S. RAJAN Vs. STATE OF KERALA

JUDGEMENT

(1.) THE Civil Appeal is directed against the judgment of a Division Bench of Kerala High Court allowing the appeal preferred by the State of Kerala and setting aside the order of the learned Subordinate Judge, Thiruvana thapuram. On an application made under section 20 of the Arbitration Act by the appellant, the learned Subordinate Judge had directed the appointment of an Arbitrator to decide the dispute and differences between the parties. He directed both the parties "to submit their panels of arbitrator to be appointed within ten days from the date of the order" for that purpose. A Division Bench set aside the said order on the ground that the very application under section 20 was barred by limitation:

(2.) AN agreement was entered into between the appellant and the State of Kerala on 19.2.1966 whereunder the appellant undertook to carry out certain work within a period of ten months. He did not complete the work within the period prescribed whereupon the contract was terminated on 19.12.1968 and the work re -tendered. It was completed by another contractor. State of Kerala took proceedings under the provisions of the Revenue Recovery Act for Respondent -covering the loss suffered by the State on account of the appellant's failure to carry out the work in accordance with the contract. A notice of demand was served upon him on 30.5.1974. The appellant challenged the said notice by way of a writ petition in the High Court of Kerala which was dismissed on 25.11.1978. In the year 1983, he applied to the Government of Kerala to refer the disputes and differences between them to an arbitrator. This was refused in the year 1984, whereupon the appellant filed the application under section 20 of the Arbitration Act before the learned Subordinate Judge. He prayed for the appointment of an arbitrator to decide the disputes arising between him and the State of Kerala. In their written statement the State raised several objections including limitation and res judicata. An objection was also raised as to the maintainability of the said application. It was submitted that according to clause (3) of the contract, the Superintending Engineer, (B&R) South Circle, Trivandrum is the named arbitrator. In that view of the matter, it was submitted, the appellant's request for appointing an arbitrator by the Court is inadmissible and liable to be rejected.

(3.) ACCORDING to Sub -section (1) 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. According to the Sub -section, the occasion for filing the application arises when a difference arise between the parties to which the agreement applies. In such a case, it is open to a party to apply under this section instead of proceeding under Chapter -II. In other words, an application under section 20 is an alternative to the proceedings under Chapter -II. Sub -section (2) is procedural. So is Subsection (3). Sub -section (4) provides that after hearing the parties and on being satisfied that the agreement should be filed, "the Court shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise or where the parties cannot agree upon an arbitrator, an arbitrator appointed by the Court. " Reading Article 137 and Sub -section (1) of Sub -section (20) together, it must be said 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 that case. The question in the present case is when should the difference between the parties be said to have arisen. According to the High Court the date on which notice of demand under the Revenue Recovery Act was served upon the appellant namely 30.5.1974 is the date on which difference must be held to have arisen between the parties, if not earlier. Sri Poti, however, says that it is not so and that it must be held to have arisen only when the appellant applied to the Government to refer the disputes between them to arbitrator in terms of the agreement and the Government refused to do so. We find it difficult to agree with the learned counsel. The agreement was entered into in 1966. It was terminated on 19.12.1968. The work was re -tendered and it was completed through another contractor. The State then worked out the loss suffered by it on account of the appellant's failure to carry out the work in accordance with the agreement and called upon the appellant to pay the same through the demand notice dated 30.5.1974. It is relevant to notice that the demand notice was questioned by the appellant by way of writ petition in the High Court of Kerala which was dismissed on 25.11.1978. Thus, the dispute had arisen in 1974 with the service of the demand notice. Only in the year 1983, did the appellant choose to request the Government to refer the dispute to the arbitrator in terms of the agreement which was rejected in the following year. Neither the arbitration clause nor a copy of the agreement is placed before us. Therefore, we cannot say whether the arbitration clause contemplates that a reference to arbitration can be made only by the Government and not by the appellant. Assuming that such was the requirement of the arbitration clause, even so it must be held that the very request in 1983 was very much belated and cannot, in any event, be treated as the date on which the right to apply accrued. The differences had already arisen between the parties following the service of the demand notice. The challenge to the said demand notice made by the appellant by filing a -writ petition in the Kerala High Court is the demonstrable proof of the dispute. Accordingly, we agree with the High Court that 30.5.1974 is the date on which the right to apply accrued in terms of Article 137 read with section 20 (1) and that therefore the application filed in the year 1985 was clearly barred by limitation.