' By this judgment both the Suits Nos. 638/81 and 639/81 will be disposed of. These are applications under section 20 of the Arbitration Act. The plaintiff had entered into an agreement to lease dated 29-7-1971 with the defendant in respect of plots of land in Block C measuring 400 sq. Yards, Alam Nagar Housing Colony. The defendant issued allotment order in favour of the plaintiff and the plaintiff complied with all the terms and conditions laid down by the agreement. The plaintiff paid all the demands that were made by the defendant from time to time. Finally on 16-3-1978 the defendants demanded an additional sum of Rs,800 as the first instalment of additional development charges. The plaintiff had already paid Rs,2,800 each towards development charges and, therefore, he took exception to this demand and by notice dated 2-5-1978 refused to comply with the demand and called upon the defendant to execute the lease. The defendants by letter dated 8-5-1978 cancelled the plaintiffs plots under clauses 5(a)(b) and 11 of the agreement to lease. The plaintiff served a legal notice dated 28-9-1978 which was replied by the defendant's Advocate letter dated 8-10-1978.
2. Clause 14 of the agreement provided that in case of any dispute between the parties the same shall be referred to sole arbitrator jointly appointed by the parties. The plaintiff therefore filed these applications under section 20 of the Arbitration Act on 1-10-1981. The only objection raised by the defendant is that the applications are barred by time.
3. Mr. Iftikhar Hassan the learned counsel for the plaintiff has contended that the defendants by their letter, dated 8th October, 1978 acknowledged and admitted their liability within the period of limitation, and therefore, the applications are within time. In order to appreciate the argument of the learned counsel it is necessary to reproduce the letter, dated 8th October, 1978: "Re: Cancellation of Plot No,78/C, measuring 400 sq. Yards, Alam Nagar Housing Project.
' Under instructions from my clients M/s. Islamic Estates & Builders Ltd. 40-C, Central Commercial Area, Tariq Road, Karachi, I hereby acknowledge the receipt of your letter, dated 28th September, 1978 addressed to them on behalf of your client Mirza Saeeduddin son of Mirza Majeeduddin and in reply thereto I have to state as under:-- ' That the various statements contained in your letter under reply are, besides being far from true, uncalled for and defamatory in character and unless the uncalled for remarks are withdrawn by your client, my clients reserve their right to take the necessary legal action against him in that behalf.
' The Agreement to Lease in question is a civil contract between the parties and both the parties to the said agreement are bound to observe the terms and conditions contained therein. If your client had agreed to pay the development charges to my clients as Lessors as may from time to time be determined of him, then how and under what provisions of law he can escape that liability and how you can call the action taken by my clients as 'uncalled for'. On account of the default in payment of the development charges as demanded by my clients under the terms of the said Agreement to Lease, dated 29th July, 1971 your client incurred the penalty of cancellation of the allotment of the plot in question and my clients were legally justified to resume the said plot.
' That in case my clients have acted within their rights and in accordance with the terms of the Agreement to Lease, dated 29th July, 1971, the only remedy applicable to your client is not to threaten my clients but to read again the terms of the said agreement to lease and see for himself as to who is at fault and what best can be done under the terms thereof.
' My clients have already cancelled the allotment of the plot in question and resumed the same in terms of clauses 5(a)(b) and clause 11 of the said Agreement to Lease and still if your client is ill- advised to take any action in that behalf, the same will have to be defended by my clients at the risk of your client as to the costs and consequences. Kindly advise your client properly.
' According to the learned counsel, the defendants in paras. 2 and 4 of this letter have acknowledged the liability. The learned counsel has contended that as the defendants have stated that they have cancelled the allotment of the plot in question this amounts to an implied admission of liability. A bare reading of this letter makes it clear that the defendants have not made any admission of liability or acknowledgment as contended by the learned counsel for the plaintiff. The defendants have reiterated their claim and in fact justified their action of cancelling the plot. The learned counsel for the plaintiff has relied on PLD 1970 Kar. 708, PLD 1964 Kar. 558 and PLD 1971 Kar.
925. The dictum laid down in these authorities cannot be disputed but the fact remains that in order to apply them the plaintiff has first to establish that the defendants by their letter have made an acknowledgment of liability. I am unable to see how the aforestated letter could be termed as an admission of liability.
4. The period of limitation for filing application under section 20 of the Arbitration Act is governed by Article 181 of the Limitation Act. Reference can be made to the case of M. Imamuddin Janjua v.
The Thal Development Authority (PLD 1972 SC 12.3). In the case of Naeem Finance Ltd. v. Bashir Ahmad Rafiqui (PLD 1971 SC 8) somewhat different view was taken but in the case of NI. Imamuddin Janjua v. The Thal Development Authority referred above after a full and elaborate discussion on the point directly the question stands settled.
5. Now it has to be considered whether the application is barred by time. Before determining this aspect it should first be ascertained when the cause of action arose to the plaintiff. The approach of the learned counsel for the plaintiff without first elaborating on this aspect was completely erroneous. I am also unable to agree with the contention of Mr. Khalil-ur-Rehman that the dispute between the parties is the cancellation of agreement and forfeiture of the plot and therefore the cause of action arose on 18-5-1978 when the plot was forfeited. The plaintiff has paid the entire occupancy value and development charges. The defendants demanded Rs,800 towards 1st instalment of additional development charges whereupon the plaintiff refused to pay and called upon the defendants to execute the lease deed. Thereupon, the defendants cancelled the plot. The plaintiff again served a notice calling upon the defendants to execute the lease and withdraw the notice of forfeiture and cancellation. The defendants by their Advocate's letter dated 8-10-1978 refused to comply. It is, therefore, obvious that all the material time the plaintiff has been demanding specific performance of the agreement dated 29-7-1971 in terms whereof the defendants were to execute a lease deed in favour of the plaintiff. Therefore, the main dispute between the parties is specific performance of the agreement dated 29-7-1971. As no date for execution of the lease deed has been fixed in the agreement, under Article 113 of the Limitation Act time will begin to run when the plaintiff has notice that performance is refused. In the present case the refusal was notified by defendants' notice dated 8-10-1978. Thel cause of action for specific performance, therefore, accrued to the plaintiff on 8-10-1978. The plaintiff could have filed application under section 20 of the Arbitration Act only after the cause of action had accrued to him. The plaintiff was entitled to file this application within three years from 8-10-1978. The application was filed on 11-3-1981 and hence it is within time.
6. The applications under section 20 of the Arbitration Act in both the suits are granted. The arbilartion agreement is ordered to be filed and the parties are directed to appoint arbitrators in terms of clause 14 of the agreement dated 29-7-1971.