Holding

The application under Section 8 of the Arbitration Act was not barred by limitation because the limitation period began only after the 15‑day notice period elapsed without concurrence, and the appellant filed within that period.

Summary

Utkal Commercial Corporation entered into a contract with Central Coal Fields Ltd to supply alumina ferric, which expired in August 1975. A dispute arose and the appellant served a notice on 12 September 1976 demanding the respondent concur in the appointment of an arbitrator under Section 8 of the Arbitration Act, 1940; no response was received. The appellant filed an application under Section 8 in the Calcutta High Court on 22 December 1977, which was dismissed for lack of jurisdiction, and subsequently filed a second application before the Subordinate Judge, Ranchi on 9 August 1978, resulting in the appointment of an arbitrator. The respondent sought revision, and the High Court held that the application was barred by the three‑year limitation period under Article 137 of the Limitation Act, 1963. The Supreme Court examined when the limitation period begins to run, held that it accrues when the right to apply under Section 8 arises—i.e., after the 15‑day period following the notice expires without concurrence—and found that both applications were within the prescribed period. Consequently, the High Court’s order was set aside and the appeal was allowed.

Issues considered

When does the limitation period under Article 137 of the Limitation Act, 1963 begin to run for an application under Section 8 of the Arbitration Act, 1940?
Whether the appellant's application under Section 8 was barred by limitation?

Legislation cited

Arbitration Act, 1940s. 8
Limitation Act, 1963s. Article 137

Subjects

ArbitrationSection 8Limitation ActArticle 137Cause of actionAppointment of arbitratorContract disputeSupreme Court

Judgment

UTKAL COMMERCIAL CORPORATION -__,__
A
v.
CENTRAL COAL . FIELDS LTD'..

JANUARY 20, 1999

B [MRS. SUJATA V. MANOHAR AND R.C. LAHOTI, JJ.)

Arbitration Act, 1940 : Section 8.

Arbitrato1'-Appointme11t of-Limitation--Reckoni11g of
c Limitation Act, 1963 : Article 137-Applicability of

Contract between appella11t-Corporatio11 and respondent 011
7.9.1974-Contract operative till 22.8. 75-Dispute between parties-Notice for
appoi11tme11t of Arbitrator under Section 8 given by appellant 011
D 12.9.1976--Respo11de11t gave no response to the appellant-011 22.12.1977 ._.,.
appellant filed 011 application under Section 8 before Calcutta High )'.
Court-As the High Court lacked jurisdiction it gave direction to file the
application before appropriate Court-Thereafter application filed before Sub-
ordinate Judge, Ranchi 011 9.8.1978 which appointed Arbitrator--On
respondent's application i11 Revision High Court held application for appoint-
E ment of Arbitrator was barred by /imitation--Appeal before Supreme
Court-Held High Court was not right in coming to the conclusion that the
application under Section 8 of the Arbitration- Act was barred by /imita-
tiorr--Requireme11ts of Section 8 Discussed.

F Major (Retd.) Inder Singh Rekhi v. DDA, [1988] 2 SCC 338, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1215 of
-~

1986.

From the Judgment and Order dated 21.3.94 of the Patna High Court
G in Civil Revision Application No. 116/80.
Arvind Kumar and Laxmi Arvind for the Appellant.

Anip Sachthey for the Respondent.

H The following Order of the Court was delivered :
166
UTKALCOMMERCIALCORPN. v. CEN1RALCOALF1ELDSLID. 167

The only question which requires to be determined in this appeal is A

- whether the application of the appellant under Section 8 of the Arbitration
Act for appointment of an Arbitrator was barred by limitation. A few dates
may be noted in this connection. The term 'respondent' occurring
hereinafter applies also to predecessors-in-interest of the respondent.
•
On 7th September, 1974 the appellant entered into a contract, with
B
the respondent under which the appellant agreed to supply Allumina
Ferric of I.CJ. specification to the respondent. The contract was operative
till 22.8.1975. On account of certain disputes and differences which arose
between the parties the appellant, on 12.9.1976, gave a notice to the
respondent. The notice is not on the record of the proceedings. From the c
judgment of the High Court which refers to this notice, it seems that under
that notice, the appellant stated that huge amounts were due to it under
the said contract and it appointed one Sohan Lal Saraf,. Barrister-at-Law
as its Arbitrator and called upon the respondent to concur in that appoint-
ment. No response was given to the notice:.
D
Thereafter negotiations seem to have taken place between the parties
for settlement of the disputes. Ultimately since the negotiations did not
fructify, the appellant on 22.12.1977 filed an application before the Calcutta
High Court under Section 8 of the Arbitration Act. The Calcutta High
Court by its. judgment and order dated 26.4.1978 held that it had no E
jurisdiction to entertain the application and directed the appellant to file
an application before the appropriate Court. Accordingly on 9.8.1978 the
appellant filed an application under Section 8 of the Arbitration Act before
the Subordinate Judge, Ranchi. Its application was allowed on 18.9.1979
and the Court appointed one A.N. Singh, Retired District & Sessions F
Judge to act as an Arbitrator.

The Arbitrator has given a reasoned award dated 16.6.1980. The
award is for a small amount of Rs. 41,342 with interest. And we are
surprised at the costly litigation indulged in by the respondent for this small
amount. Be that as it may, the respondent had filed a revision before the G
High Court at Ranchi from the order of the Subordinate Judge granting
the application under Section 8 of the Arbitration Act. The High Court
has, by the impugned order, held that the application of the appellant
under Section 8 of the Arbitration Act was barred by limitation. Hence no
Arbitrator could have been appointed. In the present appeal we have to . H
168 SUPREME COURT REPORTS [1999] 1 S.C.R.

A consider whether the application of the appellant under Section 8 of the
Arbitration Act was barred by limitation.

·The relevant Article of the limitation Act is kticle 137 which
provides as follows :
•
B "Description of Period of Time from
suit Limitation which period
begins to run

Any other Three year When the right
application for to apply accrues."
c which no period
·of limitation is
provided
elsewhere in this
Division.
D
Therefore, the time for the purposes of limitation begins to run from
the date when the right to make an application under Section 8 accrues.
Section 8 of the Arbitration Act, which is relevant for our present purposes,
is reproduced below :

E "Section 8. Power of Court to appoint arbitrator or umpire. -
(1) In any of the following cases -

(a) where an arbitration agreement provides that the reference
shall be to one or more arbitrators to be appointed by consent of
the parties, and all the parties do not, after differences have arisen,
F concur in the appointment or appointments; or

(b) xxx xxx xxx

;(c) xxx xxx xxx
G any party may serve the other parties or the arbitrators, as the case
may be, with a written notice to concur in the appointment or
appointments or in supplying the vacancy.

(2) If the appointment is not made within fifteen clear days
after s~rvice of the said notice, the Court may, on the application
-t'

UTKAL COMMERCIAL CORPN. v. CENTRAL COAL FIELDS LTD. 169

of the party who gave the notice and after giving the other parties A
-Y· an opportunity of being heard, appoint an arbitrator or arbitrators
=-' or umpire, as the case may be, who shall have like power to act in
the reference and to make an award as if he or they had been
appointed by consent of all parties."

Therefore, under Section 8 before an application can be made to the B
• ~
Court under that section the following requirements should be satisfied :-

(1) The arbitration agreement should provide for appointment of
arbitrator/s by consent.

(2) Parties do not concur in the appointment of an arbitrator. c
(3) One party serves notice on the other party to concur in the
appointment.

(4) No appointment is made within 15 day of the service of the notice.
D
I .' Thereupon the court may, on the application of the party who gave
< the notice and after giving the other party an opportunity of being heard,
appoint an Arbitrator.

In view of the express language of Section 8, it is quite clear that
unless a party who desires to apply has resorted to the process set out in
E
Section 8, and has failed to secure the concurrence of the other party to
the appointment of an Arbitrator within the prescribed period, the Court
will not intervene under Section 8. The right to apply under Section 8,
therefore, would accrue when, within 15 clear days of the notice, the other
parties do not concur in the appointment of an Arbitrator . F
••
-1· In this connection one may refer to a decision of this Court in Major
(Retd.) Inder Singh Rekhi v. DDA, [1988[ 2 SCC 338. In that case the Court
had to consider the application of Article 137 of the Limitation Act to a
petition under Section 20 of the Arbitration Act. The Court considered
when the period of limitation under Article 137 would begin to run. The G
Court said that in order to be entitled to an order of reference under
11::' Section 20 of the Arbitration Act, it is necessary that there should be an
arbitration agreement and secondly difference must arise as to which this
agreement applies. In the case before the Court, a dispute had arisen regard-
ing non-payment of the alleged dues of the appellant. The Court said : H
170 SUPREME COURT REPORTS [1999] 1 S.C.R.

A "The question is for the present case when did such dispute
arise. The High Court proceeded on the basis that the work was
completed in 1980 and, therefore, the appellant became entitled
to the payment from that date and the cause of action under Article
137 arose from that date. But in order to be entitled to ask for a
reference under Section 20 of the Act there must not only be an
B
entitlement to money but there must be a difference or dispute
must arise. It is true that on completion of the work a right to get
payment would normally arise but where the final bills as in this
case have not been prepared as appears from the record and when
the assertion of the claim was made on February 28, 1983 and there
c was non-payment, the cause of action arose from that date, that is
to say, February 28, 1983. It is also true that a party cannot
postpone the accrual of cause of action by writing reminders or
sending reminders. But where the bill had not been finally
prepared, the claim made by a claimant is the accrual of the cause
of action. A dispute arises where there is a claim and a denial and
D
repudiation of the claim. The existence of dispute is essential for • I
appointment of an arbitrator under Section 8 or a reference under ';;.
Section 20 of the Act."

Applying the same reasoning in the present case, the notice was
E served by the appellant asking the respondent to concur in the appointment
of an Arbitrator on 12.9.1976.. The application before the Calcutta High
Court under Section 8 was made on 22.12.1977 and the application before
the Subordinate Judge, Ranchi under Section 8 of the Arbitration Act was
made on 9.8.1978. Both these applications are within the period prescribed
F under Article 137. The High Court was, therefore, not right in coming to
the conclusion that the application under Section 8 of the Arbitration Act ••
was barred by limitation. Since even the second application was within the f
period prescribed under Article 137, we have not considered the question
of exclusion of the time spent before the Calcutta High Court from the
period of limitation.
G
It has been submitted before us by the respondent that since the
contract expired on 28.2.1975, that is the date from which the period of ~
limitation under Article 137 would start. We do not see any merit in this
contention, because the requirements of Section 8 of the Arbitration Act
H have to be met before limitation would start under Article 137 of the
UTKAL COMMERCIAL CORPN. v. CENTRAL COAL FIELDS LTD. 171

Limitation Act for an application under Section 8. A
•· If the submission is that the claims filed before the Arbitrator are
barred by limitation, we cannot examine such a contention without the
relevant particulars and details of the disputes between the parties being
placed before us. These particulars and even the documents have not been
filed before us because such a contention has not been raised in these B
proceedings at all. One cannot assume that the cause of action arose on
· the date of expiry of the contract. As pointed out by this Court in Major
(Retd.) Inder Singh Rekhi's case (supra) in the passage ci~ed above, cause
of action can arise later, depending on the facts of the case. Whether the
claims were or were not barred by limitation before the Arbitrator •can be C
examined only on the basis of the relevant material, which material has
not been produced. We, therefore, decline to examine this contention.

In the premises we set aside the impugned order of the High Court
and restore the order of the Sub-Judge, Ranchi. Since the Award has
already been made and we are informed that it is also filed in Court, the D
• · concerned court/the parties will now· have to take appropriate steps in
.:>' connection with that award in accordance with law. The appeal is allowed
accordingly. No order as to costs.

T.N.A. Appeal allowed .

....
.,.