1929 (1) TMI 5 - HC - Indian Laws

Summary

Issues Involved:
1. Applicability of the Indian Limitation Act, 1908, to arbitration proceedings.
2. Whether the arbitration proceedings initiated on July 15, 1915, were a continuation of prior proceedings or a new proceeding.
3. Exclusion of time under Section 14 of the Indian Limitation Act for arbitration proceedings.

Detailed Analysis:

1. Applicability of the Indian Limitation Act, 1908, to Arbitration Proceedings:

The primary question was whether the Indian Limitation Act, 1908, applies to arbitration proceedings. Section 3 of the Act states, "Subject to the provisions contained in Sections 4 to 25 inclusive, every suit instituted, appeal preferred and application made after the period of limitation prescribed therefor by the first schedule shall be dismissed, although limitation has not been set up as a defence." The relevant article under the first schedule is Article 115, which prescribes a three-year limitation period for compensation for breach of any contract not in writing registered.

The court noted that Section 3 primarily refers to suits, appeals, and applications in law courts, with no explicit mention of arbitration proceedings. However, it referenced English case law, particularly "In re Astley and Tyldesley Coal and Salt Co. v. Tyldesley Coal Co.," which established that a submission to arbitration does not exclude the right to raise the defence of the Statute of Limitations unless expressly stated otherwise in the arbitration agreement. The principle that arbitrators must decide disputes according to the existing law of contract, including all legal defences, was affirmed.

The court concluded that although the Indian Limitation Act does not explicitly apply to arbitrations, it is implied that arbitrators must consider the same defences available in a court of law, including limitation defences. Thus, the first question of law was answered affirmatively.

2. Continuation of Arbitration Proceedings:

The second issue was whether the arbitration proceedings initiated on July 15, 1915, were a continuation of prior proceedings or a new proceeding. The High Court initially held that the proceedings resulting in the award were a continuation of the earlier proceedings. However, the court disagreed, stating that the initial proceedings ended with the decision of the single arbitrator whose award was set aside. The subsequent proceedings, initiated after the Privy Council's decision, could not be regarded as a continuation of the first.

The court cited that if a suit is instituted in a court without jurisdiction, a subsequent suit in a proper jurisdiction cannot be considered a continuation of the first, even if the subject matter and parties are identical. Therefore, the arbitration proceedings initiated later were deemed new proceedings.

3. Exclusion of Time Under Section 14 of the Indian Limitation Act:

The final issue was whether the time spent in prosecuting the initial arbitration proceedings, which were found to be without jurisdiction, should be excluded under Section 14 of the Indian Limitation Act. Section 14(1) states, "In computing the period of limitation prescribed for any suit, the time during which the plaintiff has been prosecuting with due diligence another civil proceeding...against the defendant, shall be excluded, where the proceeding is founded upon the same cause of action and is prosecuted in good faith in a Court which, from defect of jurisdiction, or other cause of a like nature, is unable to entertain it."

The court agreed with Greaves J.'s reasoning that if the Indian Limitation Act applies to arbitration proceedings, then Section 14 should also apply. The analogy of the Act requires that an arbitrator should exclude the time spent in prosecuting the same claim before an arbitrator who lacked jurisdiction. The court found that the respondents had prosecuted their claim with due diligence and in good faith, and the second arbitration was based on the same cause of action. Therefore, the time spent in the initial arbitration should be excluded from the limitation period.

Conclusion:

The appeal was dismissed with costs to the respondents. The court advised that the Indian Limitation Act applies to arbitration proceedings, the subsequent arbitration was not a continuation of the initial proceedings, and the time spent in the initial arbitration should be excluded under Section 14 of the Indian Limitation Act.