Prasar Bharti v. Maa Communication ., Delhi High Court, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

ARB. A. 18/2005 and Arb. A. 20/2005

Attorney(S)

Mr. Rajeev Sharma, Advocate for the Petitioner.
Mr. Shyam Moorjani with Ms. Anuradha Anand, Advocates for the Respondent.
Mr. Amit Kumar, Advocate for the Respondent in Arb. A. 20/2005.

Judges

A.P Shah, C.J
Rajiv Sahai Endlaw, J.

Acts

Section 8(2) of the 1940 Act, Article 137 of the Limitation Act,
Section 20 of the old Act. Under Section 11 of the new Act,
SCHEDULE LIMITATION ACT
Section 11(6)(c) of the Arbitration Act, 1996,
SECTION 20 ARBITRATION ACT 1940
Chapter-II (Section 8); Section 20
Section 8(2) of the 1940 Act
Section 3 to Section 19), (ii)
Section 8 and Section 20.
1996 Act in Section 11
Section 11(6)(c)
India) Act, 1990

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Smart Summary

Factual and Procedural Background

These matters concern applications under Section 11(6)(c) of the Arbitration and Conciliation Act, 1996, which were referred by order dated 4th September 2009 to a Division Bench to consider the limitation period within which an application under Section 11(6) can be filed.

The petitioners (Prasar Bharati (Broadcasting Corporation of India) Ltd. having stepped into the shoes of the President of India in respect of certain agreements dated 25 March 1989 (AA 20/2005) and 10 April 1995 (AA 18/2005)) contend payments were due from the respondents. Notices demanding payment were sent in 2001–2002; on non-compliance, the petitioners approached the Director General, Doordarshan by notice dated 3 May 2003 requesting appointment of an arbitrator. The Director General had not appointed the arbitrator up to the filing of the petitions in or about January 2005. The petitioners filed applications under Section 11(6) seeking the court’s intervention for appointment of an arbitrator.

The Division Bench ultimately allowed the applications, appointed Justice Arun B. Saharya (on the panel of the Delhi High Court Arbitration Centre) as arbitrator, directed the arbitration be conducted under the aegis of that Centre, and ordered that parties bear their own costs.

Legal Issues Presented

What is the limitation period within which an application under Section 11(6) of the Arbitration Act, 1996 must be filed — does it run from the date the substantive cause of action accrued (as argued by respondents relying on older authorities) or from the failure of the appointment procedure prescribed under Section 11?
Whether the jurisprudence under Section 20 and Section 8 of the Arbitration Act, 1940 (and related decisions interpreting Article 137 of the Limitation Act) applies to Section 11 of the 1996 Act, and if so, how?
When does the limitation for filing an application under Section 11(4) and Section 11(6) commence to run (specifically: effect of the mandatory notice period under Section 11)?
Ancillary questions raised but reserved for arbitration: whether the substantive claims are time-barred; whether the petitioner has privity/successor-in-interest rights under the Prasar Bharati Act, 1990; and whether the agreed arbitrator’s qualification (being an officer of Government/Corporation) is permissible.

Arguments of the Parties

Respondents' Arguments

Relying on Rajesh Kumar Garg v. MCD and on decisions such as Steel Authority of India Ltd. v. J.C. Budharaja and Panchu Gopal Bose v. Board of Trustees for Port of Calcutta, the respondents argued that the three-year limitation period commences from the date on which the cause of action would have accrued had there been no arbitration clause (i.e., limitation for commencement of arbitration runs from accrual of the underlying claim).
They relied on the principle (as stated in the 1940 Act jurisprudence) that limitation for commencing arbitration runs from the date when the claimant first acquired either a right of action or a right to require arbitration to take place.
In written submissions the respondents further argued issues such as lack of privity between the petitioner and the respondents (the original agreement being with the President of India) and qualification of the agreed arbitrator (an officer of the Government or the Corporation), and contended the Chief Justice must address those points.

Petitioners' Arguments

The petitioners relied on authorities including J.C. Budhraja v. Chairman, Orissa Mining Corporation Ltd. to contend that the limitation applicable to an application for appointment of an arbitrator (analogous to Section 8 of the 1940 Act) is distinct from limitation for making the underlying claim.
The petitioners argued they followed the mandatory procedure under Section 11 (issued notice to Director General Doordarshan on 3 May 2003) and that the limitation for applying under Section 11(6)(c) should begin upon failure of the agreed appointment procedure; they submitted they filed applications within three years of approaching the Director General and thus were within time.
The petitioners asserted they stand in the shoes of the President of India by virtue of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990, and so the limitation and recovery rights available to the Government apply to them as successor-in-interest.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court in This Opinion
Rajesh Kumar Garg v. MCD (DLT 343 / 2008 (102) DRJ 137)	Held (Single Judge) that the cause of action for application under Section 11 was when claims had accrued; delay of many years (6–8) meant applicant had slept on rights and application dismissed as barred by limitation.	The Court found Rajesh Kumar Garg relied upon earlier Section 20 jurisprudence and distinguished it from Section 11 of the 1996 Act; it concluded Rajesh Kumar Garg is not good law for the proposition that Section 11 applications are to be time-barred by the accrual date of the substantive claim. The Court noted that even if an application under Section 11 is in time, claims may still be dismissed later if found to be long dead.
Steel Authority of India Ltd. v. J.C. Budharaja, (1999) 8 SCC 122	Reproduced principle from Panchu Gopal Bose that limitation for commencement of arbitration runs from the date the cause of arbitration accrued (i.e., when claimant first acquired a right of action or right to require arbitration).	The Court observed that Steel Authority's passage is rooted in Section 20 of the Arbitration Act, 1940, and held such reasoning applies to petitions under Section 20 of the 1940 Act and not to petitions under Section 8 of the 1940 Act or to Section 11 of the 1996 Act.
Panchu Gopal Bose v. Board of Trustees for Port of Calcutta, (1993) 4 SC 338	Statement that limitation for commencing arbitration runs from date on which cause of action accrued; cited as foundational for the accrual-date rule.	The Court noted that the passage from Panchu Gopal Bose forms the backbone of respondents' contention but reiterated that those pronouncements were made under the framework of the 1940 Act (Section 20), and therefore are not directly applicable to Section 11 of the 1996 Act.
M/s. Shah Construction Co. Ltd. v. Municipal Corporation of Delhi, AIR 1985 Delhi 358	Discussed the three kinds of arbitration under the 1940 Act and held that a party may proceed under Section 20 (which contains limitation principles) instead of Chapter II (Section 8); noted Section 8 lacked a specific power to order reference and that proceedings under Section 8 carried no period of limitation.	The Court relied on Shah Construction to distinguish the effects of Section 8 and Section 20 of the 1940 Act, using that distinction to support the proposition that the limitation principles applicable to Section 20 do not automatically apply to Section 8 (and by analogy to Section 11 of the 1996 Act).
Utkal Commercial Corporation v. Central Coal Fields Ltd., (1999) 2 SCC 571	Held that in a case under Section 8(2) of the 1940 Act, Article 137 of the Limitation Act (three years) applies, and the limitation begins to run from the date when the right to make an application under Section 8 accrues — i.e., upon the other party's failure to concur in appointment within 15 days after notice.	The Court used Utkal to analogize that under the 1996 Act the limitation for an application under Section 11 should begin only after the statutory procedure and its failure (i.e., after the relevant notice and prescribed period) have occurred.
J.C. Budhraja v. Chairman, Orissa Mining Corporation Ltd., (2008) 2 SCC 444	Held that the limitation period for filing a petition under Section 8(2) of the 1940 Act cannot be confused with the period of limitation for making the underlying claim.	The Court noted that this authority, relied upon by the petitioners, supports the distinction between limitation for appointment proceedings and limitation for the substantive claim, reinforcing the conclusion that Section 11 limitation is separate from underlying claim limitation.
Kerala State Electricity Board v. T.P. Kunhaliumma, (1976) 4 SCC 634	Applied Article 137 of the Limitation Act (three years) in a relevant context.	The Court cited this authority to confirm that Article 137 (three-year limitation) is the applicable article of the Limitation Act for proceedings analogous to those under Section 11; the Court accepted Article 137 as the relevant limitation provision.
Major (Retd.) Inder Singh Rekhi v. DDA, (1988) 2 SCC 338	Authority under Section 20 of the 1940 Act relied on by Rajesh Kumar Garg.	The Court observed that Rekhi is a Section 20 case and distinguished it from Section 11 of the 1996 Act; Rekhi therefore did not establish that Section 11 applications must be limited by accrual-date-of-claim principles.
National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1 SCC 267	Held that the Chief Justice (or designate) is not required to decide the merits of the underlying claims or certain disputed questions as a precondition to appointing an arbitrator under Section 11.	The Court relied on Boghara to state that the question whether claims are within time or otherwise is not ordinarily a matter for the Chief Justice or his designate when exercising the appointment function under Section 11, and such matters can be left to the arbitrator.
Northern Railway Administration v. Patel Engineering Co. Ltd., (2008) 10 SCC 240	Held that a court appointing an arbitrator under Section 11 should give due regard to any qualifications prescribed in the arbitration agreement.	The Court noted this principle but observed no qualifications were prescribed in the present agreement; being an officer of Government or Prasar Bharati was not itself a disqualifying or qualifying condition in this case.

Court's Reasoning and Analysis

The Court approached the question by first identifying that much of the case law relied upon by the respondents (Steel Authority, Panchu Gopal Bose, Shah Construction, Major (Retd.) Inder Singh Rekhi and Rajesh Kumar Garg) arose under Section 20 (and related provisions) of the Arbitration Act, 1940. It emphasized that those authorities articulate a limitation rule tied to the accrual of the underlying cause of action in the context of the 1940 Act's Section 20 procedure.

The Court then contrasted the 1940 Act with the 1996 Act. It held that the procedure under Section 11 of the 1996 Act is akin to Section 8 of the 1940 Act (not to Section 20): the 1996 Act removed the old Section 20 procedure permitting straightaway court appointment, and introduced a mandatory internal appointment procedure under Section 11 that requires a party to issue a notice proposing arbitrator(s) and to allow a prescribed period (30 days) for consensus. Because the Section 11 procedure is mandatory, the Court reasoned that there is no cause of action to approach the court under Section 11(4) or Section 11(6) until the prescribed procedure has been followed and has failed.

Drawing on Utkal and J.C. Budhraja, the Court concluded that the limitation for filing an application under Section 11(4) begins to run only from expiry of the 30-day period following the statutory notice in Section 11(4)(a) or (b), while the limitation for an application under Section 11(6) commences from occurrence of the contingencies specified in sub-clauses (a), (b) or (c) of Section 11(6). The Court thus held that the limitation for Section 11 applications is tied to failure of the appointment mechanism prescribed by Section 11, not to the date the underlying substantive claim accrued.

Applying those principles to the facts, the Court noted the petitioners had approached the Director General, Doordarshan on 3 May 2003 and had filed the Section 11(6) applications within three years of that approach. On that basis the Court concluded the applications were within time under Article 137 of the Limitation Act (three years).

The Court went on to address — and largely defer — several objections raised by respondents: (i) whether the substantive claims were time-barred (the Court held that determination of the substantive limitation of claims is not the obligatory function of the Chief Justice under Section 11 and such matters are better left to the arbitrator); (ii) whether there is privity/successorship (petitioner’s contention that it stepped into the President of India's shoes under the Prasar Bharati Act was recorded, but determination was left to the arbitrator); and (iii) qualification of the agreed arbitrator (the Court observed Northern Railway requires regard to any qualifications in the agreement but found none specified here and did not treat being a government/Corporation officer as a prescribed qualification).

Holding and Implications

Holding: The applications under Section 11(6) of the Arbitration Act, 1996 succeed. The petitioners were found to have filed their Section 11(6) applications within the applicable limitation period (Article 137 — three years measured from the failure of the appointment procedure), and were therefore entitled to have an arbitrator appointed by the Chief Justice or his designate.

Consequence and orders given: Justice Arun B. Saharya is appointed as the arbitrator; the arbitration is to proceed under the aegis of the Delhi High Court Arbitration Centre; and the parties are directed to bear their own costs.

Implications: The Court applied and clarified that limitation for an application under Section 11 of the 1996 Act runs from the failure of the appointment procedure envisaged by Section 11 (30 days after notice under Section 11(4) or upon the contingencies in Section 11(6)), rather than generally from the accrual date of the underlying cause of action as in certain Section 20 (1940 Act) authorities. The Court left substantive issues (time-bar of the underlying claims, privity/successorship, qualification questions of the arbitrator) to be determined by the arbitrator. The opinion did not purport to lay down a broader novel precedent beyond applying these distinctions and directing appointment in the present cases.

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Prasar Bharti v. Maa Communication .

Rajiv Sahai Endlaw, J.:— These applications under Section 11(6)(c) of the Arbitration Act, 1996, though entertainable by the Chief Justice or his designate, were vide order dated 4th September, 2009 referred to this Bench, to consider the aspect of limitation within which an application under Section 11(6) can be filed. The counsels for the respondents had relied upon the judgment of a Single Judge of this Court in Rajesh Kumar Garg… v. Mcd & Anr…, 149 (2008) DLT 343 : 2008 (102) DRJ 137 to contend that the limitation of three years commences from the date on which, had there been no arbitration clause, the cause of action would have accrued. It was felt that the matter was required to be considered by a larger bench.

2. The counsels for the respondents during the hearing also relied on Steel Authority of India Ltd. v. J.C Budharaja, (1999) 8 SCC 122 : AIR 1999 SC 3275; therein, relying on Panchu Gopal Bose v. Board of Trustees for Port of Calcutta, (1993) 4 SC 338, it was held that the period of limitation for commencement of an arbitration runs from the date on which the cause of arbitration accrued, that is to say from the date when the claimant first acquired either a right of action or a right to require an arbitration to take place upon the dispute concerned. It was further held that the period of limitation for commencing an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued. In fact, the said passage from Panchu Gopal Bose (supra) reproduced in Steel Authority of India Ltd. (supra) forms the backbone of the contention of the counsels for the respondents. Reliance in this regard is also placed on M/S. Shah Construction Co. Ltd… v. Municipal Corporation Of Delhi…, AIR 1985 Delhi 358.

3. The judgments in Steel Authority of India Ltd., Panchu Gopal Bose and in Shah Construction Company Ltd. (supra) are under Section 20 of the Arbitration Act, 1940. In fact, the Division Bench of this Court in Shah Construction Co. Ltd. noticed that the 1940 Act provided for three kinds of arbitration i.e (i) arbitration without intervention of Court (i.e Section 3 to Section 19), (ii) arbitration with intervention of a court where there is no suit pending (Section 20) and (iii) arbitration in suits (Chapter IV). It was further held that a party may proceed under Section 20 instead of proceeding under Chapter-II (Section 8); Section 20 confers power on court to order the agreement to be filed and further to make an order of reference to the arbitrator appointed by the parties or where the parties cannot agree upon an appointment, to an arbitrator appointed by the court. It was further distinguished that Section 8 does not contain any provision empowering the court to make an order of reference as one found in Section 20(4); the party has thus an option to proceed either under the provision of Chapter II (Section 8) or of Chapter III (Section 20) in proceeding with the reference; there is nothing in Section 20 to compel the other party not to take recourse to Section 8 of the Act; it is his choice whether to apply under Section 8 of under Section 20 of the Act. Yet further it was held that there is no period of limitation if the parties proceed under Section 8 of the Act.

4. The Division Bench in Shah Construction Co. Ltd. therefore carved out the difference between Section 8 and Section 20. The law as laid down in Panchu Gopal Bose and in Steel Authority of India Ltd. of the limitation of three years from the date of accrual of cause of action for the claim was held to apply to a petition under Section 20 of the Act only and not to a petition under Section 8 of the Act.

5. We find that the limitation for filing a petition under Section 8 of the 1940 Act has been the subject matter in Utkal Commercial Corporation v. Central Coal Fields Ltd., (1999) 2 SCC 571 : AIR 1999 SC 801 where it was held that in a case under Section 8(2) of the 1940 Act, Article 137 of the Limitation Act, providing limitation of three years, applies and the time for the purpose of limitation begins to run from the date when the right to make an application under Section 8 accrues i.e upon the failure of the other party to concur in the appointment of the arbitrator within 15 days inspite of notice. It was held by the Supreme Court that in order to be entitled to ask for a reference there must be a notice contemplated under Section 8 and no compliance thereof.

6. The position under the 1996 Act in Section 11 is akin to that under Section 8 and not to that under Section 20 of the 1940 Act. In fact, the procedure as prescribed under Section 20 of the 1940 Act has been totally done away with in the 1996 Act. Under the 1996 Act, a party to an arbitration agreement cannot straightaway approach the court for appointment of the arbitrator, as a party to an arbitration agreement was entitled to under Section 20 of the old Act. Under Section 11 of the new Act, even if there is Page: 441no named arbitrator, the party is not entitled to approach the court straightaway and is required to first issue notice to the other party proposing the names of the arbitrators and is to approach the court only upon the failure of consensus within 30 days of such notice. The procedure prescribed in Section 11 is mandatory. Thus, the question of a party preferring an application under Section 11(4) or under Section 11(6) to the Chief Justice or his designate does not arise unless the procedure of giving a notice is followed and without such procedure being followed and failure thereof, there would be no cause of action for the petition under Section 11(4) or 11(6) of the Act. Thus, the limitation for filing an application under Section 11(4) or 11(6) of the Act cannot but accrue only upon the failure of the procedure prescribed and can possibly have nothing to do with the limitation for preferring the claim. The Supreme Court in J.C Budhraja v. Chairman, Orissa Mining Corporation Ltd., (2008) 2 SCC 444, relied by the counsel for the petitioner, has clearly held that the period of limitation for filing a petition under Section 8(2) of the 1940 Act seeking appointment of an arbitrator cannot be confused with the period of limitation for making the claim.

7. We therefore find that the limitation for filing an application under Section 11(4) would commence running only from the expiry of 30 days from the receipt of request mentioned in Section 11(4)(a) or (b) and the limitation for an application under Section 11(6) would commence running from the happening of the contingencies mentioned in sub-clause (a) or (b) or (c) thereof.

8. Faced with the aforesaid, the counsel for the respondent has in his written submissions handed over today contended that the law aforesaid qua Section 8 of the 1940 Act would not apply inasmuch as the arbitration clause in the agreement between the parties in the present case is for arbitration of an officer appointed to be the arbitrator by the Director General, Doordarshan. The same in our view will not make any difference. Section 8 of the 1940 Act also applied in a situation where the appointed arbitrator neglected or refused to act or when the vacancy in the Arbitral Tribunal is not filled. The petitioners in the present cases have pleaded that they approached the Director General, Doordarshan for appointment of the arbitrator vide notice dated 3rd May, 2003 but the Director General, Doordarshan failed to appoint the arbitrator till the filing of the petition in/or about January, 2005. Section 11(6)(c) applies when in an appointment procedure agreed upon by the parties, a person fails to perform any function entrusted to him under that procedure. In the present case, the petitioner had filed the applications under Section 11(6) of the Act within three years of approaching the Director General, Doordarshan for appointment of the arbitrator. The applications are thus within time.

9. There is no dispute that the Article of the Schedule to the Limitation Act that is applicable is Article 137, providing limitation of three years. It Page: 442was also so held in Kerala State Electricity Board v. T.P Kunhaliumma, (1976) 4 SCC 634 : AIR 1977 SC 282.

10. The learned Single Judge in Rajesh Kumar Garg (supra) found that the contractor had given notice demanding arbitration after more than 6-8 years of completion of the work; it was not the case that the final bills were not prepared and for that reason the dispute could not have arisen. It was held that the cause of action for the application under Section 11 was when the claims had accrued and the applicant in that case had slept over their rights. The claims were held to be state and hopelessly barred by limitation and the application under Section 11 dismissed. The said judgment relied on Major (Retd.) Inder Singh Rekhi v. DDA, (1988) 2 SCC 338, also a case under Section 20 of the 1940 Act and which has been distinguished hereinabove. We therefore do not find Rejesh Kumar Garg, relying on Inder Singh Rekhi as limitation applicable to a petition under Section 11 of the Act, as good law. We may however clarify that even if the petition under Section 11 is found to be in time, it may still be dismissed if claims sought to be resuscitated are still found to be long dead ones.

11. The respondent has also challenged the claims being within time. We had at the time of hearing clarified that the question of claims being within time or not is not found by us to be such which can be decided by the Chief Justice or his designate. The same is in any case not the obligatory function of the Chief Justice under Section 11 of the Act as held in National Insurance Company Limited v. Boghara Polyfab Private Limited., (2009) 1 SCC 267 : AIR 2009 SC 170. However, we find that the respondent in the synopsis of submissions has taken the said plea again, though no arguments have been addressed thereon. The petitioners have pleaded that an agreement (on 25th March, 1989 in AA 20/2005 and on 10th April, 1995 in AA 18/2005) was entered into between the President of India and the respondents, that payments were due under the said agreement; that in 1997. The Prasar Bharati (Broadcasting Corporation of India) Act, 1990 was notified; that in terms of the said Act, the amounts payable by the respondents to the Government of India, became payable to the petitioner; that ultimately in 2001–2002 notices demanding the amounts were sent and upon the same remaining uncomplied with, in 2003 the Director General, Doordarshan was approached for appointment of arbitrator in terms of the agreement, as aforesaid. It is the case of the petitioner that since the petitioner has stepped into the shoes of the President of India, the same period of limitation for recovery of dues, as available to the Government, is available to the petitioner also. The respondents have controverted the said position. We, having at the time of hearing itself indicated that all the said questions shall be left to the arbitrator and the counsel for the respondents having not controverted at that time, we reiterate the same. We have recorded the respective contentions only to demonstrate that without further Page: 443investigation, it cannot be said that the claims are long dead ones and such investigation/adjudication is best left to the arbitrator.

12. The counsel for the respondent has in the synopsis also stated that the Chief Justice is also required to decide whether there is privity of contract between the parties or not. The agreement in the present case was between the President of India and the respondent. It is the case of the petitioner Prasar Bharati (Broadcasting Corporation of India) Ltd. that upon the promulgation of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990, the amounts due from the respondent to the Govt. of India have become the entitlement of the petitioner under Section 16 of the said Act. The present is a case where the petitioner claims to be the successor in interest of the party with whom the respondent had admittedly entered into agreement. We deem it appropriate that the said objection of the respondents be also kept open and be left to be decided by the arbitrator. Suffice it to state that in the facts it cannot be said that there is no arbitration agreement between the parties or that the respondent should not be vexed with the arbitration without determination on the said aspect.

13. The synopsis of the respondent also raises the pleas of the petitioner having no cause of action and of the qualification of the agreed arbitrator being an officer of the government or the Corporation. The first of the same is outside the ambit of Section 11 of the Act. As far as the qualification of arbitrator is concerned, though the Supreme Court in Northern Railway Administration v. Patel Engineering Co. Ltd., (2008) 10 SCC 240 has held that the court even while appointing the arbitrator under Section 11 of the Act is to give due regard to the qualifications if any prescribed in the agreement, but we do not find any qualification to have been prescribed in the present case; being an officer of the Govt. of India or the Prasar Bharati is not a qualification for appointment as the arbitrator.

14. The result is that the applications succeed. The petitioners have become entitled to the appointment of an arbitrator by the Chief Justice or his designate. We accordingly appoint Justice Arun B. Saharya as the arbitrator. He is on the panel of the Delhi High Court Arbitration Centre. The arbitration shall be under the aegis of the said Centre. The parties are left to bear their own costs.

Prasar Bharti v. Maa Communication .

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Respondents' Arguments

Petitioners' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Prasar Bharti v. Maa Communication .

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