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Hindusthan Flash Light Mfg. Co. Ltd. Vs. Great American Insurance Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case No. 372 of 1961
Judge
Reported inAIR1963Cal149
ActsArbitration Act, 1940 - Section 8 and 8(1)
AppellantHindusthan Flash Light Mfg. Co. Ltd.
RespondentGreat American Insurance Co. Ltd.
Appellant AdvocateA.C. Bhabra, ;S.N. Shroff and ;P. Chhoochharia, Advs.
Respondent AdvocateA.K. Basu and ;Sankar Ghosh, Advs.
DispositionApplication dismissed
Cases ReferredGopalji Kuverji v. Morarji Jeram
Excerpt:
- .....counsel appearing to oppose the application contended that the application under section 8 of the indian arbitration act does not lie. section 8 empowers a court to appoint an arbitrator when one or more arbitrators are to be appointed by consent of both the parties. this is sub-clause l(a). clause (b) provides that if any appointed arbitrator or umpire neglects or refuses to act or is incapable of acting or dies and the agreement does not show that it was intended that the vacancy should not be supplied, then one of the parties can come to the court for an appointment. it is contended by mr. basu that section 8(1)(b) would be applicable in cases covered by clause (a). in the instant case the arbitrators are not to be appointed with the consent of both parties. one arbitrator is to be.....
Judgment:
ORDER

P.C. Mallick, J.

1. This is an application for appointment of an arbitrator in place and stead of Shri Kalyan Kumar Basu, who died during the pendency of the arbitration proceeding. There is a dispute between the parties on an insurance policy. The petitioner preferred a claim on that policy which claim was disputed by the respondent. The arbitration clause in the policy is Clause 18 which reads as follows:

'If any difference arises as to the amount of any loss or damage, such difference shall independently of all other questions be referred to the decision of the arbitrator to be appointed in writing by the parties in difference, or if they cannot agree upon single arbitrator, to the decision of two disinterested persons as arbitrators of whom one shall be appointed in writing by each of the parties. * * And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the Award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained.'

The petitioner claimed a sum of more than Rs. 1,50,000/-. This claim was disputed by the respondent. A dispute between the parties having arisen as to the quantum of the loss sustained there was art arbitration and at first one Ramnath Bajoria acted as the sole arbitrator, Bachawat, J. however removed Ramnath Bajoria from the office and appointed Shri Kalyan Kumar Basu, Barrister-at-Law as arbitrator. Shri Kalyan Kumar Basu thereupon entered upon the Reference on January 17, 1953 and he all-told held 23 sittings. Before the conclusion of the arbitration proceeding, however, Shri Basu died on July 27, 1953. The petitioner took out this Notice of Motion on October 6, 1961 for appointment of an arbitrator in the vacancy caused by the death of Shri Kalyan Kumar Basu in paragraphs 19 and 20 of the petition the reason of this long delay has been given. It is stated that the petitioner was financially handicapped and not till shortly before the Notice was taken out could it secure financial assistance, without which it was impossible for it to carry on the arbitration proceeding. The efforts to secure financial assistance is evidenced by a number of letters written to certain parties, copies of which have been annexed to the petition. It is not necessary for me to deal with these letters. Suffice it to say that the petitioner is guilty of undue delay and the reasonableness of this delay does not sound convincing. In the affidavit in opposition it is stated that the arbitration was abandoned and the present attempt is to revive an abandoned arbitration. It is not necessary to go into the affidavits in greater detail.

2. Mr. Amiya Basu, learned Counsel appearing to oppose the application contended that the application under Section 8 of the Indian Arbitration Act does not lie. Section 8 empowers a Court to appoint an arbitrator when one or more arbitrators are to be appointed by consent of both the parties. This is Sub-clause l(a). Clause (b) provides that if any appointed arbitrator or umpire neglects or refuses to act or is incapable of acting or dies and the agreement does not show that it was intended that the vacancy should not be supplied, then one of the parties can come to the court for an appointment. It is contended by Mr. Basu that Section 8(1)(b) would be applicable in cases covered by Clause (a). In the instant case the arbitrators are not to be appointed with the consent of both parties. One arbitrator is to be appointed by each of the parties. In that view of the matter, Mr. Basu's contention is that no application for appointment of arbitrator can be made under Section 8 of the Indian Arbitration Act in the instant case. In support of this contention Mr. Basu cites a decision of this court in the case of Ram Chandra Ram Nag Ram Rice and Oil Mills Ltd. v. Howrah Oil Mills Ltd. : AIR1958Cal620 in which a Division Bench of this Court consisting of Lahiri and Guha. JJ. held that when the arbitration clause provides that the arbitration shall be by two arbitrators, one to be nominated by the buyer and the other by the seller and there was no question of one or move arbitrators being appointed by the consent of all parties, and in such cases Section 8 would have no application. Section 9 of the Arbitration Act also would not be of assistance to the petitioner. Section 9 empowers the Court to appoint an arbitrator when it removes an arbitrator appointed under Section 9. It does not provide for the appointment of an arbitrator on the death of an arbitrator appointed by the Court. So also there is no provision in Section 12 to empower the Court to appoint an arbitrator in case of death of an arbitrator appointed by the Court. There are binding decisions to the effect that the Court has no inherent power to appoint an arbitrator. See Bharat Construction Co. Ltd. v. Union of India : AIR1954Cal606 . There is, therefore, unfortunately a lacuna in the Act and the Court has no power to appoint an arbitrator when an arbitrator appointed by the Court dies before making the Award. Mr. Bhabra appearing in support of this application, however, contended that the language of Section 8 does not debar the Court from appointing an arbitrator when an arbitrator appointed by the Court dies before making the award and the Court should not construe the provision in such a way as to lead to this unfortunate result. Having regard to the view that I would ultimately take in this matter, it is not necessary for me to record my final decision on the point. I record my view however that this argument of Mr. Basu is of great force.

3. It is next contended by Mr. Basu that in any event this application is time barred. It is contended by Mr. Basu that Article 181 of the Limitation Act will govern the case and admittedly this application is being made more than three years after the right to make the application accrued. In support of this contention a number of authorities of this Court as well as of other High Courts have been cited by Mr. Basu. In the case of Panchanan Pal v. Nanigopal Niyogi, ILR (1951) 1 Cal 438, a Division Bench of this Court consisting of Das and Guha, JJ. held that Article 181 applies to applications under the Arbitration Act. G. N. Das, I. who delivered judgment makes the following observation at p. 440:

'The Arbitration Act does not specifically provide for any period of limitation within which an application under Section 33 of the Arbitration Act has got to be made. Section 37 of the Arbitration Act makes the provisions of the Indian Limitation Act applicable to proceedings under the Arbitration Act. Article 181 of the Indian Limitation Act is residuary Article, which lays down the period of limitation in regard to applications for which there is no express provision in the Indian Limitation Act. In a large majority of cases it was decided by this Court and other High Courts that Article 181 of the Indian Limitation Act governs applications which are contemplated by the Code of Civil Procedure. The decisions, however, are not uniform. There are instances in which applications under other Acts have been held to be governed by Article 181. See the case of Asmatali Sharip v. Mujaharali Sardar : AIR1948Cal48 where Article 181 was made applicable to the proceedings under Section 26(f) of the Bengal Tenancy Act. But since the passing of the Arbitration Act in 1940 it is difficult to say that Article 181 is confined to applications under the Code of Civil Procedure. Schedule 4 of the Arbitration Act 1940 amended sections 158 and 178 of the Indian Limitation Act and made those Articles applicable to certain proceedings under the Arbitration Act. The basis of the decisions which held that Article 181 governs only applications under the Code of Civil Procedure, has been taken away as result of the said amendment of the Arbitration Act. I may point out that the effect of Sections 2 and 4 of the Repealing and Amending Act, 1945 is to preserve the said amendments of the Indian Limitation Act.

In my opinion, the position now is that Article 181 of the Indian Limitation Act governs applications under Section 33 of the Indian Arbitration Act.' A number of decisions of the other High Courts have also been cited in support of this contention. In the case of Sarwat Yar Khan v. State of Uttar Pradesh : AIR1959All493 , a Division Bench of the Allahabad High Court held that Article 181 of the Limitation Act applies to applications under Section 20 of the Indian Arbitration Act. In the case of Mt. Anguri Devi v. Bal Ram Ganpat Rai , a Division Bench of the Punjab High Court held that Article 181 applies to an application under Section 14(2) of the Indian Arbitration Act. But as against the view stated above, there is the decision of S. R. Das, J. in the case of Sha Mulchand and Co. Ltd. v. Jawahar Mills Ltd. : [1953]4SCR351 . It is a case for rectification of a Share Register under the Indian Companies Act and a point was taken that the application having been made more than three years after the right to apply has arisen the application is barred under Article 181 of the Limitation Act. Das, J. negatived the contention and stated his view very forcefully at pp. 103 and 104 of the report. The relevant observation of Das, J. is hereunder set out:

'Learned Advocate for the Mills, however, paints out that the reason for holding that Article 181 was confined to applications under the Code was that the Article should be construed 'ejusdem generis' and that, as all the articles in the third division of the schedule to the Limitation Act related to applications under the Code, Article 181, which was the residuary Article, must be limited to applications under the Code. That reasoning, it is pointed out, is no longer applicable because of the amendment of the Limitation Act by the introduction of the present Articles 158 and 178. These Articles arc in the third division which governs applications but they do not relate to applications under the Code but to one under the Arbitration Act and, therefore, the old reasoning can no longer hold good. It is urged that it was precisely in view of this altered circumstances that in : AIR1948Cal48 a Special Bench of the Calcutta High Court expressed the opinion that an application for preemption by a non-notified co-sharer should be governed by Article 181 of the Limitation Act. A perusal of that case, however, will show that the Special Bench did not finally decide that question in that case. In 'Hurdutrai Jagdish Prasad v. Official Assignee of Calcutta' 52 Cal WN 343 a Division Bench of the Calcutta High Court consisting of Chief Justice Harries and Mr. Justice Mukherjee who had delivered the judgment of the Special Bench clearly excreted the view that Article 181, Limitation Act, applied only to applications under the Civil P. C. and did not apply to an application under Section 56 Presidency Towns Insolvency Act.

Mukherjea, J. who also delivered the judgment of the Division Bench explained the observations made by him in the Special Bench case by pointing out that the entire procedure for an application under Section 26(F). Bengal Tenancy Act, was regulated by Civil P. C. and therefore, an application for pre-emption was, as it were, an application made under Civil P. C. Subsequently in Sarvamangala Dasi v. Paritosh Kumar Das : AIR1952Cal689 G. N. Das, J. who was also a member of the Special Bench in the first mentioned case expressed the opinion, while sitting singly, that Article 181 was not confined to applications under the Code. His Lordship's attention does not appear to have been drawn to the case of 'Hurdutrai Jagdish Prasad', 52 Cal WN 343 (supra). It does not appear to us quite convincing, without further argument, that the mere amendment of Articles 158 and 178 can 'ipso facto' after the meaning which, as a result of a long series of judicial decisions of the different High Courts in India, came to be attached to the language used in Article 181. This long catena of decisions may well be said to have, as it were, added the words 'under the Code' in the first column of that Article. If those words had actually been used in that column then a subsequent amendment of Articles 158 and 178 certainly would not have affected the meaning of that Article. If, however, as a result of judicial construction, those words have come to be read into the first column as if those words actually occurred therein, we are not of opinion, as at present advised, that the subsequent amendment of Articles 158 and 178 must necessarily and automatically have the effect of altering the long acquired meaning of Article 181 on the sole and simple ground that after the amendment the reason on which the old construction was founded is no longer available.'

This well considered decision is of great authority. I confess I am very much impressed with the reasoning given by Das, J. in his decision. It has to be recognised nevertheless that Das, J. did not give his final decision on the question. Again, having regard to what I propose to do, it is not necessary for me in this application to decide this point finally. Suffice it to say that judicial opinion is sharply divided on this point.

4. It is next contended by Mr. Basu that even though this application may not be time-barred under Article 181 of the Limitation Act, nevertheless, having regard to Section 37(2) of the Indian Arbitration Act, the arbitration proceedings sought to be revived would be absolutely useless. Section 37 of the Indian Arbitration Act reads as follows:

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

(2) Notwithstanding any term in an arbitration agreement to the effect that no cause of action shall accrue in respect of any matter required by the agreement to be referred until an award is made Under the agreement, a cause of action shall, for the purpose of limitation, be deemed to have accrued, in respect of any such matter at the time when it would have accrued but for that term in the agreement.* * * *'

Mr. Basu contends that expressly under Sub-clause (2)the cause of action has accrued much more thanthree years before and even if the arbitration isallowed to proceed and the amount of loss is quantified in the arbitration proceeding, the petitionerwill have to institute a suit for the recovery of thesum in which he would be confronted with the plea of limitation. Having regard to the fact that the cause of action accrued much more than three years before, the suit is bound to fail. In that view of the matter, it is useless to proceed with the arbitration proceeding to quantify the loss sustained by the petitioner. Mr. Shroff learned junior counsel appearing in support of the application, however, contended that in computing the period of limitation the time taken for quantification of the damage would have to be excluded and if that is so, the suit may not be time-barred. I am not called upon in the present application to decide whether the cause of action would be time-barred or not in my judgment, it is not proper for me to express an opinion on this question at this stage. I will proceed on the basis that the application is maintainable under Section 8 of the Indian Arbitration Act. I will further assume that Article 181 of the Limitation Act does not apply. Even then, should I make the order asked for?

5. Mr. Saraf contended that when the conditions laid down in Section 8 have been satisfied, as in the instant case, the Court has got no discretion in the matter, the Court must make an order appointing an arbitrator so that the arbitration may proceed. In support of his argument he relied on a decision of the Court of Appeal in England in the Matter of, Eyre Corporation of Leicester, (1892) 1 QB 136, where it is stated in the judgment of Lord Esher M. R. that the Court has got no discretion in the matter and the Court must appoint an arbitrator. This observation made by Lord Esher is in general terms and divorced from its context the observation does tend to support the contention of Mr. Saraf. Subsequently, however, this decision was considered and explained by the Courts both of England and India. It is pointed out that no such broad proposition has been laid down in the case reported in (1892) 1 QB 136. In the case of In re. Bjornstad and Ouse Shipping Co. Ltd., (1924) 2 KB 673 it has been held that the Court has a discretion. It was pointed out that the observation of Lord Esher M. R. and other learned Judges in the case reported in (1892) 1 QB 136 states nothing more than this, that in the facts of that case the Court must appoint an arbitrator. So also in the case reported in Gopalji Kuverji v. Morarji Jeram, ILR 43 Bom 809: (AIR 1919 Bom 24) the Bombay High Court considered the case reported in (1892) 1 QB 136 and expressed the opinion that the Court has a discretion in the matter and that (1892) 1 QB 136 does not state anything to the contrary.

6. In the case of : AIR1954Cal606 , Chakravartti, C. J. held that the Court has undoubtedly a discretion under Section 8(1)(b) of the Indian Arbitration Act. With respect I agree with the view taken by the Bombay High Court and the Calcutta High Court as noticed above and hold that the Court has a discretion in the matter.

7. The question therefore arises whether in the facts of the present case I should exercise my discretion in favour of the petitioner. The arbitration proceedings came to an end with the death of Mr. Kalyan Kumar Basu on July 27, 1953. The petitioner did not move in the matter till February 25, 1955, when a letter was written by the then solicitor of the petitioner Messrs. Charu Ch. Bosu to the solicitor of the respondent to concur in the appointment of the arbitrator. No explanation has been offered as to why there was so much delay. Thereafter, nothing seems to have been done from. February 25, 1955 to October, 1961 when the Notice of Motion was taken out save and except writing some letters to prospective lenders. The letters written to the different parties, copies of which have been annexed in the body of the petition do not seem to impress me at all. In my judgment there is no sufficient cause for such inordinate delay.

8. It is staled in the affidavit in opposition that because of this delay the respondent will be prejudiced. Mr. Saraf pointed out that there is not much substance in this apprehension of the respondent I express no opinion one way or the other. In my judgment this inordinate delay without sufficient cause is enough to dissuade the Court from exercising discretion in favour of the petitioner. If I allow the application then in computing the period of limitation the long period of 8 years from July, 1953 to October, 1961 must be excluded. In other words simply by refraining to make an application for 8 years, the petitioner adds 8 years to the period of limitation for enforcing its claim in the suit to be instituted after loss is quantified in the arbitration proceeding. The Court will not allow a party to keep a stale claim indefinitely alive by delaying in making an application for the appointment of an arbitrator under Section 8 after the death of the arbitrator appointed by the Court. It would not be proper for me therefore to exercise my discretion in favour of the petitioner and appoint an arbitrator after more than eight years of the death of the appointed arbitrator.

9. In the result, the application fails and isdismissed. The parties will pay and bear their owncosts.


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