JUDGMENT
Arun Kumar, J.
(1) This is a petition under Sections 8 and 20 of the Arbitration Act praying that the respondent be directed to file the arbitration agreement and that the disputes and differences mentioned in the petition be referred to an arbitrator to be appointed by this Court.
(2) The respondent, Minerals & Metals Trading Corporation of India Limited (hereinafter referred to as MMTC) placed an order on the petitioner regarding purchase of 1, 11,000 Mt of Manganese ore. This quantity was subsequently increased to 1,51,000 MT. A contract bearing No. l01/65 was entered into between the parties in this connection on 30th July 1965. The price of the goods to be supplied was fixed @ 83 shillings per M T. Soon after the contract was entered into there was devaluation of the Rupee in June 1966. The supply of Manganese ore under the contract was made after the devaluation of the Rupee. However, the petitioner was paid at the pre-devaluation rate. As a result of this, according to the petitioner, it suffered a loss of Rs.30,91,378.50p. It is further stated on behalf of the petitioner that instead of paying the said amount which became due on account of devaluation of the Rupee, the respondent claimed a sum of Rs.1,15,736.00 towards penalty on the basis of the post devaluation rates for alleged impurities in the goods supplied. Besides this the respondent also claimed a refund of Rs.30,205.35p. on account of insurance charges etc. The petitioner had furnished a bank guarantee in the sum of Rs.one lac which the petitioner sought to be discharged. The contract between the parties contains an arbitration clause being clause No.14 which is reproduced as under:-
“CLAUSE14. All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or touching d/or in connection with and/or in consequence of and/or relating to this agreement whether or not the obligation of either or both parties under this agreement has been terminated or purported to be terminated or completed shall be decided under the provisions of the Indian Arbitration Act, 1940 with all statutory amendments. Cost of arbitration to be borne by the losing party.”
(3) The petitioner sought arbitration in terms of the said clause vide its letter dated 26thMay 1984. The petitioner also suggested names of certain arbitrators in the said letter. This letter was followed by a legal notice dated 21st January 1985 from the petitioner’s advocate to the respondent seeking the appointment of an arbitrator. The claim of the petitioner for appointment of an arbitrator was repudiated by the respondent vide its letter dated 11th June 1985. This led to the filing of the present petition in July 1985.
(4) The petition has been opposed by the respondent on various grounds. During the course of final hearing of the petition only the following points have been agitated:-
1.The petition is barred by time and is liable to be dismissed on this ground alone. 2. The claims sought to be referred to arbitration are barred by time and, therefore, the same cannot be referred to arbitration. Point NO.1
(5) It is not disputed that Article 137 of the Limitation Act applied to petition under Section 20 of the Arbitration Act. As per Article137of the Limitation Act the three year period runs from the date when the right to apply accrues. The right to apply would accrue when the cause of action accrues. To constitute cause of action first a right must come into existence and secondly there must be an infringement or a threat to infringe it. Cause of action would, therefore, arise when the claim of one party when it arises is denied by the other party or there is a threat of denial from the other party only then it becomes a dispute. This was so held in M/s Shah Construction Co. Ltd. vs. M.C.D., .
(6) In Union of India & Anr. vs. M/s L.K.Ahuja & Co. it was held that for a valid claim for reference under Section 20 of the Arbitration Act the claim must be made within time. ‘Within time’ would mean the time prescribed under Article 137 of the Limitation Act, i.e. three years.
(7) According to the learned counsel for the respondent the agreement was entered into in the year 1965. The cause of action, if any, turn raising a claim and for seeking the same to be referred to arbitration arose in 1966 when the payment was made to the petitioner on the basis of pre-devaluation rates. Thus according to the learned counsel for the respondent the limitation period has to .be counted from the year 1966 and the same expired latest by the end of year 1969. Reference has been made to petitioner’s letter dated 31st January 1970inwhichright to invoke the arbitration clause of the agreement has been mentioned. On the basis of this letter it is urged that the petitioner was conscious 126 of its right to seek arbitration in the year 1970. Therefore, if there was any desire on the part of the petitioner to have the disputes referred to arbitration, timely steps ought to have been taken and the petitioner could not continue to wait till July 1985 when the present petition was filed. There is another letter dated 5th February 1970 from the petitioner to the respondent, copy whereof has been placed on record. In this letter the petitioner has raised a counter claim for Rs.30,91,378.50p. The said amount has purportedly been calculated on the basis of the rate of exchange applied to premium and penalties by the MMTC itself. Further by the said letter the petitioner repudiated the claim of the respondent regarding premium and penalties. From these two letters it appears that both the parties were raising claims against each other in relation to subject contract.
(8) There are two letters on record which have an important bearing on the point in issue. Vide its letter dated 22nd June 1972 the MMTC wrote to the petitioner as under:- “THE Minerals & Metals Trading Corporation Of India LTD. “BHARTIYA Khanij Wa Dhatu Vyapar NIGAM” (A GOVT. Of India UNDERTAKING) REGD. Office Post Box No.46, 9 & 10 Bahadurshah zafar Marg 24-4-48, Manganese House New Delhi – Harbour Approach Road VISAKHAPATNAM-1 Ref. No.12/36/72 VI(FA.V)4 Dated 22.6.72 M/s S.K.Sarawagi & Co. Pvt. Ltd. Visakhapatnam Dear Sirs, Re: Settlement of disputed case We have been informed by our Head Office that an amicable settlement had been reached between our Corporation and yourself. As per the above we are told that you have withdrawn all your disputes with the Corporation in respect of P.C. No.8/65 and 101/65. Kindly confirm the same to us at an early date. Yours faithfully, for The M.M.T.C. of India LTD.,” In response to the said letter the petitioner sent the following reply on 7th July 1972:- “Ref;- SKS/VS/Acc/275 July 7, 1972 The Regional Manager, The M.M.T.C. of India Ltd., VISAKHAPATNAM. 127 Dear Sir, Sub; Disputed cases. With reference to. your letter No. 12 /38/72-VZ(FA.V) dated 22nd June 1972 as desired we wish to confirm that the disputes in respect of P.C.Nos.8/65 and 101/65 have been withdrawn by either side. Thanking you, Yours faithfully, For S.K.SARAWAGI & CO.(P) LTD. Director ”
(9) This shows that as early as in July 1972 the petitioner had treated the matter as dosed. This was reiterated by the petitioner vide its letter dated 28th January 1978 wherein the petitioner says that it understood that the MMTC took a decision to drop the issue. Reference was made by the petitioner to the aforesaid letters dated 22nd June 1972 and 7th July 1972. The petitioner further confirmed in its said letter of 28th January 1978 the withdrawal of claims from either side and also that the matter was finally closed on either side.
(10) Again on 8th February 1979 the petitioner reiterated the same position in its letter of the said date addressed to the respondent wherein it was stated that the “subject contract stands terminated long back by fulfilllment of the respective obligations of both partics”. On the basis of these letters exchanged between the parties the learned counsel for the respondent contends that the petitioner treated the matter closed as early as in the year 1972 and confirmed this fact in 1978 as well as in the year 1979. The petitioner was conscious of its right to claim arbitration as early as at least in the year 1970. Therefore, the petitioner could not be permitted to file the petition under Section 20 of the Arbitration Act in July 1985. Such a petition is hopelessly barred by time looking at the facts of the case from all the angles to which he made reference.
(11) To meet the case of the respondent, the learned counsel for the petitioner submitted that the MMTC vide its letter dated 3rd August 1981 called upon the petitioner to keep the bank guarantee renewed and the MMTC was pressing for its claims against the petitioner up to the stage of writing the said letter. The petitioner’s letter asking for appointment of an arbitrator is dated 26th May 1984. The said letter is within three years of the MMTC letter dated 3rd August 1981. Therefore, the petition is within time.
(12) Secondly, another supplier of the MMTC had, in similar circumstances raised a claim against the MMTC which was pending before the arbitrator. An understanding was reached between the parties that whatever decision will be given by the arbitrators in the said case, will be applied in the case of the petitioner. The decision in the said case was given by the arbitrators in the year 1984. Therefore, the cause of action for seeking arbitration arose when the respondent failed to make the payment in spite of the point having been decided against the respondent in the arbitration in the other similar case.
(13) Thirdly, the correspondence exchanged between the parties after January 1985 and before June 1985 shows that the claim of the petitioner was under active consideration 128 before the respondent. Therefore, the present petition is within time and cause of action would be taken to have arisen only when after active consideration the claim was repudiated vide letter dated 11th June 1985 issued by the advocates of the respondent.
(14) By its letter dated 3rd August 1981 the MMTC requested the petitioner to renew the bank guarantee while the matter was still under consideration. From this letter it appears that the same had been written in view of the fact that from 26th May 1984 the petitioner had started reagitating the matter and had started claiming on the basis of the claim allowed by the arbitrators in the similar other case to which the MMTC was a party. The MMTC being a Government organisation, thought of considering the matter rather than outright rejecting the same. While this was pending consideration, the petitioner was called upon to keep the bank guarantee, which the petitioner had furnished, renewed. This letter, therefore, cannot be said to be giving any fresh lease of life to the petitioner regarding its right to file the petition under Section 20 of the Arbitration Act. Further the correspondence including the telexes between January 1985 and June 1985 on which reliance has been placed on behalf of the petitioner shows that at best the matter was under consideration of the respondent. Certain meetings were also held in this connection between the parties but this correspondence does not in any way suggest any commitment on the part of the respondent that it would meet the claim of the petitioner or it would refer the same to arbitration. In fact the correspondence does not even suggest that the respondent was entertaining any liability towards the petitioner in relation to the subject contract. Therefore, I am unable to persuade myself to the view that the letter of. the MMTC dated 3rd August 1981 or the correspondence between January 1985 to June 1985 can be said to give a cause of action in favor of the petitioner for filing the present petition. On the other hand the letters exchanged between the parties prior to the year 1980 to which reference has been made here in before show that the petitioner was treating the contract as terminated with no repercussion on either side. The petitioner repeatedly took the stand that the claims from either side in relation to the subject contract stood withdrawn. It appears that since there was an a ward in a similar matter in May 1984 In favor of another party against the MMTC, the petitioner took a chance and started reagitating the matter. If the petitioner was serious about its claims and had not treated the same as withdrawn, there was nothing to prevent the petitioner to move the Court at the appropriate time and seek reference of its claim to arbitration. This whole exercise seems to be an after thought in view of the award in the other case against the MMTC.
(15) So far as reference has been made to an understanding between the parties that – the claim of the petitioner would be decided on the basis of the out come of the arbitration in the other similar case,I do not find any material on record in its support. Being conscious of the fact that there is no document to support such an understanding, learned counsel for the petitioner submitted that the plea of oral understanding raised by the petitioner requires evidence and can be established only after evidence is led, therefore, at this stage the same should not be rejected. An opportunity should be given to the petitioner to prove the existence of the understanding. This petition under Section 20 is being decided on the basis of evidence led by the parties by way of affidavits. I am unable to find any credibility in the plea of the alleged oral understanding. If there had been any such understanding, at least some time or the other the petitioner would have made a reference thereto in any of its several letters which have been placed on record. On the contrary, the material on record suggest that there was no such understanding. If there was any understanding, the same could have found mention at least in petitioner’s letter dated 28th 129 January 1978 or its letter dated 8th February 1979. In a letter dated 20th April 1972 from the MMTC Head Quarters at New Delhi to the Regional Manager, MMTC Vizag there is a reference to an arbitration pending between another supplier of the MMTC and the MMTC. This reference is, however, in the context off the claim of the MMTC regarding premium and penalty levied on the petitioner. This letter is between one office of the MMTC and its another office. Secondly, this letter is in the context of claims which the MMTC was raising against its suppliers including the petitioner. From this letter any understanding between the petitioner and the MMTC regarding the outcome of the arbitration and it being applied to the claim of the petitioner cannot be spelled out by any stretch of imagination. Therefore, I am unable to accept that there was any understanding between the parties that the decision of the arbitrators in the other case will be applicable to the case of the petitioner and the petitioner’s claim will be decided accordingly.
(16) For all these reasons I am of the view that this petition is hopelessly barred by time and is liable to be dismissed on this ground alone. Point N0.2
(17) Coming to the second point, i.e. the claim of the petitioner itself being barred by limitation, the learned counsel for the petitioner has urged that this is a point which should be left to be decided by the arbitrator. The learned counsel has relied on certain judgments of this court as well as a judgment of the Supreme Court. These are-Jai Chand Bhasin vs.UOI, ; Navbharat Dal Mills vs. Fci & Anr., Air 1983 Delhi 87; & The Vulcan Insurance Co.Ltd. vs. Maharaj Singh & Anr., . These judgments held that whether a particular claim is barred by limitation should be decided by the arbitrator.
(18) On the other hand, learned counsel for the respondent relies on Board of Trustees for the Port of Calcutta vs. Panchu Gopaldass & Ors., 1992 (1) Arbitration Law Reporter 87, in support of his submission that if a claim is ex facie barred by limitation, the same need not be referred to an arbitrator. Preponderance of judicial opinion appears to be in favor of the view that whether a claim is barred by limitation ought to be decided by the arbitrator and the Courts should not refuse to refer to arbitration a claim on the ground that it is barred by time. However, in view of the fact that I have held that the present petition under section 20 of the Arbitration Act is barred by time, the second question need not detain me for a detailed examination.
(19) Finally the learned counsel for the respondent, relying on the language of Section 20 of the Arbitration Act, submitted that the matter is discretionary with the court, i.e. the course may in its discretion refuse to make reference to arbitration. The discretion of courts has to be judicially exercised. In the facts of the present case it is urged that the discretion ought to be exercised in refusing to make reference to arbitration. In the facts and circumstances of the case to which detailed reference has already been made, especially the fact that the petitioner itself treated the matter as closed, I am of the view that the petitioner is not entitled to have this discretion exercised in its favor and it is a fit case in which no reference to arbitration ought to be made.
(20) Under the circumstances the petition is dismissed. The parties are left to bear their respective costs.