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Motilal Chamaria Vs. Lal Chand Dugar - Court Judgment

LegalCrystal Citation
SubjectArbitration;Limitation
CourtKolkata High Court
Decided On
Case NumberAward Case No. 25 of 1955
Judge
Reported inAIR1960Cal6,65CWN55
ActsArbitration Act, 1940 - Section 37(3) and 37(5); ;Limitation Act, 1908 - Section 3; ;Bengal Chamber of Commerce Rules - Rule 5(1)
AppellantMotilal Chamaria
RespondentLal Chand Dugar
Appellant AdvocateS. Tibriwalla, Adv.
Respondent AdvocateB. Sen, Adv.
DispositionApplication dismissed
Cases ReferredRamdutt Ramkissen Dass v. E. D. Sassoon and Co.
Excerpt:
- .....limitation act 1908 will apply to arbitrations, as they apply to proceedings in court.11. so the arbitration proceedings are placed on the same footing as proceedings in court, and all the provisions including s, 3 of the limitation act are attracted to arbitration proceedings. in other words the legislature has regarded, for the application of the indian limitation act, the proceedings before arbitrators as proceedings in the nature of suits and applications, and so every proceeding for arbitration instituted, after the period of limitation prescribed for suits and applications by the first schedule shall be dismissed, although limitation has not been set up as a defence, and similarly as under the explanation to section 3 of the limitation act a suit is instituted in ordinary cases.....
Judgment:

Bose, J.

1. This application for selling aside an award has been referred under Chapter V, Rule 2 of the Original Side Rules of this Court for decision by a Special Bench.

2. The only questions which arise for determination in this case are whether the claim of the respondent was barred by limitation on the date of the commencement of the arbitration, and if so whether the arbitrators misconducted the proceedings by entertaining such a claim.

3. It appears that by a contract concluded by the exchange of a Bought note and a Sold note both dated 12-3-1951 the petitioner agreed to sell to the respondent and !he respondent agreed to buy from the petitioner 20000 pieces of D. W. Flour bags of certain specifications contained in the said Notes at Rs. 237/- per 100 bags F. O. R. Katihar -- delivery R/R 15-4-1951.

4. The contract contains an arbitration clause which may be set out hereunder:

'All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/ or in connection with and/or in consequence of or relating to this contract whether or not the obligations of either or both parties under this Contract be subsisting at the time of such dispute and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration of the Bengal Chamber of Commerce and Industry under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted'.

5. The rule of the Tribunal of Arbitration of the Bengal Chamber of Commerce and Industry which has a material bearing on the questions at issue is Rule V and is as follows;

'V (1) -- In every case where a dispute or difference has arisen between parties who have agreed that such dispute or difference shall be referred for decision to the Chamber or the Tribunal, an application for arbitration may be addressed by either party to the Registrar which application in the case of disputes relating to piece goods shall be in such form as the Committee of the Chamber may from time to time prescribe.

V (2) -- On receipt of such application the Registrar shall constitute a Court for the adjudication of the dispute'.

6. Pursuant to this Rule V(1) the respondent presented to the Bengal Chamber of Commerce and Industry, an application for arbitration, on 15-4-1954, alleging that the petitioner had failed to deliver the goods and had become liable to pay damages for breach of contract, amounting to Rs. 2731-0-11. The application, in its body, set out the particulars of the contract, the nature of the claim and the reliefs asked for, and it was duly addressed to the Registrar, Tribunal of Arbitration, Bengal Chamber of Commerce and Industry. On 29-4-1934 the Registrar constituted a court for adjudication of the disputes, in accordance with Sub-rule (2) of Rule V, and on 5-5-1954 the Registrar sent to the petitioner a copy of the Statement of the respondent, and called upon the petitioner to submit his statement. On 7-6-1954 the petitioner submitted his statement. In this statement the petitioner inter alia raised the contention that the alleged claim of the respondent was barred by limitation and the Arbitrators had no jurisdiction to entertain the claim or the reference or to make any award.

7. Section 37 of the Arbitration Act contains provisions with regard to limitation and the correctness or otherwise of the respective contentions raised by the parties on the question of limitation depend upon the true interpretation of these provisions.

8. It is therefore convenient to set out the relevant provisions of Section 37 hereunder:

'37 (1) -- All the provisions of the Indian Limitation Act 1908 shall apply to arbitrations as they apply to proceedings in Court.

(2)* * * * * *(3) For the purposes of this section and of the Indian Limitation Act 1908, an arbitration shall be deemed to be commenced when one party to the arbitration agreement serves on the other parties thereto a notice requiring appointment of an arbitrator or where the arbitration agreement provides that the reference shall be to a person named or designated in the agreement, requiring that the difference be submitted to the person so named or designated.

(4)* * * * * *(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 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 for the commencement of the proceedings (including arbitration) with respect to the differences referred'.

9. The main contention of Mr. Tibriwalla on behalf of the petitioner is that Sub-section (3) of Section 37 lays down the different conditions under which an arbitration commences, and unless one or other of the two specified conditions are complied with, within the period of limitation prescribed for a particular claim, such a claim becomes barred and the Arbitrator has no jurisdiction to entertain any such barred claim or to give any relief in respect thereof. I do not think that this contention of Mr. Tibrewalla is sound.

10. Section 37(1) clearly provides that all the provisions of the Indian Limitation Act 1908 will apply to arbitrations, as they apply to proceedings in Court.

11. So the arbitration proceedings are placed on the same footing as proceedings in Court, and all the provisions including S, 3 of the Limitation Act are attracted to arbitration proceedings. In other words the Legislature has regarded, for the application of the Indian Limitation Act, the proceedings before Arbitrators as proceedings in the nature of suits and applications, and so every proceeding for arbitration instituted, after the period of limitation prescribed for suits and applications by the first schedule shall be dismissed, although limitation has not been set up as a defence, and similarly as under the Explanation to Section 3 of the Limitation Act a suit is instituted in ordinary cases when the plaint is presented to the proper officer, so an arbitration is commenced as soon as a claim is submitted for adjudication before the arbitrator or the officer authorised by the Arbitrator to receive the statements of claims. In the present case the respondent had submitted the application for arbitration containing the particulars of the claim and the reliefs asked for to the Registrar, Tribunal of Arbitration of the Bengal Chamber of Commerce on 15th April 1954 in accordance with Sub-rule (1) of Rule 5 of the Rules of the Bengal Chamber of Commerce. As soon as this application for arbitration was submitted to the Registrar the arbitration commenced. The fact that the personnel of the arbitrators was selected and the arbitral Court was actually constituted sometime thereafter, did not stand in the way of the arbitration proceeding being instituted. It is a matter of common knowledge that it is long after a suit is instituted in a court of justice that it is assigned to a particular bench for hearing or disposal.

12. Sub-section (3) of Section 37 cannot be construed as exhaustive of the circumstances under which an arbitration commences. The expression 'shall be deemed to be commenced' indicates that the Sub-section deals with two modes of notional or fictional commencement as distinguished from factual commencement. It is possible to conceive of cases where an arbitration can be said to have commenced under circumstances not contemplated by Sub-section (3) of Section 37 as, for example, when parties by an agreement in writing actually submit existing disputes to a particular arbitrator of their choice. In such a case no notice to appoint an arbitrator is necessary nor is, any notice requiring that the difference be submitted to a named Arbitrator, called for. So it is clear that the Sub-section (3) was not intended to be exhaustive or to be a complete code by itself.

13. Therefore if, the parties have agreed that they will be bound by the rules of the Tribunal of Arbitration of the Bengal Chamber of Commerce and the rules show that the initiation of the arbitration proceeding is to be made in a particular manner, there is no reason why the commencement of the arbitration cannot be made by adopting that course. It has been argued that some indication is also furnished by Clause (3) of the First Schedule to the Arbitration Act that an arbitration commences as soon as an arbitrator is called upon to act by notice in writing from any party to the arbitration agreement. The said clause reads as follows:--

'(3)--The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow.'

14. It has been held that this third implied condition in the First Schedule is directory in character, but this does not mean that the period of making the award does not begin to run after the notice in writing calling upon the arbitrator to act is served on the arbitrator by a party. But as against this construction of Clause (3) of the First Schedule, it may be pointed out that if it was the intention of the Legislature to make the service of notice on the arbitrator calling upon him to act, as the starting or commencement of the arbitration, this mode of commencement would also have been expressly mentioned in Sub-section (3) of Section 37; and the fact that it does not find place in that subsection shows that the giving of such notice was not intended to amount to commencement of the arbitration. In my view too much stress cannot be laid on this Clause (3) of the First Schedule in interpreting Sub-section (3) of Section 37 of the Act.

15. Mr. Tibrewalla has placed reliance on a decision of the Bombay High Court reported in : AIR1954Bom309 . Purshottamdas v. Impex (India) Ltd. where Sub-section (5) of Section 37 has been construed by Chagla C. J. and Dixit J. and it has been held that the very fact that by Sub-section (5) a specified or limited period between the commencement of the arbitration and an order setting aside an award or an order declaring that the arbitration agreement shall cease to have effect, is excluded in computing the time prescribed by the Limitation Act for commencement of another subsequent proceeding with regard to the difference referred, indicates that the legislature did not intend that the general provisions contained in Section 14 of the Limitation Act, would be applicable. In other words Sub-section (5) of Section 37 of the Arbitration Act overrides Section 14 of the Limitation Act. Accordingly it is argued before us that it should be construed in the same manner, that Sub-section (3) of Section 37 overrides the general provisions of the Limitation Act. It appears to me that the learned judges of the Bombay High Court put a rather narrow construction on the provisions which came up for consideration before them. It is quite possible that as Section 14 of the Limitation Act is a general section and it does not literally apply to arbitration proceedings, the legislature felt the necessity of enacting Sub-section (5) of Section 37 by way of abundant caution for expressly excluding certain specified periods which are conceivable only in cases where there are previous arbitration proceedings. In other words orders setting aside awards or orders declaring that the arbitration will cease to have effect, can only be made in arbitration proceedings, and such orders are not normally made in the case of ordinary suits or ordinary legal proceedings contemplated in Section 14 of the Limitation Act. So to provide for these special cases and to place such matters beyond all disputes the special provision as embodied in Sub-section (5) of Section 37 was inserted in the Statute as supplemental to Section 14 of the Limitation Act. I am therefore unable to accept the contention of Mr. Tibrewalla that Sub-section (3) of Section 37 of the Act overrides the general provisions of the Indian Limitation Act. In my view the learned judges of the Madras High Court have taken the correct view as to the interpretation to be put on Sub-section (3) of Section 37 of the Act in the case of Ratha Krishnamurtly v. Balasubramania and Co. reported in AIR 1949 Mad 559, though the process of reasoning adopted by them in arriving at their conclusion is different.

16. It may be pointed out that before the enactment of the Indian Arbitration Act 1940 the Judicial Committee had held in the case of Ramdutt Ramkissen Dass v. E. D. Sassoon and Co. 56 Ind App 128: (AIR 1929 PC 103) that:

'Although the Limitation Act does not in terms apply to arbitrations, they think that in mercantile references, of the kind in question it is an implied term of the contract that the arbitrator must decide the dispute according to the existing law of the contract and that every defence which would have been open in a court of law can be equally proponed for the arbitrator's decision unless the parties have agreed to exclude that defence.

Were it otherwise a claim for breach of a contract containing a reference clause could be brought at any time, it might be 20 or 30 years after the cause of action had arisen although the legislature had prescribed a limit of three years for the enforcement of such a claim in any application that might be made to the law courts.'

17. The English decision In re Astley and Tyldesley Coal and Salt Co. (1899) 68 L. J. Q. B. 252 on which doubt had been cast by some later cases was expressly approved by the Privy Council in course of the judgment.

The Privy Council had applied by analogy the provisions of the Limitation Act including Section 14 to arbitration proceedings. The Indian Legislature accepted the law laid down by the Judicial Committee and embodied it in Section 37(1) of the Indian Arbitration Act 1940.

18. I hold that the claim of the respondent was not barred by limitation at the date of the commencement of the arbitration.

19. In view of this finding it is not necessary to go into the other question raised in this application. The application is dismissed with costs.

Das Gupta, C.J.

20. I agree.

Lahiri, J.

21. I agree.


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