JUDGMENT
Anil Dev Singh, J.
1. This is an appeal against the order of the learned single Judge dated November 8, 1995 in Suit No. 3526/92. By that order, the learned single Judge accepted the application of the respondent under Section 20 of the Arbitration Act and directed the Chairman-cum-Managing Director of the appellant National Building Construction Corporation to appoint an Arbitrator. The necessary facts relevant for the purpose of disposal of the appeal are as under :
2. The appellant was awarded work of construction of an Airport at Agatti Island falling in the Union Territory of Lakshdweep, by the International Airport Authority. For this purpose an agreement dated April 14, 1987 was entered by and between the appellant and the International Airport Authority of India. However, the appellant entrusted the entire work of construction of the Airport to the respondent. In this regard they entered into an agreement dated April 27, 1987 and as per clause 2 thereof, the respondent was to execute the work and receive payments for the work done at the rate stipulated in the agreement dated April 14, 1987 except the amount representing 4.76% of the value of the work as the appellant was entitled to deduct the same as “margin” of the appellant while making the payment to the respondent. According to clause 3 all the terms and conditions of the agreement dated April 14, 1987, entered by and between the IAAI & the appellant were to form part of the agreement dated April 27, 1987 and were binding on the respondent. Again under clause 6 of the agreement dated April 27, 1987, the additional, altered, substituted and deviated items of work were to be carried out by the respondent on the same terms and conditions as provided in agreement dated April 14, 1987. In regard to the payments, mobilisation and other advances, securities, payment for escalation, arbitration award or any other payment received by the appellant from International Airport Authority in connection with the work, Clause 4 of the agreement dated April 27, 1987 provides for payment of the same by the appellant to the respondent except 4.76% thereof i.e. the margin money of the appellant. The said clause also provides for making a final payment to the respondent on the basis of actual quantity of work executed and paid by the International Airport Authority of India. The said clause reads as follows :
4. “All payments, Mobilisation and other advances, securities, payment for escalation, arbitration award or any other payment received by the “Corporation” from the “Clients” in connection with the said work shall be released to the “Associate Contractor after deducting 4.76% (Four decimal seventy six per cent) margin of the “Corporation” within a period of 7 days from the date of receipt. Similarly, any liabilities recoveries, penalties, compensation etc. (not attributable to any negligence on the part of the “Associate Contractor”) that may have to be paid to the “Clients” shall be shared by, both the parties in proportion of their share in the payments viz. 95.24% of the “Associate Contractor” and 4.76% for the “Corporation”. Even though intermediate payments will be released as soon as payment is received from the “Client” by deducting 4. 76% of the cheque amount, the final payment to the “Associate Contractor”; shall be based on the actual quantity of work executed and paid by “clients” at the unit rates attached herewith as Annexure II.”
3. Clause 14 of the agreement dated April 27, 1987 makes provision for reference of disputes and difference between the appellant and the respondent for being referred to the sole arbitration of an Arbitrator to be appointed by the Chairman-cum-Managing Director of the appellant Corporation. Clause 15 of the said agreement deals with the question of arbitration between the appellant and the International Airport Authority which reads as under :
15. “In case the “Associate Contractor” desires that any of the matters relating to the “Agreement” between the “Corporation” and “Clients” should be referred to arbitration as per relevant clauses of the “Agreement” the “Corporation” after mutual discussions, shall ask the “Clients” to appoint an Arbitrator for the purpose. Statement of Facts for these matters/claims shall be submitted by the “Associate Contractor” and presentation thereof before the Arbitrator shall also be done with the assistance of a representative/advocate of the “Associate Contractor”.
4. Learned single Judge noticed certain facts with regard to which there is no dispute. Since the same are relevant, it would be therefore, necessary to refer to them. The work of the construction of the Airport was completed by the respondent sometime in May 1988. The final bill was prepared by the International Airport Authority in the first week of December 1988. The respondent on coming to know of the preparation of the final bill, wrote a letter dated January 5, 1989 to the appellate stating that some of the legitimate payments which were due to it had not been including in the final bill. The details of these payments were mentioned in the said letter. On August 7, 1989 the respondent again wrote to the appellant in this regard and requested the appellant to take up the matter with the International Airport Authority of India for release of the payments specified in the letter dated January 5, 1989.
5. It appears that the appellant reacting to the letter of the respondent dated August 7, 1989 addressed a communication dated October 6, 1989 to the International Airport Authority of India for appointment of an arbitrator in terms of clause 25 of the agreement dated April 14, 1987 for resolution of disputes between the appellant and International Airport Authority of India. On May 14, 1990 the appellant informed the respondent that the International Airport Authority of India had been requested to appoint an arbitrator It seems that International Airport of India did not respond to the request of the appellant to appoint an arbitrator. On November 23, 1991 the respondent wrote to the appellant to file a petition under Section 20 of the Arbitration Act for securing the appointment of an arbitrator by International Airport Authority of India in terms of clause 25 of the agreement dated April 14, 1987 and in the alternative requested the appellant to appoint an arbitrator under clause 14 of the agreement dated April 27, 1987. The respondent not receiving any intimation from the appellant in regard to the request made by it vide letter dated November 23, 1991 sent a legal notice on March 23, 1992 to the appellant asking the appellant to make payment to it in respect of its claims, failing which it will proceed against the appellant under Section 20 of the Arbitration Act. Finally on September 10, 1992 the respondent filed the suit under Section 20 of the Arbitration Act before this court. It is note worthy that for the first time the appellant in its written statement in para 6 thereof denied that any payments were due to the respondent. Besides other place the appellant also took up the stand that the petition was barred by limitation and there was non-joinder of International Airport Authority of India, which was a necessary party. Having regard to the pleadings of the parties, the learned single Judge framed the following issued :
(1) Whether the petition is barred by time ? OPR
(2) Whether M/s. IAAI is a necessary party ? OPR
(3) Whether there is a subsisting arbitration agreement between the parties ?
(4) In case issue No. 3 is proved, whether the dispute and differences between the parties are covered by the arbitration agreement ?
(5) Relief.
6. Before the learned single Judge, the appellant pressed only the question of limitation and non-joinder of International Airport Authority of India as a party. In so far as the question of Limitation was concerned, the learned single judge came to the conclusion that the petition was not barred by time and the dispute arose only when the respondent served a notice upon the appellant on March 23, 1992. Since the petition under Section 20 was filed by the respondent in September 1992, the same was within limitation and did not “invite the wrath of Article 137 of the Limitation Act.” In so far as the question of non-joinder of International Airport Authority of India was concerned, the learned single Judge was of the opinion that as per the agreement entered into between the parties, it was for the appellant to recover all payments, mobilisation and other advances, securities, payments for escalation, arbitration award or any other payment from the International Airport Authority in connection with the execution of the said work and thereafter make payment to the respondent after deducting 4.76% of the amounts so received from the International Airport Authority as margin money. This being the position, the learned single Judge came to the conclusion that International Airport Authority could not be treated as a necessary party. Consequently, the learned single Judge directed filing of the agreement dated April 24, 1987 and also directed the appellant to appoint an arbitrator within one month of the passing of the said order. The appellant feeling aggrieved of the order of learned single Judge, has filed the present appeal.
7. We have heard learned counsel for the appellant. The only contention raised by the learned counsel before us is that the application of the respondent under Section 20 of the Arbitration Act was barred by time as the respondent had come to know about the preparation of the final bill by the International Airport Authority in January 1989 but filed the suit under Section 20 of the Arbitration Act on September 10, 1992 i.e., after a period of 3 years. In support of the contention learned counsel relied upon the decisions of the Supreme Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority , S. Rajan v. State of Kerala and another , and Union of India v. Momin Construction Co. .
8. We have considered the submission of learned counsel for the appellant but we regret our inability to accept the same. It is significant to note that the final bill was prepared by the International Airport Authority of India and not by the appellant. There was no direct relationship between the respondent and the International Airport Authority of India as no agreement was executed by them. The privity of contract was between the appellant and the respondent. It is significant that appellant had not disputed the claims of the respondent when the same were specified in the letter of the respondent dated January 5, 1989. Rather the appellant took up the matter with the International Airport Authority of India on October 6, 1989 with regard to the said claims raise by the respondent and also requested for the appointment of an arbitrator in terms of Clause 25 of the agreement dated April 14, 1987. It is another matter that despite the fact that no arbitrator was appointed by the International Airport Authority of India in accordance with Section 25 of the agreement dated April 27, 1987, the appellant did not file any application under Section 20 of the Arbitration Act for appointment of an arbitrator. The respondent feeling aggrieved by the inaction of the appellant sent a legal notice to the appellant on March 23, 1992, asking the appellant to make payment of its dues. It seems that till March 23, 1992 there was no dispute between the parties and the appellant had not denied the claims of the respondent. Therefore, the learned single Judge was right in coming to the conclusion that the application under Section 20 of the Arbitration Act which was filed on September 10, 1992 was within time as envisaged by Article 137 of the Limitation Act. It is also note-worthy that it was only in the written statement of the appellant filed on January 31, 1994 that appellant denied that any payment was due to the respondent. Actually dispute arises where there is a claim and a denial or repudiation of that claim. Since the claims of the respondent were denied by the appellant only in the written statement therefore, the dispute, if any, was raised by the appellant on January 31, 1994 when the written statement was filed. A conjoint reading of Article 137 and sub-section (1) of Section 20 leaves no manner of doubt that the right to apply for appointment of an arbitrator accrues when the the differences arise between the parties. Basically the question when the differences or disputes between the parties should be considered to have arisen is a question of fact to be determined in each case having regard to the facts of that case. The Supreme Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, S. Rajan v. State of Kerala and another and Union of India v. Momin Construction Co. (supra) have laid down the same principle and hence these authorities do not help the stand of the appellant.
9. With these observations, the appeal is dismissed in liming.