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Subhashchandra Patodi, Indore vs Food Corporation Of India on 8 January, 1992

Madhya Pradesh High Court
Subhashchandra Patodi, Indore vs Food Corporation Of India on 8 January, 1992
Equivalent citations: 1992 (0) MPLJ 808
Author: V Kokje
Bench: V Kokje


V.S. Kokje, J.

1. On 26-10-1978 an application under Section 20 of the Arbitration Act was filed by the non-applicant Food Corporation of India for reference of a dispute between the parties to arbitration. In the application it was stated that the non-applicant Subhashchandra Patodi undertook the work of transportation of foodgrains and sugar from Indore in accordance with the agreement dated 22nd Sept., 1973, executed by him in favour of the Food Corporation of India. It was further stated that because of the breaches committed by the non-applicant, the Food Corporation of India had to terminate the agreement and instead had to get the transportation of the stipulated commodities done from other carriers and transport agencies. It was contended that in this process the F.C.I, the applicant sustained a loss of Rs. 44,835.08,

which was entitled to be recovered from the applicant herein. In paragraph 6 it was stated that the cause of action for the application arose on 20th Sept., 1975 when reference was asked for. Realising that from this date, the application would be time-barred, by way of amendment paragraphs 5-A and 6-A were added. In these amended paragraphs it was stated that when the contract was not carried out by the other side, the F.C.I., extended the period of the contract exercising the power under the agreement till 9-11-1975. It was also contended that after getting the work done from other contractors during the extended period, a demand of Rs. 44,835.08 was made on 26th Nov., 1975 and the applicant herein by his reply dated 4-12-1975 denied the liability. The limitation is claimed on the basis of the breaches committed during the extended period of the contract, which expired on 9-11-1975. The applicant raised a plea of limitation before the lower Court, which was rejected it. Hence, this application for revision.

2. It is settled law that for deciding whether an application is prima facie within time or not, averments in the plaint or the application only will have to be seen. The allegations in the application show that a dispute of non-payment of Rs. 44,835.08 by way of damages is sought to be referred. The F.C.I, claims that the contract was extended till 9-11-1975 and it is entitled to damages suffered during this extended period. Obviously, the damages could be calculated only after the work was given to others and the work was completed by them. When the amount of claim was quantified, the F.C.I, demanded the same from the non-applicant and refusal of the non-applicant to pay the same supplied the cause of action for reference of a dispute regarding realisation of Rs. 44,835.08 by the F.C.I, from the applicant herein. –

3. In Union of India v. L.K. Ahuja and Co.; AIR 1988 SC1172, after reconcilling the decision in Kerala State Electricity Board, Trivandrum v. T.P.K.K. Amsom and Besom, Kerala, AIR 1977 SC 282 and Wazichand Mahajan v. Union of India, AIR 1967 SC 990,

the Supreme Court observed that in order to be entitled to ask for a reference under Section 20, there must be an entitlement to money and a difference or dispute in respect of the same. It will be entirely wrong to mix up the two aspects, namely, whether there was any valid claim for reference under Section 20 and, secondly, whether the claim to be adjudicated by the arbitrator, was barred by lapse of time. The second is a matter which the arbitrator would decide unless, however, if no admitted facts a claim is found at the time of making an order under Section 20 to be barred by limitation. In the matter of this nature, the main question is whether the application under Section 20 was within time. In para 6 of its judgment, the Supreme Court has observed that the question whether the claim sought to be raised was barred by limitation or not was not relevant under Section 20 of the Arbitration Act. There are two aspects one is whether the claim made in the arbitration is barred by limitation under the relevant provisions of the Limitation Act and Secondly, whether the claim made for application under Section 20 of the Act is barred. In order to be a valid claim for reference under Section 20 of the Arbitration Act, it is necessary that there should be an arbitration agreement and secondly differences must arise to which the agreement in question applied and thirdly, that must be within time as stipulated in Section 20 of the Act.

4. Applying the aforesaid test to the present case, it is clear that there is a valid claim for reference under Section 20 of the Arbitration Act. The Food Corporation of India, the original claimant before the lower court, has claimed a specific amount as damages. This amount according to the FCI came to be quantified only after the work was got done from other contractors, Irrespective of the fact whether the claim would be allowed on merits or not, it is plainly within limitation. The matter whether actually the claim made by the F.C.I, is barred by limitation or not is for the arbitrator to decide. The application, therefore, has no force and is accordingly dismissed. The parties shall bear their own costs.

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