# HARi SHANKAR SINGHANIA AND ORS v. GAUR HARI SINGHANIA AND ORS

- **Citation:** [2006] 3 S.C.R. 726
- **Court:** Supreme Court of India
- **Decided:** 2006-04-04
- **Bench:** H.K. Sema, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hari-shankar-singhania-and-ors-v-gaur-hari-singhania-and-ors-21152
- **Pages:** 25

## Headnote

Arbitration:
Arbitration Act, 1940:
Section 20- Application under-- Limitation for-Three brothers formed
a partnership firm-There was disagreement between them as to the division
of the assets involvLd in the partnership firm-Distribution of the immoveable
properties could not be effected by 31.5.1987 as contemplated by the Deed of
D Dissolution--Nominees were appointed by each group to work out an
arrangement--Numerous letters written by the parties to find a w01 10 seltle
the dispute pertaining to the division of assets-Lust communication in this
regard was on 29. 91989--Plailll under S. 20 filed by one group on 8. 5.1992.
High Court dismissed the arbitrution suit on the ground of limitution being 50
days beyond the period of three yeurs computed from I IJ. 3.19,W -Correctness
E of-Held: Article 137 of the limitation Act applies to an application under S.
20 of the Arbitration Act--App/ication is required to be filed within a period
of three years when the right to apply uccrues--Right to apply accrues when
difference or dispute arises between the parties to the arbitration agreementRight to apply accrued only on the date of the last correspondence i.e.
F 29.9.1989--Hence, suit filed on 8.5.1992 is within limitation.
limitation Act, 1963: Article 137.
Arbitration suit--Family arrangements or settlements-Dispute over
distribution of immoveable properties-Duty of court- -Held' Family settlement
should be treated differently from any other formal commercial settlementG Technicalities as limitation elc. should not be put ut risk of the implementation
of a settlement drawn by a family-Hence, technical considerations should
H
give way to peace and harmony in enforcement of family arrangements or
settlements.
726
-
-
-
---
HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA
727
There was a disagreement between the appellants and the respondents A
as to the division of the assets involved in the partnership firm formed by
three brothers. Therefore, the distribution of the immoveable properties could
not be effected by 31.5.1987 as con.templated by the Deed of Dissolution.
Ultimately, in February 1988 the three groups each of appointed nominees
to work out an arrangement for satisfactory distribution of the properties of B
the said dissolved firm. The nominees held several meetings but no agreement
of distribution could be arrived at. There were numerous letters written by
both parties to find a way to settle the dispute pertaining to the division of
assets. The last letter that was exchanged in this regard was a letter dated
29.9.1989.
The appellants filed a plaint under Section 20 of the Arbitration Act,
1940 before the High Court on 8.5.1992. The High Court dismissed the
Arbitration Suit on the ground of limitation being 50 days beyond the period
of three years computed from 18.3.1989. Hence the appeal.
On behalf of the appellants, it was contended that the date of the last
communication between the parties to reach a settlement was 29.9.1989; that
the right to apply under Section 20 of the Arbitration Act accrued to the
appellants on 29.9.1989; and, therefore, limitation period would start running
from 29.9.1989 and hence arbitration suit filed on 8.5.1992 was within
limitation as laid down in Article 137 of the Schedule to the Limitation Act.
1963.
The following questions arose before the court:-
I. When the right to file the application under Section 20 of the
Arbitration Act, 1940 has accrued and when it becomes time barred?
2. Whether in the context of Section 20 of the Arbitration Act, 1940 a
difference or dispute can be said to have arisen between the parties without
there being any denial or repudiation of a claim by a party?
Allowing the appeal, the Court
HELD: I.I. It is now well-settled that Article 137 of the Limitation Act,
1963 applies to an application under Section 20 of the Arbitration Act, 1940.
Accordingly, an application under Section 20 of the Act for filing the
arbitration agreement in Court and for reference of d

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A
B
c
HARi SHANKAR SINGHANIA AND ORS.
v.
GAUR HAR! SINGHANIA AND ORS.
APRIL 4, 2006
[H.K. SEMA AND DR. AR. LAKSHMANAN, JJ.]
Arbitration:
Arbitration Act, 1940:
Section 20- Application under-- Limitation for-Three brothers formed
a partnership firm-There was disagreement between them as to the division
of the assets involvLd in the partnership firm-Distribution of the immoveable
properties could not be effected by 31.5.1987 as contemplated by the Deed of
D Dissolution--Nominees were appointed by each group to work out an
arrangement--Numerous letters written by the parties to find a w01 10 seltle
the dispute pertaining to the division of assets-Lust communication in this
regard was on 29. 91989--Plailll under S. 20 filed by one group on 8. 5.1992.
High Court dismissed the arbitrution suit on the ground of limitution being 50
days beyond the period of three yeurs computed from I IJ. 3.19,W -Correctness
E of-Held: Article 137 of the limitation Act applies to an application under S.
20 of the Arbitration Act--App/ication is required to be filed within a period
of three years when the right to apply uccrues--Right to apply accrues when
difference or dispute arises between the parties to the arbitration agreementRight to apply accrued only on the date of the last correspondence i.e.
F 29.9.1989--Hence, suit filed on 8.5.1992 is within limitation.
limitation Act, 1963: Article 137.
Arbitration suit--Family arrangements or settlements-Dispute over
distribution of immoveable properties-Duty of court- -Held' Family settlement
should be treated differently from any other formal commercial settlementG Technicalities as limitation elc. should not be put ut risk of the implementation
of a settlement drawn by a family-Hence, technical considerations should
H
give way to peace and harmony in enforcement of family arrangements or
settlements.
726
-
-
-
---
HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA
727
There was a disagreement between the appellants and the respondents A
as to the division of the assets involved in the partnership firm formed by
three brothers. Therefore, the distribution of the immoveable properties could
not be effected by 31.5.1987 as con.templated by the Deed of Dissolution.
Ultimately, in February 1988 the three groups each of appointed nominees
to work out an arrangement for satisfactory distribution of the properties of B
the said dissolved firm. The nominees held several meetings but no agreement
of distribution could be arrived at. There were numerous letters written by
both parties to find a way to settle the dispute pertaining to the division of
assets. The last letter that was exchanged in this regard was a letter dated
29.9.1989.
The appellants filed a plaint under Section 20 of the Arbitration Act,
1940 before the High Court on 8.5.1992. The High Court dismissed the
Arbitration Suit on the ground of limitation being 50 days beyond the period
of three years computed from 18.3.1989. Hence the appeal.
On behalf of the appellants, it was contended that the date of the last
communication between the parties to reach a settlement was 29.9.1989; that
the right to apply under Section 20 of the Arbitration Act accrued to the
appellants on 29.9.1989; and, therefore, limitation period would start running
from 29.9.1989 and hence arbitration suit filed on 8.5.1992 was within
limitation as laid down in Article 137 of the Schedule to the Limitation Act.
1963.
The following questions arose before the court:-
I. When the right to file the application under Section 20 of the
Arbitration Act, 1940 has accrued and when it becomes time barred?
2. Whether in the context of Section 20 of the Arbitration Act, 1940 a
difference or dispute can be said to have arisen between the parties without
there being any denial or repudiation of a claim by a party?
Allowing the appeal, the Court
HELD: I.I. It is now well-settled that Article 137 of the Limitation Act,
1963 applies to an application under Section 20 of the Arbitration Act, 1940.
Accordingly, an application under Section 20 of the Act for filing the
arbitration agreement in Court and for reference of disputes to arbitration
in accordance therewith is required to be filed within a period of three years
c
D
E
F
G
H
728
SUPREME COURT REPORTS [2006] 3 S.C.R.
A when the right to apply accrues. The right to apply accrues when difference
or dispute arises between the parties to the arbitration agreement.
1.2. The High Court has committed an error in construing Article 137
of the Schedule to the Limitation Act, 1963 in a manner, which would unduly
restrict the remedy of arbitration especially in family disputes. It is a well
B settled policy of law in the first instance to promote a settlement between the
parties wherever possible and particularly in family disputes. [737-Dj
2.1. Where a settlement with or without conciliation is not possible, then
comes the stage of adjudication by way of arbitration. Article 137, as construed
C in this sense, then as long as parties are in dialogue and even the differences
would have surfaced it cannot be asserted that a limitation under Article 137
has commenced. Such an interpretation will compel the parties to resort to
litigation/arbitration even where there is a serio.us hope of the parties
themselves resolving the issues. [737-Ej
D
2.2. The High Court has failed to appreciate that merely because the
parties did not take steps for distribution of the immovable properties it did
not automatically follow that the disputes and differences had arisen between
them in this regard. In fact, from the correspondence on record, it is clear
that the parties were making efforts to complete the distribution of the
immovable properties as per the terms of the agreement between them. The
E correspondence between the parties does not indicate that any dispute or
difference had arisen between them on or before 18.3.1989 and the finding
of the High Court to the effect that the correspondence exchanged between
the parties leaves no manner of doubt that the dispute had arisen between
the parties in any case on 18.03.1989 is erroneous, contrary to the record and
F unsustainable. (738-C, DJ
3. In the instant case, the correspondence exchanged between the parties
was not merely in the nature of reminders but also instruments to resolve
the matter and amicably negotiate. Therefore, when the negotiations were
taking place between the parties by way of various letters written by both
G the parties the right to apply can be said to accrue when it becomes necessary
to apply, that is to say when a dispute in fact arose. Furthermore, the
respondent did not ever dispute the claim of the appellants. (739-G j
Vulcan Insurance Cu. ltd v. Maharaj Singh, AIR (1976) SC 287, Stale of
Orissc1 v. Damodar Das, AIR (1996) SC 942; S. Rajan v. State uf Kera/a, AIR
H (1992) SC 1918 and Major (R1Jtd) Inda Singh Rekhi v. Delhi Development
HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA
_729
Authority, [1998) 2 SCC 388, relied on.
A
Oriental Building and Furnishing Co. Ltd v. Union of India. AIR (1981)
Del 293, approved.
· · ·
·
4.1. It cannot be said that merely because nominees were appointed for
working out an arrangement, which could not ultimately be arrived at, a· B
dispute or difference arose way back in February, 1988. In fact, even
immediately after this, the ~orrespondence ~xchanged between the parties
reveals a forthcoming attitude and amiable effol'ts made towards
implementing the deed of dissolution. [740-EJ
4.2. Therefore, the right to apply under Section 20 of the Arbitration C
Act, 1940 accrued to the appellants only on the date of the last correspondence
between the parties and the period of limitation commences from the date of
the last communication between the parties. Therefore;the finding of the High
Court that the application under Section 20 of the Arbitration- Act, 1940 is
beyond the period of limitation is erroneous. )741-A)
D
. 5. Furthermore, the contesting respondents cannot allege that moving·'
the Court is a better-suited remedy than arbitration proceedings as they have .
of their. own free will only adopted the arbitration clause in the Deed of
. Dissolution. [741-FJ
6.1. A family settlement is treated differently from any other formal .
commercial settlement as such settlement in the eyes of law ensures peace and
goodwill among the family members. Such family settlements generally meet
with the approval of the Courts. Such settlements are governed by a special
equity principle where the terms are fair_ and bona fide. taking into account
E
the well being of a family. )741-G; 742-AJ
F
6.2. The concept of 'family arrangement or settlement' and the present
one in hand should be treated differently. Technicalities of limitation etc.
should not be put at risk of the implementation of a settlement drawn by a
family, which is essential for maintaining peace and harmony in a family. Any
such arrangement would be upheld if family settlements were entered into to G
allay disputes existing or apprehended and even any dispute or difference apart,
if it H'GS entered into bona fide to n1ainlain peace or to bring about harmony in
the family. Even a semblance of a claim or some otherground, as say affeetion,
inay suffice. (742-A, BJ
H
730
Sl!PREME COURT REPORTS [2006] 3 S.C.R.
A
Ram Charan v. Gir!ja Nandini, AIR (1996) SC 323, Sahu Madho Das v.
B
Pandit Mukand Ram, f 1995( 2 SCR 22, Maturi Pullaiah v. Maturi Narasimham,
AIR (1966) SC 1836, Krishna Bihari/al v. Gulabchand 1197111 SCC 837, S.
Shanmugam Pillai v. K. Shanmugaon Pillai, 1197312 SCC 312, Kale v. Deputy
Director<J(Consolidatiun, (197613SCC119 and K.K. Modiv. KN. Modi, (1998(
3 sec 573, relied on.
Clifton v. Cockburn, (1834) 3 my & 76 and William v. William, (1866)
LR 2 Ch 29, referred to.
Kerr: "On Fraud" p. 364, referred to.
C
6.3. Technical considerations should give Wl.IY tu peace and harmony in
enforcement ojfamizy arrangements or settlements. (744-FI
7. I. The observation made by the High Court was that, an era!
application for condonation of delay will not be entertained in a Court of law.
'!'his observation is not pertinent in the present case because, condonation of
D delay needs to be asked for only if there is a delay in filing a suic and in the
fact situation of this case, there is no delay in the filing of the Arbitration suit
and the suit for arbitration filed by the appellants is within time prescribed
under Article 137 of the Schedule to the Limitation Act, 1963. [744-Gf
E
7.2. The arbitration suit filed by the appellants is well within time as
the dispute is deemed to have arisen only after the last communication between
the parties dated 29.9.1989, whereby there were efforts made to amicably settle
the dispute between the parties. (745-Af
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 126/2005.
From the Judgment and Order dated 8/9th June 2004 of the High Court
of Bombay in Appeal No. 440/1996 in Arbitration Suit No. 1904/1992.
Dr. A.M. Singhavi, Prag P. Tripathi. Pradip Kumar Khaitan. Ms. Gauri
Rasgotra and Shiladitya Rakshit for Mis. Khaitan & Co. A.O.R. for the
G Appellants.
Anil B. Divan, S. Ganesh, Bhargava V. Desai, S.V. Mehta. Rahul Gupta,
Ms. l'<upur Kanungo, Vinod B. Agarwala and Arvind Kumar for M/s. Gagrat
& Co. for the Respondent.
H
The Judgment of the Cou11 was delivered by
HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J] 73 J
DR. AR. LAKSHMANAN, J. This appeal was directed against the A
final judgment and order dated. 8/9th June, 2004 passed by the Division
Bench of the High Court of Judicature at Bombay in Appeal No. 440of1996
'
in Arbitration Suit No. 1904 of 1992 whereby the High Court dismissed the
appellants' appeal and upheld the order of the learned single Judge dismissing
the appellants' application under Section 20 of the Arbitration Act, 1940 as B
being barred by the law of limitation.
The short facts of the case are as follows:-
•
A partnership firm was formed by three brothers of the Singhania family.
The family owned considerable amount of immovable property, which was c
brought into the firm's business. In 1987, the partnership firm was dissolved
by ·way of dissolution deed as a family settlement. Under the dissolution
deed, clause 13 which enabled the parties or any party to go for arbitration
in case there was a dispute between them reads as follows:
"13. That if at any time any dispute, doubt or question shall arise D
between the parties hereto or their respective legal representative,
either on the construction of interpretation of these presents or
respecting the accounts, transactions, profit or loss of business or
their respective rights and obligations of the parties hereto or otherwise
in relation to the winding up of the partnership, then any such dispute,
E
doubt or question shall be referred to the arbitration of a single
Arbitrator. In case, however, the parties are unable to agree upon a
single Arbitrator, a panel of three Arbitrators shall be appointed, one
of them to be appointed by Shri Hari Shankar Singhania or failing
him by the Sixth Party, or failing the Sixth Party by the Seventh
Party, or failing the Seventh party, by the Eighth party and the second
to be appointed by Dr. Gaur Hari Singhania and failing him by the F
second party and failing the second party by the ninth party and the
third to be appointed by Shri Vijaypat Singhania and failing him by
the fourth party, provided always that the decision and/or award by
the said panel of the arbitrators shall have to be unanimous and in the
event of unanimity not being reached by the panel of arbitrators, they G
-
shall appoint an Umpire whose decision shall be final. All the
proceedings, before the sole arbitrator and/or panel of arbitrators shall
be governed by the provisions contained in the Arbitration Act, 1940
or by any statutory modification or re-enactment thereof."
Disagreement between the parties took place as to the division of the H
732
SUPREME COURT REPORTS [2006] 3 S.C.R.
A assets involved in the partnership firm. Therefore, the distribution of the said
immoveable properties could not be effected by 31st May 1987 as
contemplated by the Deed of Dissolution. Ultimately in February 1988, the
three groups each appointed a nominee to work out an arrangement whereby
distribution of the said immoveable properties of the said dissolved firm
B could be made and1 effected in the manner acceptable to all. The nominees
held several meetings but no agreement of distribution could be arrived at.
Further it can be observed that there were numerous letters written by both
parties to find a way to settle the dispute pertaining to the division of assets
involved in the partnership firm which was dissolved. The last letter that was
exchanged in this regard was a letter dated 29 September, 1989.
c
On May 8, 1992, a plaint under section 20 of the Arbitration Act, 1940
was filed before the High Court of Judicature at Bombay by the appellants
(1-7 ousted group). On September 19, 1992, respondent No.I herein, Dr.
Gaur Hari Singhania group (contesting respondent Nos.1-9) filed an affidavit
in opposition stating and submitting that, the suit filed by the appellant in the
D High Court is barred by limitation and that the High Court had no jurisdiction
to entertain the suit and, therefore, the same is liable to be dismissed.
It is pertinent to notice that respondent Nos. I 0-20 supported the claim
made by the appellants. A learned Single Judge of the Bombay High Court
E on April 09, 1996 dismissed the Arbitration Suit of the appellants on the
ground of limitation being 50 days beyond the period of three years computed
from March 18, 1989. An appeal was preferred by appellant Nos. 1-7 and
learned Judges of the Division Bench of the Bombay High Court dismissed
the appeal on the ground of limitation and that oral prayer for condonation
of delay will not be entertained by the Courts.
F
Against this order of the Bombay High Court, the appellants have come
by way of special leave petition before this Court. Leave was granted on
03.01.2005 by this Court.
We heard Dr. Abhishek Manu Singhvi, learned Senior Counsel appearing
G for appellants 1-7, Mr. S. Ganesh, learned senior counsel appearing for
respondents I 0-20 and Mr. A nil Diwan, learned Senior Counsel appearing
for the respondents 1-9.
The claim of the appellants was that, after the dissolution of the
partnership there were a series of communication between the appellants and
H the respondents on the division of the assets which wa5 a part of the dissolved
-
•
HARi SHANKAR SINGHANIA v. GAUR HAR! SINGHANIA [LAKSHMANAN, J.] 733
firm in order to arrive at an amicable settlement as evident from the words A
used in the letters of correspondence like, to not cause unduly delay in the
distribution of the property/expedite the matter of dissolution (letter dated
29th September, 1989) etc. Therefore, according to Dr. Abhishek Manu
Singhvi, learned counsel appearing for the appellants, the right to apply under
section 20 of the Arbitration Act, 1940 accrued to the appellants on the date B
of the last communication between the parties to reach a settlement, which
is the letter dated 29th September, 1989. Therefor.e, limitation period will
start running for three years as stated under Article 137 of the Limitation Act,
1963 only from that date. The thrust of the argument on behalf of the appellants
is that the right to apply under section 20 of the Arbitration Act, 1940 accrued
to the appellants on receipt of the letter dated 29th September, 1989.
C
According to the contesting respondents, the differences and disputes
with respect to distribution of immovable properties amongst the partners of
the dissolved firm arose before 3 lst May, 1987 and that is why the distribution
of the said immovable properties could not be effected as contemplated by
the Deed of Dissolution. The respondents further claimed that the appointment D
of nominees by the parties was enough evidence of disagreement and
differences between the parties which arose on 29th February, 1988. Further
the respondent also relied on communications dated 4th October, 1988, 13th
February, 1989 [notice] and 18th March 1989, to prove differences among
the parties.
E
It is now well settled that Article 13 7 of the Limitation Act, 1963
applies to an application under Section 20 of the Arbitration Act, 1940.
Accordingly, an application under Section 20 of the Act for filing the
arbitration agreement in Court and for reference of disputes to arbitration in
accordance therewith is required to be filed within a period of three years F
when the right to apply accrues. The right to apply accrues when difference
or dispute arises between the parties to the arbitration agreement. In the facts
of the case, it is therefore necessary to find out as to when the right to apply
accrued.
Therefore, the questions before us. that deserve consideration are:
G
I.
When the right to file the application under Section 20 of the
Arbitration Act has accrued and when it becomes time barred;
and
2.
Whether in the context of Section 20 of the Arbitration Act, 1940 H
734
A
SUPREME COURT REPORTS [2006] 3 S.C.R.
a difference or dispute can be said to have arisen between the
parties without there being any denial or repudiation of a claim
by a party?
We have heard both the parties extensively. We have carefully perused
all the letters, annexures and the orders passed by the High Court produced
B in Court.
Letter dated 16th. September, 1988 is a letter by Shri Hari Shankar
Singhania to Shri Gaur Hari Singhania specifically stating that"/ request that
the distribution of immovable properties is being delayed and I will request
C you to please make all attempts to expedite the same. "
Letter dated 4th October, 1988 is a letter by Shri Gaur Hari Singhania
to Shri Hari Shankar Singhania stating that "I on my part have given all the
information and materials and done everything possible to expedite the
distribution. The Committee appointed by the partners is seized of the matter.
D I am equally anxious that the matter should be amicably sorted out as early
as possible. "
Letter dated 18th October, 1988 is a letter by Shri Hari Shankar
Singhania to Shri Gaur Hari Singhania wherein it is stated that "/ only
requested you to make all attempts to expedite. You can judge for yourselves
E what is the reason for the delay. In my view, unless there is sincere desire
to solve the matter expeditiously the matter will drag on and I can only
repeat that this will not be to the benefit of any one. I can only request you
to do all you can to get the matter expedited. "
Letter dated 24th November, 1988 is a letter by Shri Gaur Hari Singhania
F to Shri Hari Shankar Singhania wherein it is stated that, "/ am sending the
modified account for your kindly returning the same duly signed by you and
all the other partners at your end. "
Letter dated 13th February, 1989 is a letter by Shri Vijaypat Singhania,
Shri Ajaypat Singhania, Shri Raghupati Singhania, Shri Hari Shankar Singhania
G and Shri Bharat Hari Singhania to Shri Gaur Hari Singhania wherein it is
stated that "As regards Ganga Kuti, your comments on the licence Agreement
dated 2.1.1986 do not meet the issue raised in the letter of Shri Hari Shankar,
dated 18th October, 1988. As pointed out, the said agreement stipulates
payment of licence fee of Rs.24,000 per annum payable by monthly instalments
H of Rs.2000 to be paid in advance on the 5th day of every month. Neither the
HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA (LAKSHMANAN, J.] 735
mode of payment nor the amount paid were in conformity with the said A
agreement. Due to violation of this key provision, the licence is no more valid
and it should be treated as such and the monies received on this account
should be returned and suitable corrective entries made in the accounts.
Moreover, such arrears of rent were received after the dissolution which
should not be accepted and given effect to, in the spirit of the terms of B
dissolutions. Apparently it is not bona fide. We are returning the accounts for
the period (20th March, 1987 to 31st March, 1988) for necessary rectification.
The property should henceforth not be rented/licensed to anyone. "
Letter dated 18th March, 1989 is a letter by Shri Gaur Hari Singhania
to Shri Hari Shankar Singhania wherein it is stated that "The licence is C
subsisting and cannot be treated as null and void Since you have returned
the account unsigned, I am sending the accounts once again to you with a
request to kindly sign the accounts and forward the same to me for signature
of Shri Vijaypat and Shri Ajaypat. "
Letter dated 22nd May, 1989 is a letter by Shri Vijaypat Singhania, D
Shri Ajaypat Singhania, Shri Raghupati Singhania, Shri Hari Shankar Singhania
and Shri Bharat Hari Singhania to Shri Gaur Hari Singhania wherein it is
stated that "As regards Ganga Kuti, we had in our letter dated February 13,
1989 stated the factual position in regard to the licence agreement dated 2nd
January, 1986 and the fact of the licence remaining no more valid particularly E
in view of the continuous violation of the essential provisions of the licence
agreement for two years from 1.4.1985 ...... The spirit of the terms of dissolution
has certainly not been adhered to in this regard and it is only fair in the
fitness of the circumstances that the licence agreement should no more be
treated as valid and appropriate amendment be made in that regard by returning
the monies received and making suitable corrective entries in the accounts.
We are returning the accounts for the period 20th March, 1987 to 31st March,
1988 for necessary rectification."
Letter dated 8th July, 1989 is a letter by Shri Gaur Hari Singhania to
F
Shri Hari Shankar Singhania wherein it is stated that "However, as stated G
above, the distribution of the immovable properties is being delayed due to
entirely the unreasonable stand taken by or on your behalf and due to
insistence on your behalf of the distribution to be effected in a particular
mode which is neither feasible nor reasonable and proper .... .It is, therefore,
not only in the interest of all the partners but imperative that you should not H
hold up the signing of the accounts. I, therefore, once again send lo you the
736
SUPREME COURT REPORTS (2006] 3 S.C.R.
A said accounts with a request tu return the same duly signed. I need not add
that if as a result of your not signing the said accounts any adverse orders
are passed by the Income Tax Officer in the pending assessment of the said
firm for the said twu assessment years 1987-1988 and 1988-1989, you alone
will be held responsible."
B
Letter dated 29th September, 1989 is a letter from Shri Vijaypat
Singhania, Shri Ajaypat Singhania, Shri Raghupati Singhania, Shri Hari
Shankar Singhania and Shri Bharat Hari Singhania to Shri Gaur Hari Singhania
wherein it is stated that "It is not fair to impute impropriety or to say that the
stand taken by us is an attempt to bring pressure upon immovable properties
C of the dissolved partnership. ft is equally not fair to say that the distribution
uf immovable properties remains pending because of the unreasonable ur
improper stand taken by us. The Deed of Dissolution and the understanding
among the partners 1s quite clear as to the mode of distribution and as such
there is no question of any partner dictating the mode of distribution. .... We
D are sure that you will expedite the matter of dissolution of 1he immovable
properties in the same spirit as was envisaged at the time of dissolving the
firm."
It is seen from the above letters that on 29.02.1988, the parties decided
to appoint one representative each who would endeavour to arrive at an
E agreed distribution acceptable to all parties. This only shows that it is the
modality of distribution which were tried to be worked out. The contemporary
correspondence, above referred to, would also show that the letters exchanged
between the brothers were in amiable language. It is thus clear that at this
stage the parties had not reached a stage of break where an adjudication of
F dispute had become inevitable. Thereafter, in September, 1988 letters were
written as to the distribution of properties. The letter written by the appellants
on 16.09.1988 and its reply of 04.10.1998 clearly show that there was not yet
a break down of the agreement, in fact, on behalf of the respondents. It was
suggested that a Committee appointed by the partners is seized of the matter.
It is clear from a reading of this letter that the parties, as late as in October,
G 1988 were trying to obtain an amicable resolution. This situation continued
on 18.03.1989 as well. The accounts were sent by the respondents. The letter,
inter alia, annexed certain confirmatory letters and requested that the accounts
be confirmed by the appellants. In reply thereto in May, 1989 the accounts
were sent back, as the letter disclosed that there were some differences as to
H one of the properties. On 08.07.1989, the respondent reiterated that the
accounts were correct and sent back for the confirmation and also alleged
HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J.] 73 7
that the matter of distribution of immovable properties remained pending A
because of the unreasonable and improper stand taken by the appellants. It
was argued that at best it could be suggested that by this date, the stage has
reached where the partners could have contemplated the adjudication of their
disputes. This would show that the petition would clearly be within time. Suit
under Section 20 of the Arbitration Act was filed on 8.5.1992.
On 29.09.1989, a letter was written by Shri Vijaypat Singhania, Shri
Ajaypat Singhania, Shri Hari Shankar Singhania and Bharat Hari Singhania
to Shri Gaur Hari Singhania, respondent wherein it is stated that it is not fair
B
to impute impropriety or to say that the stand taken by the appellants is an
attempt to bring pressure upon immovable properties of dissolved partnership. C
It is also stated therein that the respondent will expedite the matter of
dissolution of the immovable properties in the same spirit as was envisaged
at the time of dissolving the firm. If this letter dated 29.09.1989 is taken into
account, it would show that Section 20 suit would clearly be within time. In
our opinion, the High Court has committed an error in construing Article 137
in a manner, which would unduly restrict the remedy of arbitration especially D
in family disputes of the present kind. It is a well-settled policy of law in the
first instance is always to promote a settlement between the parties wherever
possible and particularly in family disputes.
Where a settlement with or without conciliation is not possible, then
comes the stage of adjudication by way of arbitration. Article 137, as construed E
in this sense, then as long as parties are in dialogue and even the differences
would have surfaced it cannot be asserted that a limitation under Article 137
has commenced. Such an interpretation will compel the parties to resort to
litigation/arbitration even where there is serious hope of the parties themselves
resolving the issues. The learned Judges of the High Court, in our view, have p
erred in dismissing the appellants appeal and affirming the findings of the
learned Single Judge to the effect that the application made by the appellants
under Section 20 of the Act, 1940 asking for reference was beyond time
under Article 137 of the Limitation Act. The learned Judges ought to have
allowed the appeal and quashed and set aside the impugned order passed by
the learned Single Judge and ought to have restored and allowed arbitration G
suit filed by the appellants. As already noticed, the correspondence between
the parties, in fact, bears out that every attempt was being made to comply
with and carry out the reciprocal obligations spelt out in the agreement between
the parties. As rightly pointed out by learned counsel for the appellant that
the learned Judges of the Division Bench have erred in coming to the H
738
SUPREME COURT REPORTS [2006] 3 S.C.R.
A conclusion that the distribution of immovable properties in specie as provided
in the Deed of Dissolution dated 26.03.1987 and a Supplementary Agreement
dated 20.03.1987 could not be done before 31.05.1987 due to some differences.
There is absolutely no material on record on the basis of which the learned
Judges could have come to such a conclusion. None of the correspondence
referred to by the learned Judges spells out the existence of any disputes as
B a result of which the properties could not be distributed prior to 31.05.1987.
The High Court, in our view, has erred in coming to the conclusion that
because no distribution of the property had been made till 29 .02.1988, it was
indicative of the fact that there were disputes and differences between the
C parties. The High Court, in our view, has failed to appreciate that merely
because parties did not take steps for distribution of the immovable properties
it did not automatically follow that disputes and differences had arisen between
them in this regard. In fact, from the correspondence on record, it is clear that
the parties were making efforts to complete the distribution of the immovable
properties as per the terms of the agreement between them. It is submitted
D that the correspondence between the parties does not indicate that any dispute
or difference had arisen between them on or before 18.03.1989 and the
finding of the learned Judges to the effect that the correspondence exchanged
between the parties leaves no manner of doubt that the dispute had arisen
between the parties in any case on 18.03.1989 is erroneous, contrary to the
E record and unsustainable.
We shall now advert to the various decisions cited by both the parties.
law on the Subject:
F
Article 137 of the Limitation Act is reproduced hereunder:
Description of application
period of
Limitation
"Any other application for which no period Three years
G of limitation is provided elsewhere in this
division."
Time from
which period
begins to run
When the right
to
apply
accrues.
The period of three years prescribed in Art. 137 of the Limitation Act,
1963 is applicable to file an application under section 20 of the Arbitration
H Act, 1940 as decided by this Court in the case of Vulcan Insurance Co. ltd.
HARi SHAN KAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J.] 739
v Maharaj Singh, AIR (1976) SC 287. The limitation period starts running A
from the time the right to apply accrue. An application filed under section 20
of the Arbitration Act has to be filed within three years from the date when
the right to apply accrues.
In the case of State of Orissa v. Damodar Das, AIR ( 1996) SC 942,
this Court held that, the right to apply accrues under section 20, Arbitration B
Act, 1940, as soon as dispute or difference arises on unequivocal denial of
claim by one party to the other party as a result of which the claimant
acquires a right to refer the dispute to arbitration.
In the case of S. Rajan v. State of Kera/a, AIR (1992) SC 1918, the
right to apply accrues when the difference arises or differences arise between C
the parties involved. It is thus a question of fact, not a question of law as
urged by the respondents, and should be determined in each case having
regard to the facts of the case.
In Major (Reid) lnder Singh Rekhi v. Delhi Development Authority, D
[1988] 2 SCC 338 at 340, this Court holding that the application under
section 20 was filed within time examined 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 the claimant is the accrual of E
cause of action. A dispute arises where there is a claim and a denial
and repudiation of the claim .... There should be a dispute and there
can only be a dispute when a claim is asserted by one party and
denied by the other on whatever grounds. Mere failure or inaction to
pay does not lead to the inference of the existence of dispute. Dispute
entails a positive element and assertion of denying, not merely inaction F
to accede to a claim or request. Whether in a particular case dispute
has arisen or not has to be found out from the facts and circumstances
of the case."
In the instant case, correspondence was not merely in the nature of
reminders but also instruments to resolve the matter and amicably negotiate. G
Therefore, when the negotiatio~s were taking place between the parties by
way of various letters written by both parties the right to apply can be said
to accrue when it becomes necessary to apply, that is to say when a dispute
in fact arose. Furthermore, the respondent did not ever dispute the claim of
the appellants.
H
740
SUPREME COURT REPORTS [2006] 3 S.C.R.
A
Learned counsel appearing for the appellants placed reliance on Oriental
Building and Furnishing Co. ltd. v. Union of India, AIR ( 1981) Del 293,
where the material question was what is the starting point of limitation for
moving a petition under section 20 of the Arbitration Act, 1940. It was held
that: "Neither party can move the Court without the existence of a difference
between them. So, the material question is, when the difference arose between
B the parties and not when the lease expired, nor when it was entered into." The
court further observed, " ..... a difference can arise long afier some work has
been done under a contract. There can be negotiations between the parties
and all sorts of correspondence. But it is only when they come to the conclusion
that they cannot resolve the di~pute between them, it can be said that a
C difference arises. A difference under the arbitration agreement is a claim
made by one party, which is refuted by the other party. At that stage. it is
open to the parties or any one of them to go for arbitration to get this
difference or differences settled and it is only at this stage it is possible to
say that a difference has arisen between the parties. "
D
This decision of the Delhi High Court squarely covers the case on hand
as a close perusal of the letters exchanged between the parties show clearly
that there was intention to arrive at an amicable settlement between the family
members with regard to the division of assets in question.
It cannot be said that merely because nominees were appointed for
E working out an arrangement, which could not ultimately be arrived at, a
dispute or difference arose way back in February 1988. In fact, even
immediately after this, the correspondence exchanged between the parties
reveals a forthcoming attitude and amiable efforts made towards implementing
the deed of dissolution.
F
An examination of the correspondence can give us valuable insight as
to the "differences" if any among the parties. The first such communication
was made on 16 September, 1988 from Shri Hari Shankar Singhania [appellant)
to Gaur Hari Singhania [Respondent] requesting the rtspondent to make all
attempts to expedite distribution of the immovable properties. In reply to this
G was the communication relied on by the respondents from Dr. Gaur Hari
Singhania [Respondent] to Shri Hari Shankar Singhania [appellant No. I]
dated 4th October, 1988. This communication also does not reveal either
hostility or dispute and only exposes an effort "to expedite the distribution".
The last sentence of the above mentioned communication reads: "I am equally
H anxious that this matter should be amicabZv sorted out as early as possible."
HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J.] 74 l
Therefore, we observe that the right to apply under section 20 of the A
Arbitration Act, 1940 accrued to the appellants only on the date of .the last
correspondence between the parties and the period of limitation commences
from the date of the last communication between the parties. Therefore, the
finding of the High Court that the application under section 20 of the
Arbitration Act, 1940, is beyond the period of limitation is erroneous.
B
Further, in an English decision rendered by the Court of Appeal in
Hughes v. Metropolitan Rly. Co., it was held that, where negotiations for
settlement are pending, the strict rights of the parties do not come into play.
It is also pertinent to note that under the new Act, namely the Arbitration C
and Conciliation Act, 1996 that came into force in 1996, the intervention of
the Court in the matter of arbitration proceedings has been minimized to a
great extent. Further, there is no provision in the Arbitration and Conciliation
Act, 1996 that is similar to section 8 (power of court to appoint arbitrator),
section 20 (application to file in Court the Arbitration Agreement) and section
33 (Arbitration agreement or award to be contested by application), which D
were present in the Arbitration Act of 1940.
Another thing that should not miss the attention of the Court is that, the
assets in question are with the contesting respondent Nos. I to 9 and an
amicable settlement for the division of the assets have not been arrived at
since last 18 years as clear from the facts. Hence it is observed that the E
contesting respondents are the ones who are enjoying the assets in question
and therefore we observe that, the respondents are merely trying to drag the
proceedings endlessly forever and for another period of uninterrupted
enjoyment of the assets.
Furthermore the contesting respondents cannot allege that moving the
Court is a better-suited remedy than arbitration proceeding as they have of
their own free will only adopted the arbitration clause in the Deed of
Dissolution.
Family Arrangement/Family Settlement:-
Another fact that assumes importance at this stage is that, a family
settlement is treated differently from any other formal commercial settlement
F
G
as such settlement in the eyes of law ensures peace and goodwill among the
family members.