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M/s. Foamative Toys (P) Ltd v/s M/s. Devidayal Castings (P) Ltd

    Arbitration Case No. 3 of 2004

    Decided On, 03 February 2012

    At, High Court of Punjab and Haryana


    For the Petitioner: Amar Vivek, Divya Suri, Advocate. For the Respondent: Rajiv Atma Ram, Senior Advocate, with Amit Jhanji, Advocate.

Judgment Text

Hemant Gupta, J.

Present is an application for appointment for appointment of an Arbitrator in respect of the disputes arising out of between the parties pertaining to agreement to sell dated 21.01.2001.

Vide the aforesaid agreement, the petitioner has agreed to purchase a plot measuring 1770 sq. meters in Sector – 18, Gurgaon for a total sale consideration of Rs.1,58,00,000/-. The petitioner is said to have paid a sum of Rs.10 lacs as earnest money. The petitioner as a vendee was to provide funds for liquidating the liabilities of the vendors towards Haryana Urban Development Authority, Haryana Financial Corporation & State Bank of India before the sale deed could be executed.

The agreement had the following clauses, which are relevant at this stage:

9. That in case any of the parties fails to perform its respective part of the contract, the other party shall be at liberty to have the contract enforced specifically through court of law at the cost and expense of the defaulting party.

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13. That in case of any dispute or difference arising between the parties with regard to the transaction in question, the matter shall be referred to the sole arbitration of (to be decided jointly). The decision of the said Arbitrator shall be final and binding on both the parties and shall not be liable to be challenged in any Court.

The petitioner is said to have made certain payments from time to time total amounting to Rs.40,26,429/-, but it is pleaded by the petitioner that the respondent sent a letter dated 09.06.2001 alleging that the petitioner has failed to perform its obligation. The petitioner controverted the said letter vide communication dated 13.06.2001. Subsequently, on 13.08.2001, the respondent addressed a letter to the petitioner so as to communicate of forfeiture of the amount paid by the petitioner, which led to serving a notice on 23.10.2001 calling upon the respondent to perform its obligation under the agreement. Vide another letter dated 18.05.2002, the petitioner invoked the arbitration clause and suggested the names of the Arbitrators as well. The respondent alleged violation of the terms of the contract by the petitioner, but did not consent to the appointment of any of two Arbitrators.

The petitioner filed a petition under Section 9 of the Arbitration & Conciliation Act, 1996 (for short 'the Act') on 17.06.2002 before the learned District Judge, Gurgaon. The petitioner also filed separate petition under Section 11 of the Act on 12.09.2002 before the learned District Judge, Gurgaon. At that time, an application for appointment of an Arbitrator was maintainable before the Civil Judge (Senior Division) in terms of Clause 3 of the Scheme for appointment of Arbitrators published by the Chief Justice of the Punjab & Haryana High Court, Chandigarh, Scheme, 1996. The relevant clause reads as under:

3. For the purpose of dealing with the request made under para 2, the Chief Justice may designate Civil Judge (Senior Division) of the concerned District or Tehsil or Sub-division as the case may be.

Since petition under Section 11 of the Act was not presented before the competent Court, the same was withdrawn on 10.10.2002, when the following order was passed:

Present: Sh.M.P.Gupta, counsel for the applicant.


Ld. Counsel for the applicant/petitioner made a statement withdrawing the present application under Section 11 of the Arbitration and Conciliation Act. In view of the statement given by the applicant/petitioner, the present application is withdrawn. File be consigned to record after due compliance.

District Judge,


Section 9 petition was also withdrawn on 10.10.2002 vide a separate order.

The petitioner preferred a second petition for appointment of an Arbitrator before the Civil Judge (Senior Division) in terms of 1996 Scheme on 24.10.2002. It was on 13.11.2003, the petitioner filed an application that in terms of the subsequent scheme framed by the Chief Justice notified on 17.09.2003, the jurisdiction to entertain such petition has been entrusted to learned District Judge. On such application, the learned Civil Judge passed an order on 13.11.2003, whereby the case file was sent to the Court of learned District Judge and the parties are directed to appear before him. On 17.11.2003, the learned District Judge passed an order of sending the file to the Registrar of this Court, as the jurisdictional domain is of Hon'ble the Chief Justice. The operative part of the order dated 17.11.2003 passed by the learned District Judge, Gurgaon is as under:-

'In the light thereof, the matter is within the jurisdictional domain of my lord, Hon'ble the Chief Justice. The file, complete in all respects (duly paged and indexed) be sent to the Registrar of the Hon'ble High Court for further action in accordance with the scheme.'

However, the Joint Registrar (General) has returned the files to learned District Judge Gurgaon on 20.12.2003, with the direction that learned counsel for the parties may be directed to file the petition directly before this Court. The petitioner filed the present petition for appointment of an Arbitrator on 22.01.2004. It is the said petition, which has been taken up for final disposal.

Learned counsel for the respondent has raised a preliminary objection that the present petition is barred, as the petitioner has not sought any permission to file fresh petition before the competent Court, when it withdrew its earlier petition under Section 11 of the Act filed before the Court of Civil Judge (Senior Division) on 10.10.2002. In the absence of any permission sought, the present petition is barred in view of the provisions of Order 23 Rule 1 of the Code of Civil Procedure (for short 'the Code'). It is also argued that the petitioner has filed the second petition before the learned Civil Judge (Senior Division), which was transferred to learned District Judge. The learned District Judge has ordered the file to be sent to this Court, therefore, it is that proceedings alone, which could have been continued with by the petitioner and that filing of fresh petition is not maintainable.

Another argument raised was that the agreement to sell was executed on 21.01.2001 and the present petition has been filed on 22.01.2004 i.e. after the expiry of 3 years, therefore, the present petition is barred by limitation as well.

It would be a disputed question that as to whether the petitioner or the respondent has committed the default in performance of the respective obligations in terms of the agreement. Such disputes are required to be decided by an Arbitrator. However, the question, whether the present petition is barred in terms of Order 23 Rule 1 of the Code or the second petition could not be filed or that whether the petition is within the limitation are the questions, which require consideration of this Court.

The petitioner has initially filed a petition before the learned District Judge for appointment of an Arbitrator though such a petition in terms of 1996 Scheme was maintainable before the Civil Judge (Senior Division). The petitioner has withdrawn such petition on 10.10.2002. The bar in terms of Order 23 Rule 1(4) shall be in respect of a suit filed before a competent Court. The Civil Judge (Senior Division) did not have pecuniary jurisdiction in terms of Section 6 of the Code. Such petition before the learned District Judge was before a court possessed to decide the question raised. Therefore, the bar contained in Order 23 Rule 1 will not come into operation.

In respect of the second petition filed, the stand of the respondent was that the Arbitrator can be appointed by the Hon'ble Chief Justice, as the Hon'ble High Court cannot delegate the powers of the Chief Justice to any authority including the said Court. There was no objection raised that the application filed is barred in terms of Order 23 Rule 1 of the Code. However, the Joint Registrar (Judicial) of this Court returned the files vide the letter dated 20.12.2003 with the directions that the learned counsel for the parties may be directed to file these matters in this Court as per the notification dated 17.9.2003. It is thereafter, the petitioner has filed the present petition under Section 11 of the Act. Therefore such petition cannot be said to be barred by any provision of law.

Coming to the plea of bar of limitation, the present petition has been filed after the expiry of one year and one day. As per the agreement in question, the petitioner was to arrange necessary funds within 30 days to liquidate the liabilities of the vendors. Therefore, the period of limitation to seek specific performance of the agreement will start not earlier than expiry of one month. Still further, the jurisdiction to appoint an Arbitrator can be exercised by this Court after the serving of statutory notice of one month in terms of Section 11 (4) of the Act. Such period has to be statutorily excluded in terms of Section 15 of the Limitation Act, 1963. Such view has been rendered by this Court in Arbitration Case No.37 of 2009 titled 'The Hisar Model Town Azad Co-operative Labour & Construction Society Limited Vs. The State of Haryana and others' decided on 18.5.2011, wherein it has been held to the following effect:

The right to apply accrues when the cause of action accrues. To constitute a cause of action, firstly there has to be existence of right and secondly its infringement or threat of infringement. The cause of action denotes and determines the starting point of limitation. Such cause of action in relation to arbitration proceedings is said to be cause of arbitration as held in PanchuGopal Bose Vs. Board of Trustees for Port of Calcutta (1993) 4 SCC 338. The question as to when right to sue accrues depends on the facts of each case and as and when the right is asserted or denied or when the right to claim ascertained amount arises. The cause of action to seek appointment of an arbitrator does not accrue with the issue of the notice. To seek appointment of an Arbitrator, the notice is required to be served in terms of sub clause 4 of Section 11 of the Act. It is step in aid to seek appointment of an arbitrator. The right to apply for cause of arbitration will accrue prior thereto and in pursuance of such right, a notice is required to be served. Therefore, th

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e starting period of limitation in terms of Article 137 of the Limitation Act would be prior to the serving of notice. It is from the said date, the aggrieved party has to seek intervention of the Court within three years. Since, the right to apply to the Court in terms of subsection 6 arises only after expiry of 30 days of serving of a notice, therefore such 30 days are required to be excluded while determining the period of limitation in terms of Section 15(2) of the Limitation Act, 1963. Such interpretation is by harmonious construction of Section 21, Section 43 and Section 11 of the Act. Thus, after examining the question from all angles, it cannot be said that the present petition seeking appointment of an Arbitrator is barred by limitation. Therefore, the disputes between the parties are required to be resolved by an Arbitrator. Consequently, Hon'ble Mr. Justice I.P. Vashisht (Retd.) resident of House No.385, Sector 16-A, Faridabad is appointed as an Arbitrator to adjudicate upon the disputes between the parties. The Arbitrator shall be entitled to fee as per Punjab and Haryana High Court (Arbitrator's Panel and Fee) Rules, 2011.