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2015 DIGILAW 541 (CAL)

Prakash Roadlines Corporation v. Coal India Limited

2015-07-01

SANJIB BANERJEE

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JUDGMENT : Sanjib Banerjee, J. 1. The first and third respondents are unnecessary parties and have been needlessly impleaded. Since the first and third respondents are not parties to the arbitration agreement cited by the petitioner, the names of the first and third respondents are deleted from the array of parties. 2. This is a request under Section 11 of the Arbitration and Conciliation Act, 1996 consequent upon the petitioner's invocation of the arbitration agreement by its letter of March 9, 2012 going unheeded despite due receipt thereof by the respondent and the appointing authority named in the arbitration agreement. 3. The claim pertains to transportation services rendered by the petitioner to the respondent in the early 1980s. Following disputes having arisen as to the amount payable to the petitioner, a committee was constituted to ascertain the sum and the committee opined in 1983 that a sum of Rs. 19,81,386/- was due to the petitioner. It appears that substantial payments were released to the petitioner and by a letter dated September 15, 1987, the respondent admitted that a balance sum of Rs. 1,47,990/- was payable to the petitioner in respect of the services rendered. A subsequent letter of January 14, 1988 was issued by the respondent acknowledging its debt and assuring the petitioner of immediate payment. 4. For a period of more than three years after the issuance of the letter of January 14, 1988, there appears to have been no acknowledgement of the liability or the jural relationship by the respondent. On May 6, 1991 the respondent or its holding company wrote to the petitioner as follows: "This has reference to your letter No. PRC/120A/91-92/1379 dated 4th May, 1991 we stated that your bills are under process in our accounts department and your payment shall be released after adjustment of the previous advance shortly." 5. The petitioner instituted W.P. No. 3062 of 1992 in this Court under Article 226 of the Constitution of India seeking a direction on the respondent and its holding company to ensure that the payment due to the petitioner was duly released. Such petition was allowed by an order of August 13, 2002. The order was, however, set aside in appeal on March 16, 2009 and the certified copy of the appellate order was made available to the petitioner in early April, 2009. 6. Such petition was allowed by an order of August 13, 2002. The order was, however, set aside in appeal on March 16, 2009 and the certified copy of the appellate order was made available to the petitioner in early April, 2009. 6. Two principal grounds have been urged by the respondent to resist the present request. The respondent contends that the claim of the petitioner can no longer be pursued as it is barred by the laws of limitation. It is the further contention of the respondent that the clause cited as the arbitration agreement is no arbitration agreement at all. 7. In support of the ground of limitation, the respondent says that even if the letter of May 6, 1991 is regarded as an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, 1963, since a period of nearly ten months therefrom was expended before the writ petition was filed by the petitioner and a period of two years and eleven months elapsed from the date of the petitioner obtaining the certified copy of the appellate order of March 16, 2009 and the petitioner invoking the arbitration agreement by its notice of March 9, 2012, the claim can no longer be pursued. 8. On the ground of the arbitration agreement, the respondent submits that though the heading of the relevant clause says "Arbitration" nothing in the clause indicates that there would be an adjudication by way of arbitration. 9. The petitioner says that since a period of more than three years had elapsed from the last acknowledgement of the debt by the respondent on January 14, 1988 and the next letter on such aspect issued by the respondent on May 6, 1991, the letter of May 6, 1991 cannot be regarded as an acknowledgement within the meaning of Section 18 of the said Act of 1963 since it was not issued within a period of three years from the previous acknowledgement. The petitioner says that the letter of May 6, 1991 should be seen to be a promise to pay a debt barred by limitation law under Section 25(3) of the Contract Act, 1872. The petitioner asserts that since the letter indicated that the payment would be made shortly, but did not indicate any time, the starting point for reckoning the period of limitation would be a reasonable time after the issuance of such letter. The petitioner asserts that since the letter indicated that the payment would be made shortly, but did not indicate any time, the starting point for reckoning the period of limitation would be a reasonable time after the issuance of such letter. The petitioner refers to Article 113 of the Schedule to the Act of 1963 to contend that a period of three years would be available to the petitioner to institute the suit from the date of accrual of the right to sue and the ascertainment of such date would be an issue on facts that cannot be decided on affidavit evidence. The substance of the submission on behalf of the petitioner is that it cannot be said that the substantive claim is ex facie barred by limitation. 10. Since the petitioner has invoked Section 25(3) of the Contract Act and it is a plausible argument that the letter dated May 6, 1991 has to be regarded to be a promise to pay a debt which is barred by limitation law, notwithstanding the quantum of debt not being specified in the document, the petitioner may be entitled to the benefit under Section 46 of the Contract Act. As a consequence, the substantive claim of the petitioner, which is to be carried to the arbitral reference, does not appear to be ex facie barred by the laws of limitation. 11. The petitioner has relied in this context to an unreported judgment of September 5, 2008 rendered in GA No. 3551 of 2003, CS No. 269 of 2003 (Berger Paints India Ltd. v. Ashish Chattopadhyay). Paragraph 29 of the judgment has been placed for the distinction recognised therein between an acknowledgement of the liability under Section 18 of the Act of 1963 and a promise to pay a debt barred by the laws of limitation under Section 25(3) of the Contract Act. 12. Since an arguable issue has arisen as to whether the substantive claim of the petitioner is barred by limitation, the Chief Justice or his designate has to yield to the superior authority of the arbitral tribunal as recognised in Section 16 of the said Act of 1996; which is a departure from the arbitration law as it stood prior thereto, primarily in the arbitral tribunal being conferred the authority to decide on its own jurisdiction. 13. 13. In consonance with the Constitution Bench opinion in the judgment reported at (2005) 8 SCC 618 (SBP & Co. v. Patel Engineering Ltd.), the Chief Justice or his designate will reject a request for reference under Section 11 of the Act of 1996 if either the right to go to arbitration or the substantive claim of the claimant appears, ex facie, to be barred by limitation. But when an arguable case is made out on facts, and the issue does not pertain to the physical existence of the arbitration agreement (which is to be exclusively decided by the Chief Justice or his designate), the authority conferred under Section 16 of the 1996 Act would demand that the Chief Justice or his designate defer to the same and not conclusively decide an issue that involves adjudication on facts. 14. The second ground urged by the respondent is utterly un-meritorious. In a commercial document when the clause is intitule "Arbitration" the substance of the clause has to be read in such light and the adjudication or settlement provided for in the clause cannot be read in isolation of the general description or nomenclature given to the relevant clause. In any event, this aspect of the matter may already have been concluded in the Division Bench judgment of March 16, 2009. 15. Since it is evident that the petitioner duly invoked the arbitration agreement, but the respondent and its appointing authority chose to ignore the same, the appointment must now be made without reference to the respondent or its appointing authority. 16. Accordingly, AP No. 223 of 2015 is allowed by appointing Mr. Sarathi Dasgupta, Advocate as Arbitrator to adjudicate the disputes covered by the arbitration agreement. The point of limitation urged by the respondent is kept open for adjudication. 17. The Arbitrator will be paid a consolidated remuneration of Rs. 1.5 lakh to be shared by the parties in equal measure and the Arbitrator will endeavour to conclude the reference within six weeks of the pleadings being completed. The petitioner has agreed to file the statement of claim within three weeks from date. The Arbitrator will immediately issue directions for filing of the counter statement. 18. The petitioner will also be entitled to the costs of the present proceedings assessed at 1000 GM. The petitioner has agreed to file the statement of claim within three weeks from date. The Arbitrator will immediately issue directions for filing of the counter statement. 18. The petitioner will also be entitled to the costs of the present proceedings assessed at 1000 GM. Urgent certified website copies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities. Application is allowed.