UNION OF INDIA Vs. VIJAY CONSTRUCTION COMPANY

JUDGEMENT

(1.) .This is an appeal against the order of the learned Single Judge by which, he has held that the application filed by the respondent u/s 20 of the Arbitration Act (the Act) was filed within time and directed the appointment of the arbitrators in accordance with the conditions of the contract.

(2.) ON 8.6.73 a contract was entered into between the respondent and the Union of India for construction of 48 units of types staff quarters at Moradabad. The contract was to be completed by 8.6.74. This date was, however, extended to 512.74. Apparently, the work was not completed and the appellant, therefore, rescinded the contract on 6.12.74, The respondent sent a notice, dated 17.10.76 to the General Manager, Northern Railways, requiring that as per the agreement, he was to Act as the sole arbitrator and informing him that he may appoint some one else as an arbitrator, within the prescribed period of 15 days from the receipt of the letter and that if no such arbitrator was appointed within the said statutory period, the respondent will proceed u/s 20 of the Act or any other provision as might be open. A reminder was also sent to the appellant who by his letter of 24.8.77 stated that the matter was receiving active consideration and nal reply will be sent as early as possible. No further communication was received from the appellant. The respondent thereafter moved an application on 8 9.78 u/s 20 of the Act for filing the arbitration agreement and referring the matter to arbitration.

(3.) ACCORDING to the learned Judge in that case, the application u/s 20 filed in March, 1978, was well within time because the Limitation would expire only in 1980. How untenable it is when it is recalled that the contract was rescinded on 4 8.72 the grievance of the contractor really arises from that date and yet the learned Judge would permit a period of eight years for an application to be filed u/s 20 of the Act. How uncertain the position is will be apparent if the reply in this case was received not in 1977, but in 1980, the limitation would be extended still further till 1983. This would make the applicability of Limitation Act too vague to stand. The learned Judge accepts that the existence of a right to apply arises when the contract was rescinded. But yet he postpones the right to move u/s 20 of the Act to the date when the General Manager of the railways replied rejecting the resort to arbitration on the ground that if the General Manager had accepted to refer the matter to arbitration there would be no grievance to the contractor. We feel there is a fallacy in the reasoning. No doubt if the General Manager Railways accepted the request to refer the matter to arbitration there would be no necessity to move the application u/s 20 of the Act. But, this does not mean that the right to apply which had accrued to the contractor on the date when the contract was rescinded is not the starting period for the purpose of limitation. When the contractor is informed of the rescission, he must at that point of time take a view that an injury has been caused to him. If he feels that it is not an injury, then obviously there is no dispute and no need to have recourse to any legal remedy. But if he feels aggrieved then the right to apply has accrued at that point of time and the same cannot be postponed to await the letter from the General Manager. It cannot be said simply because the General Manager may in an eventuality accept the request to refer the matter to arbitration that no differences had already arisen in the sense that an injury has been caused to the contractor. The right to apply for arbitration is dependent 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 for 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 rescision of the contract. The rescision 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 u/s 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 that date,