JUDGMENT
Vikramajit Sen, J.
1. The parties have been litigating with each other with ferocity for several years. Observations were made by this Court to the effect that the Oil and Natural Gas Corporation Limited (hereinafter referred to as the Petitioner) had adopted dilatory tactics in the Claims raised by Amtek Geophysical Pvt. Ltd. (hereinafter referred to as the Respondent) which are the subject matter of arbitration proceedings. One of the contentions that had arisen was whether the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996 would govern the arbitral proceedings. In SLP No.5211/2002 the Hon’ble Supreme Court had passed the following Order while disposing of the Petition on 19.4.2002: By consent of parties, the order of the High Court is modified as follows:
The arbitration proceedings will go on under the provisions of the new Arbitration Act. However, any party aggrieved by the Award to be passed by the Arbitrator will be at liberty to challenge the same either under the old or the new Act and, if any objection is raised by any of the opposing parties as to the applicability of the old or the new Act, the same shall be decided by the court concerned independently without being influenced by the impugned order in this special leave petition. With this modification, the SLP is disposed of.
2. The contentions that have been raised before me have been articulated by Mr. Sundaram, learned Senior Counsel for the Petitioner as follows:
1. For the purpose of limitation what is relevant is the institution of proceedings and not filing of pleadings.
2. In some cases like a suit under CPC, institution of proceedings arises through the filing of pleadings.
3. However, under the Arbitration Act, the institution of proceedings for the purpose of limitation is through giving of notice of dispute. See Sections 43(2) and Section 21.
4. Any delay would only be for condoning the delay in filing pleadings as directed and there is no bar under Section 3 of the Act that such delay should not be considered.
This is in the context of the decision dated 17.8.2004 of the learned Arbitral Tribunal dismissing the Counter Claim filed by the Petitioner for the reason that it could not be entertained on the date on which it was filed. The application seeking condensation of delay was dismissed.
3. The annals of the litigation, in brief, is that the Petitioner had, in 1986, invited Tenders for Acquisition of 2D Seismic Data in India. After detailed discussions and negotiations Works were awarded on 17.10.1988 to the Respondent for Cambay Basin (Gujarat) and Assam/Nagaland region; and for the Cauvery Basin and Krishna Gadavary Basin on two other parties. The Contract was executed between the Petitioner and the Respondent on 19.10.1989. It is the case of the Petitioner that even after the expiry of the stipulated period of nine months for mobilisation of equipment and crew, it gave as many as ten extensions to the Respondent. The Petitioner further asserts that almost no work was carried out by the Respondent in the Cambay area. On 28.12.1993 several notices were issued by the Petitioner to the Respondent for resumption of work. Eventually on 31.12.1993 the Petitioner invoked a Bank Guarantee furnished by the Respondent. This led to the filing of a petition under Section 20 of the Arbitration Act, 1940 by the Respondent being the springboard for the litigation which had reached the Hon’ble Supreme Court which was disposed of by its Order dated 19.4.2002. On 23.4.1997 the Petitioner appointed Justice Rajinder Sachar, Retired Chief Justice of the Delhi High Court as its Arbitrator. By a communication dated 9.11.1996 the Respondent appointed Late Shri R. V. Reddy as their Arbitrator. In December 1997 Justice K. Amareswari (Retired) was appointed as the Presiding Arbitrator by these two Arbitrators. On 22.11.2002 Shri R.V. Reddy died and consequently Dr. Avtar Singh was appointed in his place in December, 2002. It has been stated in the Petition that between December, 2002 and July, 2003 the Petitioner made considerable efforts to locate the records pertaining to the Counter Claim.
4. Mr. Sundaram has submitted that the request for submission of disputes to arbitration was made by the Respondent on October 28, 1996, despite the execution of the Deed of Settlement dated 8.6.1995, which the Petitioner has affirmed in its oral as well as written arguments. The Respondent proffered its Statement of Claim before the Arbitral Tribunal on 19.1.1998. Thereafter the Petitioner filed its Preliminary Objection dated 26.3.1998. It appears that the Arbitral Tribunal had deferred the consideration and decision on these Objections. On 30.5.1998 the Petitioner filed its defense Statement containing the following:
14. GENERAL:-
(a) Unless otherwise specifically admitted the respondents deny all the claims raised by the claimants in the statement of facts and all the allegations made by the claimants against the respondents regarding the breaches of contract.
(b) In view of the limited time, the respondents are not in position to submit in this counter statement a copy of all the letters relevant to the claims. They crave the permission of the Learned Arbitrators for submission of these documents in due course.
(c) The respondents are also raising their claims against the claimant separately. The detailed statement of counter-claims will be filed separately.
15. PRAYER:
In reply to the prayer clause the respondents most respectfully submit that the Hon’ble arbitrators may be pleased to:-
(a) to adjudicate and decide the portion of the claim No.3.1 only of the claimants pertaining to stand-by charges for 88 days as were agreed to be referred for arbitration.
(b) dismiss and reject all the claims as have been raised by the claimant more particularly claims detailed in paras 3.2 to 3.9.
(c) to reject the prayers 4.1 to 4.8 made by the claimants in the last page of the statement of facts/claims.
(d) to declare that this Hon’ble Arbitral Tribunal has no jurisdiction to adjudicate on the remaining claims (all claims excepting claim No.3.1) of the claimants raised by them in their statement of facts/claims.
(e) to award costs to the respondents for having to defend an unwanted arbitration proceedings.
(f) to grant such other relief or reliefs as the Hon’ble Arbitral Tribunal considers the respondents as entitled to in the facts and circumstances of the case.
PLACE: For and on behalf of
DATED:30.05.1998 Oil & Natural Gas Corpn. Ltd.
Sd/-
RESPONDENT
THROUGH
ADVOCATE
5. Owing to the initiation and pendency of litigation arbitral proceedings are stated to have been adjourned sine die for almost four years and were revived in December, 2002.
6. My attention has been drawn to the Petitioner’s letter dated 3.9.1998 addressed to the Respondent with reference to the subject contract stating therein that – “ONGC has suffered heavy losses and accordingly …. has the following claims on you ….. which you are liable to pay and reimburse to our organisation. The details of the claim as are due and payable by you on account of your various illegal acts and non performance of your contractual obligation are enclosed as separate Annexure. ….. You are hereby by way of this notice called upon to pay and remit to ONGC the above mentioned sum of Rs.24.49 crores along with interest accrued thereon at current market rate of interest @ 22% per annum from the date of the accrual of the claim to the date of payment, within 15 days from receipt thereof, failing which we shall be constrained to take appropriate legal action in the matter as may be advised, which shall be filed at your risk, cost and expenses”. The question to be answered is whether this communication is indicative of the Petitioner’s intent to set the arbitral proceedings into motion, if the cryptic sentence in the defense Statement is not so; or does the letter disclose a demand for payment of money simpliciter de hors and distinct from the arbitration clause.
7. Very often one gets so embroiled in esoteric legal arguments that we fail to perceive what is patently obvious. If A has a claim or grievance against B plain commonsense expects A to articulate it at at the very earliest occasion. The case of the Petitioner is that almost from the inception of the contract the Respondent failed to perform its obligations according to the tenor of the agreement, yet it did not take any legal action for several years. Despite an alleged ‘Settlement’ in 1995, on a demand for arbitration being raised by the Respondent in October, 1996, the Petitioner did not consider it imperative to raise and thereafter litigate upon its own claims. Assuming that the communication dated 3.9.1998 was not a simple demand for damages and was a sequel to the intent of the Petitioner to raise its own claim in arbitration, the question to be answered is why were steps not taken before the Arbitral Tribunal immediately. In the Petitioner’s Written Synopsis filed in Court on 4.10.2004 there is a mention for the first time of a letter dated 13.08.1997 copy of which is not forthcoming.
8. At this stage it would be relevant to briefly discuss the decision of the Hon’ble Supreme Court in Sundaram Finance Ltd. vs. NEPC India Ltd., and the clarification made thereto by the Hon’ble Supreme Court in Firm Ashok Traders and Another vs. Gurumukh Das Saluja and Others, . While it is true that the Apex Court was dealing with the Section 9 of The Arbitration and Conciliation Act, 1996, it would not be unfair to extrapolate upon the decision by holding that any party having a claim against another, must invoke the Arbitration Clause and initiate proceedings with expedition. Paragraph 17 of Firm Ashok’s case(supra) reads thus:
17. There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid down by this Court in Sundaram Finance Ltd. an application under Section 9 seeking interim relief is maintainable even before commencement of arbitral proceedings. What does that mean? In Sundaram Finance Ltd. itself the Court has said:
It is true that when an application under Section 9 is filed before the commencement of the arbitral proceedings, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings.
Section 9 permits application being filed in the court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word “before” means, inter alia, “ahead of; in presence or sight of; under the consideration or cognizance of”. The two events sought to be interconnected by use of the term “before”must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or “within-sight” certainly. The party invoking Section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the court that the arbitral proceedings are actually contemplated or manifestly intended (as Sundaram Finance Ltd. puts it) and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting Section 9, read in the light of the Model Law and UNCITRAL Rules is to provide “interim measures of protection”. The order passed by the court should fall within the meaning of the expression “an interim measure of protection” as distinguished from an all-time or permanent protection”.
9. On 11.7.2003 a Counter Claim was filed by the Petitioner along with an application for condensation of delay, which application has been disposed of by the impugned Orders of the Arbitral Tribunal. Issues were framed on 28.2.2003 and 24.4.2003. Evidence has been recorded in the form of Affidavits.
10. It is contended on behalf of the Petitioner that on 17.8.2004 the Tribunal rejected the Counter Claim on the grounds that it had been proffered after the lapse of five years from 30.5.1998. The contention is that there can be only one date for commencement of arbitration proceedings between the parties and that even a simple and single averment in the defense Statement that a Counter Claim would be filed should be taken as a step for commencement of arbitration proceedings. It is also mentioned in the Written Submissions that the delay in filing the Counter Claim was for the reason that Petitioner ” was pursuing appropriate remedy before a competent Court of law, which was only decided on 19.4.2002 by the Hon’ble Apex Court and thereafter the proceedings effectively recommenced only in January 2003 where after the counter-claims which were filed on 11th July 2003 without any undue or unexplained delay”. Emphasis has also been laid on the fact that on 22.11.2003 the Arbitral Tribunal had stated that the issue of Counter Claim will be decided along with the main Claim. In my view, this, however, does not preclude the Tribunal from chartering a different course after hearing the parties concerned. I find no substance in the Petitioner’s submission that the Tribunal failed to appreciate that the Counter Claim has the same effect as a Cross Suit so as to enable the Tribunal to pronounce a final judgment in the same proceedings. No decisions have been placed before me to the effect that even a time barred Counter Claim must be adjudicated upon and decided merely because another Claim is pending consideration. In Ramesh Chand Ardawatiya vs. Anil Panjwani, has been opined thus:-
26. A perusal of the above said provisions shows that it is the Amendment Act of 1976 which has conferred a statutory right on a defendant to file a counter-claim. The relevant words of Rule 6-A are–
A defendant in a suit may, in addition to his right of pleading a set-off under Rule 6, … before the defendant has delivered his defense or before the time limited for delivering his defense has expired…
These words go to show that a pleading by way of counter-claim runs with the right of filing a written statement and that such right to set up a counter claim is in addition to the right of pleading a set-off conferred by Rule 6. A set-off has to be pleaded in the written statement. The counter-claim must necessarily find its place in the written statement. Once the right of the defendant to file written statement has been lost or the time limited for delivery of the defense has expired then neither can the written statement be filed as of right nor a counter-claim can be allowed to be raised, for the counter-claim under Rule 6-A must find its place in the written statement. The court has a discretion to permit a written statement being filed belatedly and, therefore, has a discretion also to permit a written statement containing a plea in the nature of set-off or counter-claim being filed belatedly but needless to say such discretion shall be exercised in a reasonable manner keeping in view all the facts and circumstances of the case including the conduct of the defendant, and the fact whether a belated leave of the court would cause prejudice to the plaintiff or take away a vested right which has accrued to the plaintiff by lapse of time.
11. The question that immediately arises is whether the Counter Claim had become time barred so far as the pending arbitral proceedings are concerned. Section 41 of the 1940 Act makes it clear that, subject to the provisions of the Act and Rules framed there under the provisions of the CPC shall apply to the Court. A slight departure has been made in the present Act in that Section 19 substantially introduces the corresponding Article 19 of the UNCITRAL Model Law granting freedom to the Arbitrators to conduct proceedings in the manner they consider appropriate. So far as the CPC is concerned it collates general principles of law, all of which are imbued with plain and sound commonsense. In A.A. Haja Muniuddian vs. Indian Railways, the Apex Court had before it Section 18 of Railways Claims Tribunal Act, which provides in its first sub-section that the Tribunal shall not be bound by the procedure laid down by the Code, but shall be guided by the principles of natural justice and shall have power to regulate its own procedure. The Court observed that – “Nowhere in the Act is there any provision which runs counter to or is inconsistent with the provisions of Order XXXII of the Code. Although the Act and the Rules do not specifically provide for the application of Order XXXIII of the Code, there is nothing in the Act or the Rules which precludes the Tribunal from following that procedure if the ends of justice so require”. Even where courts of law are concerned the salutary approach is that they should not become subservient to the letter of procedural law. If the Arbitrator draws upon principles of this genre of law to effect justice between the parties he cannot be faulted. This is even more so where the parties are represented by Advocates. If A initiates a claim against B, the latter may similarly initiate its claim against the former but if it is not by means of a separate action, the claim must be articulated and lodged at the very earliest and surely not later than when B files its response/defense/written-statement to the Claim. This is also what Rule 6A of Order VIII postulates; this provision also clarifies that the counter-claim shall have the same effect as a cross suit and shall be treated as a plaint. Under the 1940 Act, Section 37 made it indubitably clear that all the provisions of the Limitation Act, 1908 were applicable to arbitrations as they were to proceedings in Court. Since the question of which of the two arbitration statutes apply has been left somewhat open by the Hon’ble Supreme Court, both the provisions will have to be carefully considered. I shall advert to sub-sections (3) and (4) of Section 37 of the old Act a little later. It is clear that on a reading of Section 43 the same position obtains under the 1996 Act. However, there is no gainsaying that the counter-claim cannot be filed in respect of a claim that has become time-barred. So far as the claims before the Arbitral Tribunal are concerned, time started to run on 28.10.1996 when the Respondent sought reference to arbitration. So far as this cause of action is concerned the Petitioner ought to have raised or lodged its claims with its written statement, or latest within three years of 28.10.1996 but by means of other proceedings. The Arbitral Tribunal under both statutes could no doubt have followed its own procedure. The Petitioner has been represented by distinguished Advocates all through out. To contend that it could raise its claims even after the Issues had been framed and the recording of evidence had commenced for a considerable time, would render nugatory every tenet of the general principles of law or natural justice, leave aside the CPC.
12. The Division Bench had observed in Union of India and another vs. M/s. Vijay Construction Co., AIR 1981 Delhi 193 as follows:
The right to apply for arbitration is dependant on a dispute having arisen and the dispute is whether the rescission of the contract was justified or not. The learned Judge assumes that it is only if the General Manager rejects the request of arbitration that a dispute arises. We cannot agree. The dispute between the contractor and the railway arose on the rescission of the contract. Making a request for referring the matter to arbitration is a demand to refer the dispute to the forum which the parties had agreed upon. Awaiting reply from the Railways cannot save limitation which had already started running from the date of the rescission of the contract. The rescission of the contract is a clear and straight intimation to the contractor that his work has not been found satisfactory and the consequences will follow. It is no doubt true that if in pursuance of a notice given, the arbitrator had been appointed by the Railways, no necessity to file an application under Section 20 would have arisen. But the grievance of the contractor had arisen from the date of rescission of the contract. In order to get the relief from the injury done to him by the rescission of contract, the appointment of an arbitrator was one of the steps, he had to take. The right to apply and take effective steps had thus arisen from the date.
13. From the above extract it will be palpably clear that the decision in M/s. Oriental Building & Furnishing Co. Ltd., New Delhi vs. Union of India, AIR 1981 Delhi 293 is clearly per incuriam. It needs to be clarified that even if there may be a distinction between the arising of the cause of action of a dispute, and that of a petition under Section 20, the latter does not inject any elasticity to the adjudication of the former, and would not resurrect a time-barred claim. It is an absurdity to contend that if a dispute has arisen, say in January 1995, and a legal notice has been issued in January 1997, it would be possible to initiate recovery proceedings beyond January 1998. Even a categoric admission/acknowledgment of liability has to be made during the currency of the limitation period for such acknowledgment to extend limitation for another three years. Once a petition for the appointment of an arbitrator under Section 20 is brought before it, the Court may still refer the dispute to adjudication since it is the domain of the Arbitrator to rule on the question of whether the claim stands time-barred or not. This is so also in relation to a claim being excluded by the terms of the contract or barred for the reason that accord and satisfaction had occurred between the parties, inter alia, on the receipt of full and final payment.
14. A Single Judge of the Calcutta High Court in the case of Shankar Construction Co. Pvt. Ltd., v. Union of India, had considered the precedents available till that date and had found a divergence in the opinion of the Calcutta High Court on the one hand, and the Delhi High Court and Allahabad High Court on the other. The Learned Judge, therefore, expressed her opinion, (in conformity with the decision of the Calcutta High Court), to the effect that unless differences had arisen between the parties, Section 20 of the Arbitration Act would not be applicable. However, the views expressed by the learned Division Bench in Vijay Construction Co. case (supra) must prevail.
15. This very question had arisen before the Hon’ble Supreme Court in some other cases also. In S. Rajan v. State of Kerala and another, , the Apex Court had observed that the period of limitation for the filing of an application under Section 20 of the Arbitration Act is governed by Article 137 of the Limitation Act. In that case the Contractor had entered into an agreement with the State for carrying out certain works. The Contractor could not, however, execute the work as per the terms of the agreement and the Contract was retendered. The State computed the loss suffered by it on account of retendering and served a demand notice on the Contractor. The demand notice was unsuccessfully challenged by the Contractor by way of a writ petition. Subsequently, the Contractor applied to the State to refer the dispute to an arbitrator. This application was rejected by the State. The Contractor’s application under Section 20 filed 9 years after the initial service of the demand notice was held to be barred by limitation. The Hon’ble Supreme Court opined that the differences between the Contractor and the State, or in other words the right to apply under Section 20, arose on the date of service of demand notice on the Contractor and not on the date his application to the State to refer the disputes to arbitration was rejected. In Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, , the Apex Court again observed that the three year period must be computed from the accrual of the cause of action. The Hon’ble Supreme Court was of the view that “in order to be entitled to ask for a reference under Section 20 of the Act there must not only be an entitlement to money but there must be a difference or dispute. It is true that on completion of the work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claim was made on 28th February, 1983 and there was non-payment, the cause of action arose from that date, that is to say, 28th of February, 1983”. What is essential, therefore, is to trace backwards to the earliest date on which differences had arisen. Law would not give succor to a litigant who sleeps over his rights and agitates them only after limitation has run out.
16. If any doubt still remained, it has now been finally set to rest by the Hon’ble Supreme Court in Steel Authority of India Limited v. J.C. Budharaja, Government and Mining Contractor, 1999 (3) Arb. LR 335 (S.C.) in which the Hon’ble Court has discussed the controversy threadbare. It first reiterated its earlier view expressed in State of Orissa v. Damodar Das, to the effect that Section 3 of the Limitation Act, 1963 enjoins the Court to consider the question of limitation, regardless of whether it is pleaded or not. It then reproduced the following extract from that judgment:
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 an 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.
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 Hon’ble Supreme Court also referred to its earlier decision in Panchu Gopal Bose v. Board of Trustees for Port of Calcutta, in which it had spoken thus:
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 takes place upon the dispute concerned.
Therefore, the period of limitation for the commencement of an 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.
The facts in Budharaja’s case (supra) were that the Contractor had raised claims in terms of his letter dated 29.8.1979. Thereafter the parties had entered into a Supplementary Agreement on 20.12.1980. Keeping in perspective that the Contractor had not sought any reference within three years from the date when the cause of action had arisen i.e. 29.8.1979, and had done so only in 1985 when the dispute arose with regard to the second agreement, the Apex Court declined to permit a Reference of the claims of 1979. More recently, in Asia Resorts Limited v. Usha Breco Limited, , a similar question had arisen and the Hon’ble Supreme Court took note of its decisions in the foregoing cases. The dispute between the parties was in respect of the contract for the construction of a ropeway which was completed and handed over on 27.4.1988. The appellant issued a notice on 17.4.1990 threatening legal action. On 16.6.1993 the appellant issued a notice proposing the filing of a petition under Section 20 and this was eventually filed on 30.11.1993. The Hon’ble Supreme Court affirmed the view of the Division Bench that the petition had become barred by time.
17. Reference should be made to the decision of the Hon’ble Supreme Court in Union of India vs. M/s. Momin Construction Company, where it has been opined thus:-
3. The appellant and the respondents entered into a contract which contained an arbitration clause, namely, that all disputes or matters in difference between them arising out of or connected with the contract during the progress of the construction work therein set out or after its completion would be decided by arbitration. The final bill in respect of the construction work was prepared and the respondents gave a ‘No Claim Certificate’ on 11th August, 1965, whereupon the final bill was passed. On 26th February, 1971, the respondents filed a petition under Section 20 of the Arbitration Act to take on the file of the City Civil Court, Ahmedabad the arbitration agreement aforementioned. The appellant contested the petition and urged that it was barred by limitation. The issue was answered against the appellant and the petition was allowed.
4. The appellant preferred an appeal to the Gujarat High Court. The High Court relied upon various judgments and concluded, basing itself principally upon the decision of this Court in Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubli, , that Article 137 of the Limitation Act, 1963, did not apply to an application under Section 20 of the Arbitration Act. The High Court dismissed the appeal.
5. Two judgments of this Court subsequent to the decision in the case of the Town Municipal Council (AIR 1969 SC 1325), aforesaid must be noted.
6. In Kerala State Electricity Board, Trivandrum v. T.P.K.K. Amsom and Besom, Kerala, , this Court held that Article 137 of the Limitation Act, 1963, would apply to any petition or application filed under any Act to a Civil Court. The view taken by the two judge bench in the Town Municipal case (AIR 1969 SC 1325), aforementioned was expressly different from and it was held that Article 137 was not confined to applications contemplated by or under the Code of Civil Procedure. In Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, , the decision in the case of Kerala State Electricity Board : , just cited was applied in respect of an application under Section 20 of the Arbitration Act. It was held that Article 137 applied thereto.
7. The claim in the first appeal aforementioned arose to the respondents therein before 11th August, 1965, when they issued the No Claim Certificate and the final bill was passed. The right to apply under Section 20, of the Arbitration Act, therefore, arose to the respondents before 11th August, 1965. The application under Section 20 was made by them much after the expiry of three years there from. The application under Section 20 was, therefore, plainly barred by time.
18. Asia Resort’s case (supra) is of importance because of the two principles that it lays down – (a) that a Petition under Section 20 must be filed within three years from the date on which the cause of action arises and (b) that Section 5 of the Limitation Act can be applied to such Petitions. This is what the Court observed on the first Issue which is topical for our purposes.
11. It is true that from the above arbitration clause it is clear that parties should have made an effort to settle the differences by mutual consultations and only on failure of such attempt steps could have been taken by the parties for making a reference to the arbitrator, but the notices issued between the parties hardly give any indication that these mutual consultations for resolution of differences continued up to 1993. A perusal of the notice sent by the appellant on 17-4-1990 to the respondent and the reply received from the latter would show that the cause of action had arisen for filing of a petition under S.20 of the Act as early as on 17-5-1990. The material portion of the notice sent by the appellant has been extracted in the impugned judgment. Suffice it to say that in the notice dated 17-4-1990, it is made out in unmistakable terms that the appellant was of the view that the respondent had committed a serious breach of the agreement and, therefore, the respondent was called upon to do the needful within 30 days from the date of that notice, failing which the appellant would take legal action against the respondent in Court of law.
…..
16. Under Section 20 of the Act, the cause of action for filing an application may arise whenever “a difference has arisen to which the agreement applies”. Regard must be had to the relevant arbitration clause in the agreement. If any specific terms are used in the arbitration clause, that would govern the parties as to when a petition for reference of arbitration shall be filed in Court.
17. In the instant case, the arbitration clause states that all parties would resolve such differences by mutual consultation failing which either party must give to the other notice in writing of the existence of such question, dispute or difference and the same shall be referred for the final determination. The appellant issued notice to the respondent and a definite reply was received by the appellant. It is clear that cause of action for filing had arisen, the moment the appellant received the reply notice denying the claims made by the appellant. Therefore, the Division Bench has rightly held that the application was barred by time.
19. It has already been noticed that the parties had entered into a Deed of Settlement and the question whether the Respondent’s Claims could thereafter be open to adjudication will indubitably be answered by the Arbitral Tribunal. Presumably, the cause of action is pegged by the Respondent on this Deed. Prima facie, if the Petitioner is also of the opinion that it can raise demands despite the Settlement its cause of action also arises from the same date. This may be impermissible in view of the Petitioner’s averment in its application dated 9.7.2004 under Section 16 of the 1996 Act where it has stated that “as a result of the above, the claims/disputes as set-out prior to the deed of settlement stood settled and closed beyond the jurisdiction of either the Hon’ble Tribunal or any other Tribunal”. An ingenious but interesting argument has been proffered by Mr. Sundaram that whatever action is contemplated in law to be taken has in fact been carried out purely upon the statement made by the Petitioner in its defense Statement dated 30.5.1998 that a counter-claim would be filed. The contention of Mr. Sundaram is that time ceased to run against the Petitioner as a consequence of this simple statement. In civil law in order to ensure that a claim/dispute is not liable to be dismissed as having become time-barred a plaint must be presented to the proper officer as contemplated in Section 3(2)(a) of the Limitation Act. The next sub-section, that is, Section 3(2)(a) stipulates that a counter claim shall be treated as a separate suit and shall be deemed to have been instituted on the date on which it is made in Court. Since every person is aware of where and how the plaint has to be presented no difficulty or imponderable is encountered. In the case of arbitration however, more often than not the Arbitrator is unknown and the venue is indeterminate and therefore the claimant can do no more than notify the adversary of the resolve to commence arbitration; this action is therefore not comparable with raising a claim or demanding payment followed by a civil action. In the old statutory regime if the adversary had to take steps in this direction and failed to do so the Courts could be approached under Section 20 so that an order of reference to the Arbitrator(s) could be made. Whilst Section 37(3) of the old Act enunciates that arbitration shall be deemed to have commenced when one party to the arbitration agreement serves on the other party a notice requiring the appointment of an arbitrator, in those not so infrequent instances where the other party recalcitrantly refuses to initiate the process, recourse has to be had to Section 20. Provided the hiatus between the issuance of the notice and the moving of the Court under Section 20 was not inordinate or beyond the period of limitation, the parties would be referred to arbitration. The judgments of the Apex Court have already been discussed above. Accordingly, the present case is viewed from the perspective of the old Act there is no escape from the conclusion that the claims cannot be adjudicated.
20. Assuming that the cause of action arose in October, 1996, if the Counter Claim had been filed within three years it would have warranted its consideration. The cryptic pleading in paragraph 14(c) of the defense Statement dated 13.5.1998 to the effect that ” the respondents are also raising their claims against the claimant separately”, if taken as a notice under Section 37(3) would nevertheless mandate that the provisions of Section 20 should have been invoked immediately thereafter and before October, 1999. If this had happened, then even if the matter had remained pending in the Court for ten years, the claims would not have become stale and time barred. The case of the Petitioner is, however, hopeless since the cryptic statement reproduced above cannot be viewed as a notice requiring the appointment of an arbitrator. It was not addressed to the person possessing power to appoint the arbitrator but was made to the Arbitral Tribunal which was adjudicating the claims of the Respondent. The Arbitral Tribunal committed no error in following the principles pertaining to Counter Claims contained in the Civil Procedure Code on the analogy of the ratio in Haja Muniuddian’s case (supra). What remains to be seen is whether any appreciable difference occurs if the 1996 Act is applied.
21. Section 43 of the 1996 Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to proceedings in the Court. Thereafter, reverting back to Section 21 the Act stipulates that arbitral proceedings in respect of a particular dispute commences on the date on which a request for that dispute to be referred to arbitration is received by the Respondent. The opinion has already been expressed that the defense Statement cannot be construed as a request that the dispute should be referred to arbitration. It was not addressed to the Respondent, that is, Amtex, but to the Arbitral Tribunal which was dealing with another dispute albeit between the same parties. It did not contain any material particulars about the claim or dispute. The letter of the Petitioner dated 3.9.1998 cannot also be viewed as a notice under Section 21 of the 1996 Act. It is true that the Claims of the Petitioner have been detailed in this letter but rather than requesting or notifying that these Claims were to be referred to arbitration a peremptory demand for the payment of those Claims has been conveyed. The fact that the Petitioner had not intended to refer these Claims to arbitration is borne out from the fact that it took no steps to refer its particular disputes to arbitration either through the avenue of Section 11 of the Act or arguably by bringing these Claims before the Arbitral Tribunal adjudicating the Claims of the Respondent within three years. Had it done so the legal conundrum of whether the already constituted Arbitral Tribunal was competent to decide the disputes raised by the Petitioner would have had to be decided. But this has not happened. Instead, the Claims raised in the Petitioner letter dated 3.9.1998 are now sought to be introduced in July 2003 when they had already become time barred. I find no reason to hold that the Petitioner needed to do nothing more than make a demand for for payment of its Claims contained in its letter dated 3.9.1998 for five long years, assuming that the letter dated 3.9.1998 conformed to the requirements of a notice as envisaged by Section 21 of the 1996 Act. The Hon’ble Supreme Court had pronounced in the series of decisions mentioned above that a claim must not be time barred for a reference to be made under Section 20 of the old Act. The language of Section 37(3) of the old Act and Section 21 of the present Act is appreciably the same in content and intent. Time would have ceased to run for the Petitioner upon its taking requisite steps to commence arbitration without delay presuming that the letter dated 3.9.1998 conformed with the provisions of Section 21 of the new Act. Viewed from any angle, therefore, the impugned Order cannot be faulted.
22. Petition is dismissed.