STATE OF ORISSA AND ANR. versus SRI DAMODAR DAS

Citation: [1995] SUPP. 6 S.C.R. 800 · Decided: 15-12-1995 · Supreme Court of India · Bench: K. RAMASWAMY, FAIZAN UDDIN, B.N. KIRPAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
STATE OF ORISSA AND ANR. 
v. 
SRI DAMODAR DAS 
DECEMBER 15, 1995 
B 
[K. RAMASWAMY, FAIZAN UDDIN AND B.N. KIRPAL, JJ.] 
Arbitration Act, 1940 : Sections 8, 20 and 37. 
Limitation-Commencemellf of-From the date on which cause of 
C arbitration acc1ued--Cause of arbitration-Whether arises-On unequivocal 
denial of claim of one parry by the other-This is so even if there is a provision 
in the arbitration clause that no cause of action shall accrue until award is 
made. 
D 
E 
F 
Arbitration Act, 1940: Section 2(a). 
Arbitration Clause-Agreement to refer dispute or difference to ar-
bitrator-1'.fust be spelt out expressly or by necessary implication-Clause 
empowering decision of Public Health Engineer as final in dispute relating to 
specifications, drawing or quality of work-Held: does not constitute an 
arbitration clause. 
Limitation Act, 1963 : 
Anic/e 137 of Schedule-Applicable to application under Section 20 of 
the Arbitration Act, 1940. 
Deeds and Documents : 
Clause in contract-Must be read as a whole. 
The respondent-contractor was awarded three contracts for execut-
ing water supply work. In respect of two contracts, after executing some 
G work, he abandoned the contract and accepted the measurements and 
payment of the fourth running bill without any objection on July 19, 1976 
and October 6, 1977 respectively. With regard to the first, which was 
executed in 1967, he accepted the measurement and payment of the bill 
without raising any objection. 
H 
On September 15, 1980, the respondent wrote a letter to the Chief 
800 
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.... 
STATEv. DAMODARDAS 
801 
Engineer, Public Health alleging that disputes had arisen out of and A 
relating to the aforesaid agreement for the works done and called upon 
the Chief Engineer to nominate an arbitrator who in turn informed the 
respondent that since there was no arbitration clause in the agreement, 
the question of relevance to arbitrator did not arise. The respondent 
thereon filed applications under Sections 8 and 20 of the Arbitration act, B 
1940 in the court of sub.ordinate Judge for appointment of an arbitrator. 
The Subordinate Judge allowed the application under Section 8 and 
directed the parties to file the agreement in the Court and also to nominate 
panel of names for appointment as an arbitrator. On revision and appeals 
having been filed, the High Court dismissed the revision and miscel-
C 
laneous appeals. Aggrieved by the High Court's judgment the appellants 
have preferred the present appeal. 
On hehalf of the appellants it was contended that there was no 
arbitration agreement between the parties; that the question of reference 
did not arise; that works having been executed as early as in 1967 and 1976, D 
the dispute was barred by limitation; and that the respondent having 
received the amounts without any protest, conld not avail of the arbitra· 
ti on. 
On behalf of the respondent it was contended that the decision of E 
the Public Health Engineer was final in respect of any claim, right, matter 
or thing whatsoever in any arising out of, or relating to, the contract; that 
by necessary implication envisages, within its ambit, an ar~itration of a 
dispute or difference between the appellants and the respondent; that the 
respondent having issued a notice calling upon the Chief Engineer to 
appoint or nominate an arbitrator and the Chief Engineer having failed F · 
to do so, he was entitled to invoke the jurisdiction Qf the Court under 
Sections 8 and 20 of the Act; that the claim was made on september 15, 
1980 and the applications were immediately filed thereafter; and that the 
claims were not barred by limitation. 
Allowing the appeal, this Court 
HELD : 1.1. The period of limitation for commencing 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 
G 
or a right to require that an arbitration take place upon the dispute H 
802 
SUPREME COURT REPORTS [1995) SUPP. 6 S.C.R. 
A concerned. The period of limitation for the commencement of an arbitra· 
tion runs from the date on which, had there been no arbitration clause, 
the cause of action would have accrued : 
1:just as in the case of 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 
B 
c 
arbitrations, the claim is not to be put forward after the expiration of the

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