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The State of U.P. and anr. Vs. Singhal and Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 3278 of 1972
Judge
Reported inAIR1981All362
ActsArbitration Act, 1940 - Sections 37(5); Limitation Act - Sections 14
AppellantThe State of U.P. and anr.
RespondentSinghal and Co.
Appellant AdvocateS.N. Upadhya, Standing Counsel
Respondent AdvocateRadha Krishna, Adv.
DispositionAppeal dismissed
Excerpt:
.....- section 37(5) of arbitration act will apply. - - 8. so far as the first submission of the learned standing counsel is concerned, i have examined the judgment of the trial court as well as the lower appellate court. this finding clearly is a finding of fact and i do not find any legal infirmity in the said finding. if the legislature intended that section 14 should apply and that all the time taken up in arbitration proceedings should be excluded, then there was no reason to enact section 37(5). the very fact that section 37(5), has been enacted clearly shows that the whole period referred to in section 14, limitation act is not to be excluded but the limited period indicated in section 37(5).'13. the principle laid down in the case of the commissioner, sales tax (supra) fully..........is entitled to the amount claimed is a finding vitiated in law.6. the second submission of the learned counsel is that the plaintiff-respondent was not entitled to the benefit of section 14 of the limitation act and as such the suit could not have been decreed.7. i have heard shri radha krishna, learned senior counsel on behalf of the respondent.8. so far as the first submission of the learned standing counsel is concerned, i have examined the judgment of the trial court as well as the lower appellate court. the finding by both the trial court and the appellate court is that the plaintiff-respondent was not responsible for the delay in execution of the contract, and in fact, it was the public works department of the state of u. p. who was responsible for the said delay. this finding.....
Judgment:

S.D. Agarwala, J.

1. This is a second appeal filed by the State of U.P. arising out of a suit filed by the plaintiff-respondent M/s. Singhal & Company for recovery of Rs. 4757.45P.

2. Briefly, the facts are that the plaintiff-respondent entered into a contract with the State of U. P. through the Executive Engineer P.W.D. Temporary Division, Allahabad for supply and fixing steel windows and north light windows as provided under the contract. There was certain delay in executing the contract. The case of the plaintiff-respondent was that the delay was caused not due to the fault of the plaintiff-respondent but because of the appellant State of U. P. The State of U. P. did not pay the full price of the contract, also deducted the security from the plaintiff-respondent and levied penalty on the plaintiff-respondent. The plaintiff-respondent, therefore, filed a suit for recovery of the amount of the price, deduction of security, refund of penalty and interest thereon. The appellants contested the suit on the ground that the plaintiff-respondent did not complete the work within time and as such the action of the appellants was justified and the plaintiff-respondent was not entitled to the amount claimed in the suit. It was further pleaded that the suit was barred by time and the plaintiff-respondent was not entitled to the benefit of Section 14 of the Limitation Act.

3. The trial Court held on merits that the plaintiff-respondent was entitled to the amount claimed but dismissed the suit on the ground that it was barred by time and that the plaintiff-respondent is not entitled to exclude the time under Section 14 of the Limitation Act. The judgment of the trial Court is dated 16th October, 1971.

4. Against the judgment dated 16th October, 1'971 an appeal was filed before the lower appellate Court. The lower appellate Court also on merits held that the plaintiff-respondent was entitled to the amount claimed by it. It also held that the plaintiff-respondent was entitled to the benefit of Section 14 of the Limitation Act and as such decreed the plaintiff-respondent's suit. The appeal was accordingly allowed by judgment dated 15th April, 1972 and the suit decreed. The judgment dated 15th April, 1972 has been impugned in the present appeal.

5. Shri Ravikant, learned Standing Counsel appearing on behalf of the appellants has contended that the finding recorded by the lower appellate Court that the plaintiff-respondent is entitled to the amount claimed is a finding vitiated in law.

6. The second submission of the learned counsel is that the plaintiff-respondent was not entitled to the benefit of Section 14 of the Limitation Act and as such the suit could not have been decreed.

7. I have heard Shri Radha Krishna, learned senior counsel on behalf of the respondent.

8. So far as the first submission of the learned Standing Counsel is concerned, I have examined the judgment of the trial Court as well as the lower appellate Court. The finding by both the trial Court and the appellate Court is that the plaintiff-respondent was not responsible for the delay in execution of the contract, and in fact, it was the Public Works Department of the State of U. P. who was responsible for the said delay. This finding clearly is a finding of fact and I do not find any legal infirmity in the said finding.

9. In regard to the second submission, the relevant facts are that the work was completed on 15th October, 1963. On 24th of March, 1966 in pursuance of Clause 23 of the Contract Bond, the matter was referred to the Arbitration of Shri J. K. Saxena. The Public Works Department of the State of U. P. filed a written statement on 9-11-1966. Shri J. K. Saxena did not give an award within the time prescribed by law. The plaintiff-respondent awaited the delivery of the award but since the award was not given then on 4-9-1967 another application was moved by him before the Superintending Engineer for appointment of another Arbitrator. Notice was issued on this application to the Public Works Department and 7-11-1967 was fixed for hearing. At this stage Public Works Department took an objection before the Superintending Engineer that he had no jurisdiction to proceed with the arbitration and also took the objection that Shri J. K. Saxena had no jurisdiction to commence the arbitration proceedings. The Superintending Engineer, therefore, directed the plaintiff-respondent to approach the court for getting the effect of the arbitration agreement determined by a competent court of law. A miscellaneous case No. 11 of 1968 was commenced before a competent court of law and in this case on 10th of August, 1968 it was found that Clause 23 did not apply to the difference in question and so no arbitrator could be appointed in respect of the difference. Immediately thereafter on 25th September, 1968 the present suit was filed.

10. The question for consideration, therefore, is as to whether the time taken in respect of the arbitration proceedings from 24th March, 1966 to 10th August, 1968 is liable to be excluded or not under Section 14 of the Limitation Act.

11. Learned Standing Counsel has submitted that Section 14 of the Limitation Act does not apply at all to the facts of the present case. Learned counsel for the respondent, however, stated that in any case the time is liable to be excluded under Section 37(5) of the Arbitration Act, 1940.

12. In the Commr. of Sales Tax v. M/s. Parson Tools and Plants, Kanpur, AIR 1975 SC 1039 their Lordships ofthe Supreme Court had occasion to consider the effect of Section 14 of the Limitation Act in respect of arbitration. Their Lordships opined as follows (at p. 1044):--

'It is, therefore, no longer open to the Court to rely on Section 14, Limitation Act as applying by analogy to arbitration proceedings. If the legislature intended that Section 14 should apply and that all the time taken up in arbitration proceedings should be excluded, then there was no reason to enact Section 37(5). The very fact that Section 37(5), has been enacted clearly shows that the whole period referred to in Section 14, Limitation Act is not to be excluded but the limited period indicated in Section 37(5).'

13. The principle laid down in the case of the Commissioner, Sales Tax (supra) fully applies to the instant case. In the circumstances, the submission made by the learned Standing Counsel that the principle of Section 14 would not apply is well founded.

The question, however, remains as to whether the plaintiff-respondent can take benefit of Section 37(5) of the Arbitration Act, 1940 or not. Section 37(5) is in the following terms:

'37 (5). Where the court orders that an award be set aside or orders, after the commencement of an arbitration, that the arbitration agreement shall cease to have effect with respect to the difference referred, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Indian Limitation Act, 1908 (9 of 1908), for the commencement of the proceedings (including arbitration) with respect to the difference referred.'

14. The argument of the learned Standing Counsel is that the words 'shall cease to have effect' are indicative of the fact that they would apply only to those cases where the arbitration clause was valid initially but ceased to apply subsequently and it would not apply to a case where it has been held that the arbitration clause does not apply at all or the clause is void in law.

15. Sub-section (5) to Section 37 is an enabling provision and it has to be liberally construed. In my opinion, the words 'shall cease to have effect' cannot be given a restrictive meaning. If a court of law at any stage of the arbitration proceedings comes to the conclusion that the clause which was sought to be relied upon by the party did not apply to the difference in question then in my opinion,this clause would fully apply because it is in view of the order of the court that a clause which was sought to be relied upon by both the parties ceased to have effect.

16. In the instant case, as I have already stated above the arbitration commenced on 24th March, 1966 and it was only when the court decided on 10th August, 1968 that clause 23 ceased to have effect and the plaintiff-respondent was compelled to approach the civil court for relief. In view of the above, I am of the opinion that the plaintiff-respondent is entitled to take the benefit of Section 37(5) of the Arbitration Act.

17. In case the plaintiff-respondent is given benefit of Section 37(5), the suit of the plaintiff-respondent would be within time.

18. Learned Standing Counsel further pointed out that even if Section 37(5) applies, the period after the expiry of four months of the non-delivery of the Award by the earlier arbitrator and moving of the fresh application for appointment of an Arbitrator could not be excluded. I do not agree with the submission made by the Learned Standing Counsel. Sub-section (5) of Section 37 of the Arbitration Act makes it clear that from the date of commencement of the arbitration till the date of decision by the court of law that the agreement has ceased to have effect has to be excluded. In this view of the matter this period also has to be excluded because this period is a period which comes between the two limits as laid down by Sub-section (5) of Section 37. In this view of the matter, the lower appellate Court was right though for different reasons in giving the benefit of the exclusion of time to the plaintiff-respondent.

19. In the result, there is no force in this appeal. It is accordingly, dismissed but in the circumstances of the case parties are directed to bear their own costs.


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