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M/S.Tvs Finance And Services Ltd vs M/S.Kwality Spinning Mills


Author: Muskaan Bangani, 4th Year student at Mody University of Science and Technology.


Citation: 2004 52 SCL 500 Mad

Date of Decision: 30th June, 2016

Bench:  A.SELVAM and P. Kalaiyarasan

Original Copy: N/A

 

Facts:

  • The first respondent is a finance company that entered into a hire purchase agreement on 28.03.1997 with the petitioner and a subsequent agreement in which the petitioner agreed to follow the terms and conditions of the agreement.
  •  The second petitioner is the guarantor for the first petitioner. In the said agreement, the petitioner agreed to pay the full amount before the period of 34 months starting rom 1.6.1997. Since the petitioners have failed to fulfil the terms of the said agreement, a notice dated 7.1.1998 has been issued to them by the first respondent, and therefore, the first respondent is calling upon the petitioners to pay an amount of Rs.21,84,486 as on 31.12.1997, within a period of 21 days. 
  • Since this time, a Provisional Application No.316 was submitted, which created an Advocate Commissioner to take control of the machinery. Since then, other proceedings have emerged and, at last, the petitioner (the respondent in the case) has requested that arbitration proceedings be initiated by the respondent, whereupon the award being questioned was rendered in favour of the petitioner (the respondent) and to nullify the same, an appeal was filed by the petitioner to The Madras High Court. 
  • On behalf of the appellant, a learned counsel argued that a Deed of Assignment has been entered into on 23.7.1998 between the parties, where under Clause 22, it is specifically stated that if the parties do not make their respective payments by June 2003, arbitration proceedings can be initiated. By taking into the consideration the facts of the case, Article 55 of the Limitation Act, 1963, would apply precisely. 
  • In Khetsidas Gangaram v. First Land Acquistion Collector, Calcutta, successfully argued against the acquisition of land by the first land acquisition collector in Calcutta, that,the first instalment became due no later than July 1st, 1992. Installments were due every six months, with the following payment paying on January 1st, 1993. Cause of action arose for the recovery of the installment when it became due, meaning the first installment was already past due by the time the series was issued and therefore could not be paid. Thus, in this way, the following installments’s causes of action emerged only as they were due. Because of this, we believe that the learned trial judge was incorrect when he claimed that the plaintiff’s whole claim accrued on the day the agreement was executed. Our view is that when a specific instalment is due, a new cause of action is created for that installment. This new cause of action accrues with respect to each and every instalment and lasts for three years. The computation to determine whether the time of limitation has expired for any given checks and, if that computation yields a positive result, the respondent’s letter must also be taken into account, necessitating a reconsideration. 
  • The counsel for the respondents/petitioners argued that Clause 22 of the Deed of Assignment requires arbitration procedures to be promptly started on default of two instalments. Under such circumstances, provided for In article 137 of the Limitation Act, 1963, the whole arbitration proceedings are barred by limitation and the arbitrator, without considering the plea of limitation raised on the respondents 1 and 2/petitioners, has passed an erroneously found award.
  • Various judgements cited by the counsel for its argument are as follows:
  1. The Hon’ble Supreme Court of India said in Steel Authority of India Ltd. v. J.C.Budharaja, Government and Mining Contractor that arbitration procedures begin when notice is given under Article 137 of the Limitation Act, 1963
  2.  The Honorable Supreme Court of India in S. Rajan vs State Of Kerala And Another concluded that if any difference exists between the parties, the right to bring suit accrued with the date of the difference according to Article 137 of the Limitation Act, 1963.
  3. The Hon’ble Apex Court in Panchu Gopal Bose vs. Board of Trustees for the Port of Calcutta ruled that the statute of limitations commenced at the date of the occurrence of the event that gives rise to the claim.

Issue:

  • The only point that has now winched to the fore is as to whether as per Clause 22 of the Deed of Assignment, Article 55 of the Limitation Act would apply or Article 137 of the said Act would apply?

Judgement:

The madras high court –

  • The learned Single Judge after hearing the submissions from both the parties, stated that, the parties can initiate to arbitration proceedings under Clause 22 of the Assignment Deed, and Clause 22 has been dissected into two sections, Part 1 stipulates that in the event that there is any disagreement, conflict, or problem between the parties, the parties may request arbitration, Part 2, if two consecutive payments are not paid within a certain period of time, arbitration procedures may be initiated.  
  • Clause 22’s application allows the court to rely on Article 137 of the Limitation Act, the court is prevented from coming to a judgement that the period of limitation would begin only when the obligation of two consecutive payments is not fulfilled.
  • It is well-known that agreement had been formed between the parties. The primary argument put out on the appellant/first respondent’s side is that once a contract is broken, the time period would start to run according to Clause 55 of the Limitation Act, 1963 An acknowledged truth is that the final instalment is due from June, 2003, as shown by the document contained in the Deed of Assignment. 
  • After June 2003, there would be cause of action for initiating arbitration procedures, and as of June 2003, the respondent had begun arbitration proceedings. In light of this, it is apparent that Article 55 of the Limitation Act, 1963, which speaks directly to the circumstances of the case, is applicable to the circumstances and the arbitration procedures have begun before the expiration of the period of limitation and cause of action would continue till breach of contract in respect of last payment. The Original Side Appeal is liable to be allowed with cost.

Critical analysis:

  • According to Article 137 of the Limitation Act limitation period would commence only from default of two consecutive installments. According to Article 55 of the Limitation Act, the period of limitation would commence only from the date the cause of action arises and further if there is any breach of contract, cause of action is continuing.
  • The final instalment comes due only from June, 2003, according to the provisions contained in the Deed of Assignment. Arbitration procedures were started by the appellant on June 16, 2003, resulting in cause of action arising for initiating arbitration proceedings. Thus, because the facts and circumstances of the current case are identical to those in Article 55 of the Limitation Act, 1963, the arbitration procedures began well within the time frame established by law.
  • Since the previous payment comes due in June of 2003, and arbitration proceedings have been started on June 16th 2003, the next instalment falls due in June of 2003. Article 55 of the Limitation Act, 1963, thus makes it plain that action would proceed up to the breach of contract in connection with the last payment.

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