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Advocates
  • Narinder Singh
  • Manish Sharma
  • B.D.Sharma
Judges
  • Hima Kohli, J.
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Advocates
  • Narinder Singh
  • Manish Sharma
  • B.D.Sharma
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  • Hima Kohli, J.
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Smart Summary

Judgment Summary — Hima Kohli, J. (Oral)

Factual and Procedural Background

The petitioner filed the present petition under Section 11 read with Section 8 of the Arbitration and Conciliation Act, 1996, seeking appointment of the named arbitrator specified in a Reference Deed dated 30.4.1991 to adjudicate disputes between family members concerning immovable property (plot No. 33, Ashoka Park Extn., East Punjabi Bagh, Rohtak Road, Delhi) originally purchased by the parties' father in 1963. The dispute is between the petitioner and respondent No. 1 (the petitioner’s brother); respondent Nos. 2 and 3 are sisters.

Relevant factual points recorded in the opinion:

  • The father of the parties died on 17.2.1974; the parties and their mother were legal heirs.
  • An Agreement and a Reference Deed were executed on 30.4.1991 (the Reference Deed appointed Sh. Jagat Bir Vohra as sole arbitrator and prescribed a three-month time for the award, extendable by mutual agreement).
  • The mother died on 5.8.1996.
  • The petitioner contends he served a legal notice on respondent No. 1 on 20.1.2005 and that the present petition was filed in 2005 (the opinion records the filing date as 4.6.2005 at one place and refers to the petition being preferred on 31.5.2005 at another place).

The petition was contested primarily on the ground that it is barred by limitation. The Court reviewed the accrual date of the right to apply for appointment of the arbitrator and ultimately dismissed the petition as time-barred. The dismissal was accompanied by an express observation that the remarks were limited to the context of the prayer under the Reference Deed and would not preclude the petitioner from pursuing other civil remedies.

Legal Issues Presented

  1. Whether the petition under Section 11(6) (read with Section 8) of the Arbitration and Conciliation Act, 1996, seeking appointment of the named arbitrator pursuant to the Reference Deed dated 30.4.1991, is barred by limitation.
  2. When did the right to apply for appointment of the arbitrator accrue for the petitioner (i.e., the relevant date for computation of limitation)?
  3. Whether Article 137 of the Limitation Act, 1963 (residuary article) and other provisions of the Limitation Act apply to arbitration petitions and, if so, how the three-year residuary period operates in this context.
  4. Whether circumstances asserted by the petitioner (alleged misrepresentation/fraud, assurances by respondent No. 1, the mother's requests, the petitioner’s alleged accident and incapacity) can either (a) postpone accrual of the right to apply, (b) toll or extend limitation under relevant statutory provisions (including Section 17 Limitation Act and Section 43(3) of the Arbitration Act), or (c) justify condonation of delay.

Arguments of the Parties

Petitioner's Arguments

  • The right to apply for arbitration accrued not only on 30.4.1991 but continued to accrue thereafter because the petitioner did not approach the arbitrator at the request of the mother and relied on assurances from respondent No. 1 that he would take steps to partition the property.
  • The petitioner asserted that intervening events (mother's requests and assurances, and an accident on 23.2.2002 which allegedly left him confined to bed for 2–3 years) justified delay in approaching the arbitrator; however, the opinion records that the petitioner did not place medical or other documentary evidence to substantiate the accident/incapacity claim.
  • Legal grounds invoked: reliance on Sections 18 and 19 of the Contract Act (misrepresentation and voidability for want of free consent), Section 17 of the Limitation Act, 1963 (to contend the period of limitation can be extended in cases of fraud or mistake), and Section 43 (and specifically Section 43(3)) of the Arbitration and Conciliation Act (that the Limitation Act applies to arbitration and that the court can extend time in cases of undue hardship).
  • Case law relied on by petitioner (as recorded in the opinion): Ashok Leyland Ltd. v. Union of India; New Delhi Municipal Committee v. Tirath Ram Ahuja; Major (Retd.) Inder Singh Rekhi v. DDA; Pallav Sheth v. Custodian; Gulbarga University v. Mallikarjun S. Kodagali.

Respondent No. 1's Arguments

  • The petition is barred by limitation because no action was taken by either party to approach the arbitrator under the terms of the Reference Deed and the time prescribed (including any mutual extension) for initiating arbitral proceedings was not observed or extended.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ashok Leyland Ltd. Madras v. The Union of India, AIR 1980 Delhi 140 Discussed in relation to applicability of Section 17 of the Arbitration Act, 1940 and its effect on Section 5 of the Limitation Act for condonation of delay. The Court held this authority was of no assistance to the petitioner on the facts before it because Ashok Leyland dealt with Section 17 of the old Arbitration Act and condonation; it did not help the petitioner establish that his petition was within time.
New Delhi Municipal Committee v. Tirath Ram Ahuja, AIR 1980 Delhi 185 Reference to Article 137 for purposes of calculating the period of limitation for petitions under the Arbitration Act, 1940. The decision was noted as authority discussing application of Article 137; the Court treated it as part of the body of authority confirming Article 137's relevance to arbitration-related petitions.
Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, (1988) 2 SCC 338 : AIR 1988 SC 1007 Confirming that Article 137 (residuary article) of the Limitation Act applies for calculating limitation in arbitration contexts (Arbitration Act, 1940 context referenced). The Court accepted the principle (no dispute is recorded) that Article 137 applies to arbitration matters for calculation of limitation and relied on it in computing the three-year residuary period applicable to the petition.
Pallav Sheth v. Custodian, (2001) 7 SCC 549 Principle that limitation does not begin to run where knowledge of the right is concealed by fraud; in such cases limitation begins when the fraud is discovered. The Court observed that this principle could not assist the petitioner because he had not established any fraud or misrepresentation on the part of respondent No. 1 in the petition or on record; the judgment was held inapplicable on the facts.
Gulbarga University v. Mallikarjun S. Kodagali, (2008) 7 SCC 784 Cited by petitioner in support of submissions (specific rule/principle as relied upon by petitioner is not further elaborated in the opinion). The opinion records the citation but does not elaborate on a specific application of this authority to the facts of the case.
State of Orissa v. Damodar Das, (1996) 2 SCC 216 : AIR 1996 SC 942 Held that the right to apply for arbitration accrues as soon as a dispute or difference arises on an unequivocal denial of claim by one party to the other. The Court relied on this principle to determine that accrual of the right to apply is a question of fact and to find that the right to apply had accrued when the disputes arose (here, effectively in 1991 as recorded in the Reference Deed), thereby starting the limitation clock.
S. Rajan v. State of Kerala, (1992) 3 SCC 608 : AIR 1992 SC 1918 Referenced for the proposition that whether a difference or dispute has arisen is a question of fact to be determined having regard to the facts of each case. The Court cited this authority for the proposition about factual determination of accrual of disputes; it reinforced the approach taken in assessing when the petitioner's right to apply arose.
Kerala State Electricity Board v. T.P.K.K. Amson, (1976) 4 SCC 634 Referenced in the context that provisions of the Limitation Act apply to arbitration in the same manner as to Court proceedings. The Court cited this authority as part of the jurisprudence supporting the proposition (via Section 43 of the Act) that Limitation Act provisions apply to arbitration-related applications.
Rajesh Kumar Garg v. MCD & Anr., 149 (2008) DLT 343 Authority cited for the proposition that a recital or a single legal notice alone does not necessarily reset or start limitation absent an established course of correspondence or negotiations; on the facts, limitation may continue to run from the earlier accrual date. The Court relied on this authority to support the view that the petitioner could not rely solely on the legal notice dated 20.1.2005 to contend that limitation began to run from that date given lack of evidence of continuing negotiations or correspondence.

Court's Reasoning and Analysis

The Court's analysis proceeded in identifiable steps, based strictly on the material placed before it and the authorities cited in the opinion:

  1. Accrual principle: The Court began by identifying the relevant test for accrual of the right to apply for appointment of an arbitrator — relying on State of Orissa v. Damodar Das — that the right accrues as soon as a dispute arises on an unequivocal denial of the claim. Whether a dispute has arisen is a question of fact.
  2. Application of the Limitation Act: The Court then considered the applicability of the Limitation Act to arbitration petitions under Section 43 of the Arbitration Act. The residuary Article 137 prescribes a three-year period for "other applications" and thus, the Court applied Article 137 to compute the limitation period for the petition.
  3. Computation of limitation: Based on the parties' Reference Deed dated 30.4.1991 (and the petitioner's own admission that the right to apply accrued within three years of that date), the Court computed the residuary three-year limitation period as commencing w.e.f. 1.5.1991 and expiring on 30.4.1994.
  4. Evaluation of petitioner's factual excuses: The petitioner argued the accrual date was later (or the right continued to accrue) because (a) the mother had requested delay, (b) respondent No. 1 had given assurances to take steps to partition the property, and (c) the petitioner suffered an accident in 2002 that confined him to bed for 2–3 years. The Court examined the record and found no corroborative documentary material (no correspondence with respondent No. 1, no medical records) to substantiate these contentions. The Court noted glaring gaps in the petitioner's chronology and failure to explain inaction between 1991 and 1996 and thereafter until 2002, and also failure to produce documents regarding the alleged accident/incapacity.
  5. On the legal notice dated 20.1.2005: The Court rejected the contention that this legal notice could be treated as the operative accrual date. The Court observed that the petitioner could not establish any sustained negotiations or communication that would make 20.1.2005 the date from which limitation should be reckoned.
  6. Fraud/misrepresentation tolling: The petitioner sought to rely on principles (invoking Sections 18 & 19 Contract Act and Section 17 Limitation Act) that fraud or misrepresentation could postpone accrual or extend limitation. The Court found no averments in the petition alleging fraud or misrepresentation and no evidence of fraud; therefore, the tolling/concealment principle from Pallav Sheth was inapplicable.
  7. Discretion to extend time under Section 43(3): The petitioner urged the Court to exercise discretion under Section 43(3) to extend time. The Court refused that route on the facts: it found that the petitioner had "slept on his rights" for an extended period (about 15 years) and had not taken steps to preserve or assert the rights under the Reference Deed. In the absence of evidence of continued negotiations or other compelling circumstances, the Court found no basis to extend the time.
  8. Conclusion of analysis: For these reasons — accrual in 1991, application of Article 137, absence of adequate explanation or supporting material for delay, inability to show fraud, and lack of grounds to exercise discretion to extend time — the Court concluded the petition was barred by limitation.

Holding and Implications

Holding: The petition is barred by limitation and is rejected/dismissed (petition dismissed, along with pending applications).

Implications:

  • Direct effect: The specific prayer for invoking the Reference Deed to appoint the named arbitrator was refused on the ground of limitation and the petition was dismissed.
  • Preservation of other remedies: The Court expressly recorded that its observations were confined to the context of the petition under the Reference Deed and that the dismissal would not preclude the petitioner from pursuing any civil remedies otherwise available to him in law.
  • Precedential note: The opinion applies established principles about accrual of the right to apply for arbitration, the applicability of Article 137 of the Limitation Act to arbitration-related petitions, and the requirement of relevant supporting evidence to justify delay. The Court did not indicate the setting of any new legal principle beyond application of the existing authorities to the facts of this case.

Order: Petition dismissed.

Show full summary ...

    Balram Sehgal v. Vinod Kumar Sehgal

    Hima Kohli, J. (Oral)— The present petition is filed by the petitioner under Section 11 read with Section 8 of the Arbitration and Conciliation Act, 1996 (in short the ‘Act’), praying inter alia for appointment of the named Arbitrator as referred to in the Reference Deed dated 30.4.1991, to adjudicate the disputes between the parties.

    2. Briefly stated, the facts of the case are that the dispute, subject matter of the present petition, is between the petitioner, son of late Sh. Baldev Raj Sehgal and the respondent No. 1, his brother. Respondent Nos. 2 and 3 are the sisters of the petitioner and the respondent No. 1. Late Sh. Baldev Raj Sehgal, father of the parties, purchased a residential premises on 31.8.1963, bearing plot No. 33, Ashoka Park Extn., East Punjabi Bagh, Rohtak Road, Delhi, measuring 155.8 sq. yds.

    3. The father of the parties expired on 17.2.1974, leaving behind the petitioner, the respondents and their mother, late Smt. Padma Sehgal as the legal heirs. It is the case of the petitioner that the plot in question was a vacant piece of land, on which construction was carried out by the contribution of all the legal heirs of the deceased. During the lifetime of the mother, all the parties executed an Agreement dated 30.4.1991, duly witnessed by the respondent Nos. 2 and 3 and a Reference Deed of the same date, duly executed by the petitioner and the respondent No. 1, to which their mother and the respondents Nos. 2 and 3 were the witnesses. The present petition is based on the Reference Deed dated 30.4.1991

    4. In the Reference Deed, it was recorded that the property in question was purchased by the father of the parties, i.e late Sh. Baldev Raj Sehgal and the respondent No. 1 being a Government servant, wanted to take loan from the Government, hence all the legal heirs of the deceased executed a relinquishment deed in favour of respondent No. 1. However, as the petitioner claimed that he had equally spent on the superstructure of the aforesaid property and wanted to partition the property being a joint owner, certain disputes and differences arose between the petitioner and the respondent No. 1 regarding the aforesaid property and other family affairs.

    5. It was agreed by the parties that to settle their disputes amicably and avoid litigation, an Arbitrator should be appointed. Accordingly, in the Reference Deed dated 30.4.1991, one Sh. Jagat Bir Vohra was appointed as a Sole Arbitrator to decide all the disputes regarding the property No. 33, Ashoka Park, Extn., East Punjabi Bagh, Rohtak Road, Delhi, between the petitioner and the respondent No. 1 and give an award within three months or within such time as may be mutually extended by both the parties.

    6. The present petition has been filed by the petitioner on 4.6.2005, seeking directions for appointment of the named Arbitrator as contained in the Reference Deed, for adjudicating the disputes between the parties, which disputes, Counsel for the petitioner states are still pending.

    7. The present petition is mainly assailed by the Counsel for the respondent No. 1 on the ground that the petition is barred by limitation and is therefore liable to be rejected. A perusal of the para 19 of the petition shows that, as per the petitioner, the cause of action had arisen in favour of the petitioner when the Agreement dated 30.4.1991 was executed at Delhi and the respondent No. 1 started harassing the petitioner after the death of their mother and did not take any steps to partition the property. Thereafter, the cause of action is stated to have arisen on 20.1.2005, when the petitioner served a legal notice upon the respondent No. 1 to settle the matter amicably or to refer the disputes to the named Arbitrator within 30 days from the date of receiving the legal notice.

    8. Counsel for the petitioner states that the cause of action has to be examined in the light of the fact that the disputes may have arisen on 30.4.1991 when the Agreement and Reference Deed were executed by the parties, but the right to apply for arbitration continued to accrue even thereafter as during the lifetime of the mother, the petitioner did not approach the Arbitrator, at the request of his mother. He states that the mother of the parties expired on 5.8.1996, and after her death, the petitioner was assured by the respondent No. 1 that he shall take steps to partition the suit property and hence, the petitioner did not take further steps in the matter. Thereafter, the petitioner is stated to have met with an accident on 23.2.2002, due to which, he was confined to bed for 2-3 years. It is pertinent to note that the petitioner has failed to substantiate the said submission by enclosing any relevant documents, including his medical certificates, etc. After 23.2.2002, Counsel for the petitioner refers to the next relevant date as 20.1.2005, on which date, a legal notice was issued by the petitioner to the respondent No. 1 and upon failure of the respondent No. 1 to act, the petitioner preferred the present petition on 31.5.2005

    9. Counsel for the petitioner seeks to rely on the provisions of Section 18 of the Contract Act, 1872, which defines the term, “Misrepresentation” and Section 19, which deals with “Voidability of agreements without free consent”. He also refers to Section 17 of the Limitation Act, 1963, to contend that the period of limitation can be extended, in cases of fraud or mistake. He further submits that in view of the provisions of Section 43 of the ‘Act’, the Limitation Act applies to arbitrations as it applies to the proceedings in Court. Also, under Section 43(3) of the ‘Act’, in cases of undue hardship, the Court can extend the time where the time fixed by an agreement to commence arbitration proceedings has expired. In support of the aforesaid submissions, Counsel for the petitioner relies on the following judgments:

    (i) Ashok Leyland Ltd. Madras v. The Union of India, AIR 1980 Delhi 140;

    (ii) New Delhi Municipal Committee v. Tirath Ram Ahuja, AIR 1980 Delhi 185;

    (iii) Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority, (1988) 2 SCC 338 : AIR 1988 SC 1007;

    (iv) Pallav Sheth v. Custodian, (2001) 7 SCC 549;

    (v) Gulbarga University v. Mallikarjun S. Kodagali, (2008) 7 SCC 784.

    10. On the other hand, Counsel for respondent No. 1 submits that the present petition is barred by limitation as no action whatsoever was taken by either of the parties to approach the Arbitrator, in terms of the Reference Deed and nor was the time mutually extended for seeking an award.

    11. For the purpose of examining the right of the petitioner to apply under Section 11(6) of the ‘Act’ for calculating the period of limitation, it is necessary to establish, in the first instance, the relevant date when the right to apply accrued in favour of the petitioner. In the case of State of Orissa v. Damodar Das, (1996) 2 SCC 216 : AIR 1996 SC 942, it was held that the right to apply accrues under Section 20 of the Arbitration Act, 1940, as soon as a dispute or difference arises on unequivocal denial of claim by one party to the other party, as a result of which, the claimant acquires a right to refer the dispute to arbitration. When a difference arises or disputes arise between the parties, is a question of fact and not a question of law and has to be determined in each case having regard to the facts of the case. [Refer S. Rajan v. State of Kerala, (1992) 3 SCC 608 : AIR 1992 SC 1918].

    12. Section 43 of the ‘Act’ provides that the provisions of limitation act would apply to the arbitration in the same manner as they apply to claims before the Court [Refer (1988) 2 SCC 338, Major (Retd) Inder Singh Rekhi v. DDA; (1976) 4 SCC 634, Kerala State Electricity Board v. T.P.K.K Amson and Besom]. Provisions of the Limitation Act, 1963 show that Article 137 under Part II of the Schedule, which is a residuary Article, is applicable in respect of “other applications”. The said Article stipulates the period of limitation, in respect of any other application, for which no period of limitation is provided elsewhere in the schedule, to be three years from the date when the right to apply accrues. In other words, the period of three years prescribed under Article 137 starts from the date when the right to apply for arbitration accrues. In the present case, the petitioner admits that the right to apply accrued within three years from the date when the Reference Deed and Agreement dated 30.4.1991 were executed between the parties. In other words, the said period of three years started w.e.f 1.5.1991 and expired on 30.4.1994 Counsel for the petitioner, however, contends that the right to apply continued to accrue in favour of the petitioner right from 30.4.1991 till the date of the filing of the present petition. For establishing the said fact, he has been called upon to show from the record, any material including correspondence/communications of any nature with respondent No. 1 to establish that the parties intended to arrive at an amicable settlement with regard to the partition of the immovable property in question. Apart from the bald averments made in the petition, nothing has been placed on the record to substantiate the said submission. Therefore, this contention of the petitioner appears to be devoid of merits and cannot be accepted.

    13. It is not even a case where the petitioner says that no disputes and differences had arisen between the parties prior to institution of the petition, as reference has been made in the Deed itself to the fact that the disputes and differences had arisen between the parties regarding the property and other family affairs. Hence, it is not as if either of the parties, could not have moved the Court after 30.4.1991 Assuming that disputes and differences had arisen between the parties thereafter and parties could not resolve their interse disputes, and the differences that had arisen under the Deed of Reference remained unresolved, it was open to either of the parties to apply the Court to get their differences adjudicated upon. The same was also not done by the petitioner for about 15 years.

    14. Reliance placed by the Counsel for the petitioner on the legal notice dated 20.1.2005 to state that the said notice being the last correspondence between the parties, the period of limitation for establishing the right to apply for arbitration commences from the said date, is misconceived, as the petitioner has not been able to establish any correspondence/communication whatsoever between him and respondent No. 1 in respect of the dispute, or the attempt to resolve it. Reference made by the Counsel for the petitioner to the judgment in the case of Ashok Leyland (supra) is of no assistance as in the aforesaid judgment, the Court was dealing with issue of applicability of Section 17 of the Arbitration Act, 1940 and its effect on Section 5 of Limitation Act, 1963 for the purposes of condonation of delay. In the present case, it is asserted by the Counsel for the petitioner that the petition is well within time and, therefore, no application has been filed for seeking condonation of delay.

    15. In the case of Tirath Ram (supra), the provisions of Article 137have been mentioned for presenting a petition under Section 20 of the Arbitration Act, 1940 for the purposes of calculating the period of limitation. Counsel for the petitioner has relied on the case of Major (Retd.) Inder Singh Rekhi (supra) to state the same fact that Article 137 of the Limitation Act applies to the Arbitration Act, 1940 for the purposes of calculating the period of limitation. There is no dispute in this regard, as admittedly, Article 137 is a residuary article in the schedule and is applicable to petitions of such a nature. In the case of Pallav Sheth (supra), the Supreme Court observed that the limitation period of one year for initiating the contempt proceedings would be attracted by virtue of Section 29(2) of the Limitation Act and would commence from the date on which the commission of contempt came to the knowledge of a party. In the aforesaid context, the Supreme Court observed that in case the knowledge of the right or title on which a suit or application is founded is concealed by the fraud of the other side, the period of limitation shall not begin to run until the fraud is discovered. It is not understood as to how this judgment can take the case of the petitioner any further as the petitioner has failed to establish any fraud or misrepresentation on the part of the respondent No. 1, except for making bald allegations to the said effect in the course of arguments. There is no reference to any fraud or misrepresentation by the respondent No. 1 in the petition. The said judgment has no application to the facts of the present case.

    16. As already noted above, the facts of each case have to be examined in their own right to establish the accrual of the date when right to apply for arbitration arises. At this stage, Counsel for the petitioner states that this Court ought to exercise its powers under Section 43(3) of the Act to extend the time for commencing the arbitral proceedings between the parties. Facts and circumstances of the present case do not establish that the petitioner took any steps, much less some steps to exercise his rights under the Deed of Reference. On the contrary, it is apparent that the petitioner chose to sleep over his rights. There are gaping holes in the narration of facts by the petitioner which he has failed to plug. The same is apparent from the fact that while the Deed of Reference between the parties was executed on 30.4.1991, the petitioner in his narrative jumps straightaway to the year 1996, when the mother of the petitioner expired on 5.8.1996, without furnishing any justifiable reason for the time lag. Even, thereafter, there is no explanation as to what correspondence, if any, was exchanged between the parties in respect of the pending family disputes. Then the petitioner seeks to take benefit of his accident in the year 2002-2003, to explain the inaction on his part. As already noted above, the petitioner has not given any believable explanation for the complete silence maintained by him from in the year 1996 to the year 2002. No documents have been placed on record by the petitioner to show that he was confined to bed after the accident he met, for a period of 2-3 years. From the year 2002, the petitioner comes straight to the date, 20.1.2005 when a legal notice was issued by the petitioner to the respondent. In view of the above by no stretch of imagination can it be said that the present case was kept alive by the parties or any correspondence was exchanged between them to resolve their inter se disputes. Had the petitioner been able to establish that negotiations were taking place between the parties to resolve their family dispute, the Court would have taken a different view. But in the present facts and circumstances, in the absence of any such communication/correspondence, it cannot be stated that the period of limitation for filing a petition under Section 11(6) of the Act, invoking the arbitration can be taken as the year in which a legal notice was issued by the petitioner to the respondent [Rajesh Kumar Garg… v. Mcd & Anr…, 149 (2008) DLT 343]. The right to apply for arbitration arose in the year 1991 itself, whereafter the petitioner has miserably failed to establish that any steps were taken by him, till the year 2005 for seeking arbitration.

    17. In the aforesaid circumstances, it is held that the present petition is barred by limitation and is, therefore, rejected along with the pending applications. Needless to state that the observations made hereinabove are only in the context of prayer made by the petitioner for invoking the Reference Deed for appointment of an Arbitrator and shall not preclude the petitioner from exercising his civil remedies as may be available to him in law.

    Petition dismissed.
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    Comments

    Balram Sehgal v. Vinod Kumar Sehgal
    (Apr 12, 2008)