JUDGMENT
Hakim Imtiyaz Husain, J.
1. This order will dispose of the objections filed by the State of J&K through Chief Engineer, Irrigation and Flood Control Department, Srinagar to the award passed by the arbitrator (Mr. Justice A.Q.Parray Rtd.) on 14.9.2002.
2. Facts relevant for the disposal of the present matter are that M/s Mir Gh. Hussain contractor (for short the Firm) through its proprietor Mir Gh. Hussain were allotted different works by the Irrigation and Flood Control Department from the year 1979. The works were as under:-
S.No. Name of work; Arbitration Allotment No.
Petition
Pet. involved
in the
Contract
1. Construction of 1st. stage Pump House 38/1994 PS/1075-76/82
and intake Structure at Kachchkote of dated
Tral Lift irrigation Scheme 27.8.1982
2. Balance work of 1st. stage Pump house 39/1994 DB/30354
and intake structure at Kachchkote. dated
22.5.1985
3. Construction of Pump House No. 1st. of 40/1994 CS/998-1001
Koil Lift Irrigation Scheme And dated
intake structure on The left 19.12.1979
bank of river Jehlum near Larkipora. and CSJ/1110-13
dated
23.01.1980
4. Construction of llnd stage Pump house 41/1994 PS/1565-66/82
and intake Structure at malangpora of dated
Koil Lift Irrigation Scheme 05.10.1982
5. Construction of 1st. Stage Pump House 42/1994 PS/568-69/83
and intake Structure at Larkipora of dated
Rajpora Lift Irrigation Scheme. 11.07.1983
6. Constuction of Pile Toe Protection work 43/1994 PS/327-28/83
on LP Bund of river jehlum U/s & D/S dated
of Pump House Ist. of Koil Lift 27.5.1983
Irrigation Scheme.
7. Fixation of contract of Balance Work of 44/1994 PS/887-88/87
RCC Culvert at RD 3530 Mtrs. On dated
Malangpora Lajora Road Near 2nd 04.06.1987
stage Pump House Koil Lift
8. Fixation of Contract of link Channel 45/1994 PS/513-14/87
Between Culvert at RD 3530 Mt. & dated
Intake Channel Pump House End 25.3.1987
Stage Malangpora of Koil Lift
Irrigation Scheme.
9. Fixation of contract for construction of 46/1994 DB/PS/875
RCC Flume at Taki Nalla at Stage 76/86
canal of Tral Lift Irrigation Scheme. dated
18.6.1986
3. For these works nine different contracts were allotted to the said firm. The first contract was allotted in the year 1979 for construction of pump house No. 1st of Koil Lift Irrigation Scheme. The firm was required to use deodar poles classified as timber logs in the schedule rates besides allied components. The firm started the work in pursuance of the contract for which valid agreements were executed between the firm and the State from time to time. During the execution of work the firm received on account payments from the State on different occasions. Till 1983 there was no dispute between the parties on the procedure as to how the measurement of the logs, which the firm supplied in pursuance of the contract, was to be done. The State was adopting the formula for measurement as G2/16xL. This formula is known as ‘quarter girth formula’ which, according to the objector, is in vogue in the State for measurement of deodar poles and other kinds of logs. Under this method the girth of each pile is measured at three different places i.e. top, centre and bottom, from it is determined the mean girth of each pole to which quarter girth formula was applied and volume determined. In the year 1983 the firm requested the Chief Engineer and Executive Engineer concerned to use different formula for measurement of timber as according to the firm the quarter girth formula was not the correct formula for measurement of logs. The firm was of the view that the quarter girth formula was not the perfect formula and since there were different formulas in the books for ascertaining the volume of piles, the one which was being adopted in other countries should be used. According to the firm by taking the mean girth the department was determining the volume of a cylindrical log and that for doing so quarter girth formula. The claim put forth by the firm, it appears, did not find approval of the concerned authorities so the payments continued to be made in accordance with the measurement taken according to the quarter girth formula. In the year 1992 the records of the concerned department got gutted in a devastating fire.
During this period the other copies of the record which were lying in the Accountant General Office also had been written off in accordance with the rules prelevant in the Accountant General Office. In the year 1994, when allegedly no record was available with the department, the firm lodged an arbitration proceeding for all the 9 contracts before this court stating therein that the authorities were not resorting to the correct measurement procedure and that since the quarter girth formula did not determine the true and correct volume, the State should make payments to the firm in accordance with the measurement taken on other formulas. The firm applied to the court to refer the matter to the arbitrator as in view of the agreement clause all disputes arising out of the contracts are referable to an arbitrator. Ultimately the Govt. of J&K vide order No. 131-HYd of 1999 dated 11.8.1999 referred all the 9 matters to an arbitrator. Mr. Justice A.Q. Parray (Rtd.) was appointed as the sole arbitrator in the case. The arbitrator entered upon the reference. On behalf of the claimants M/s Mir Gh. Hussain separate statement of claims were filed in all the 9 arbitration matters. On behalf of the State also reply was filed to all the 9 arbitration matters. The firm also filed rejoinder to the reply of the State.
4. Following issues were framed by the Arbitrator in the case:
1. What formula is applicable for measurement of timber piles for determining their value? OPP
2. Whether the respondents have applied the correct formula in determining the volume of timber piles?
3. To what amount the petitioner is entitled to, if any?
4. Whether the petitioner is entitled to interest on the amount due, if so, to what extent? OPP
5. Whether the respondents are entitled to recover any amount from the petitioner, if so, to what extent and interest thereon? OPD
6. Relief.
5. The parties examined the witnesses and also placed before the arbitrator various documents a mention of which has been mentioned by the arbitrator on page 2 to 5 of his report.
6. The Arbitrator after completion of the proceedings considered the matter and gave the award which is impugned before this court in the present objections. The Arbitrator, while considering issue No. 1 found that the quarter girth formula was not the accurate formula to determine the volume of log timber so the firm was entitled to 15% increase in the volume of timber determined by application of quarter girth formula. The Arbitrator observed as under:-
“Having regard to the facts and circumstances of the case and the position that quarter girth formula is not accurate formula for determining the volume of log timber I am of the opinion that claimants are entitled to 15% increase in the volume of timber determined by application of quarter girth formula. This is just and reasonable. The excess volume of timber supplied by the claimant to the respondents was not intended to be gratis.”
7. In reply to issue No. 2 it was found by the Arbitrator that the department has not applied ‘correction formula’ and thus the firm has not been paid to the extent it was due to them. The Arbitrator therefore allowed additional amount in all the claim petitions, as indicated below and also allowed simple interest of 12% per annum on the payments due to the firm. The Arbitrator gave separate awards in all the 9 petitions which reads as under:-
A. Arbitration Pet No. .38/1994
The Arbitrator allowed the following amount in this petition.
(a) Rs. 2,62,233.83. This amount will also carry simple interest at the rate of 12% per annum from 1986 till the date of realization.
(b) Rs. 16,212.00. This amount will carry interest at the rate of 12% per annum, from 1986 till the date of realization.
It was further directed that the respondents shall pay Rs. 10,000/-as costs in this arbitration petition to the claimants and that the amount shall be paid within two months by the respondents to the claimants.
Arbitration Petition No. 39/1994
The Arbitrator in respect of this claim held:-
“The total amount to which the claimant is found entitled to is as follows:
(a) Rs. 2,53,902.60. This amount will also carry simple interest at the rate of 12% per annum from 1987 till the date of realization.
(b) Rs. 4,29,104.00. This amount will carry interest at the rate of 12% per annum, from 1993 till the date of realization.
(c) The respondents shall pay Rs. 10,000/- as costs in this arbitration petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimants.”
Arbitration Petition No; 40/1994
It was held:
“The total amount to which the claimant is found entitled to is as follows:
(a) Rs. 1,02,772.00. This amount will also carry simple interest at the rate of 12% per annum from 1984 till the date of realization.
(b) Rs. 777.00. This amount will carry interest at the rate of 12% per annum from 1985 till the date of realization.
(c) The respondents shall pay Rs. 10,000/-as costs in this Arbitration petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimant.”
Arbitration Petition No: 41/1994. It was held:
“The total amount to which the claimant is found entitled to is as follows:
(d) Rs. 1,57,735.40. This amount will also carry simple interest at the rate of 12% per annum from 1987 till the date of realization.
(e) Rs. 26,000.00. This amount will carry interest at the rate of 12% per annum from 1989 till the date of realization.
(f) The respondents shall pay Rs. 10,000/- as costs in this Arbitration petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimant.”
Arbitration Petition No. 42/1994.
It was held:
“The total amount to which the claimant is found entitled to is as follows.
(a) Rs. 2,68,587.80. This amount will also carry simple interest at the rate of 12% per annum from 1988 till the date of realization.
(b) Rs. 2,39,263.00. This amount will carry interest at the rate of 12% per annum, from 1992 till the date of realization.
(c) Rs. 1,02,000.00. This amount will carry interest at the rate of 12% per annum from 1988.
(d) The respondents shall pay Rs. 10,000/- as costs in this Arbitration petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimants.”
Arbitration Petition No. 43/1994.
The Arbitrator found the firm entitled to:-
“(a) Rs. 19,323.00. This amount will also carry simple interest at the rate of 12% per annum from 1984 till the date of realization.
(b) Rs. 1093.00. This amount will carry interest at the rate of 12% per annum from 1984 till the date of realization.
(c) The respondents shall pay Rs. 10,000/- as costs in this Arbitration Petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimant.”
Arbitration Petition No. 44/1994. The Arbitrator held:
“The total amount to which the claimant is found entitled to is as follows:
(a) Rs. 31,340.00. This amount will also carry simple interest at the rate of 12% per annum from 1989 till the date of realization.
(b) Rs. 43,475.00. This amount will carry interest at the rate of 12% per annum from 1989 till the date of realization.
(c) The respondents shall pay Rs. 10,000/- as costs in this Arbitration Petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimant.”
Arbitration Petition No: 45/1994.
The Arbitrator found the firm entitled to:-
“(a) Rs. 35,196.00. This amount will also carry simple interest at the rate of 12% per annum from 1989 till the date of realization.
(b) Rs. 10,090.00. This amount will carry interest at the rate of 12% per annum from 1989 till the date of realization.
(c) The respondents shall pay Rs. 10,000/- as costs in this Arbitration Petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimant.”
Arbitration Petition No: 46/1994.
It was held:
“The total amount to which the claimant is found entitled to is as follows:
(a) Rs. 34,080.00. This amount will also carry simple interest at the rate of 12% per annum from 1989 till the date of realization.
(b) Rs. 51,512.00. This amount will carry interest at the rate of 12% per annum from 1989 till the date of realization.
(c) The respondents shall pay Rs. 10,000/- as costs in this Arbitration Petition to the claimants.
The aforesaid amount shall be paid within two months by the respondents to the claimant.”
The award was passed by the Arbitrator on 14th Sept. 2002.
8. The arbitrator, therefore, accepted the claim of the firm in substance and finding fault with the quarter girth formula directed to enhance the payment due to the firm.
9. The award has been accepted by the firm but the State has contested it and filed its objections challenging the correctness of the award. It is alleged that the Arbitrator has mis-conducted himself and also mis-conducted the proceedings therefore the award cannot be made rule of the Court. The State has in its objections filed before this court on 17.1.2003 submitted that the quarter girth formula was the recognized formula in the Forest Department and the Forest Corporation for measurement of timber logs and that the forest department as well as the corporation makes supplies and payments for the timber to traders, contractors and consumers in accordance with this formula. It is being further submitted by the State that the said formula is in vogue in the State and that the firm was in know of this fact right from the date the agreement was entered into by the State with the firm. It is also alleged that the claim made by the firm was barred by limitation as the same has been made after 14 years of the execution of work as such the Arbitrator was not right in awarding the amount in favour of the firm.
10. The firm has filed its objections to the objections filed by the State in which it has been stated that the Arbitrator on consideration of the matter has taken a balanced view and in his wisdom has allowed only 15% increase which almost is the same as was recommended by the Executive Engineer. It is further stated that in fact it is the claimant who has suffered loss to the extent of Rs. 33.32 lacs in all the claims petitions in total. According to the firm the award is thus perfect, according to law and does not suffer from any infirmity.
This court framed the following issue in the case on 24.4.2003:-
1. Whether the award is liable to be set aside on the ground that the Arbitrator has mis-conducted in the arbitral proceedings?
O.P State of J&K.
11. The State has filed affidavits of Mushtaq Ahmed Retired Executive Engineer, Gh. Hassan Shah, Chief Engineer, Irrigation and Flood Control Department Kashmir Srinagar, Sheikh Mohd. Aslam Executive Engineer, in support of their case. The firm has submitted affidavit of Mir Zahid Hussain S/o Gh. Hassan Mir R/o Rajbagh, Srinagar.
Mir Gh. Hassan who was the proprietor of the firm died during the proceedings hence his legal representatives were brought on record. Mir Zahid is the son of the deceased and attorney holder on behalf of other legal heirs of late Mir Gh. Hassan.
12. Heard. Considered. It is alleged by the State that the Arbitrator has misconducted himself and also misconducted the proceedings. In para (c) of the objections, it is pleaded:
“That for measurement of log timber the only formula applicable is quarter girth formula. No other formula can be applied for measuring the volume of logs in the State including other states of country. In measurement of log timber it is the mean girth of the log which is being taken for evaluation of volume. While applying 4xD2 x L, it is diameter which is being taken for evaluation of the quantity. In case of long timber the diameter cannot be taken because logs are not of definite shapes. Therefore aforementioned formulas cannot be superimposed. The quarter girth formula is applicable in case of non-geometrical shaped logs which are always irregular in shape. Other reasons for applying quarter girth formula for measuring timber log is that the timber logs always contain wastage timber and if the timber log is converted in cylindrical shape taking lowest diameter into account, the actual useable timber or the cylinder arrived at will be 78.5% of the total volume of the timber log which will not include the wastage as mentioned above. Because of these two reasons the only formula which has been made applicable by J&K Government in its department is quarter girth formula and the respondent State has proved it by evidence and has also proved it by producing of experts of field, but the Hon’ble arbitrator has not appreciated that evidence and has been pleased to hold that quarter girth formula is not applicable which opinion framed by the Hon’ble arbitrator is contrary to the statements of the expert witnesses and therefore the Hon’ble arbitrator has misconducted the proceedings and himself and the award is liable to be rejected on that count.”
13. Learned counsel for the firm, repelling the arguments of the State, would argue that an Arbitrator is a Judge appointed by the parties and that his award being binding on the parties is not vulnerable to any challenge thereto. The Court, according to the learned Counsel, has not to sit as a court of appeal over the award passed by the Arbitrator and cannot speculate as to what impelled the arbitrator to arrive at his conclusion. It is further being argued that the Arbitrator, in the present case, has come to a just and proper conclusion in awarding an increase in the amount in favour of the firm, which in fact had been agreed to by the officers of the department as also by the REC. Even if the arbitrator commits a mere error of fact or law in reaching his conclusion, the court cannot interfere. In support Mr. Shah has referred to Sudarsan Trading Co. v. Government of Kerala (1989) 2 SCC 38; State of U.P. v. Ram Nath International Construction (P) Ltd. (1996)1 SCC 18; B.V. Radha Krishna v. Sponge Iron India Ltd. (1997)4 SCC 693; P.V. Subba Naiddu and Ors. v. Government of A.P. and Ors.. (1998) 9 SCC 407; HP. State Electricity Board v. R.J. Shah & Co. (1999) 4 SCC 214; Kundale & Associates v. Konkan Hotels (P) Ltd. (1999) 3 SCC 533; Rajasthan State Mines & Minerals Ltd. v. Eastern Engg. Enterprises (1999) 9 SCC 283; State of U.P. v. Allied Constructions (2003) 7 SCC 396 and Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission (2003)8 SCC 593.
14. Misconduct of an arbitrator or of the proceedings before an arbitrator were grounds under Section 30 of the Arbitration Act, 2002 (Svt.) for setting aside an award by the court but under the Jammu & Kashmir Arbitration and conciliation Act of 1997 (for short the Act) these are no more recognized grounds for the purpose now. The Courts jurisdiction to set aside an award on this ground has been taken away by the Act of 1997. Thus even if misconduct of arbitrator or the proceedings is shown, it cannot be used as a ground to set aside the award. Section 34 of the Act of 1997 however recognizes certain grounds for setting aside the award. Under the Section the award can be set aside by the Court ‘only’ if-
(i) the party was under some incapacity; or
(ii) the arbitration agreement entered into between the parties is not valid under the law to which the parties have subjected it or, falling any indication thereon. Under the law for the time being in force; or
(iii) the party making an 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, or
(v) the composition of arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties. The arbitral award can also be set aside-
(i) when the court finds that the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force; or
(ii) the arbitral award is in conflict with the public policy of India.
15. One of the grounds recognized by the Act is that the award is in conflict with the public policy of India. Supreme Court in Oil & Natural Gas Corpn. Ltd. v. Saw Pipes Ltd AIR 2003 SC 2629 while dealing with the meaning and scope of ‘public policy’ observed as under:-
“Therefore, in our view, the phrase ‘public policy of India’ used in S.34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term ‘public policy in Renusagar’s case (supra) it is required to be held that the award could be set aside if it is patently illegal. Result would be award could be set aside if it is contrary to:-
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.”
16. Thus where an award is contrary to an express provision of law it would be opposed to public policy within the meaning of the section.
17. An important objection raised by the State to challenge the award is that the claim raised is barred by limitation.
18. Learned Counsel for the State has referred to condition 36(iii) of Tender document and submitted that the firm could have made a claim only within fifteen days of taking of final measurement. Condition 36(iii) provides:
“No claim shall be made or be filed by the contractor beyond fifteen days of taking of final measurement of the works by the department. Acceptance by the contractor of the final payments shall release the Engineer, from all claims and liabilities of the contractor in this respect and in respect of any act or omission of the Engineer or any other person connected with the work.”
19. Learned Counsel for the State has further argued that the first a contract was entered into in the year 1979 but the arbitration has been sought by the firm in the year 1994. Ld. Counsel has further submitted that this issue was raised before the Arbitrator but the Arbitrator has not decided the same in accordance with the law of limitation. According to the State since the firm has approached the court after a period of 14 years from the date the alleged dispute has arisen the award cannot be made rule of the Court.
20. The firm has in reply to the objection regarding the limitation submitted that the arbitrator has already given his finding with regard to limitation which is not open to review. The firm has further submitted that the findings of the arbitrator, who is a judge of the choice of the parties, is final and conclusive both on facts as well as on law.
21. The works out of which the present proceedings have arisen were admittedly allotted to the firm during the period starting from 1979 to 1987. The petition for referring the matter to arbitration was filed before this court in the year 1994 and the arbitrator was appointed by the Govt. in the year 1999.
22. Issue relating to limitation has been specifically dealt with by the Arbitrator. He has found that when the claimant approached the High Court for appointment of an arbitrator and filed petitions U/s 20 of J&K Arbitration Act, the State set up limitation as a plea but the same did not find favour with the Hon’ble Single Judge. Thereafter appeal was filed before Division Bench but even the Division Bench did not accept the plea. The Arbitrator further observed that there is no finding recorded by this Court in respect of the said plea and that he is of the opinion that the same having been specifically raised, shall be deemed to have been rejected. The Arbitrator, therefore, concluded that he cannot sit in review over the judgement of this court. The Arbitrator observed as under:-
“From the record it appears that when the claimants approached the Hon’ble High Court for appointment of an Arbitrator and filed petitions under Section 20 of the J&K Arbitration Act (now repealed), the respondents had set up limitation as a plea. It did not find favour with the Hon’ble Single Judge. Thereafter appeal was filed before the Division Bench and even before the Division Bench the plea did not find favour. There is no finding recorded by the Hon’ble high Court in respect of the said plea and I am of the opinion that the same having been specifically raised, shall be deemed to have been rejected. I, therefore, cannot sit in review over the judgment of the Hon’ble High Court. That apart, I have found on facts that none, of the works executed by the claimants have been finaled. No final bill of any of the works has been produced before the Arbitrator. The Executive Engineer stated that at their own level they had prepared two final bills in respect of Pump House Ist. Stage Rajpora and Balance works of Pump House Ist. Stage Kachchkote but no such record has been produced. Final bills have neither been produced not the works have been finaled. Further the claimant has laid its claim with regard to its deposits which again goes to show that the works have not been finaled up. There exists correspondence on the file even of the year 1993/94 which goes to show that the matters in controversy were still pending before the department. In these circumstances it cannot be said that the claim petitioners filed by the claimants are barred by limitation.”
23. Learned counsel for the firm supporting the findings of the Arbitrator on the issue would argue that the objection on limitation cannot be raised as the same was duly raised before the Division Bench of this Court but the same was not entertained by the Court. It is further argued that jurisdiction to decide as to whether a claim before an Arbitrator, was barred by limitation or not vests in the Arbitrator and once the Arbitrator considers the question and decides it, the court cannot sit as a court of appeal over the findings of the Arbitrator. Reference has been made to State of Orrissa & Anr. v. Damodardas 1996 (2) SCC 216, Union of India v. Momin Constructon Co. 1997 (9) SCC 97 and State of Bihar v. Hanuman Mal Jain (11) SCC 40.
24. Law is well settled now that the arbitrator is the sole judge of the facts and law of a dispute referred to him for adjudication and award. The award cannot be interfered with unless the legality is apparent on the face of it. Section 43 of the Act provides that the provisions of the Limitation Act, Samvat 1996 shall apply to Arbitrations as it applies to proceedings in court.
25. Law relating to limitation regarding an arbitration as stated by Russell on Arbitration was quoted with approval by the Supreme Court in State of Orissa v. Damodardas 1996 (2)SCC 216. The Court observed as under:-
“Russell on Arbitration by Anthony Walton (19th Edn.) at PP 4-5 states that the period of limitation for commencing an arbitration runs from the date on which the “cause of arbitration” accrued, that is to say, from the date when the claimant first acquired either a right of action or a right to require that an arbitration take place upon the dispute concerned. The period of limitation for the commencement of arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued:
“just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued.”
26. The Apex Court further held that even if the arbitration clause contains a provision that no cause of action shall accrue in respect of any matter agreed to be referred to until an award is made, time still runs from the normal date when the cause of action would have accrued if there had been no arbitration clause. The court referred to the relevant portions of law of Arbitration by Justice Bachawat and observed:-
“In law of Arbitration by Justice Bachawat at P.549, commenting on Section 37, it is stated that subject to the Limitation Act, 1963, every arbitration must be commenced within the prescribed period. Just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date when the cause of action accrues, so in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues. For the purpose of Section 37(1) ‘action’ and “cause of arbitration” should be construed as arbitration and cause of arbitration. The cause of arbitration arises when the claimant becomes entitled to raise the question, that is, when the claimant acquires the right to require arbitration. An application under Section 20 is governed by Article 137 of the schedule to the Limitation Act, 1963 and must be made within 3 years from the date when the right to apply first accrues. There is no right to apply until there is a clear and unequivocal denial of that right by the respondent. It must, therefore, be clear that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of cause of action arisen in a civil action.”
27. Supreme Court in Panchu Gopal Bose v. Board of Trustees for port of Calcutta 1993 (4) SCC 38, which was followed in Damodar Das’s case (supra) held:-
“that the provisions of the Limitation Act would apply to arbitrations and notwithstanding any term in the contract to the contrary, cause of arbitration for the purpose of limitation shall be deemed to have accrued to the party, in respect of any such matter at the time when it should have accrued but for the contract. Cause of arbitration shall be deemed to have commenced when one party serves the notice on the other party requiring the appointment of an arbitrator. The question is when the cause of arbitration arises in the absence of issuance of a notice or omission to issue notice for a long time after the contract was executed? Arbitration implies to charter out time-ous commencement of arbitration availing of the arbitral agreement, as soon as difference or dispute has arisen. Delay defeats justice and equity aids promptitude and resultant consequences. Defaulting party should bear the hardship and should not transmit the hardship to the other party, after the claim in the cause of arbitration was allowed to be barred. It was further held that where the arbitration agreement does not really exist or ceased to exist or where the dispute applies outside the scope of arbitration agreement allowing the claim, after a considerable lapse of time, would be harassment to the opposite party. It was accordingly held in that case that since the petitioner slept over his rights for more than 10 years, by his conduct he allowed the arbitration to be barred by limitation and the Court would be justified in relieving the party from arbitration agreement under Sections 5 and 12(2) (b) of the Act.”
28. Applying these principles to the facts of the present case, it becomes evident that the claim in question has made by firm beyond period of limitation. Learned Arbitrator has duly considered the plea of limitation raised by the State but the conclusion arrived at and the finding returned thereon does not appear to be sound. Learned Arbitrator is of the view that since the issue was raised before the Division Bench of this Court and the Court did not record any finding on the issue, so he (the Arbitrator) cannot sit in review over the said judgment. This in my view is not the correct approach. It was for the Arbitrator to see as to whether the claim raised before it was within time or not. When the Division Bench of this Court did not record any finding over the same, it became all the more imperative for the Arbitrator to consider the issue. When there was no finding, no question of review arises. In this context it would be useful to refer to the following observations made by the Supreme Court in Wazir Chand Mahajan v. Union of India AIR 1967 SC 990:
“There is no doubt that Cl.(l) of S. 37 of the Arbitration Act deals only with the authority of the arbitrator to deal with and decide any dispute referred to him; it has no concern with an application made to the Court to filed an arbitration agreement and to refer a dispute to the arbitrator. After an agreement is filed in Court and the matter is referred to the arbitrator, it is for the arbitrator to decide by the application of the law contained in the Limitation Act, whether the claim is barred.”
29. Learned Arbitrator has further found that there was correspondence going even in the year 1993/94 which shows that the matters in controversy were still pending before the department. Limitation is always considered on the basis of cause of action and not on the correspondences between the parties. Once the cause of action accrues it cannot stop or get deferred merely because of correspondence between the parties. The record as well as the statement of the attorney of the firm, excerpts of which have been reproduced by the Arbitrator on pages 30-45 of the award, goes to show that the cause of action in all the claims accrued prior to 1988 while as the Arbitration petitions were filed in the year 1994. Thus the claims were undoubtedly barred by limitation.
30. Limitation in a case of the present nature does not start from the date of correspondence comes to an end or for that matter from the date of completion of work when the payment becomes due but from a date from which a dispute arises which requires appointment of an arbitrator.
Reading of Article 137 of the Limitation Act and Section 8 of the Act shows that the right to apply accrues when the difference arises. In a case S. Rajan v. State of Kerala (1992) 3 SCC 608, the Supreme Court found that the date on which the right to apply accrued in terms of Article 137 read with Section 20(1) was the date on which the demand notice was served i.e. May 30, 1974, so the application filed in 1985 was clearly barred by limitation. As regards the request made by the appellant in 1983 to the Government to refer the dispute to arbitration in terms of the agreement the Court held that the request was very much belated and cannot in any event be treated as the date on which the right to apply accrued.
31. The record shows that the dispute raised by the firm is that quarter girth formula was not the correct formula to take the measurements of the wooden deodar poles. The claim was raised in the year 1983. The state did not accept the claim. As per the counter affidavit filed by Chief Engineer, Irrigation and Flood Control Department, Kashmir Division, the firm accepted the said formula and received payments from time to time and even maximum contract were finalized in which the firm had already received final payment. He has further said that it was only in the year 1992, when the concerned gutted in fire that the firm filed arbitration petition in the year 1994. The prayer for arbitration should therefore have been made within three years of the first measurement done according to the formula by the State or from the year 1983. Instead the prayer was made in the year 1994.
32. Under these circumstances I find that the claims put forth by the firm were barred by limitation. The Arbitrator should not have entertained a time barred claim. The award passed by the Arbitrator therefore cannot be made rule of the court.
Order accordingly. All the petitions therefore decided accordingly.