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2016 DIGILAW 12 (MAN)

State of Manipur v. Th. Haridas Singh

2016-01-27

L.K.MOHAPATRA, N.KOTISWAR SINGH

body2016
JUDGMENT : N. Kotiswar Singh, J. Heard Mr. Ch. Chonjon, Sr. Advocate, Mr. Ng. Kumar, Advocate, learned counsel for the appellants. Also heard Mr. R.K. Tomma, Advocate, learned counsel and Mr. M. Devananda, Advocate, learned counsel for the respondents. 2. The present appeal has been preferred by the State of Manipur being aggrieved by the judgment and order dated 31.08.2013 passed by the learned District Judge, Manipur East in Arbitration Case No. 2 of 2010 which was filed by the claimant/contractor challenging the Arbitration Award dated 29.11.2010 which rejected the claim of the claimant/contractor, respondent no. 1 herein as time barred. 3. In order to appreciate the issues involved in this appeal, it may be necessary to refer to certain relevant facts. A contract for execution of the work of construction of Thoubal Multi-purpose Project was entered into between the claimant/contractor, the respondent No. 1 herein and the Engineer-in-charge for and behalf of the Government of Manipur. The aforesaid contract consisted of 3 (three) separate works, namely, (i) Construction of Earthen Dam and the Diversion Work of Rs. 23,89,29,480/- (Rupees twenty-three crores, eighty-nine lakhs twenty-nine thousand four hundred and eighty only); (ii) Construction of Chute Spillways and intake for water supply and Hydro Power Generation for Rs. 9,13,74,659/- (Rupees nine crores thirteen lakhs seventy-four thousand six hundred fifty-nine only); and (iii) Construction of Barrage across Thoubal river at Keithelmanbi for Rs. 3,13,64,300/- (Rupees three crores, thirteen lakhs sixty-four thousand three hundred only). 4. The present case involves the first contract work for construction of Earthen Dam and Diversion Work which was to commence from 17.08.1980 and to be completed on or before 16.08.1987. Under the relevant agreements, the State authorities were to pay certain mobilisation advance and machinery advance to the contractor. Parts of the said advances were paid to the contractor. According to the appellants, the appellants made advance payment of a total sum of Rs. 71,08,533/- (Rupees seventy-one lakhs eight thousand five hundred and thirty-three), out of which Rs. 47,19,239/(Rupees forty-seven lakhs nineteen thousand two hundred and thirty-nine) were towards machinery advance and the remaining Rs. 23,89,294/- (Rupees twenty-three lakhs eighty-nine thousand two hundred and ninety-four) as mobilisation advance. The appellants further claimed that after the claimant started executing work worth Rs. 7,17,587/- (Rupees seven lakhs seventeen thousand five hundred and eighty seven) which was duly paid in 1982, he discontinued execution of the contract. 23,89,294/- (Rupees twenty-three lakhs eighty-nine thousand two hundred and ninety-four) as mobilisation advance. The appellants further claimed that after the claimant started executing work worth Rs. 7,17,587/- (Rupees seven lakhs seventeen thousand five hundred and eighty seven) which was duly paid in 1982, he discontinued execution of the contract. On the other hand, it was the case of the claimant that the work could not be continued as necessary funds were not allocated. Though funds were subsequently allocated by the Planning Commission for the construction of the dam during 1988-89, the programme for completion of dam was rescheduled by the appellants reducing the period of execution from 7 years to 5 years. The claimant was thereafter asked to submit his construction programme as per the said revised schedule. The contractor intimated the authorities by his letter dated 20.04.1988 raising several issues and reasons regarding difficulties in executing the contract and informed the authorities for putting the contract to an end. However, by a subsequent letter dated 12.05.1988 the claimant/respondent wrote to the authorities offering to execute the work of spillways and intake for water supply and hydropower generation arrangement on certain terms and conditions mentioned therein. It seems the authorities examined the issues and constituted a committee in that regard which recommended for withdrawal of the work from contractor/claimant which was duly communicated to the contractor/claimant on 7.12.1989 and directing for recovery of the advances made to him by executing mortgage deeds and bank guarantees and surety bond for the machinery and mobilisation advances given to the contractor and mentioning other conditions. Thereafter, there was a series of correspondences between the claimant/contractor and the authorities regarding execution of mortgage deeds regarding the refund of the advances. While the claimant as well as the State authorities were engaged in negotiations and correspondences, the claimant/contractor wrote to the appellant authorities on 2.11.1991 requesting for releasing the bill of the work executed by him in connection the construction of Earthen dam and diversion work, as done in the case of Chute spillways and Intake for water supply and hydropower generation and requesting that bill amount may be adjusted against the repayment of balance advances. As the letter dated 2.11.1991 is important for the purpose of deciding the issue involved, it is reproduced herein below:- “TH. HARIDAS SINGH, (ASHA CINEMA COMPLEX) North AOC. Imphal- 795001, (Manipur) Phone : Office : 21219, 20879 Res. As the letter dated 2.11.1991 is important for the purpose of deciding the issue involved, it is reproduced herein below:- “TH. HARIDAS SINGH, (ASHA CINEMA COMPLEX) North AOC. Imphal- 795001, (Manipur) Phone : Office : 21219, 20879 Res. : 20345 Date : 2.11.91……….19 To : The Chief Engineer (Irrn). I.F.C. Department, Manipur. Sub:- THOUBAL MULTIPURPOSE PROJECT (SH:-CONSTRUCTION OF EARTHEN DAM AND DIVERSION WORKS). Sir, I have the honour to request you to kindly consider for releasing bill of the work executed by me in connection with the above mentioned work, as done in the case of Chute Spillway and intake for water supply and Hydro Power. So that, the bill amount may please be adjusted against the repayment of the balance advance. Thanking you in anticipation. Yours faithfully, Sd/- (TH. HARIDAS SINGH) Copy to : 1. The Superintending Engineer, Thoubal Circle No.I, I.F.C. Department, Manipur. 2. The Executive Engineer, Thoubal Project Division No. I, IFC Dept., for favour of information, please. Sd/- (TH. HARIDAS SINGH).” (emphasis added) In response to the said request of the claimant/contractor, the authorities wrote to the claimant/contractor on 25.11.1991 asking him to submit his claims, if any, in respect of the works executed by him at an early date. The said letter dated 25.11.1991 reads as follows: “GOVERNMENT OF MANIPUR IRRIGATION & FLOOD CONTROL DEPARTMENT. No.TPD-I/Com/1/91-92/Vol-III/249-51 Maphou, the 25th Nov.1991. To Shri Th. Haridas Singh, Spl. Class Contractor, (Asha Cinema Complex), North A.O.C., Imphal- 795001. Sub:- Thoubal Multipurpose Project (SH:-Construction of Earth Dam & Diversion works). Sir, In inviting a reference to your letter No. nil dt. 02-11-1991 addressed to the Chief Engineer (Irrgn), IFC Deptt. and copy endorsed to the Superintending Engineer, Thoubal Circle No.I, IFC Deptt. and the Executive Engineer, Thoubal Project Division No.I, IFC Deptt., Manipur regarding final bill for the above work you are requested to submit claims, if any in respect of the works executed by you at an early date. Yours faithfully, Sd/- (Kh. Rajmani Singh) Executive Engineer, Thoubal Project Division No.I, IFC Deptt., Manipur. Endt. No.TPD-I/Com/1/91-92/Vol-III/249-5/Maphou, the 25th Nov/91. Copy to : 1. The Chief Engineer (Irrgn)., IFC Department, Manipur for favour of information. 2. The Superintending Engineer, Thoubal Circle No.I, IFC Deptt., Manipur for favour of information. Sd/- (Kh. Yours faithfully, Sd/- (Kh. Rajmani Singh) Executive Engineer, Thoubal Project Division No.I, IFC Deptt., Manipur. Endt. No.TPD-I/Com/1/91-92/Vol-III/249-5/Maphou, the 25th Nov/91. Copy to : 1. The Chief Engineer (Irrgn)., IFC Department, Manipur for favour of information. 2. The Superintending Engineer, Thoubal Circle No.I, IFC Deptt., Manipur for favour of information. Sd/- (Kh. Rajmani Singh) Executive Engineer, Thoubal Project Division No. I, IFC Deptt., Manipur.” (emphasis added) Pursuant to this letter, the claimant/contractor wrote to the authorities on 13.12.1991 requesting the authorities to prepare the final bill of works already executed by him in connection with the above mentioned work, in the manner prepared by the Executive Engineer, Thoubal Project Division No. II, IFC Department, in the case of Chute spillways and Intake for water supply and hydropower generation. He also enclosed photocopy of the bill prepared by the Executive Engineer, Thoubal Project Division No. II and requested the authorities to prepare the final bill and adjust the same against the payment of balance advances. This letter dated 13.12.1991 reads as follows :- “TH. HARIDAS SINGH, (ASHA CINEMA COMPLEX) North AOC. Imphal-795001, (Manipur) Phone : Office : 20879, 21219 Res. : 20345 Date : 13th Dec., 91 To : The Executive Engineer, Thoubal Project Divn. No. I, I.F.C. Deptt., Manipur. Sub:- Thoubal Multipurpose Project (Sh:-Construction of Earth Dam & Diversion Works). Sir, With reference to your letter No. TPD-I/Com/1/91-92/Vol-III/249-51 dated 25th Nov., 91 I am to state as follows. As stated earlier, I am to request you to preparer the final bill of the works already executed by me in connection with the above mentioned work, in the manner prepared by the Executive Engineer, Thoubal Project Divn. No. II, I.F.C. Depat., Manipur in the case of Chute Spillway and Intake for Water Supply and Hydro Power. To make it convenient in preparing the final bill. I am enclosing herewith a photocopy of the said bill prepared by the E.E., Thoubal Project Divn., No. II. Further, I am to request you to prepare the final bill and adjust the same against the payment of the balance advance. Thanking you in anticipation. Yours faithfully, Sd/- (TH. HARIDAS SINGH)” (emphasis added) It is on record that there were subsequently a series of correspondences between the claimant and the authorities as regards the refund of the advance payment made by the authorities to the claimant. Thanking you in anticipation. Yours faithfully, Sd/- (TH. HARIDAS SINGH)” (emphasis added) It is on record that there were subsequently a series of correspondences between the claimant and the authorities as regards the refund of the advance payment made by the authorities to the claimant. While the said correspondences/negotiations were going on relating to the refund of the advance payment, the authorities themselves wrote to the claimant/contractor again on 26.07.1994 vide their letter No. TPD1/Com/1/Vol-III/94-95/239-1 with reference to their earlier letter dated 25.11.1991 intimating the claimant that though the claimant had been requested to submit the claims for settlement of the final bill of the work, information had not been received by the authorities and accordingly requested the claimant/contractor again to submit claims in connection with the work at an early date for settlement of the final bill. The contents of the letter which has a direct bearing on the issue is also reproduced as below :- “GOVERNMENT OF MANIPUR IRRIGATION & FLOOD CONTROL DEPARTMENT. No. TPD-I/Com/1/Vol-III/94-95/239-1 Maphou, the 26th July/94. To Shri Th. Haridas Singh, Spl. Class Contractor, Asha Cinema Complex, North A.O.C., Imphal. Sub:- Thoubal Multipurpose Project (SH:-Construction of Earth Dam and Diversion arrangement)- Final bill thereof. Ref. :- Your letter of 25.7.94. D/Sir, Please refer to your letter under reference to the address of the Executive Engineer, Thoubal Project Division No. III, I&FCD, Manipur and copy endorsed to this office on the above subject. You had been requested to submit claims, if any, in connection with the works done of the above project under T.O. letter No.TPD-I/Com/1/Vol-III/91-92/24951 dt. 25.11.91 for settlement of the final bill of the above work. The information is not yet received. You are requested again to submit claims, if any, in connection with the work at an early date for settlement of the final bill. Yours faithfully, Sd/- (Kh. Rajmani Singh) Executive Engineer, Thoubal Project Division No.I, I&FCD. Manipur. Endt. No.TPD-I/Com/1/Vol-III/94-95/Maphou, the 26th July/94. Copy to :- 1. The Superintending Engineer, Thoubal Circle No.1, I&FCD, Manipur along with a copy of the contractor’s letter for favour of information. Sd/- (Kh. Rajmani Singh) Executive Engineer, Thoubal Project Division No.I, I&FCD. Manipur.” (emphasis added) Pursuant to the said letter dated 26.07.1994 asking the claimant/contractor to submit the final bill, the claimant/contractor submitted the claimed amount of Rs. The Superintending Engineer, Thoubal Circle No.1, I&FCD, Manipur along with a copy of the contractor’s letter for favour of information. Sd/- (Kh. Rajmani Singh) Executive Engineer, Thoubal Project Division No.I, I&FCD. Manipur.” (emphasis added) Pursuant to the said letter dated 26.07.1994 asking the claimant/contractor to submit the final bill, the claimant/contractor submitted the claimed amount of Rs. 8,38,17,049.00 (Rupees Eight crores eight lakhs seventeen thousand and forty-nine only) under various heads vide his letter dated 18.01.1995. This claim furnished by the claimant/contract on 18.01.1995, however, was rejected by the authorities on 24.06.1995 as not tenable and not acceptable to the department and directed him to clear the balance liabilities of the advance made to the claimant. It was only after the claim of the claimant/contractor was rejected by the appellant authorities on 24.06.1995 that the claimant/contractor wrote to the authorities on 12.07.1995 for appointment of the arbitrator in terms of the contract agreement. The authorities rejected the claim for appointment of arbitrator and informed the claimant/contractor on 16.09.1995. 5. Later the State/appellants had filed a suit against the claimant/contractor before the learned Civil Judge (Sr. Divn.), No. I, Manipur East in Original Money Suit No. 59 of 1995 for recovery of Rs. 1,74,43,201/- (Rupees one crore seventy-four lakhs forty-three thousand two hundred and one) from the claimant/contractor. The claimant/contractor filed an objection to the said suit contending that there is an arbitration clause under the contract agreement and the claimant/contractor had already filed an application under Section 20 of the Arbitration Act, 1940 for reference to an arbitrator which was registered as Original (Arbitration) Suit No. 19 of 1995 and accordingly prayed for stay of the said suit. The learned Court of Civil Judge (Sr. Divn.) No.1, Manipur East accordingly stayed the suit vide order dated 14.09.1998 which was affirmed by the Hon’ble Gauhati High Court vide order dated 1.02.2006 by holding that the dispute between the parties is essentially traceable to the agreement entered into by and between the parties in relation to the work and further observed that the trial court before whom the arbitration application was filed could examine whether resolution of the dispute between the parties is to be through arbitration or by a civil suit. The Original Suit (Arbitration) No. 19 of 1995 filed by the claimant/contractor before the Court of the Civil Judge (Sr. The Original Suit (Arbitration) No. 19 of 1995 filed by the claimant/contractor before the Court of the Civil Judge (Sr. Divin.) No. 1, Manipur East was heard and allowed by the Trial Court on 29.06.1998 holding that as the dispute between the parties arose out of a contract and as the contract contains an arbitration clause, the dispute is to be referred to arbitration. As regards the question of limitation raised in the said application, the Trial Court held that it was for the arbitrator to decide the question of limitation. 6. Thus, the dispute was referred to the arbitrator. The learned Arbitrator made the Award dated 29.11.2010 rejecting the claim of the claimant on the ground that the claims of the claimant is time barred. Though the learned Arbitrator framed as many as 10 (ten) other issues, these issues were not considered as the claim of the claimant was rejected on the ground of limitation. 7. Being aggrieved by the rejection of the claims of the claimant as time barred, the claimant/contractor filed a statutory application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the arbitration Award dated 20.11.2010 by filing the Arbitration Case No. 2 of 2010 before the Court of the District Judge, Manipur East. 8. The learned District Judge vide order dated 31.01.2013 allowed the said application holding that the claim of the claimant was not time barred and set aside the Award. It is against this order setting aside the Award by the learned Sessions Judge, Manipur East that the present appeal has been preferred by the State appellants under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996. 9. The main grounds raised in this appeal, inter alia, are that the limitation for initiation of arbitration proceeding is governed by Article 137 of the Limitation Act, 1963 and as such, the period of limitation is 3 years from the date on which the right to claim accrues. It has been contended by the State Appellants that in the present case, right to make claim accrued on 7.12.1989 when the contract was rescinded by the State authorities or at least on 2.11.1991 when the claim was asserted by the claimant. It has been contended by the State Appellants that in the present case, right to make claim accrued on 7.12.1989 when the contract was rescinded by the State authorities or at least on 2.11.1991 when the claim was asserted by the claimant. It has been contended that, since the arbitration proceeding was initiated only in the year 1995 which is beyond 3 years period of limitation counting either from 7.12.1989 when the contract was rescinded or from 2.11.1991 when the claimant raised his claim, the arbitration proceeding is clearly time barred as the claim itself is time barred. It has been further contended that the grounds of challenge of an arbitral award are governed by and restricted to the conditions provided under Section 34(2) of the Arbitration and Conciliation Act, 1996 and since none of the grounds raised in the present case referable to any of these grounds mentioned in Section 34(2) in the present case, setting aside of the arbitration Award by the learned District Judge, Manipur East on the ground that it is not time barred, is illegal. On the other hand, the present appeal has been contested by the claimant/respondent contending that there was no error on the part of the learned District Judge, Manipur East in holding that the claim made by the claimant is not time barred in as much as the claim of the claimant was rejected by the appellant/State only on 24.06.1995 and the cause of action arose on that day. It has been contended that it was only after the claim of the claimant was rejected by the authorities that the dispute arose between the contesting parties and the claimant initiated the process for arbitration for resolution of the dispute in the same year and as such it cannot be said that the claim of the claimant is time barred. As regards the power of the learned District Judge, Manipur East to set aside the Award, it has been contended that since the arbitral Award is in conflict with the public policy of India within the meaning of Section 34(2)(b) of the Arbitration and Conciliation Act, 1996, as such an arbitral Award can be set aside by a Court. 10. We have heard the learned counsel for the parties and perused the records. 11. 10. We have heard the learned counsel for the parties and perused the records. 11. As regards the issue of limitation and contention that the claim of the claimant is time barred, this Court has observed that though the appellant authority informed the claimant of their decision to rescind the contract on 7.12.1989, there were certain conditions attached to it for refund of the advance payment made to the claimant/contractor. The records reveal a series of correspondences and negotiations between the claimant and the State respondents regarding the refund of the advance, interest etc. Though the claimant contractor started refunding the advance money received by him, he was also requesting the authority to adjust his liabilities from the bill amounts which were to be received by him. In that regard, we have noted that the claimant contractor requested the appellant authorities to make payment of the final bill vide his letter dated 2.11.1991 and to adjust it against the repayment of the balance advance. As regards this factum of claim made by the claimant/contractor for payment of the final bill on 2.11.1991 and for adjusting with his liabilities, this is not in dispute. In response to this, the State appellants wrote to the claimant to submit his claim vide their letter dated 25.11.1991. The appellant authorities contended that the period of limitation starts running from 7.12.1989 when the contract was rescinded or from 2.11.1991 when the claimant made his first claim. It has been contended that since the authorities did not fulfil the demand and claim of the claimant, the claimant ought to have initiated the arbitration proceedings and made his claim within 3 years at least from the date of assertion of his claim on 2.11.1991. The appellants also contended that merely by making correspondence after correspondence, the period of limitation cannot be extended. This contention of the appellant cannot be doubted. However, the problem has arisen because of the act of the appellant authorities themselves. The appellate authorities rather than rejecting the claim of the claimant made on 2.11.1991 asked the claimant/contractor vide their letters dated 25.11.1991 and 26.07.1994 to furnish his claim again for early settlement of the final bill. These letters dated 25.11.1991 and 26.07.1994 are in our view very crucial for the decision as regards the issue of limitation because of which these have been reproduced above. 12. These letters dated 25.11.1991 and 26.07.1994 are in our view very crucial for the decision as regards the issue of limitation because of which these have been reproduced above. 12. A minute examination of the letters from the State authorities dated 25.11.1991 and 26.07.1994 directing the claimant/contractor to submit his claim again would indicate that the authorities had not yet rejected the claim of the claimant nor settled the final bill. Because of this, the appellant authorities directed the claimant/contractor to submit his claim in connection with the work at an early date for settlement of the final bill. The last letter dated 26.07.1994 clearly indicates that the authorities had not yet rejected the claim of the claimant but it was still under consideration of the authorities. This letter certainly created an expectation to the claimant contractor that his plea for adjusting amounts payable to him under the final bill, against his liabilities to refund advances, was under active consideration of the authorities. In that event, it would be reasonable to hold that the claimant would postpone any legal action with reference to his claim under the final bill in the expectation that the authorities would adjust such amounts as may be found due. The claimant could not be expected to initiate any legal action including arbitral proceeding when he was expecting adjustment in terms of the aforesaid communication. It was only after the authorities formally rejected his claims as untenable on 24.06.1995 that the claimant would clearly know that the State authorities are not willing to examine his claim for adjustment. Thus, it is very clear that it was only after 24.06.1995 when the authorities ultimately rejected the claim of the claimant that the time for making a claim would start running against the claimant. 13. Further, assuming that the cause of action arose on 7.12.1989 when the contract was rescinded by the State appellants as contended by them, the fact remains that the claimant vide his letter dated 2.11.1991 requested the State authorities for releasing the bill for the works executed by him and to adjust against the repayment of the balance advance. In response to the said claim of the claimant submitted on 2.11.1991, the State authorities rather than declining it directed the claimant to submit his claims by their letter dated 25.11.1991. In response to the said claim of the claimant submitted on 2.11.1991, the State authorities rather than declining it directed the claimant to submit his claims by their letter dated 25.11.1991. This letter dated 25.11.1991 was issued within the limitation period running from 7.12.1989, and thus has the effect of extending the period of limitation to another 3 (three) years w.e.f. 25.11.1991. It is to be noted that the subsequent letter dated 26.07.1994 directing the claimant respondent to resubmit his claim was issued within the said subsisting 3 years of limitation period (upto 24.11.1994), which in turn extended the period of limitation by another 3 years w.e.f. 26.07.1994. The claimant respondent made his claim by initiating the arbitration proceeding in 1995, which is within 3 years counting from 26.07.1994. Though the said communications sent by the authorities on 25.11.1991 and 26.07.1994 do not apparently appear to be formal acknowledgment of debt, the fact remains that by these acts the authorities had decided to examine the claim of the claimant as regards any liability of the authorities towards the claimant relating to the final bill and to that extent, it can be deemed that such action on the part of the appellant State to examine the claim of the claimant will have the same effect as acknowledgement of debt within the meaning of Section 18 of the Limitation Act, 1963. These actions clearly indicate the intention of the State appellants that, if there are dues payable by the State appellant to the claimant in connection with the final bill, such amount could be adjusted against the liabilities of the claimant. If there was no such intention on the part of the State authorities, there was no necessity on the part of the State authorities to write to the claimant to resubmit his claim towards the final bill in response to the request of the claimant to adjust his claims against the repayment of advance. If such intention was conveyed to the claimant through these letters, the claimant cannot be expected to rush through the legal process to make his claim but to wait for appropriate response from the authorities. The Hon’ble Supreme Court in Food Coroporation of India Vs. Assam State Cooperative Marketing & Consumer Federation Ltd. & Ors., (2004) 12 SCC 360 held that :- “14. The Hon’ble Supreme Court in Food Coroporation of India Vs. Assam State Cooperative Marketing & Consumer Federation Ltd. & Ors., (2004) 12 SCC 360 held that :- “14. According to Section 18 of the Limitation Act, an acknowledgement of liability made in writing in respect of any right claimed by the opposite party and signed by the party against whom such right is claimed made before the expiration of the prescribed period for a suit in respect of such right has the effect of commencing a fresh period of limitation from the date on which the acknowledgement was so signed. It is well-settled that to amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, it need not be accompanied by a promise to pay either expressly or even by implication. 15. The statement providing foundation for a plea of acknowledgement must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. The words used in the acknowledgement must indicate the existence of jural relationship between the parties such as that of debtor and creditor. The intention to attempt such jural relationship must be apparent. However, such intention can be inferred by implication from the nature of the admission and need not be expressed in words. A clear statement containing acknowledgement of liability can imply the intention to admit jural relationship of debtor and creditor. Though oral evidence in lieu of or making a departure from the statement sought to be relied on as acknowledgement is excluded but surrounding circumstances can always be considered. Courts generally lean in favour of a liberal construction of such statements though an acknowledgement shall not be inferred where there is no admission so as to fasten liability on the maker of the statement by an involved or far-fetched process of reasoning. (See : Shapoor Freedom Mazda Vs. Durga Prosad Chamaria & Ors. AIR 1961 SC 1236 and "Lakshmiratan Cotton Mills Co. Ltd. Vs. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67 : (1971) 2 SCR 623 ). (See : Shapoor Freedom Mazda Vs. Durga Prosad Chamaria & Ors. AIR 1961 SC 1236 and "Lakshmiratan Cotton Mills Co. Ltd. Vs. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67 : (1971) 2 SCR 623 ). So long as the statement amounts to an admission, acknowledging the jural relationship and existence of liability, it is immaterial that the admission is accompanied by an assertion that nothing would be found due from the person making the admission or that on an account being taken something may be found due and payable to the person making the acknowledgement by the person to whom the statement is made.” These communications dated 25.11.1991 and 26.7.1994 clearly indicate acknowledgment by the State authority of the jural relationship of debtor and creditor of the State authorities and the claimant and also the acknowledgment that in the event the State owes any liability to the claimant on account of the settlement of the final bill, the same can be adjusted against the liability of the contractor claimant towards repayment of the advance money to the State appellants. It will be entirely a different matter that ultimately it may be found that there was hardly any amount to be adjusted, which could be ascertained only after proper verification and assessment. 14. Further assuming that the period of limitation runs w.e.f. 2.11.1991 as contended by the appellants, in that event, 3 (three) years of limitation period would have expired on 24.11.1994. However, as mentioned above, before expiry of the said period of 3 (three) years on 24.11.1994, the appellant authorities again at their own instance wrote to the claimant on 26.07.1994 directing the claimant to submit his claim again with reference to the earlier letter dated 25.11.1991 for examination of the claim of the claimant. The said communication dated 26.07.1994 from the State appellant to the claimant was within the aforesaid extended period of limitation of 3 (three) years which was otherwise to expire on 24.11.1994. This act of the appellant authorities in inviting the claimant on 26.07.1994 to submit the claim of the petitioner again would have the same effect of extending the period of limitation. Therefore, when the claimant initiated the process of appointment of Arbitrator in the year 1995 it cannot be said that the claim of the claimant had become time barred. 15. Therefore, when the claimant initiated the process of appointment of Arbitrator in the year 1995 it cannot be said that the claim of the claimant had become time barred. 15. This Court could have accepted the contention of the State appellants that the claim of the claimant is time barred, if the said letters dated 2.11.1991 and 26.07.1994 from the State authorities to the claimants directing him to resubmit his claim had not been issued. Since in the present case, the State authorities had themselves offered to the claimant on 25.11.1991 and 26.07.1994 asking the claimant to submit his claims again, it can be held that the appellate authorities themselves have extended the period of limitation. 16. This Court has also observed that before the rejection of the claim of the claimant by the authorities on 24.06.1995 there was no dispute as regards the final bill claimed by claimant. The question of referring to arbitration would arise only when a dispute arises. In the present case, as can be seen above, this Court observes that the claimant respondent or the State appellants did not consider that there was any dispute till 26.07.1994 because of which the appellate authorities wrote to the claimant/contractor to submit his bill for settlement of the final bill. It was only after the claimant submitted his bill on 18.01.1995 and it was rejected on 24.06.1995 that the dispute can be said to have arisen. It may be noted that arbitration proceeding can be initiated only when a dispute arises and since dispute can be said to have arisen only with the rejection of the claim of the claimant by the appellate authorities on 24.06.1995, it can be said that the cause of action arose also on 24.06.1995. Since the claimant/contractor initiated the process for arbitration in the same year 1995, we are of the view that the initiation of the arbitration proceeding is not hit by limitation and is not time barred. 17. Since the claimant/contractor initiated the process for arbitration in the same year 1995, we are of the view that the initiation of the arbitration proceeding is not hit by limitation and is not time barred. 17. As regards the other issue as to whether the learned District Judge, Manipur East could have set aside the arbitration award by holding that the arbitration proceeding was not time barred on the ground that arbitral award can be set aside only on the grounds mentioned under Section 34(2) of the Act and the ground of limitation is not one such a ground available under Section 34(2) of the Act for setting aside the arbitral award, we entirely agree with the submission of the learned counsel for the respondents that an arbitral award could be set aside if that award is in conflict with public policy of India. The issue, whether an arbitral award is time barred or not and hit by law of limitation may come within the purview of the expression “public policy of India” if the decision of the arbitral tribunal is contrary to the law of arbitration as applicable in India. We are of the view that the learned Arbitrator while deciding the issue of limitation has not correctly applied the law relating to law of limitation and in that view of the matter, it can be said that the decision of the learned Arbitrator was not in conformity with the public policy of India and as such, such an arbitral award which has been passed dehorse the fundamental laws of the land including the law of limitation can be interfered and set aside by the Court under Section 34 of the Arbitration and Conciliation Act, 1996. Hence, we are of the view that the decision of the Ld. District Judge to set aside the arbitral Award on the ground that the claim of the claimant respondent is not barred by limitation, cannot be faulted with. 18. In this regard, one may refer to the decision of the Hon’ble Supreme Court in Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., AIR 2003 SC 2629 : (2003) 5 SCC 705 . In the said judgment, the Hon’ble Supreme Court held :- “75. 18. In this regard, one may refer to the decision of the Hon’ble Supreme Court in Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., AIR 2003 SC 2629 : (2003) 5 SCC 705 . In the said judgment, the Hon’ble Supreme Court held :- “75. In the result, it is held that:- (A) (1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that- (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration; (2) The court may set aside the award:- (i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, (b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act. (ii) if the arbitral procedure was not in accordance with: (a) the agreement of the parties; or (b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act. However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate. (c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. (3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:- (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. (3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:- (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. (4) It could be challenged:- (a) as provided under Section 13(5); and (b) Section 16(6) of the Act. (B)(1) The impugned award requires to be set aside mainly on the grounds:- (i) there is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract; (ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed; (iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages; (iv) on the request of the respondent to extend the time-limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered; (v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor; (vi) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable. (vii) in certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care of by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract.” (emphasis added) In the present case, since there was a fundamental error in the application of law of limitation by the learned Arbitrator in holding that the claim of the claimant/respondent is time barred, the arbitral award can be rightly interfered with by invoking Section 34 of the Arbitration and Conciliation Act, 1996. 19. We will now refer to the case laws relied upon by the State appellants. It has been contended by the State appellants relying on the decision of the Hon’ble Supreme Court in Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, (1988) 2 SCC 338 that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders. It has been contended by the State appellants relying on the decision of the Hon’ble Supreme Court in Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, (1988) 2 SCC 338 that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders. It has been contended that in the present case merely because claimant/respondent had been writing to the State authorities to settle the final bill would not lead to postponement of the accrual of cause of action which had already arisen on 7.12.1989 when the contract was rescinded by the State authorities and in any event not later than 2.11.1991 when the claimant first asserted his claim. Though there may not be any dispute as to the date when the cause of action arises, as contended by the State appellants, for the reasons already discussed above, the said date of accrual of claim/cause of action had been postponed by the very act of the appellant authorities themselves and as such, the aforesaid decision does not support the appellants. On the other hand, in the said judgment, the Hon’ble Supreme Court has observed that though it is 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 accrual of the cause of action. It was further held that a dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an Arbitrator under the Act. 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. In the present case, the appellant authorities never claimed that the final bill had already settled and as such and that there was no question of any due payable to the claimant. On the other hand, the letters dated 25.11.1991 and 26.07.1994 issued by the State authorities clearly indicate that the final bill of the claimant is required to be examined. On the other hand, the letters dated 25.11.1991 and 26.07.1994 issued by the State authorities clearly indicate that the final bill of the claimant is required to be examined. Thus, this judgment of the Hon’ble Supreme Court in Major (Retd.) Inder Singh Rekhi (supra) rather seems to support the case of the claimant/respondent. In view of the decisions arrived at by this Court that the period of limitation stood extended by the acts of the appellant/respondents themselves, this Court is of the view that it may not be necessary to discuss the other decisions relied upon by the State appellants to determine the date of accrual of cause of action. 20. Accordingly, for the reasons discussed above, the appeal fails. The judgment and order dated 31.01.2013 passed by the learned District Judge, Manipur East in Arbitration Case No. 2 of 2010, setting aside the Award is upheld, however, for the reasons discussed above. Since the learned Arbitrator has merely rejected the claim of the claimant/respondent as time barred without giving any finding on the rest of the issues framed, we direct that the entire matter be remitted to the learned Arbitrator to proceed with the arbitration and decide the issues on merit in accordance with law.