JUDGMENT
S.M. Jhunjhunuwala, J.
1. By this application registered and numbered as suit under the provisions of section 20 of The Arbitration Act, 1940 (for short, ‘the Act’), the petitioners seek to file the arbitration agreement contained in the agreement dated 30th April, 1985 in this Court.
2. On 30th April, 1985, the petitioners and the respondents entered into an agreement where – under the respondents appointed the petitioners as their selling agents for India for sale and distribution of the products of the respondents on the terms and conditions mentioned therein (for short, ‘the said agreement’), Clause 22
of the said agreement which provides for reference of disputes and differences between the petitioners and the respondent to arbitration reads as under:
CLAUSE 22. “If any dispute or difference shall arise between the manufacturers and the selling agents touching upon these presents or any clauses of thing therein contained or the construction hereof or as to any matter in any way connected with or arising out of these presents or the operation thereof or the rights, duties, or liabilities of either party in connection with these presents, then and in every such case unless the parties concur in the appointment of a single arbitrator the matter in difference shall be referred to the two arbitrators, one to be appointed by the manufacturers and the other by the selling agents in accordance with and in all other respect of conform with the provisions in that behalf contained in the Indian Arbitration Act, 1940 or any subsisting statutory modifications or re-enactments thereof for the time being in force.”
The reference to manufacturers in the above referred Clause is to the respondents and to ‘selling agents’ is to the petitioners.
3. According to the petitioners, since the disputes and differences arose by and between the petitioners and the respondents under the said agreement, the same were required to be referred to arbitration in accordance with the above referred arbitration agreement by and between the petitioners and the respondents and since the reference to arbitration was not made, the petitioners are required to file the present application for filing the said arbitration agreement in this Court and for order of reference to arbitration in accordance therewith.
4. There is no dispute as regards the said agreement entered into by and between the petitioners and the respondents. By their letter dated 30th January, 1989, the respondents terminated the said agreement. According to the respondents, after making the accounts between the parties, the sum of Rs. 90,214.78 found due and payable by the respondents to the petitioners was paid by the respondents to the petitioners and on 3rd August, 1989, a letter in respect thereof was addressed by the respondents to the petitioners. The said payment was made by the respondents by a cheque dated 3rd August, 1989 drawn in favour of the petitioners. The petitioners had received the said payment in full and final settlement from the respondents and thereafter demanded reference to arbitration in respect of further amount which according to the petitioners was due by the respondents to the petitioners. In the present application, it is not for this Court to consider the claim of the petitioners on its merits.
Mr. Kamdar, the learned Counsel appearing for respondents, has submitted that the present application for filing the arbitration agreement in this Court is barred by limitation. Mr. Kamdar has further submitted that in view of payment of Rs. 90,264.95 made by the respondents to the petitioners in full and final settlement of the amount due and payable by the respondents to the petitioners, which payment was accepted by the petitioners, no dispute between the parties remained outstanding for being referred to arbitration and as such, the petitioners are not entitled to any relief in the present application. In support of his submissions, Mr. Kamdar has put reliance on the judgments of the Supreme Court in the case of State of Maharashtra v. Nav Bharat Builders1, reported in 1994 Supl. (3) Supreme Court Cases 83; in the case of M/s. P.K. Ramaiah and Company v. Chairman & Managing Director, National Thermal Power Corpn2, reported in 1994 Supl. (3) Supreme Court Cases 126; and in the case of Union of India v. M/s. Momin Construction Company3, .
5. An application under section 20 of the Act for filing of the arbitration agreement in Court is required to be filed within the period of 3 years from the date of accrual of the right to apply. The right to apply accrues when the cause of action arises and the cause of action arises when the dispute arises and a dispute arises when there is a claim, a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under section 8 or reference under section 20 of the Act. So far as the applicability of the Limitation Act. 1963 to an application under section 20 of the Act is concerned, it is no longer res integra. In Inder Singh Rekhi v. Delhi Development Authority4, reported in A.I.R. 1988 S.C. 100, the Supreme Court has held that Article 137 of the Limitation Act applies to an application under section 20 of the Act. In subsequent judgment in the case of Union of India v. M/s. Momin Construction Co.., , the same view has been taken by the Supreme Court. According to Article 137, the period of three years begins to run from the date when the ‘right to apply accrues.’ The question is when did the right to apply under section 20 accrue in the instant case.
6. According to sub-section (i) of section 20 of the Act, where an arbitration agreement has been entered into before the institution of any suit with respect to subject matter of such agreement, and where difference has arisen to which the agreement applies, either or both the parties can apply to the Court that the agreement be filed in Court. Hence, the occasion for filing the application arises when a difference arise between the parties to which the agreement applies. Reading Article 137 of the Limitation Act and sub-section (i) of section 20 of the Act together, it is obvious that the right to apply accrues when the difference arises or differences arise, as the case may be, between the parties. It is thus a question of fact to be determined in each case having regard to the facts of each case. In the instant case, it is an admitted position that on 30th January, 1989 the respondents did terminate the said agreement. On termination of the said agreement, the disputes between the petitioners and the respondents arose and the reckoning of time for filing the application or making the reference to arbitration commenced from the date of termination of the said agreement. Consequently, the period of 3 years as contemplated by Article 137 expired on 30th January, 1992. The petitioners had lodged the present application in this Court on 31st July, 1992. Since the application has been lodged after expiration of the period of three years as aforesaid, it is barred by limitation.
7. Even otherwise also, reading the above arbitration Clause, it is clear that if there is an arbitrable dispute, it shall be referred to arbitration as provided therein. Therefore, for reference to arbitration, there must exist a subsisting dispute. The respondents had paid the said sum of Rs. 90,214.78 in full and final settlement of the amount due and payable to the petitioners and the petitioners had accordingly received the same. On the said payment being admittedly made by the respondents to the petitioners, no arbitrable dispute remained outstanding for reference. In the case of Messrs. P.K. Ramaiah and Company (supra), the Supreme Court has held that once there is settlement of the claims admittedly made, there is no pending dispute and the question of arbitration of the dispute thereafter does not arise. In the case of State of Maharashtra v. Nav Bharat Builders (supra), the Supreme Court has followed its earlier judgment in the case of P.K. Ramaiah and Company.
8. In the circumstances, the petitioners are not entitled to any relief in the present application. The application numbered as suit is, therefore, dismissed with no order as to costs.