BQ plates as the same were not identifiable and not even available. The crucial period-is the activity of the Petitioner-Corporation for the next three years with effect from 2001. 13.
The crucial period-is the activity of the Petitioner-Corporation for the next three years with effect from 2001. 13. It cannot be overlooked that from the own showing of the Petitioner-Corporation, the Respondent-company had refused to return the scraps/materials as early as 2001 as per the reconciliation statement dated 17.2.2001 (Annexure F) and contrary to the agreement and the indemnity bond executed by them. Thus, in my opinion, it can be safely said that a claim for return of the scraps/BQ plates had been made by the Petitioner-Corporation to the Respondent-company, but this claim was categorically refuted or denied by the Petitioner-company in 2001 itself. Besides, there is not an iota of evidence to show that any negotiation had taken place between the parties from 2001 to 2005 for settlement of their dispute. The conduct of the Respondent-company, on the admitted facts and circumstances of the case, does not exhibit any evidence of mere failure or inaction on their part to return those scraps/BQ plates: it was a clear case of refusal by them to return those materials as early as 2001 contrary to the agreement. On the basis of these findings, the inference is irresistible and the conclusion inevitable that the right to apply for appointment of arbitrator accrued to the Petitioner-company in 2001 itself; that the period of limitation had started running from 2001 onwards and that as the Petitioner-Corporation not apply for appointment of arbitrator within the next three years, the application is hopelessly barred by time. The written request of the Petitioner-Corporation on 24.2.2005 (Annexure H) to the Respondent-company to allow the authorized representative of OMML and JSC-JV for inspecting the stock of BQ plates in their custody and the minutes of the meeting held between them on 2.9.2008 recording the proposal and counterproposal made by the rival parties appear to be an afterthought or, at any rate, are events which took place after the expiry of the period of limitation and, therefore, cannot breathe new life to the dead claim, particularly, when it is the admitted position of the parties that no negotiation for settlement of their dispute ever took place from 2001 to 2005. In my opinion, there is, therefore, no much difficulty in deciding that the application is time-barred.
In my opinion, there is, therefore, no much difficulty in deciding that the application is time-barred. As I have been able to give a definite finding on the question of limitation in this manner, I do not think it necessary to deal with the other contentions raised by the Learned Counsel for the rival parties. 14. The result of the foregoing discussion is that this application, being barred by limitation, is not maintainable and I, therefore, dismiss. As the Petitioner-Corporation has raised an important question of law, they need not saddled with costs.