ORDER
B.B. Vagyani, J.
1. Heard learned Counsel Shri K.G. Nawandar, holding for Shri S.G. Thombre, learned Counsel for the petitioners and Shri H.M. Karwa, learned Counsel for the respondent.
2. Rule, made returnable forthwith with the consent of the learned Counsel for the parties.
3. The respondent-plaintiff was registered contractor for Public Works Department. The construction business was carried under the name and style as “Rajurkar Brothers” at Aurangabad. The respondent is a registered partnership firm. The Maharashtra Industrial Development Corporation is a body corporate established under the Maharashtra Industrial Development Act, 1961 and is represented through its principal contract authorities. The Superintending Engineer was in-charge of the circle for all contract works in the districts of Aurangabad and Jalgaon. The Executive Engineer In-charge was the authority to accept and execute a contract. The contract for the work of construction of SICOM Sheds and ancillary works at Jalgaon was entrusted by the Superintending Engineer of the Maharashtra Industrial Development Corporation, Circle Aurangabad to the present respondent. The estimated costs of the work was to the tune of Rs. 6.28 Lakhs with the time limit of 12 months. The contract No. B/1/10 of 1975-76 was executed at Aurangabad and the work order was issued on 8-3-1976.
4. The work was executed as per the drawings and designs and as per the directions of the field staff. The work was delayed on account of changes suggested and due to rectifications got done by the Superintending Engineer and Executive Engineer, due to errors in the design. The work was completed in all respects by the respondent in October, 1977. The demand for final bill of Rs. 49,581-06 Ps. was preferred. The petitioners made certain deductions and paid Rs. 23,306.06 Ps. to the present respondent on 9-5-1978. The respondent accepted this payment under protest because the claim for extra work done at the instance and as per the specific directions of the present petitioners, was not paid, though measurements for the same were taken by the engineers of the present petitioners.
5. The Superintending Engineer and Executive Engineer of the Maharashtra Industrial Development Corporation agreed for payment for the work on the basis of extra item rate list. Accordingly, the respondent submitted his claim through letter dated 28-4-1978. Nothing was informed thereafter by the present petitioners. Hence the respondent went on pursuing for settlement of the claims under Clause 31 of B-1 contract but no action was
taken by the Superintending Engineer as per the terms of contract. Finally, a reference was made by the present respondent to the Chief Engineer of Maharashtra Industrial Development Corporation, Pune by letters dated 28-3-1984 and 26-4-1993.
6. After protracted correspondence and constant persuasion from the side of the respondent, it was informed by the present petitioners through letter dated 24-2-1995 that the claim could not be considered. According to the respondent, the dispute arose on or about 24-2-1995. Thereafter the present respondent filed an application under section 20 of the Arbitration Act, 1940 in the Court of the 2nd Joint Civil Judge, Senior Division, Aurangabad on 27-6-1996. The said Application is numbered as Special Arbitration Suit No. 334 of 1996. A show cause notice was given to present petitioners. In response to the show cause notice, the petitioners appeared in the Court and filed their say. The main contention of the present petitioners is that the Reference Application is hopelessly time barred as per Article 137 of the Limitation Act, 1963. The petitioners, by their separate application, moved the learned Civil Judge, Senior Division, Aurangabad for framing of a preliminary issue on the point of intimation. A request was made on behalf of the petitioners that the preliminary issue with regard to limitation should be heard first before making further orders under the provisions of Arbitration Act, 1940. The respondent resisted the said application on the ground that the claim was denied by the petitioners by letter dated 24-2-1995 and, therefore, the application for reference is perfectly within limitation. Moreover, the learned Civil Judge cannot decide the point of limitation by way of preliminary issue. It is further contended by the respondent that the Arbitrator is the sole authority to decide whether the claim is within limitation.
7. The learned 2nd Joint Civil Judge, Senior Division, Aurangabad, after hearing both the sides and taking into consideration the material placed on record, has concluded that the point of limitation is a mixed question of facts and law and for deciding such a mixed question, parties are required to lead evidence. The learned Civil Judge has observed that the Arbitrator is the competent authority to decide as to whether the dispute is barred by limitation or not. Having so concluded the learned Civil Judge, Senior Division, Aurangabad, by his order dated 26-7-1999, rejected the application filed by the present petitioners.
8. Feeling aggrieved by the order of rejection, the present petitioners have filed this Civil Revision Application.
9. The learned Senior Counsel Shri K.G. Nawandar submitted that the demand for final bill was made on 20-4-1978 and payment was made to the respondent on 9-5-1978 and, therefore, the limitation starts from 9-5-1978, as per Article 137 of the Limitation Act, 1963. The period of three years is provided from the date when the right to apply accrues. Pointing out these circumstances, Mr. Nawandar, learned Senior Counsel submits that the respondent should have filed application for reference under section 20 of the Arbitration Act within three years from 9-5-1978. As the application for reference under section 20 of the Arbitration Act, 1940 is filed on 27-6-1996, the claim of the respondent and the application for reference are hopelessly time barred. In order to support his submissions, he placed reliance on the case of
Union of India v. M/s. L.K. Ahuja, . He invited my attention to para Nos. 6 and 7 of the said ruling. It is observed by the Supreme Court:
“In order to be a valid claim for reference under section 20 of the Arbitration Act, 1940, 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.”
He also diverted my attention to the observations of the Supreme Court made in para No. 8. It is observed :
“It is wrong to mix up the two aspects, namely, whether there was any valid claim for reference under section 20 of the Act 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 on admitted facts the claim is found at the time of making an order under section 20 of the Arbitration Act to be barred by limitation.”
10. On the other hand, Shri Karwa learned Counsel submitted that the payment was accepted under protest on 9-5-1978 and thereafter letters were sent to the petitioners making further claim. The claim of the respondent was first time rejected by the Chief Engineer on 24-2-1995. Therefore, dispute arose on or about 24-2-1995. The respondent has filed an application for reference under section 20 of the Arbitration Act on 27-6-1996 and, therefore, the application for reference is within limitation. Shri Karwa, learned Counsel has relied upon the case of Wazir Chand Mahajan v. The Union of India, . It has been held in this case that:
“After an agreement is filed in the Court and the matter is referred to the Arbitrator, it is for the Arbitrator to decide the application of the law contained in the Limitation Act, whether the claim is barred. Section 37(1) does not confer authority upon the Court to reject the application for filing of an arbitration agreement under section 20 of the Arbitration Act because the claim is not made within three years from the date on which the right to apply arose.”
This decision is given by the Bench consisting of three judges. Prima facie it appears to me that the cause of action for filing application for reference arose on rejection of the claim by the Chief Engineer on 24-2-1995 and, therefore, the application for reference filed on 27-6-1996 appears to be in time. Under the circumstances, it cannot be held that on admitted facts a claim is found at the time of making an order under section 20 of the Arbitration Act is barred by limitation.
11. The learned Senior Counsel Shri K.G. Nawandar then submits that the party cannot postpone the accrual of cause of action by writing reminders or sending reminders. In this behalf, he wants to rely on the case of Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, . According to him, the cause of action would arise on submission of final bill. In this case, the respondent preferred his claim for final bill on 28-4-1978 and final bill was in fact prepared on 9-5-1978 for Rs. 49,581/-. Therefore, the indulgence in further correspondence as is witnessed in the present case, does not at all come to the rescue of the respondent. I have already made the position clear that the respondent accepted the payment under protest and immediately thereafter he expressed is grievance and wrote
letters and sent reminders for remaining payment. The Chief Engineer rejected the claim for remaining amount by his letter dated 24-2-1995 and, therefore, the limitation will run from the date of refusal i.e. 24-2-1995. This argument of Shri Karwa, learned Counsel sounds well and worthy of consideration. This cannot be rejected straightway.
12. The Senior Counsel Shri Nawandar has also relied upon the case of Union of India v. Momin Construction Company, in order to show that time will run from the date of submission of final bill and Article 137 of the Limitation Act would apply to the application made under section 20 of the Arbitration Act, 1940. In the case relied, the final bill was prepared and the respondents in the said case gave a “No claim certificate” on 11-8-1965 whereupon the final bill was passed. The petition under section 20 of the Arbitration Act was filed on 26-2-1991 in the City Civil Court, Ahmedabad. It has been held that the application was plainly barred under Article 137 of the Limitation Act, 1963. The facts of this case can be distinguished. In the instant case, though the final bill was prepared on 9-5-1978, the payment was accepted under protest and thereafter letters were sent to the authorities for making further payment. The claim for further payment was rejected by the Chief Engineer on 24-2-1995. The petition under section 20 of the Arbitration Act has been filed on 27-6-1996. Prima facie, the petition is filed within a period of three years. Prima facie, it appears to me that the ratio of above cited case cannot be pressed into service.
13. A reference with profit can also be made to the case of The Vulcan Insurance Co. Ltd. v. Maharaj Singh, of the said judgment, it is said that :
“There was no limitation prescribed for filing of application under section 20 of the Arbitration Act, under the Indian Limitation Act, 1908 or the Limitation Act, 1963. Article 181 of the former did not govern such an application. The period of three years prescribed in Article 137 of the Act of 1963 may be applicable to an application under section 20.”
Relying on the case of Wazirchand Mahajan (cited supra), the Supreme Court went on to observe to the effect that :
“If the difference which had arisen between the parties was the one to which the arbitration clause applied, then the application under section 20 of the Act would not be dismissed on the ground that the claim would not ultimately succeed either on facts or in law. The matter will have to be left for the decision of the Arbitrator.”
This case of the Supreme Court is decided by a Bench consisting of three judges. It prima facie appears to me that the dispute which has arisen in between the parties is one to which the arbitration Clause applies and, therefore application under section 20 of the Arbitration Act cannot be dismissed on the ground that the claim would not ultimately succeed either on facts or in law.
14. Taking into consideration the discussion made in the foregoing paragraphs, it prima facie appears to me that the impugned order under challenge does not suffer from any illegality. Hence no interference is called for. Civil Revision Application is dismissed. Rule discharged accordingly Certified copy expedited.
15. Revision application dismissed.