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2016 DIGILAW 1195 (RAJ)

Govind Garg v. Mahendera Goyal

2016-08-19

MOHAMMAD RAFIQ

body2016
ORDER : 1. This application under Section 11(6) of the Arbitration and conciliation Act, 1996 has been preferred by one Govind Garg with prayer that an independent arbitrator be appointed for resolution of its dispute pertaining to accounts of firm M/s Avantika Enterprises, Ajmer Indane Distributor, with the non-applicant. 2. The applicant and non-applicant are partners of the aforesaid firm. A partnership deed was executed between them thereabout on 23.07.1986. A memorandum of agreement was executed between Indian Oil Corporation Limited and M/s Avantika Enterprises, Ajmer, on 24.10.1990 in respect of the distribution of LPG Cylinder for the domestic purposes. On 26.12.2000 the Field Officer of the Indian Oil Corporation conducted the inspection of the said firm and in pursuance thereof, vide communication dated 13.02.2001 addressed to the non-applicant, communicated that during inspection the non-applicant was not available at the distributorship for carrying out the operations and request was made to immediately start attending the distributorship functions and to convey the reasons for such long absence in the past. 3. Despite notice issued by this court vide order dated 17.04.2015, no one has appeared on behalf of the non-applicant to oppose the application. 4. Mr. S.K. Saksena, learned counsel for the applicant, submitted that the applicant addressed a letter on 17.02.2001 that as per the Clause 23(b) of the agreement, it was a paramount condition of the agreement that the distributor himself or both the partners of the distributor's firm, as the case may be, shall take active part in the management and running of the distributorship and shall personally supervise the same and shall not any circumstances do so through any other person, firm or body. The Field Officer of Indian Oil Corporation on 26.12.2000 conducted inspection of the firm and in pursuance thereof, vide letter dated 13.02.2001, addressed to the non-applicant, communicated that during inspection the non-applicant was not available at the distributorship business and required him to convey the reasons for such long absence. A copy of the aforesaid letter was endorsed to the applicant asking him why his partner has not been taking part in affairs of the distribution. Learned counsel argued that, pursuant to partnership deed, it was agreed to pay a monthly amount of Rs.50,000/- to the applicant for attending functions of the business of distributorship during working hours. A copy of the aforesaid letter was endorsed to the applicant asking him why his partner has not been taking part in affairs of the distribution. Learned counsel argued that, pursuant to partnership deed, it was agreed to pay a monthly amount of Rs.50,000/- to the applicant for attending functions of the business of distributorship during working hours. But, such payment does not ipso facto absolve the non-applicant from attending the distributorship from time to time especially on the occasion when inspection is carried out by the Indian Oil Corporation, as per the conditions of the agreement to save the termination of the distributorship. The amount of Rs.50,000/- per month as agreed is not being paid or debited in the account of the applicant. The applicant then also send another letter dated 17.02.2001 to the non-applicant with reference to his repeated assurance, and also advising him to attend the work of distribution, on inspection of the Indian Oil Corporation authority, which was likely to take place on or about 22.10.2001. 5. The applicant then served yet another letter dated 10.04.2003 on the non-applicant with reference to previous communication dated 28.02.2001 stating that monthly amount of Rs.50,000/- to be paid to the applicant, was accumulating and the non-applicant assured the applicant from time to time to make the payment out of the account of the distributorship. Reference is also made to the letter dated 21.03.2005 sent by the applicant to the non-applicant, whereby he was again advised to make payment of the arrears within a week. Finally, when the payment was not made all this time for such a long time, the applicant served on the non-applicant a notice dated 26.12.2014 calling upon the non-applicant to make payment or to refer the dispute to the sole arbitrator in terms of Clause 11 of the Partnership Deed, proposing the name of Mr. Atul Maloo, as the sole arbitrator to resolve the dispute. It was stated in the notice that if appointment of arbitrator was not made or another name was not proposed within thirty days from the date of receipt of notice, the applicant would be free to approach this court under Section 11(6) of the Act of 1996 for appointment of arbitrator. 6. Mr. It was stated in the notice that if appointment of arbitrator was not made or another name was not proposed within thirty days from the date of receipt of notice, the applicant would be free to approach this court under Section 11(6) of the Act of 1996 for appointment of arbitrator. 6. Mr. S.K. Saksena, learned counsel appearing for applicant, submitted that present application cannot be said to be barred by limitation or the claim of the applicant cannot be said to be dead claim. Learned counsel for applicant, in support of his arguments, has relied on judgment of the Supreme Court in Purple India Holdings Ltd. Vs. Drilling and Offshore Pvt. Ltd. - AIR 2016 SC 1747 and argued that the Supreme Court in that case held that averments made in the petition must, in the absence of any counter from the respondent, be taken to be correct, especially when such averments are supported by an affidavit filed by the applicant. 7. Learned counsel for applicant also relied on judgment of the Supreme Court in Rajesh Verma Vs. Ashwani Kumar Khanna – 2016 SAR (Civil) 714, and argued that the Supreme Court in that case observed that the jurisdiction of the court under Section 11 of the Act of 1996 is limited and confined to examining as to whether there is an arbitration agreement between the contracting parties and if so, whether any dispute has arisen between them out of such agreement which may call for appointment of arbitrator to decide such disputes. Once it is held that disputes had arisen between the parties in relation to agreement which contained an arbitration clause for resolving such disputes, the court should have made reference to the arbitrator, leaving the parties to approach the arbitrator with their claim and counter-claim to enable the arbitrator to decide all such disputes on the basis of case set up by the parties before him. 8. Mr. S.K. Saksena, learned counsel for applicant, also relied on judgment of the Supreme Court in Schlumberger Asia Services Ltd. Vs. Oil & Natural Gas Corporation Ltd. - 2013 (2) WLC (SC) Civil 158, and argued that the Supreme Court in that case, while dealing with the question of limitation, held that even if claim is made a little after three years, after completion of work, the same may not be held time barred. 9. Oil & Natural Gas Corporation Ltd. - 2013 (2) WLC (SC) Civil 158, and argued that the Supreme Court in that case, while dealing with the question of limitation, held that even if claim is made a little after three years, after completion of work, the same may not be held time barred. 9. Admittedly, in the present case, dispute between the parties arose when the letter dated 13.02.2001 was addressed by the Senior Area Manager of the Indian Oil Corporation to the non-applicant Shri Mahendra Goyal. On the basis of this letter, the applicant wants to build a case that the non-applicant has not been attending to the business of the firm and that it is he alone, who has been doing so. Yet the payment of a sum of Rs.50,000/- per month, as per the partnership-deed, was not being made to him. Such demand for the first time was raised by the applicant in letter dated 17.02.2001 addressed to the non- applicant, followed by another letter dated 15.10.2001 and letters dated 10.04.2003 and 21.03.2005. The applicant again in the letter dated 21.03.2005 sent to the non-applicant stated that the non-applicant each time gave assurances for settlement of accounts as to the payment of the arrears at the rate of Rs.50,000/- per month with effect from 01.01.2001 up to date, and the same is getting accumulated each month. Two years thereafter, the applicant again sent similar letter to the non-applicant on 21.03.2005 requesting to payment of arrears within a week. Even after this letter, the applicant waited for as many as seven-and- a-half year and finally served notice on the non- applicant through his advocate on 26.12.2014 calling upon him to refer the dispute to the arbitrator in terms of Clause 11 of the partnership-deed. 10. Even if it is accepted that there exists a clause of arbitration in the partnership deed, question that falls for consideration before this court is whether the reference to the arbitrator can be made now when the dispute first arose in the year 2001. 10. Even if it is accepted that there exists a clause of arbitration in the partnership deed, question that falls for consideration before this court is whether the reference to the arbitrator can be made now when the dispute first arose in the year 2001. No doubt, the question of limitation has to be left open to be decided by the arbitrator where the parties would have opportunity to lay their claim and counter claim and also set up the pleadings with reference to the proof as to the delay, but this rule is not applicable in a case where the prayer for arbitration is made with grossly enormous delay to resurrect a dead claim. 11. The Supreme Court in Indian Oil Corporation Limited Vs. SPS Engineering Limited – (2011) 3 SCC 507 considered the difference between dead claim and long time barred claim and observed that 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. The observations made by the Supreme Court are worth consideration. 12. The Supreme Court in National Insurance Company Limited Vs. Boghara Polyfab Private Limited – (2009) 1 SCC 267 , followed its earlier decision in SBP & Co. Vs. Patel Engineering Ltd. (2005) 8 SCC 618 , and classified the issues that may be raised in an application under Section 11 of the Act into three categories, the first category is of those which the Chief Justice/his designate will have to decide, second category is of those which the Chief Justice/his designate may choose to decide and third category of those which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal. It was held that whether a claim is dead (long time barred) claim or live claim, the Chief Justice or his designate may himself decide or leave it for decision of the arbitral tribunal. These two judgments were followed in Indian Oil Corporation Limited Vs. It was held that whether a claim is dead (long time barred) claim or live claim, the Chief Justice or his designate may himself decide or leave it for decision of the arbitral tribunal. These two judgments were followed in Indian Oil Corporation Limited Vs. SPS Engineering Limited, supra, when the Supreme Court, while considering an application under Section 11 of the Act, held that there can be no threshold consideration and rejection of a claim on the ground of res judicata, as it requires consideration of pleadings as also the claims/issues/points and the award in the first round of arbitration, in juxtaposition with the pleadings and the issues/points/claims in the second arbitration. Even while considering limitation as preliminary issue, the Chief Justice or his designate is not expected to go into merits of the claim either on facts or law in an application under Section 11 of the Act of 1996. But he can decide a dead claim, which is evidently and patently long time barred. There is no need of detailed consideration. In para 14 of the report, the Supreme Court explained difference between dead stale claim and mere time barred claim in the following terms:- “14. 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 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. 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 acknowledgment of a liability or other factors that kept the claim alive in law, and the 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 of 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.” 13. The law enunciated by the Supreme Court in Indian Oil Corporation Limited Vs. SPS Engineering Limited, supra, was reiterated by the Supreme Court in State of Goa Vs. Praveen Enterprises, (2012) 12 SCC 581 , in which it was held that the issue of limitation is not an issue that has to be decided in an application under Section 11 of the Act, but the Chief Justice or his designate in appropriate cases may consider whether the application was in regard to a claim, which on the face of it was so hopelessly barred by time, that it is already a dead/stale claim, which did not deserve to be resurrected and referred to arbitration. It was held that “...whether the application was in regard to a claim which on the face of it was so hopelessly barred by time, that it is already a dead/stale claim which did not deserve to be resurrected and referred to arbitration.” 14. Facts of the present case clearly shows that the dispute between the parties with regard to payment of monthly sum of Rs.50,000/- arose as far back as in 2001, when the applicant sent the first letter to the non-applicant followed by another letters dated 17.02.2001 and 15.10.2001. Since then he has been making such claim usually with interval of one or two years. That would mean that he sent three consecutive letters to the non-applicant way back in 2001 and yet did not invoke the remedy of arbitration despite there being clause thereabout in the partnership-deed. In fact, the applicant by registered post thereafter sent two letters to the non-applicant, one on 10.04.2003 and thereafter on 21.03.2005 and did not proceed to do anything till he finally served legal notice on 26.12.2014 on the non-applicant through his advocate. Apparently, the claim of the applicant is not only time barred but is a dead claim, which does deserve to be resurrected and referred to arbitration. Therefore his prayer for appointment of arbitrator cannot be accepted. 15. In view of the above discussion, the present application deserves to be dismissed. It is accordingly dismissed.