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TMI Blog1993 (4) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner. D.P. Gupta, Solicitor General, A.K Sil and G. joshi These three Special Leave Petitions arise out of Arbitration Agreement said to be executed by the petitioner on May 27, 1978 which provided that the petitioner had to execute the work within 9 months. It is his claim that while executing the work he sent the bills on July 12, 1979 but payment was not made. For the first time he sent notice on Nov. 28, 1989 to the respondent for reference to the arbitration. On receipt thereof, the respondent filed an arbitration suits in the Calcutta High Court under ss. 5, 12 and 33 of the Arbitration Act, 1940 for short the Act. The learned Single Judge held that the claim was hopelessly barred by limitations There was no proof that the petitioner had sent any claim in July, 1979. Since the Claim was made long after 10 years the arbitration cannot be proceeded with. Accordingly finding that it to be an exceptional case for interference, the learned Single Judge cancelled the arbitration clause 68 of the contract in matter Nos. 1326, 1364 and 1365/90 dated November 23. 1990. On further appeals the division bench by its order dated December 18, 1992 in Appeal Nos 104/90 etc. dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in the agreement. Exfacie it would appear that appointment of an arbitrator is a condition to avail the remedy under s.5. Section 12 accords consequential power which postulates that the power of the Court where Arbitrator is removed or his authority revoked. Subsection (2) says that: "Where the authority of an arbitrator or arbitrators or an umpire is revoked by leave of the Court, or where the Court removes an umpire who has entered on the reference or a sole arbitrator or all the arbitrators, the Court may, on the application of any party to the arbitration agreement, either (b)order that the arbitration agreement shall cease to have effect with respect to the difference referred." Therefore, by a conjoint reading of ss. 5 and 12 (2) (b) it is clear that the court has been given power in given circumstances to grant leave to a contracting party to have the arbitrator or umpire removed and the-arbitration agreement entered into with other contracting part revoked. Where the Court grants such authority consequentially arbitration agreement shall cease to have effect with respect to the difference or dispute. It flows therefrom that there exist implied power vested in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... howing cause of arbitration has arisen in July, 1979, the petitioner did not take any action from then. On the other hand when notice was issued in November, 1989 the respondent immediately approached the Court and sought its leave to rescind the agreement explaining the circumstances. The Court exercised the jurisdiction in permitting the respondent to revoke the arbitration agreement. The question then is whether it is justified? Section 37 (1) of the Act provides that all the provisions of the Indian Limitation Act, 1908 (since amended Act came into force in 1963) shall apply to arbitrations as they apply to the proceedings in court. Sub-section (2), employing non-obstenti clause, says that 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. Sub-section (3) thereof states that for the purposes of this section and of the Indian Limita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of debt can be excluded in a legal arbitration. Although the Limitation Act does not in terms apply to arbitrations, they (their Lordships of the Judicial Committee) think that in mercantile reference 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 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- which is not suggested here- to exclude that defence. Were it otherwise, a claim for breach of contract containing a reference cause could be brought at any time, it might be 20 or 30 years after the cause of action had arisen, although the legislature has prescribed a limit of three years for the enforcement of such a claim in any application that might be made to the law courts. This ratio was approved by House of Lords in Naamlooze Vennootschap Handels-En- Transport-Maatschappij "Vulcaan' v. A/S J. Ludwig Mowinckels Rederi [1938]2 All E.R. 152, Lord Maugham, L.C. speaking for the unanimous Court held that in considering whether the Limitation Act would apply to arbitration (pre- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration" corresponding to "the cause of action" in litigation "treating a' cause of arbitration in the same way as a cause of action would be treated if the proceeding were in a court of law. In West Riding of Yorkshirs Country Council v. Huddersfield Corporation [1957] 1 All E.R. 669, the Queens Bench Division, Lord Goddard, C. J. (as he then was) held that the Limitation Act applies to arbitrations as it applies to actions in the High Court and the making, after a claim has become statute barred, of a submission of it to arbitration, does not prevent the statute of limitation being pleaded. Russell on Arbitration, 19th Edition, reiterates the above proposition. At page 4 it was further stated that the parties to an arbitration agreement may provide therein, if they wish, that an arbitration must be commenced within a shorter period than that allowed by statute; but the court then has power to enlarge the time so agreed. The period of limitation for commencing an arbitration runs from the date on which the cause of arbitration accrued, that is to say, from the date when the claimant first acquired either a right of action or a right to require that an arbitration takes place u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date when the claim accrues, as also in the case of arbitrations, the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues. For the purpose of s. 37 (1) 'action' and cause of action' in the Limitation Act should be construed as arbitration and cause of arbitration. The cause of arbitration, therefore, arises when the claimant becomes entitled to raise the question, i.e. when the claimant acquires the right to require arbitration. The limitation would run from the date when cause of arbitration would have accrued, but for the agreement. Arbitration implies to charter out timous commencement of arbitration availing the arbitral agreement, as soon as difference or dispute has arisen. Delay defeats justice and equity aid the promptitude and resultant consequences. Defaulting party should bear the hardship and should not transmit the hardship to the other party, after the claim in the cause of arbitration was allowed to be barred. The question, therefore, as posed earlier is whether the court would be justified to permit a contracting party to rescind the contract or the court can revoke, the authority to refer the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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