M/S GEO MILLER & CO. PVT. LTD.versusCHAIRMAN, RAJASTHAN VIDYUT UTPADAN NIGAM LTD.

1108                      [2019]
                SUPREME COURT    11 S.C.R. 1108
                               REPORTS                       [2019] 11 S.C.R.


 A                    M/S GEO MILLER & CO. PVT. LTD.
                                          v.
       CHAIRMAN, RAJASTHAN VIDYUT UTPADAN NIGAM LTD.
                            (Civil Appeal No. 967 of 2010)
 B                             SEPTEMBER 03, 2019
           [N. V. RAMANA, MOHAN M. SHANTANAGOUDAR
                      AND AJAY RASTOGI, JJ.]
             Arbitration:
 C           Arbitration proceedings – Determination as regards
       applicability of Arbitration Acts viz. Arbitration Act, 1940 or
       Arbitration and Conciliation Act, 1996 – Held: For the purpose
       of deciding as to which of the Acts is applicable, on conjoint
       reading of ss.21 and 85(2)(a) of 1996 Act, the date of
       commencement of arbitration proceedings shall be the date on
 D
       which notice was served on the other party requesting appointment
       of arbitrator – If the date of notice was prior to 25.1.1996 (i.e.
       the date on which 1996 Act came into force) 1940 Act would apply
       and if the date of notice was on 25.1.1996 or after that, 1996
       would apply – Arbitration and Conciliation Act, 1996 – ss.21 and
 E     85(2)(a) – Arbitration Act, 1940.
             Arbitration and Conciliation Act, 1996:
             s.43(3) – Limitation – Limitation period for reference of
       dispute to arbitration or for seeking appointment of an arbitrator
       before a Court is three years from the date on which course of
 F     action or the claim which is sought to be arbitrated, first arises –
       On certain sets of facts and circumstances, the period during which
       the parties were bonafide negotiating towards an amicable
       settlement may be excluded for the purpose of computing the
       period of limitation – However, in such cases, entire negotiation
 G     history must be specifically pleaded and placed on record – In
       commercial disputes, failure to respond to the claim has to be
       treated as denial of claim giving rise to dispute and hence cause
       of action for reference to arbitration – Mere correspondence
       subsequent to this date of cause of action would not extend the
       time of limitation – In the facts of the present case, application for
 H
                                        1108
          M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN,                  1109
           RAJASTHAN VIDYUT UTPADAN NIGAM LTD.


reference of the dispute to the Arbitrator is barred by limitation –   A
Rather, appellant company’s case has certain element of mala fide
as it has remained silent on specific actions taken to recover the
dues during certain period – Under s.114(g) of Evidence Act, the
Court can presume that evidence which would be and was not
produced, would, if produced be unfavourable to the person who
                                                                       B
withholds it – Appellant’s own fault in sleeping over his right for
14 years will not constitute a case of ‘undue hardship’ justifying
extention of time u/s.43(3) – Limitation Act, 1963 – First Schedule,
Art.137 – Limitation.
      Dismissing the appeals, the Court
                                                                       C
      HELD: 1.1 The date of commencement of arbitration
proceedings for the purpose of deciding which Act (Arbitration
Act 1940 or Arbitration and Conciliation Act, 1996) applies,
upon a conjoint reading of Sections 21 and Section 85(2)(a) of
the 1996 Act, shall be regarded as the date on which notice was        D
served to the other party requesting appointment of an arbitrator.
[Para 6] [1117-B-C]
      Milkfood Ltd. v. GMC Ice Cream (P) Ltd. (2004) 7 SCC
      288 : [2004] 3 SCR 854 ; Shetty’s Constructions
      Co.Pvt. Ltd. v. Konkan Railway Construction and                  E
      Another (1998) 5 SCC 599 – relied on.
      1.2 Though strictly speaking the 1996 Act came into force
from 22.8.1996, for all practical purposes it is deemed to have
been effective from 25.1.1996, which is when the Arbitration and
Conciliation Ordinance, 1996 came into force. Hence if the date        F
of notice was prior to 25.1.1996, the 1940 Act will apply. If the
date of notice was on or after 25.1.1996, the 1996 Act will apply
to the arbitral proceedings though the arbitration clause
contemplated proceedings under the 1940 Act. In the present
case, since notice was served to the respondent in 2002, the           G
provisions of the 1996 Act will be deemed to apply to the present
Arbitration Applications filed by the appellant. [Para 6] [1117-
D-E-G]
      Fuerst Day Lawson Ltd v. Jindal Exports Ltd. (2001)
      6 SCC 356 : [2001] 3 SCR 479 – relied on.                        H
1110           SUPREME COURT REPORTS                     [2019] 11 S.C.R.


 A           2.1 By virtue of Article 137 of the First Schedule to the
       Limitation Act, 1963 the limitation period for reference of a
       dispute to arbitration or for seeking appointment of an arbitrator
       before a Court under the 1940 Act as well as the 1996 Act is
       three years from the date on which the cause of action or the
       claim which is sought to be arbitrated first arises. [Para 7] [118-
 B
       C-D]
             State of Orissa and Another v. Damodar Das, (1996)
             2 SCC 216 : [1995] 6 Suppl. SCR 800 ; Grasim
             Industries Limited v. State of Kerala (2018) 14 SCC
             265 – referred to.
 C
             2.2 In the present case, the appellant’s cause of action in
       respect of Arbitration Applications, relating to the work orders
       dated 7.10.1979 and 4.4.1980 arose on 8.2.1983, which is when
       the final bill handed over to the respondent became due. Mere
       correspondence of the appellant by way of writing letters/
 D     reminders to the respondent subsequent to this date would not
       extend the time of limitation. Hence the maximum period during
       which this Court could have allowed the appellant’s application
       for appointment of an arbitrator is 3 years from the date on which
       cause of action arose i.e. 8.2.1986. Similarly, with respect to
 E     Arbitration Application relating to the work order dated
       3.5.1985, final bill was handed over and became due on
       10.8.1989. Hence the limitation period ended on 10.8.1992. Since
       the appellant served notice for appointment of arbitrator in 2002,
       and requested the appointment of an arbitrator before a Court
       only by the end of 2003, his claim is clearly barred by limitation.
 F     [Para 8] [1120-C-F]
            2.3 On a certain set of facts and circumstances, the period
       during which the parties were bona fide negotiating towards an
       amicable settlement may be excluded for the purpose of
       computing the period of limitation for reference to arbitration
 G     under the 1996 Act. However, in such cases the entire
       negotiation history between the parties must be specifically
       pleaded and placed on the record. The Court upon careful
       consideration of such history must find out what was the
       ‘breaking point’ at which any reasonable party would have
 H     abandoned efforts at arriving at a settlement and contemplated
          M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN,                  1111
           RAJASTHAN VIDYUT UTPADAN NIGAM LTD.


referral of the dispute for arbitration. This ‘breaking point’ would   A
then be treated as the date on which the cause of action arises,
for the purpose of limitation. The threshold for determining when
such a point arises will be lower in the case of commercial
disputes, where the party’s primary interest is in securing the
payment due to them, than in family disputes where it may be
                                                                       B
said that the parties have a greater stake in settling the dispute
amicably, and therefore delaying formal adjudication of the claim.
[Para 10] [1122-C-F]
      2.4 Moreover, in a commercial dispute, while mere failure
to pay may not give rise to a cause of action, once the applicant
                                                                       C
has asserted their claim and the respondent fails to respond to
such claim, such failure will be treated as a denial of the
applicant’s claim giving rise to a dispute, and therefore the cause
of action for reference to arbitration. It does not lie to the
applicant to plead that waited for an unreasonably long period
to refer the dispute to arbitration merely on account of the           D
respondent’s failure to settle their claim and because they were
writing representations and reminders to the respondent in the
meanwhile. [Para 10] [1122-G-H]
      2.5 In the present case, the appellant company vaguely
stated before this Court that it was involved in ‘negotiation’ with    E
the respondents in the 14 years preceding the application dated
4.10.1997 before the Settlement Committee. However it did not
place on record any evidence to show when it had first made a
representation to the respondent in respect of the outstanding
amounts, and what was the history of their negotiation with the        F
respondents such that it was only in 1997 that they thought of
approaching the Settlement Committee. Further, they have not
brought anything on record to show that they were required to
proceed before the Settlement Committee before requesting the
appointment of an arbitrator. The arbitration clause does not          G
stipulate any such requirement. [Para 11] [1123-B-C]
      2.6 The appellant company’s case has a certain element
of mala fide in so far as it has made detailed submissions in
respect of its communications with the respondents subsequent
to 4.10.1997, but has remained conspicuously silent on the             H
1112           SUPREME COURT REPORTS                    [2019] 11 S.C.R.


 A     specific actions taken to recover the payments due prior to that
       date. Under Section 114(g) of the Evidence Act, 1872 this Court
       can presume that evidence which could be and is not produced
       would, if produced, be unfavourable to the person who withholds
       it. Hence, in the absence of specific pleadings and evidence
 B     placed on record by the appellant with respect to the parties’
       negotiation history, this Court cannot accept the appellant’s
       contention that it was only after the respondent’s letter dated
       18.12.1999 that the appellant could have contemplated
       arbitration in relation to the outstanding amounts. Even if the
       time spent proceeding before the Settlement Committee is
 C
       included, the limitation period, at the latest, would have started
       running from 4.10.1997 which is when the appellant made a
       representation to the Settlement Committee and the Committee
       failed to respond to the same. [Para 11] [1123-D-G]

 D            2.7 The appellant’s own default in sleeping over his right
       for 14 years will not constitute a case of ‘undue hardship’
       justifying extension of time under Section 43(3) of the 1996 Act
       or show ‘sufficient cause’ for condonation of delay under Section
       5 of the Limitation Act. The appellant should have approached
       the Court for appointment of an arbitrator under Section 8(2) of
 E     the 1940 Act within the appropriate limitation period. The entire
       dispute seems concocted so as to pursue a monetary claim
       against the respondents, taking advantage of the provisions of
       the 1996 Act. [Para 11] [1124-B-C]
            Panchu Gopal Bose v. Board of Trustees for Port of
 F          Calcutta (1993) 4 SCC 338 : [1993] 3 SCR 361–
            relied on.
            Major (Retd.) Inder Singh Rekhi v. Delhi Development
            Authority (1988) 2 SCC 338 : [1988] 3 SCR 351 ;
            Hari Shankar Singhania and Others v. Gaur Hari
 G          Singhania and Others (2006) 4 SCC 658 : [2006]
            3 SCR 726 ; Shree Ram Mills Ltd. v. Utility Premises
            (P) Ltd., (2007) 4 SCC 599 : [2007] 4 SCR 279 ;
            Sunder Kukreja and Others v. Mohan Lal Kukreja and
            Anr. (2009) 4 SCC 585 : [2009] 4 SCR 1163 –
 H          distinguished.
           M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN,                   1113
            RAJASTHAN VIDYUT UTPADAN NIGAM LTD.


      Union of India v. Momin Construction           Company             A
      (1997) 9 SCC 97 – referred to.
      O.P. Malhotra on The Law and Practice of Arbitration,
      Justice Indu Malhotra ed., 3 rd. edn, 2014 at page
      1915) – referred to.
                       Case Law Reference                                B

[2004] 3 SCR 854                   relied on            Para 6
(1998) 5 SCC 599                   relied on            Para 6
[2001] 3 SCR 479                   relied on            Para 6
                                                                         C
[1995] 6 Suppl. SCR 800            referred to          Para 7
[1993] 3 SCR 361                   relied on            Para 7
(2018) 14 SCC 265                  relied on            Para 8
[2007] 4 SCR 279                   distinguished        Para 9           D

[1988] 3 SCR 351                   distinguished        Para 9
[2009] 4 SCR 1163                  distinguished        Para 9
(1997) 9 SCC 97                    referred to          Para 9
                                                                         E
[2006] 3 SCR 726                   distinguished        Para 10
      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 967
of 2010.
                                With
                                                                         F
      Civil Appeal Nos. 968, 969 of 2010.
      From the Judgment and Order dated 25.01.2007 of the High
Court of Judicature for Rajasthan at Jaipur Bench, Jaipur in S.B.
Arbitration Application No. 25 of 2003.
                                                                         G
        S. D. Singh, Mrs. Bharti Tyagi, Mrs. Shweta Sinha, Jitender
Singh, Mrs. Meenu Singh, Ram Kripal Singh, Vishwajit Singh, Advs.
for the Appellant.
      Sushil Kumar Jain, Sr. Adv., Ms. Christi Jain, Ms. Ankita Gupta,
Harshit Khanduja, Ms. Pratibha Jain, Advs. for the Respondent.           H
1114            SUPREME COURT REPORTS                        [2019] 11 S.C.R.


 A           The Judgment of the Court was delivered by
             MOHAN M. SHANTANAGOUDAR, J.
              1. The appeals arise out of the common judgement dated
       25.1.2007 of the High Court of Rajasthan at Jaipur Bench dismissing
       the three Arbitration Applications Nos. 25/2003, 27/2003 and 28/2003
 B     (‘Arbitration Applications’) filed by the appellant under Section 11(6)
       of the Arbitration and Conciliation Act, 1996 (hereinafter referred to
       as ‘the 1996 Act’) seeking appointment of an arbitrator for adjudication
       of the disputes between the common appellant and the respondent in
       these appeals.
 C            2. The facts giving rise to these appeals are as follows: The
       respondent had floated tenders for execution of work on a water
       treatment plant. Three work orders dated 7.10.1979, 4.4.1980 and
       3.5.1985 were assigned in favour of the appellant. The three Notice
       Inviting Tender (‘NIT’) documents in respect of these work orders
       constituted the terms and conditions of the three separate contracts
 D
       between the parties. The three contracts had a common arbitration
       clause as follows (relevant part):
             “i. If at any time any question/dispute/difference whatsoever
             arises between the purchaser and the supplier, upon or in relation
             to the contract, either party may forthwith give to the other once
 E           question(s), disputes or difference and the same shall be referred
             to the Chairman, Rajasthan State Electricity Board, Jaipur or any
             person appointed by him for the purpose (hereinafter referred
             to as Arbitrator). Such a reference to the arbitrator/arbitrators
             shall be deemed to be a submission to the Arbitrator within the
 F           meaning of the Indian Arbitration Act, 1940 and statutory
             modifications thereof.”
               3. The appellant's case is that the respondent failed to make the
       payments due to them under the three contracts. Till 1997, the appellant
       was involved in discussions with the respondents in respect of the
 G     outstanding payments and the respondent kept delaying their decision
       on the same. On 4.10.1997 the appellant approached the Settlement
       Committee constituted by the respondent Board for release of the
       outstanding payment. It is the appellant's case that they were required
       to have pursued the matter with the Settlement Committee prior to
       initiating arbitration. However the Settlement Committee also failed to
 H     respond to their representations.
M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN, RAJASTHAN VIDYUT 1115
    UTPADAN NIGAM LTD. [MOHAN M. SHANTANAGOUDAR, J.]


       The respondent vide internal communications dated 20.11.1997              A
acknowledged that the matter was pending consideration with them.
Thereafter by letters dated 17/18.12.1999 the respondent replied to the
appellant partly allowing one claim to the extent of Rs. 1,34,359.12 and
requesting details of bills/invoices of certain other claims for verification.
The appellant on 6.1.2000 replied stating that the bills had already been        B
processed for payment and sent photocopies of the bills submitted earlier
to the respondents.
       On 5.10.2002 and 10.10.2002 the appellant sent a final
communication to the respondent requesting payment of all the
outstanding amounts. When the payment was still not made, the                    C
appellant sent a communication dated 22.11.2002 to the respondent
requesting appointment of an arbitrator for adjudication of disputes
relating to payment, as provided under the arbitration clause. However
the respondent did not appoint an arbitrator within the period of 30 days
as stipulated under the agreement between the parties. Hence the
appellant has filed the aforementioned Arbitration Applications for              D
appointment of an arbitrator. Per contra, the respondent contends that
as per the appellant’s own admission, the final bills for the work orders
were raised in 1983. Hence since the request for arbitration was invoked
only in 2002, the appellant's claim is barred by limitation.
       4. The High Court in the impugned judgement accepted the                  E
respondent’s argument. The Court found that the appellant had raised
the final bill on 8.2.1983, but had not stated any explanation for why it
failed to take any steps for immediately referring the dispute in 1983
to the Chairman, Rajasthan State Electricity Board, as provided under
the arbitration clause, but instead requested appointment of arbitrator          F
as late as in 2002. Further, that the appellant could not be allowed to
make such a request under the 1996 Act given that the contracts
provided that the arbitrator was to be appointed under The Arbitration
Act, 1940 (‘1940 Act’). This all reflected that the appellant had filed
the Arbitration Applications merely as a gamble for pursuing a monetary
                                                                                 G
claim against the respondent, without the existence of any bonafide
dispute. Thus the High Court in the impugned judgement held that the
appellant had failed to make out any case of hardship or injustice
justifying condonation of delay in filing the applications under Section
43(3) of the 1996 Act, and the Arbitration Applications were hopelessly
barred by limitation. Hence this appeal.                                         H
1116            SUPREME COURT REPORTS                          [2019] 11 S.C.R.


 A            5. The limited issue which arises for our consideration is
       therefore, whether the Arbitration Applications, on the facts of this case,
       are barred by limitation?
               Learned counsel for the appellant vehemently contended that
       the cause of action arose not in 1983 or 1989, but by the letters dated
 B     17/18.12.1999 in which the respondents repudiated the appellant’s claims.
       The period prior to 18.12.1999 during which the parties were negotiating
       and corresponding with each other could not be counted for the purpose
       of computing the limitation period. It was due to the respondent’s delay
       in responding to the representations sent by the appellant that delay arose
 C     in filing the Arbitration Applications. Hence the Arbitration Applications
       are not barred by limitation. In support of his contention, he relied upon
       the decisions of this Court in Major (Retd.) Inder Singh Rekhi v. Delhi
       Development Authority, (1988) 2 SCC 338; Hari Shankar Singhania
       and Others v. Gaur Hari Singhania and Others, (2006) 4 SCC 658;
 D     Shree Ram Mills Ltd. v. Utility Premises (P) Ltd., (2007) 4 SCC
       599 and Sunder Kukreja and Others v. Mohan Lal Kukreja and
       Anr., (2009) 4 SCC 585.
             6. Before deciding the issue of limitation, we must first consider
       whether it is the 1940 Act or the 1996 Act which applies to the
 E     Arbitration Applications. Section 85 of the 1996 Act provides as follows:
             “85. Repeal and savings.-(1) The Arbitration (Protocol and
             Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10
             of 1940) and the Foreign Awards (Recognition and Enforcement)
             Act, 1961 (45 of 1961) are hereby repealed.
 F
              (2) Notwithstanding such repeal,-
             (a) the provisions of the said enactments shall apply in relation
             to arbitral proceedings which commenced before this Act came
             into force unless otherwise agreed by the parties but this Act shall
 G           apply in relation to arbitral proceedings which commenced on or
             after this Act comes into force;
             (b) all rules made and notifications published, under the said
             enactments shall, to the extent to which they are not repugnant
             to this Act, be deemed respectively to have been made or issued
 H           under this Act.” (emphasis supplied)
M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN, RAJASTHAN VIDYUT 1117
    UTPADAN NIGAM LTD. [MOHAN M. SHANTANAGOUDAR, J.]


      Section 21 of the 1996 Act provides:                                   A
      “21. Commencement of arbitral proceedings.-Unless
      otherwise agreed by the parties, the arbitral proceedings in
      respect of a particular dispute commence on the date on which
      a request for that dispute to be referred to arbitration is received
      by the respondent.”                                                    B
       It is settled law that the date of commencement of arbitration
proceedings for the purpose of deciding which Act applies, upon a
conjoint reading of Sections 21 and Section 85(2)(a) of the 1996 Act,
shall be regarded as the date on which notice was served to the other
party requesting appointment of an arbitrator (See Milkfood Ltd. v.          C
GMC Ice Cream (P) Ltd, (2004) 7 SCC 288; Shetty's Constructions
Co. Pvt. Ltd. v. Konkan Railway Construction and Another, (1998)
5 SCC 599).
       Though strictly speaking the 1996 Act came into force from
22.8.1996, for all practical purposes it is deemed to have been effective    D
from 25.1.1996, which is when the Arbitration and Conciliation
Ordinance, 1996 came into force. Hence if the date of notice was prior
to 25.1.1996, the 1940 Act will apply. If the date of notice was on or
after 25.1.1996, the 1996 Act will apply to the arbitral proceedings
though the arbitration clause contemplated proceedings under the 1940        E
Act (See Fuerst Day Lawson Ltd v. Jindal Exports Ltd., (2001)
6 SCC 356: O.P. Malhotra on The Law and Practice of Arbitration,
Justice Indu Malhotra ed., 3rd. edn, 2014 at page 1915). In Milkfood
Ltd (supra) as well, the arbitration agreement was governed by the
provisions of the 1940 Act. The appellant sent a notice to the respondent
                                                                             F
for appointment of an arbitrator on 14.9.1995. Hence this Court held
that the 1940 Act would apply.
      In the present case, since notice was served to the respondent
in 2002, the provisions of the 1996 Act will be deemed to apply to the
present Arbitration Applications filed by the appellant. However, it         G
remains to be examined separately whether the aforesaid Applications
have been filed within the statutory limitation period.
      7. Section 43 of the 1996 Act (relevant part) provides as follows:
      43. Limitations.-(1) The Limitation Act, 1963 (36 of 1963), shall
      apply to arbitrations as it applies to proceedings in court…           H
1118            SUPREME COURT REPORTS                          [2019] 11 S.C.R.


 A           (3) Where an arbitration agreement to submit future disputes to
             arbitration provides that any claim to which the agreement applies
             shall be barred unless some step to commence arbitral
             proceedings is taken within a time fixed by the agreement, and
             a dispute arises to which the agreement applies, the Court, if it
             is of opinion that in the circumstances of the case undue hardship
 B
             would otherwise be caused, and notwithstanding that the time
             so fixed has expired, may on such terms, if any, as the justice of
             the case may require, extend the time for such period as it thinks
             proper…”
              Section 43(1) and (3) of the 1996 Act is in pari materia with
 C
       Section 37(1) and (4) of the 1940 Act. It is well-settled that by virtue
       of Article 137 of the First Schedule to the Limitation Act, 1963 the
       limitation period for reference of a dispute to arbitration or for seeking
       appointment of an arbitrator before a Court under the 1940 Act (See
       State of Orissa and Another v. Damodar Das, (1996) 2 SCC 216)
 D     as well as the 1996 Act (See Grasim Industries Limited v. State of
       Kerala, (2018) 14 SCC 265) is three years from the date on which
       the cause of action or the claim which is sought to be arbitrated first
       arises.
             In Damodar Das (supra), this Court observed, relying upon
 E     Russell on Arbitration by Anthony Walton (19th Edn.) at pages 4-5
       and an earlier decision of a two-Judge bench in Panchu Gopal Bose
       v. Board of Trustees for Port of Calcutta, (1993) 4 SCC 338, that
       the period of limitation for an application for appointment of arbitrator
       under Sections 8 and 20 of the 1940 Act commences on the date on
       which the “cause of arbitration” accrued, i.e. from the date when the
 F
       claimant first acquired either a right of action or a right to require that
       an arbitration take place upon the dispute concerned.
              We also find the decision in Panchu Gopal Bose (supra)
       relevant for the purpose of this case. This was a case similar to the
       present set of facts, where the petitioner sent bills to the respondent in
 G
       1979, but payment was not made. After an interval of a decade, he
       sent a notice to the respondent in 1989 for reference to arbitration. This
       Court in Panchu Gopal Bose observed that in mercantile references
       of this kind, it is implied that the arbitrator must decide the dispute
       according to the existing law of contract, and every defence which
 H     would have been open to the parties in a court of law, such as the plea
M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN, RAJASTHAN VIDYUT 1119
    UTPADAN NIGAM LTD. [MOHAN M. SHANTANAGOUDAR, J.]


of limitation, would be open to the parties for the arbitrator's decision      A
as well. Otherwise, as this Court observed:
      “8…a claim for breach of contract containing a reference clause
      could be brought at any time, it might be 20 or 30 years after
      the cause of action had arisen, although the legislature has
      prescribed a limit of three years for the enforcement of such a          B
      claim in any application that might be made to the law courts…”
      This Court further held as follows:
      “11. Therefore, the period of limitation for the commencement
      of arbitration runs from the date on which, had there been no
      arbitration clause, the cause of action would have accrued. Just         C
      as in the case of civil actions the claim is not to be brought after
      the expiration of a specified number of years from the date on
      which the cause of action accrued, so in the case of arbitrations,
      the claim is not to be put forward after the expiration of the
      specified number of years from the date when the claim accrued.          D
      12. In Russell on Arbitration,…At page 80 it is stated thus:
      ‘An extension of time is not automatic and it is only granted if
      ‘undue harship’ would otherwise be caused. Not all hardship,
      however, is ‘undue hardship’; it may be proper that hardship
      caused to a party by his own default should be borne by him,             E
      and not transferred to the other party by allowing a claim to be
      reopened after it has become barred.’ ” (emphasis supplied)
       Therefore in Panchu Gopal Bose this Court held that the claim
is “hopelessly barred” by limitation as the petitioner by his own conduct
had slept over his right for more than 10 years.                               F
       8. Undoubtedly, a different scheme has been evolved under the
1996 Act. However we find that the same principles continue to apply
with respect to the applicability of the law of limitation to an application
under Section 11(6) of the 1996 Act as laid down in the decisions dealing
with judicial appointment of an arbitrator under Sections 8 and 20 of          G
the 1940 Act.
       Our finding is supported by the decision of a three-Judge Bench
of this Court in Grasim Industries (supra). In Grasim Industries,
similar to the present case, the arbitration agreement provided for
reference to be made under the 1940 Act. However the appellant raised          H
1120            SUPREME COURT REPORTS                          [2019] 11 S.C.R.


 A     their claim in 2002, attracting the application of the 1996 Act. This Court
       was therefore faced with the issue of whether an application for
       appointment of an arbitrator under the 1996 Act would be barred by
       limitation in respect of the appellant’s claim. This Court found that, in
       view of Section 28 of the Indian Contract Act, 1872, the parties in the
       arbitration agreement could not stipulate a restricted period for raising
 B
       a claim. However, the limitation period for invocation of arbitration
       would be three years from the date of the cause of action under Article
       137 of the Limitation Act, 1963. However in the facts of that case,
       this Court found that certain claims had arisen within the three year
       limitation period and hence, could be allowed.
 C
              Applying the aforementioned principles to the present case, we
       find ourselves in agreement with the finding of the High Court that the
       appellant’s cause of action in respect of Arbitration Applications Nos.
       25/2003 and 27/2003, relating to the work orders dated 7.10.1979 and
       4.4.1980 arose on 8.2.1983, which is when the final bill handed over to
 D     the respondent became due. Mere correspondence of the appellant by
       way of writing letters/reminders to the respondent subsequent to this
       date would not extend the time of limitation. Hence the maximum period
       during which this Court could have allowed the appellant’s application
       for appointment of an arbitrator is 3 years from the date on which cause
       of action arose i.e. 8.2.1986. Similarly, with respect to Arbitration
 E
       Application Nos. 28/2003 relating to the work order dated 3.5.1985, the
       respondent has stated that final bill was handed over and became due
       on 10.8.1989. This has not been disputed by the appellant. Hence the
       limitation period ended on 10.8.1992.
             Since the appellant served notice for appointment of arbitrator
 F
       in 2002, and requested the appointment of an arbitrator before a Court
       only by the end of 2003, his claim is clearly barred by limitation.
              9. The decisions relied upon by the appellant are inapplicable to
       the present facts and circumstances. At the outset, we observe that
       the decision in Sunder Kukreja (supra) is on a different set of facts.
 G
       In that decision, the question before this Court was whether the
       arbitration clause in a partnership deed would continue to subsist in light
       of a subsequent retirement deed which the appellant denied executing,
       and whether the arbitrator appointed by the Court could examine the
       genuineness of the said retirement deed. Hence it is not relevant to
 H     the issue of limitation.
M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN, RAJASTHAN VIDYUT 1121
    UTPADAN NIGAM LTD. [MOHAN M. SHANTANAGOUDAR, J.]


       Turning to the other decisions, it is true that in Major (Retd.)         A
Inder Singh Rekhi (supra), this Court observed that the existence of
a dispute is essential for appointment of an arbitrator. A dispute arises
when a claim is asserted by one party and denied by the other. The
term 'dispute' entails a positive element and mere inaction to pay does
not lead to the inference that dispute exists. In that case, since the
                                                                                B
respondent failed to finalise the bills due to the applicant, this Court held
that cause of action would be treated as arising not from the date on
which the payment became due, but on the date when the applicant
first wrote to the respondent requesting finalisation of the bills. However,
the Court also expressly observed that ‘a party cannot postpone the
accrual of cause of action by writing reminders or sending                      C
reminders.’
       In the present case, the appellant has not disputed the High
Court's finding that the appellant itself had handed over the final bill to
the respondent on 8.2.1983. Hence, the holding in Major (Retd.) Inder
Singh Rekhi (supra) will not apply, as in that case, the applicant's claim      D
was delayed on account of the respondent's failure to finalize the bills.
Therefore the right to apply in the present case accrued from the date
on which the final bill was raised (See Union of India v. Momin
Construction Company, (1997) 9 SCC 97).
       10. In Hari Shankar Singhania (supra), the dispute to be                 E
referred to arbitration was regarding division of assets amongst partners
of a dissolved family partnership firm. The appellants specifically placed
letters on the record showing that the parties were trying to reach an
amicable settlement prior to the stage where adjudication of the dispute
became inevitable. This Court observed that the stage of adjudication
                                                                                F
by way of arbitration comes when settlement with or without conciliation
becomes impossible. Hence this Court held that the limitation period
would not run so long as the parties were in dialogue. In that sense,
when the settlement talks were taking place, the period of limitation
would commence from the date of the last communication between the
parties.                                                                        G
       It is relevant to note that the findings in Hari Shankar
Singhania were made in the specific context of a family settlement.
This Court specifically observed that such a settlement is to be treated
differently from a formal commercial settlement, and that efforts should
be made to promote family settlements without the obstruction of                H
1122             SUPREME COURT REPORTS                           [2019] 11 S.C.R.


 A     technicalities of limitation, etc. Hence this Court was not dealing with
       a mercantile dispute such as in the present case.
              In Shree Ram Mills Ltd (supra), this Court found that the parties
       were continuously at loggerheads over joint development of certain land.
       They had entered into a Memorandum of Understanding to settle their
 B     dispute, however the respondent cancelled this Memorandum; hence
       the dispute was referred to arbitration under Section 11(6) of the 1996
       Act. This Court, upon considering the complete history of negotiation
       between the parties which was placed before it, on the facts of that
       case, concluded that the claim would not be barred by limitation as there
 C     was a continuing cause of action between the parties.
              Having perused through the relevant precedents, we agree that
       on a certain set of facts and circumstances, the period during which
       the parties were bona fide negotiating towards an amicable settlement
       may be excluded for the purpose of computing the period of limitation
 D     for reference to arbitration under the 1996 Act. However, in such cases
       the entire negotiation history between the parties must be specifically
       pleaded and placed on the record. The Court upon careful consideration
       of such history must find out what was the ‘breaking point’ at which
       any reasonable party would have abandoned efforts at arriving at a
 E     settlement and contemplated referral of the dispute for arbitration. This
       'breaking point' would then be treated as the date on which the cause
       of action arises, for the purpose of limitation. The threshold for
       determining when such a point arises will be lower in the case of
       commercial disputes, where the party’s primary interest is in securing
       the payment due to them, than in family disputes where it may be said
 F     that the parties have a greater stake in settling the dispute amicably,
       and therefore delaying formal adjudication of the claim.
              Moreover, in a commercial dispute, while mere failure to pay may
       not give rise to a cause of action, once the applicant has asserted their
       claim and the respondent fails to respond to such claim, such failure
 G
       will be treated as a denial of the applicant's claim giving rise to a dispute,
       and therefore the cause of action for reference to arbitration. It does
       not lie to the applicant to plead that waited for an unreasonably long
       period to refer the dispute to arbitration merely on account of the
       respondent's failure to settle their claim and because they were writing
 H     representations and reminders to the respondent in the meanwhile.
M/S GEO MILLER & CO. PVT. LTD. v. CHAIRMAN, RAJASTHAN VIDYUT 1123
    UTPADAN NIGAM LTD. [MOHAN M. SHANTANAGOUDAR, J.]


        11. We are of the considered opinion that the decisions in Hari        A
Shankar Singhania and Shree Ram Mills Ltd. (supra) will not be
applicable to the appellant’s case as in these cases the entire negotiation
history of the parties had been made available to this Court. In the
present case, the appellant company vaguely stated before this Court
that it was involved in ‘negotiation’ with the respondents in the 14 years
                                                                               B
preceding the application dated 4.10.1997 before the Settlement
Committee. However it did not place on record any evidence to show
when it had first made a representation to the respondent in respect of
the outstanding amounts, and what was the history of their negotiation
with the respondents such that it was only in 1997 that they thought of
approaching the Settlement Committee. Further, they have not brought           C
anything on record to show that they were required to proceed before
the Settlement Committee before requesting the appointment of an
arbitrator. The arbitration clause does not stipulate any such
requirement.
       We therefore find that the appellant company’s case has a               D
certain element of mala fide in so far as it has made detailed
submissions in respect of its communications with the respondents
subsequent to 4.10.1997, but has remained conspicuously silent on the
specific actions taken to recover the payments due prior to that date.
Under Section 114(g) of the Indian Evidence Act, 1872 this Court can
                                                                               E
presume that evidence which could be and is not produced would, if
produced, be unfavourable to the person who withholds it.
       Hence, in the absence of specific pleadings and evidence placed
on record by the appellant with respect to the parties' negotiation history,
this Court cannot accept the appellant’s contention that it was only after
                                                                               F
the respondent's letter dated 18.12.1999 that the appellant could have
contemplated arbitration in relation to the outstanding amounts. Even if
we were to include the time spent proceeding before the Settlement
Committee, the limitation period, at the latest, would have started running
from 4.10.1997 which is when the appellant made a representation to
the Settlement Committee and the Committee failed to respond to the            G
same.
       It is further relevant to note that even the respondent’s letter
dated 18.12.1999 does not completely repudiate the appellant's claims
but requests the submission of certain documents for verification. Hence
it was not so radical a departure from the prevailing situation at that        H
1124             SUPREME COURT REPORTS                          [2019] 11 S.C.R.


 A     time so as to give a finding that the appellant could not have
       contemplated arbitration prior to the aforesaid letter.
              We also find it pertinent to add that the appellant’s own default
       in sleeping over his right for 14 years will not constitute a case of ‘undue
       hardship’ justifying extension of time under Section 43(3) of the 1996
 B     Act or show ‘sufficient cause’ for condonation of delay under Section
       5 of the Limitation Act. The appellant should have approached the Court
       for appointment of an arbitrator under Section 8(2) of the 1940 Act
       within the appropriate limitation period. We agree with the High Court's
       observation that the entire dispute seems concocted so as to pursue a
       monetary claim against the respondents, taking advantage of the
 C
       provisions of the 1996 Act.
             12. Hence the appeals are dismissed and the impugned judgement
       and order is confirmed, in the above terms.


 D     Kalpana K. Tripathy                                         Appeals dismissed.




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