LB 302 - Limitation &
Arbitration
Part A: Limitation
The Limitation Act 1963
Topic 1: Limitation of Suits,
Appeals and Applications (Sections 3-11)
(a) Effect of expiry of limitation -
dismissal of suit, appeal, application (S3)
Section 3. Bar of limitation
(1) Subject to the provisions
contained in sections 4 to 24 (inclusive) every suit instituted, appeal
preferred, and application made after the prescribed period shall be dismissed
although limitation has not been set up as defense;
(1) For the purposes of this Act,
(a) A suit is instituted,
(i) in an ordinary case, when the plaint is
presented to the proper officer;
(ii) in the case of a pauper, when his
application for leave to sue is a pauper is made; and
(ii) in the case of a claim against a company
which is being wound up by the court, when the claimant first sends in his
claim to the official liquidator;
(b) any claim by way of a set-off or
a counter claim, shall be treated as a separate suit and shall be deemed to
have been instituted-
(i) in the case of a set-off, on the dame date
as the suit in which the set off is pleaded;
(ii) in the case a counter claim, on the date
on which the counter claim is made in court;
(c) an application by notice of
motion in a High Court is made when the application is presented to the proper
officer of that court
Section 4. Expiry of prescribed
period when court is closed -
When the prescribed period for any
suit, appeal or application expires on a day when the court is closed, the
suit, appeal or application may be instituted, preferred or made on the day
when the court reopens.
Explanation - A court shall be
deemed to be closed on any day within the meaning of this section if during any
part of its normal working hours it remains closed on that day.
Section 9. Continuous running of
time -
Where once time has begun to run, no
subsequent disability or inability to institute a suit or make an application
stops it:
Provided that where letters of administration
to the estate of a creditor have been granted to his debtor, the running of the
period of limitation for a suit to recover the debt shall be suspended while
the administration continues.
Section 10. Suits against trustees
and their representatives -
Notwithstanding anything contained
in the foregoing provisions of this Act, no suit against a person in whom
property has become vested if trust for any specific purpose, or against his
legal representatives or assigns (not being assigns for valuable consideration),
for the purpose of following in his or their hands such property, or the
proceeds thereof or for an account of such property or proceeds, shall be
barred by any length of time.
Explanation - For the purposes of
this section any property comprised in a Hindu, Muslim or Buddhist religious or
charitable endowment shall be deemed to be property vested in trust for a
specific purpose and the manager of the property shall be deemed to be the
trusted thereof.
Section 11. Suits on contracts
entered into outside the territories to which the Act extends -
(1) Suits instituted in the
territories to which this Act extends on contracts entered into the State of
Jammu and Kashmir or in a foreign country shall be rules of limitation
contained in this Act.
(2) No rule of limitation in force in the
State of Jammu and Kashmir or in a foreign country shall be a defense to a suit
instituted in the said territories on a contract entered into in that State or
in a foreign country unless -
(a) the rule has extinguished the contract;
and
(b) the parties were domiciled in that State
or in the foreign country during the period prescribed by such rule.
(1) R B Policies At Lloyd's vs Butler
Plaintiff’s car stolen in 1940 –
filed petition in 1947 – Whether suit was barred under Limitation Act 1939,
S2(1) of which provides that no action shall be brought after the expiration of
six years from the date on which the cause of action accrued. A cause of action
cannot accrue unless there be a person in existence capable of suing and
another person in existence who can be sued. Held that plaintiff was not guilty
of heartless or cruel conduct but a claim made 7 or 8 years after the loss of
the car against a perfectly innocent holder who has given good consideration
for it without any knowledge that it was stolen, does not seem just. One of the
objects of the limitation act is to prevent innocent people against demand
which are made many years afterwards.
(2) P.K Kutty Anuja Raja vs State of
Kerala AIR 1996 SC 2212
Assessment of agriculture income tax
upon the estate of Raja Manavikraman was made by the Agricultural Income Tax
officer for the period of 1-11-1956 to 31-3-1958. Payment in part was made in
discharge of the liability. High Court on 1-1-1968 quashed the assessment. A
civil suit for recovery of amount paid by the successors was filed on 1974,
which was decreed by the trial court in 1976. On appeal the division bench of
the High Court held it was barred by limitation (4-1-1977). SLP to SC.
Appellants contended that they had
discovered mistake on 5-10-1971 when this court(SC) dismissed the appeal filed
by the State against the orders passed in 1965. The court observed that once
the limitation starts running, it runs its full course until the running of the
limitation is interdicted by an order of the court. S3 of the limitation act
gives a power of entertaining the suit. The pendency of the appeal, unless the
operation of the judgment is suspended by this court, does not amount to
suspending of the operation of running of limitation. The knowledge of the
mistake of law cannot be countenanced for extended time till the appeal was
disposed of.
(3) Punjab National Bank vs Surendra
Prasad Sinha
Appellant bank gave loan 5th
May 1984 to Sriman N Dubey – respondent & his wife stood guarantors
executed security bond and handed over Fixed Deposit Receipt which matured on 1
Nov 1988 – on maturity appellant adjusted the sum due and payable by the
principal debtor as on Dec 1988 and rest credited to the Savings Bank Account
of the respondent. Respondent alleged that the debt was barred by limitation –
Held limitation bars remedy and not right – The right remains and can be
enforced by means other than suits
(b) Extension of Limitation (S5)
Section 5.Extension of prescribed
period in certain cases -
Any appeal or any application, other
than an application under any of the provisions of Order XXI of the Code of
Civil Procedure, 1908 (5 of 1908) may be admitted after the prescribed period,
if the appellant or the applicant satisfies the court that he had sufficient
cause for not preferring the appeal or making the application within such
period.
Explanation - The fact that the
appellant or the applicant was misled by any order, practice or judgment of the
High Court in ascertaining or computing the prescribed period may be sufficient
cause within the meaning of this section
(4) Collector, Land Acquisition,
Anantag v. Katiji, AIR 1987 SC 1533
Held that term ‘sufficient cause’àadequately elastic to enable courts to apply the law in a meaningful
manner – sub-serves ends of justice. A liberal approach is adopted in principle
as it is realized that:-
(i) Refusing to condone delay can
result in meritorious matter being thrown out at the very threshold and cause of justice being
defeated.As against this the highest that can happen is that a cause would be
decided on merits after hearing the parties.
(ii) Every day’s delay must be
explained does not mean a pedantic approach should be made. Why not every hours
or every seconds delay to be explained? The doctrine must be applied in a
rational common sense pragmatic manner. Mathematical accuracy is not justified.
(iii) When substantial justice and
technical considerations are pitted against each other, cause of substantial
justice deserves to be preferred for the other side cannot claim to have vested
right in injustice being done because of a non-deliberate delay.
(iv) There is no presumption that
delay is occasioned deliberately or on account of culpable negligence, or on
account of mala fides. A litigant does not stand to benefit by resorting to
delay. In fact he runs a serious risk.
(5) Ramlal v Rewa Coalfields Ltd.,
AIR 1962 SC 361
Appellant delayed by one day in
filing an appeal – prayed that 1 day delay be condoned because his partner who
was in charge of the litigation fell ill on the last date for filing the
appeal. Respondent contended that since the appellant showed lack of diligence
during a major portion of the period of limitation and since they put off the
filing of the appeal till the last date, the illness of the partner cannot be
said to be sufficient cause for condoning the delay u/s 5.
Appellant urged that it had a right
to file the appeal on the last day and so the delay of one day which it was
required to explain by sufficient reason had been satisfactorily explained.
Court granted condonation.
Issue: Whether applicant under S5
has to explain his conduct for the whole period of limitation. Or in other
words if illness might be the sufficient cause it was further necessary for the
party to show that he was reasonably diligent in prosecuting the appeal till he
fell ill.
SC laid down the following
principles.
(i)
If the limitation act
prescribes different periods of limitation for appeals or applications to which
S5 applies that normally means that the liberty is given to the party to act
within the period prescribed. It would not be reasonable to require a party to
take necessary action on the very first day after the cause of action accrues.
It may do so any day during the said period.
(ii)
The term ‘within such period’
used in S5 means (not during such period) within the period which ends with the
last day of the limitation prescribed. In all cases under S5, what the party
has to show as to why he did not file appeal on the last day of limitation and
that may inevitably mean that the party will have to show sufficient cause not
only for the delay made thereafter day by day. Thus the party has to explain
for the whole of the delay covered by the period between last day prescribed
and the day on which appeal is filed.
(iii)
It would be immaterial and even
irrelevant to invoke general considerations of diligence of parties in
construing the words of S5. Such considerations are more relevant under S14.
(iv)
In construing S5 two important
considerations are to be considered: 1st legal right which has
accrued to the decree holder should not be light heartedly disturbed. 2nd
if sufficient cause for excusing delay is shown discretion is given to the
court to condone delay. Such discretion has been conferred to advance
substantial justice. Even after substantial delay is shown the party is not
entitled to the condonation of delay as a matter of right. The court in its
discretion can still refuse condonation regard being had to the facts of each
particular case.
(v)
In Kalicharan Sharma v A
Bajpeyi – papers for appeal handed over to advocate in the morning of the last
day of limitation. Due to work pressure advocate did not look into papers till
the evening of the day. Appeal was thus filed next day. Held there was
sufficient cause, it was enough if the appellant satisfied the court for his
inability to file on the last day and his action during the whole period need
not be explained.
(6) State of Nagaland v Lipok AO
(2005) 3 SCC 752
State of Nagaland appeals against HC
order rejecting application filed by state u/s 5 – HC refused condonation of 57
day delay by the State. – HC held the fact that Addl Adv General did not file
an appeal in spite of instructions issued to him did not constitute sufficient
cause – further the records were purportedly missing was not a valid ground.
Apex Court observed:- Proof by
sufficient cause is a condition precedent for exercise of the extraordinary
discretion vested in court – What counts is not the length of delay but the
sufficiency of the cause and shortness of the delay is one of the circumstances
to be taken into account in using the discretion. What constitutes sufficient
cause cannot be laid down by hard and fast rules.
Term sufficient cause should be considered
with pragmatism in a justice oriented approach rather than the technical
detection of sufficient cause for explaining everyday’s delay. Red tape in
decision making process of Govt – State an impersonal machinery – cannot be put
on the same footing as an individual – Officers concerned should be made
personally responsible for the delay in filing the appeal.
SC considering factual background
set aside HC order and granted condonation.
(c) Reckoning of limitation in case
of legal disability - minors, insane persons, idiots (Ss 6 - 8)
Section 6.Legal disability -
Where a person entitled to institute
a suit or make an application for the execution of a decree is, at the time
from which the prescribed period is to be reckoned, a minor or insane, or an
idiot, he may institute the suit or make the application within the same period
after the disability has ceases, as would otherwise have been allowed from the
time specified therefore in the third column of the Schedule.
(2) Where such person is, at the
time from which the prescribed period it to be reckoned, affected by two such
disabilities, or where, before his disability has ceased, he is affected by
another disability, he may institute the suit or make the application within
the same period after both disabilities have ceased, as would otherwise have
been allowed from the time so specified.
(3) Where the disability continues
up-to the death of that person, his legal representative may institute the suit
or make the application within the same period after the death, as would
otherwise have been allowed from the time so specified.
(4) Where the legal representative
referred to in sub-section (3) is, at the date of the death of the person whom
he represents. affected by any such disability, the rules contained in
sub-sections (1) and (2) shall apply.
(5) Where a person under disability
dies after the disability ceases but within the period allowed to him under
this section, his legal representative may institute the suit or make the
application within the same period after the death, as would otherwise have
been available to that person had he not died.
Explanation - For the purposes of
this section 'minor' includes a child in the womb.
Notes - This section corresponds with section
6 of the old Act with some changes.
Section 7. Disability of one of
several persons -
Where one of several persons jointly
entitled to institute a suit or make an application for the execution of a
decree is under any such disability, and a discharge can be given without the
concurrence of such person, time will run against them all; but, where no such
discharge can be given, time will not run as against any of them until one of
them becomes capable of giving such discharge without the concurrence of the
others or until the disability has cased.
Explanation I - This section applies
to a discharge from every kind of liability, including a liability in respect
of any immovable property.
Explanation II - For the purposes of
this section, the manager of a Hindu undivided family governed by the
Mitakshara law shall be deemed to be capable of giving a discharge without the
concurrence of the other members of the family only if he is in management of
the joint-family property.
Section 8. Special exceptions -
Nothing in section 6 or in section 7
applies to suits to enforce rights of pre-emotion, or shall be deemed to
extend, for more than three years from the cessation of the disability or the
death of the person affected thereby the period of limitation for any suit or
application.
(7) Kolandevel Gounder v Chinnappan,
AIR 1965 Mad 541
In this case, the father alienated
on behalf of himself and his three minor sons certain properties in 1942. The 1st
son(eldest) born in 1928, 2nd born in 1931 and 3rd born
in 1937 – eldest became major in 1946 and the youngest son in 1955 – eldest
became manager of the family in 1948 after the death of his father – The sons
filed a suit for partition and separate possession of their 2/3rd
share on the ground that alienation by father was not binding on them – the suit was filed in
1958 – Art 126 of limitation act provides for 12 years from the time when the
alience takes possession of the property – The cause of action thus accrued in
1942, but the suit was filed in 1958. Held that the suit is barred by
limitation – The contention of the plaintiff was that the 12 year period in
view of the minority of the sons should be counted from the date when the
youngest son became major – Alternatively it is contended that the eldest son
became manager of the family only in 1948 when only he was competent to give
discharge on behalf of his brothers also that therefore the time would commence
to run against all of them only from 1948 – further it was contended that S8
provides a period of limitation in cases of cessation of the disability and
that incapacity to give discharge is not a disability contemplated under S8.
Court negatived these contentions
and observed – The sections 6, 7 & 8 should read together – S8 imposes a
limitation on the concession provided under Ss 6 & 7 to a maximum of three
years after cessation of disability. The law allows the maximum period of 3
years from the statuable cause of action or the full period from the ordinary
starting point which ever is more advantageous to the plaintiff – In the
present case the eldest son as manager in 1948 was competent under the personal
law to give a valid discharge.
(8) Darshan Singh v Gurdev Singh,
AIR 1995 SC 75
Respondent minor at time of father’s
death – attained majority on 17th April 1977 and thereafter a suit
for possession was filed on 4th Nov 1982 which was within 12 years
under A65 of the Limitation Act – but was after expiry of 3 years of his
attaining majority. The plea was made by the appellant that the suit ought to
have been filed within 3 years of his attaining majority. Held that the period
of limitation expired when respondent was 16 years of age and consequently he
ought to have filed the suit within 3 years of attaining majority and his suit
is barred by limitation.
Topic 2: Computation of Limitation
(Ss 12 - 24)
(a) Exclusion of time (Ss 12- 13)
Section 12. Exclusion of time in
legal proceedings -
(1) In computing the period of
limitation for any suit, appeal or application, the day from which such period
is to be reckoned shall be excluded.
(2) In computing the period of
limitation for an appeal or an application for leave to appeal or for revision
or for review of a judgment, the day on which the judgment complained of was
pronounced and the time requisite for obtaining a copy of the decree, sentence
or order appealed from or sought to be revised or reviewed shall be excluded.
(3) Where a decree or order is
appealed from or sought to be revised or reviewed, or when an application is
made for leave to appeal from a decree or order the time requisite for
obtaining a copy of the judgment on which the decree or order is founded shall
also be excluded.
(4) In computing the period of
limitation for an application to set aside an award, the time requisite for
obtaining a copy of the award shall be excluded.
Explanation - In computing under
this section the time requisite for obtaining a copy of a decree or an order,
any time taken by the court to prepare the decree or order before an
application for copy thereof is made shall not be excluded.
Section 13. Exclusion of time in
cases where leave to sue or appeal as a pauper is applied for -
In computing the period of
limitation prescribed for any suit or appeal in any case where an application
for leave to sue or appeal as a pauper has been made and rejected, the time
during which the applicant has been prosecuting in good faith his application
for such leave shall be excluded, and the court may, on payment of the
court-fees prescribed for such suit or appeal, treat the suit or appeal as having
the same force and effect as if the court-fees had been paid in the first
instance.
(9) The Commissioner of Sales Tax,
UP vs M/s Madan Lal Das & Sons, Bareilly, AIR 1977 SC 523
1960 – 61 (assessment year) appeal
filed by the respondent dealer was disposed of by the Addl Comm(Judicial) Sales
Tax – copy of the appellate order was served on the respondent on Aug 22, 1963
which was lost by him and he made an application on 15th June 1966
for another copy of the order – Copy was ready on Aug 17, 1967 and delivered to
the respondent on Aug 18, 1967
A revision under S10 of the UP Sales
Tax Act was filed by the respondent on 9th Sept 1967 – Sub 3B of S10
prescribes the period of limitation for filing a revision within one year from
the date of service of the order and the revising authority may on proof of
sufficient cause entertain it within a further period of 6 months.
Respondent claimed under S12(2) of
the Limitation Act 1963 exclusion of period in computing the period of
limitation for filing of revision and his claim was rejected by the Revisions
Judge who allowed the revision petition. On appeal the High Court favored the
respondent and so does the Apex court. Question before the SC was applicability
of S12(2) of the Limitation Act in UP sales tax act disputes.
SC obsrvd: UP sales tax act answers
to the description of a special or local law – According to S29(2) of the
limitation act for determining any period of limitation prescribed for any
application by any special/local law the provision contained in S12(2) shall
apply in so far as and to the extent to which they are not expressly excluded
by such special or local law – Nothing in UP Sales Tax Act expressly excluding
the application of S12(2) of limitation act for determining the period of
limitation prescribed for revision application.
Nothing in language of S12(2) which
suggests that the time spent for obtaining copy of the order sought to be
revised can be excluded only if such a copy is required to be filed along with
the revision application – In a number of cases the court considered the
application of S12(2) of the limitation act because it helps in giving right
judicial decisions.
Provisions of S12(2) would apply
even though the copy mentioned in that sub-section is not required to be filed
along with the memorandum of appeal. Same position should hold good in case of
revision petition ever since Lim Act1963 came into force. In St of Up vs
Maharaj Narain Singh the court observed that what is deductible under S12(2) is
not the minimum time within which a copy of the order appealed against could
have been obtained.
If that be the position of law in a
case where there was no allegation of the loss of any copy, a fortiori it would
follow that where as in the present case the copy is served upon a party is
lost there is no alternative for that party except to apply for a fresh copy in
order to be in position to file revision petition, the time spent in obtaining
that copy would necessarily have to be excluded under S12(2) of the limitation
act 1963.
(10) St of UP vs Maharaj Narain, AIR
1968 SC 960
Court examined true scope of the
expression ‘time requisite for copy’ under S12(2) – Memorandum of appeal was
filed on March 29, 1963 – The order of appeal had been delivered on Nov 10,
1962 – the appeal was within time excluding the time requisite in obtaining
certified copy viz from Nov 15 to Jan 3. But the contention of the respondent
was that the appeal was out of time in view of the fact that the appellant had
applied for and obtained two other copies of the order appealed from time and
if time is calculated on the basis of those copies the appeal was beyond time.
The point for consideration is whether the obtaining of those copies has any
relevance in the matter of computing the period of limitation for appeal.
SC observed: The expression time
requisite under S12(2) cannot be understood as the time absolutely necessary
for obtaining the copy or the minimum time within which a copy could be
obtained – The appellant is not required to apply for a copy immediately after
the order is pronounced, he could have applied it at the end of limitation
period. – The section lays no obligation on the appellant to be prompt &
diligent in his application for a copy of the order – A plain reading of S12(2)
shows in computing the limitation period prescribed for an appeal the day on
which the judgment or order to make available the copy applied for, have to be
excluded. There is no justification for restricting the scope of that provision.
SC in support of its observation
cited two decisions
(i) Jijiboy v T.V.S Chettyar – court
obsrvd the word ‘requisite’is a strong word and means ‘properly required’ and
it throws upon the appellant the necessity of showing that no part of the delay
beyond the prescribed period is due to his fault.
(ii) P. Thirumala v Anavemareddy –
court laid down that in S12 the words time requisite for copy means the time
beyond the party’s control occupied in obtaining the copy which is filed with
the memorandum of appeal and not an ideal lesser period which might have been
occupied if the application for copy had been filed on some other date.
SC further observed that if courts
are required to find out in every appeal filed the minimum time required for
obtaining the copy of the order appealed from, it would be unworkable.
Held that the time requisite for
obtaining a copy is to be ascertained from the copy actually filed along with
the appeal. Obtaining of other copies is not decisive of the matter under
section 12(2).
(11) Udayan Chinubhai vs R.C. Bali
AIR 1977 SC 2319
SC held that when a party makes an
application for a copy after signing of the decree that period will not be
covered by for the benefit of the appellant as time requisite for obtaining the
copy under S12(2) .
Facts: The trial court decreed the
suit by its judgment dated 27-3-1976 and directed the plaintiff to make up the
deficiency in court fee within one month & the plaintiff after obtaining an
extension of time from the court supplied the deficient court-fee on 6-5-1976.
The decree was prepared and signed on 6-5-1976. Defendant applied for certified
copies on 14-7-1976 – copies ready on 17-9-1976 on which day they were received
by defendant and the appeal filed on 29.9.1976. Held appeal was not time
barred.
SC observed that ordinarily a judgment
is unconditional and the date of the judgment will necessarily be the date of
the decree( Order 20, Rule 7, CPC, 1908). The time therefore begins to run from
the date of the judgment unless there is a legal impediment to prepare a decree
on account of certain directions in the judgment.
Present case governed by exception
recognized in Lala Balmukand Case –
Without deposit of the deficient court fee by plaintiff the decree could not be
instantly prepared. Without existence of decree any application for a copy of
the decree would be useless – there for operative purposes the date of the
decree was when the plaintiff furnished court fees and limitation period of 90
days would count from that date as it is only then the court could take up
preparation of the decree. The respondent cannot take advantage of own default
to defeat the appellant.
(12) India House vs Kishan N Lalwani
(2003) 9 SCC 393
There need not be any prayer or
application by the party for the exclusion of time under S12. Duty of the court
to exclude the time when the case comes under the purview of S12.
Held that it does not make any
difference whether the application for certified copy was made within period of
limitation or beyond it. The period was liable to be excluded in all cases and
not depending on whether there is sufficient cause or not.
(b) Exclusion of time for proceeding
bonafide in a court without jurisdiction
(S 14)
Section 14. Exclusion of time of
proceeding bona fide in court without jurisdiction -
(1) In computing the period of
limitation for any suit the time during which the plaintiff has been
prosecuting with due diligence another civil proceeding, whether in a court of
first instance or of the appeal or revision, against the defendant shall be
excluded, where the proceeding relates to the same matter in issue 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.
(2) In computing the period of
limitation for any application, the time during which the applicant has been
prosecuting with due diligence another civil proceeding, whether in a court of
first instance or of appeal or revision, against the same party for the same
relief shall be excluded, where such proceeding is prosecuted in good faith in
a count of first instance or of appeal or revision, against the same party for
the same relief shall be excluded, where such proceeding 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.
(3) Notwithstanding anything
contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of
1908), the provisions of sub-section (1) shall apply in relation to a fresh
suit instituted on permission granted by the court under rule of that Order,
where such permission is granted on the ground that the first suit must fail by
reason of a defect in the jurisdiction of the court of other cause of a like
nature.
Explanation - For the purpose of
this section, -
(a) In excluding the time during
which a former civil proceeding was pending, the day on which that proceeding
was instituted and the day on which it ended shall both be counted;
(b) Plaintiff or an applicant
resisting an appeal shall be deemed to be prosecuting a proceeding;
(c) Misjoinder of parties or of
causes of action shall be deemed to be a cause of a like nature with defect of
jurisdiction.
Related Judgements
FERRO ALLOYS CORPORATION LTD. v.
RAJHANS STEEL LTD.
(13) Deena(Dead) through LRS vs
Bharat Singh (Dead) through LRS AIR 2002 SC 2768
A suit decreed by the TC was
challenged in appeal by the defendant. During pendency of the suit the
plaintiff withdrew the suit with permission to file fresh suit (non impleadment
of a necessary party) . There after the present suit filed on 24-8-1982 seeking
declaration that they were owners of suit property and that order passed by the
Collector was void and inoperative. In a written statement, the defendant took
the plea that the suit was barred by limitation. TC held suit barred by
limitation. First appellate court also held the same.
HC held order passed by collector
29-2-1980. First suit filed on 23-3-1980 which was decreed by the TC. The
defendant respondent filed appeal on 15-2-1982 the plaintiff-respondent were
allowed to withdraw the suit which was decreed in their favor by the TC with
permission to file a fresh one on the same cause of action – fresh suit filed
on 24-2-1982. HC held à
entitled to exclusion of time from 23-3-1980 to 15-2-1982. Findings of the
lower court are set aside and the suit filed by the plaintiff appellants is
decreed.
SC obsrvd: In O23 R2 CPC it is
provided that any fresh suit instituted on permission granted under R1 the
plaintiff shall be bound by law of limitation in the same manner as if the
first suit had not been instituted. S14(3) is in the nature of a proviso to O23
R2 CPC. The non obstante clause provides that notwithstanding anything
contained in O23 R2 the provisions of S14(1) shall apply in relation to a fresh
suit instituted on permission granted by court under O23 R1.
For applicability of the provision
in sub section (3) of Sec 14 certain conditions are to be satisfied. Conditions
before S14 can be applied.
(i) both the prior and subsequent
proceedings are civil proceedings prosecuted by the same party
(ii) the prior proceeding had been
prosecuted with due diligence and good faith
(iii) the failure of the prior
proceeding was due to defect of jurisdiction or other cause of like nature
(iv) the earlier proceeding and the later
proceeding must relate to the same matter in issue.
(v) Both the proceedings are in a
court
Main factor in extending benefit of
S14 to a litigant is whether the prior proceeding had been prosecuted with due
diligence and good faith. Good faith means exercise of due care
and attention. Non impleadment of a necessary party was a clear case of
laches on the part of the plaintiffs. In such circumstances it could not be
said that the plaintiffs were prosecuting the previous suit in good faith.
The objection regarding non
impeachment was taken in written statement despite such objection, the
plaintiffs chose to prosecute the suit. They succeeded in trial court and the
matter was pending before the 1st appellate court when the
permission under Order 23 seeking withdrawal of the suit with permission to
file a fresh suit for the same relief was filed by them. Therefore the trial
court(and 1st appellate court) was right in holding that the
plaintiffs were not entitled to exclusion of the time u/S14 and suit barred by
limitation.
(14) Rameshwarlal vs Municipal
Council, Tonk (1996) 6 SCC 100
Petitioner filed writ petition in HC
for salary amount for period of 10-9-1987 to 18-8-1988. Held it’s a claim
recoverable in civil action the discretionary power u/A226 CoI is not
exercisable and petition is dismissed. Division Bench of the HC on 6-5-1996
also came to the same conclusion.
SC held that its axiomatic that the
exercise of the power u/A226 being
discretionary the HC has not exercised the same.
Obsrvd since limitation has run out
to file a civil suit which was not on the date of filing of the writ petition
the civil court is required to exclude u/S14 of the Limitation act the entire
time taken by the HC in disposing of the matter.
Under normal circumstance (for S14
to apply) the court dealing with the matter in 1st instance must be
found to have lack of jurisdiction with the matter at hand.
(c) Exclusion of time in miscellaneous
cases, eg. stay/injunction order, requirement of notice or previous consent,
etc. (Ss 15 - 16)
Section 15. Exclusion of time in
certain other cases -
(1) In computing the period of
limitation for any suit or application for the execution of a decree, the
institution or execution of which has been stayed by injunction or order, the
time of continuance of the injunction or order, the day on which it was issued
or made, and the day on which it was withdrawn, shall be excluded.
(2) In computing the period of
limitation for any suit of which notice has been given, or for which the
previous consent or sanction of the Government or any other authority is
required, in accordance with the requirements of any law for the time being in
force, the period of such notice or, as the case may be, the time required for
obtaining such consent or sanction shall be excluded.
Explanation - In excluding the time
required for obtaining the consent or sanction of the Government or any other
authority, the date on which the application was made obtaining the consent or
sanction and the date of receipt of the order of the Government or other
authority shall both be counted.
(3) In computing the period of
limitation for any suit or application for execution of decree by any receiver
of interim receiver appointed in proceedings for the adjudication of a person
as an insolvent or by any liquidator or provisional lipuidator appointment in
proceedings for the winding up of a company, the period beginning with the date
of institution of such proceeding and ending with the expiry of three months
from the date of appointment of such receiver or liquidator, as the case may
be, shall be excluded.
(4) In computing the period of
limitation for a suit for possession by a purchaser at a sale in execution of a
decree, the time during which a proceeding to set aside the sale has been
prosecuted shall be excluded.
(5) In computing the period of
limitation for any suit the time during which the defendant has been absent
from India and from the territories outside India under the administration of
the Central Government, shall be excluded.
Section 16. Effect of death on or
before the accrual of the right to sue -
(1) Where a person who would, if he
were living, have a right to institute a suit or make an application dies
before the right accrues, or where a right to institute a suit or make an
application accrues only on the death of a person, the period of limitation
shall be computed from the time when there is a legal representative of the
deceased capable of instituting such suit or making such application.
(2) Where a person against whom, if
he were living, a right to institute a suit or make an application would have
accrued dies before the right accrues, or where a right to institute a suit or
make an application against any person accrues on the death of such person, the
period of limitation shall be computed from the time when there is a legal
representative of the deceased against whom the plaintiff may institute such
suit or make such application.
(3) Nothing in sub-section (1) or
sub-section (2) applies to suits to enforce rights of preemption or to suit for
the possession of immovable property or of a hereditary office.
(d) Effect of fraud or mistake ( S
17), Effect of acknowledgement (S 18), Effect of payment (S 19), Effect of
substituting or adding new plaintiff or
defendant ( S 21 )
Section 17. Effect of fraud or
mistake -
(1) Where, in the case of any suit
or application for which a period of limitation is prescribed by this Act-
(a) The suit or application is based
upon the fraud of the defendant or respondent or his agent; or
(b) The knowledge of the right or
title on which a suit or application is founded is concealed by the fraud of
any such person as aforesaid; or
(c) The suit or application is for
relief from the consequences of a mistake; or
(d) Where any document necessary to
establish the right of the plaintiff or applicant has been fraudulently
concealed from him;
The period of limitation shall not
begin to run until the plaintiff or applicant has discovered the fraud or the
mistake or could, with reasonable diligence, has discovered it, or in the case
of concealed document, until the plaintiff or the applicant first had the means
of producing the concealed document or compelling its production:
Provided that nothing in this
section shall enable any suit to be instituted or application to be made to
recover or enforce any charge against or set aside any transaction affecting,
any property which-
(i) In the case of fraud, has been
purchased for valuable consideration by a person who was not a party to the
fraud and did not at the time of the purchase know, or have reason to believe,
that any fraud had been committed, or
(ii) In the case of mistake, has
been purchased for valuable consideration subsequently to the transaction in
which the mistake was made, by a person who did not know, or have reason to
believe, that the mistake had
been made, or
(iii) In the case of a concealed
document, has been purchased for valuable consideration by a person who was not
a party to the concealment and, did not at the time of purchase know, or have
reason to believe, that the document had been concealed.
(2) Where a judgment-debtor has, by
fraud or force, prevented the execution of a decree or order within the period
of limitation, the court may, on the application of the judgment-creditor made
after the expiry of the said period extend the period for execution of the
decree or order:
Provided that such application is
made within one year from the date of the discovery of the fraud or the
cessation of force, as the case may be.
Section 18. Effect of acknowledgment
in writing -
(1) Where before the expiration of
the prescribed period for a suit or application in respect or any property or
right, an acknowledgment of liability in respect of such property or right has
been made in writing signed by the party against whom such property or right is
claimed, or by any person through whom he derived his title or liability, a
fresh period of limitation shall be computed from the time when the
acknowledgment was so signed.
(2) Where the writing containing
thee acknowledgement is undated, oral evidence may be given of the time when it
was signed; but subject to the provisions of the Indian Evidence Act,1872 ( 1
of 1872), oral evidence of its contents shall not be received.
Explanation - For the purposes of
this section, -
(a) An acknowledgment may be
sufficient though it omits to specify the exact nature of the property or
right, or avers that the time for payment, delivery, performance or enjoyment
has not yet come or is accompanied by refusal to pay, deliver, perform or
permit to enjoy, or is coupled with a claim to set-off, or is addressed to a
person other than a person entitled to the property or night;
(b) The word "signed"
means signed either personally or by an agent duly Authorised in this behalf ;
and
(c) An application for the execution
of a decree or order shall not be deemed to be an application in respect of any
property or right.
NOTES - It is not necessary that an
acknowledgment within Section 18 must contain a promise pay or should amount to
a promise to pay. (Subbarsadya v.Narashimha, AIR 1936 Mad.939)
The above section corresponds to
S.19 of the old Act and makes slight changes.
Section 19. Effect of payment on
account of debt or of interest on legacy -
Where payment on account of a debt
or of interest on a legacy is made before the expiration of the prescribed
period by the person liable to pay the debt or legacy or by his agent duly
Authorised in this behalf, a fresh period of limitation shall be computed from
the time when payment was made:
Provided that, save in the case of
payment of interest made before the 1st day of January,1928, an acknowledgment
of the payment appears in the hand-writing of, or in a writing signed by the
person making the payment.
Explanation - For the purposes of
this section, -
(a) Where mortgaged land is in the
possession of the mortgage, the receipt of the rent of produce of such land be
deemed to be a payment;
(b) "Debt" does not
include money payable under a decree or order of a court.
Section 20. Effect of acknowledgment
or payment by another person -
(1) The expression "agent duly
Authorised in this behalf" in sections 18 and 19 shall in the case of a
person under disability, include his lawful guardian, committee or manager or
an agent duly Authorised by such guardian, committee or manager to sign the
acknowledgment or make the payment. (2) Nothing in the said sections renders
one of several joint contractors, partners, executors or mortgages chargeable
by reason only of a written acknowledgment signed by, or of a payment made by,
or by the agent of, any other or others of them.
(3) For the purposes of the said
sections, -
(a) an acknowledgment signed or a
payment made in respect of any liability by, or by the duly Authorised agent
of, any limited owner of property who is governed by Hindu Law, shall be a
valid acknowledgment or payment, as the case may be, against a reversionary
succeeding to such liability; and
where a liability has been incurred
by, or on behalf of a Hindu undivided family as such, an acknowledgment or
payment made by, or by the duly Authorised agent or, the manager of the family
for the time being shall be deemed to have been made on behalf of the whole
family.
Section 21. Effect of substituting
or adding new plaintiff or defendant -
(1) Where after the institution of a
suit, a new plaintiff or defendant is substituted or added, the suit shall, as
regards him, be deemed to have been instituted when he was made a party:
Provided that were the court is
satisfied that the omission to include a new plaintiff or defendant was due to
a mistake in good faith it may direct that the suit as regards such plaintiff
or defendant shall be deemed to have been instituted on any earlier date.
(2) Nothing in sub-section (1) shall
apply to a case where a party is added or substituted owing to assignment or
devolution of any interest during the tendency of a suit or where a plaintiff
is made a defendant or a defendant is made a plaintiff.
Section 22. Continuing breaches and
torts -
In the case of a continuing breach
of contract or in the case of a continuing tort, a fresh period of limitation
beings to run at every moment of the time during the breach or the tort, as the
case may be, continues.
Section 23. Suits for compensation
for acts not actionable without special damage -
In the case of suit for compensation
for an act which does not give rise to a cause of action unless some specific
injury actually results there from, the period of limitation shall be computed
from the time when the injury results.
Section 24. Computation of time
mentioned in instrument -
All instruments shall for purposes
of this Act, be deemed to be made with reference to the Gregorian calendar.
(15) Mahabir Kishore vs State of MP
AIR 1990 SCC 313
Suit for refund of money paid under
mistake of law – question if whether and if so which provision of the
limitation act will apply to such a suit – court observed that money realized
was under a mistake and without any authority of law – appellants also while
paying suffered from the same mistake. The principle of unjust enrichment
requires
(i) the defendant has been enriched
by the receipt of a “benefit”
(ii) this enrichment is at the
expense of the plaintiff
(iii) that the retention of the
enrichment be unjust
This justifies restitution.
No constitutionally provided period
of limitation u/A226 the limitation prescribed for such suit has been accepted
as the guideline and little more latitude available in civil suits.
M/s Budh Prakash – HC held period of
limitation for filing WP u/A226 for monies paid under mistake of law is 3 years
from the date the mistake would lie.
S17(1)[c] of the limitation act 1963
provides that in suit for relief on ground of mistake, the period of limitation
does not begin to run until the plaintiff had discovered the mistake or could
with reasonable diligence, have discovered it.
Usually mistake known to appellant
only when court makes a declaration. Seldom that a person with reasonable
diligence discover a mistake of law before judgment adjudging the validity of
the law.
Question: Whether in the application
u/A226 CoI the court should have refused refund on the ground of laches &
delay.
Guwahati HC – held that a citizen
should be refunded money because no State has the right to receive or retain taxes
or money without the authority of law.
Settled law that for money paid by
mistake of law S72 Contract Act applies and period of limitation is 3yrs as
prescribed in Art113 Sch to Lim Act1963 and the provision of 17(1)[c] will be
applicable.
Present case the final decision of
the Government(respondent) dated Oct 17, 1961 was purely an internal
communication and never communicated to the appellant. Hence no question of
limitation starting from that date.
(16) State of Kerala vs T.M Chacko
(2000) 9 SCC 722
Facts: Respondent highest bidder in
auction – bid accepted on 15-1-1974 – Bid amount paid by the respondent but
unfortunately a fire broke out in the forest and the respondent’s coupe got
destroyed in it. Representations were made to the appellant for reduction in
bid amount on which the appellant for reduction in bid amount on which the
appellant reduced it and extended the time to remove the forest produce by 45
days – Respondent neither paid the balance nor removed the produce – On
19-9-1974 the appellant intimated to the respondent about cancellation of the
contract – respondent issued notice to the appellant u/S80 CPC to claim
compensation amount and filed the suit as an indigent person on 28-7-1977 and
got it decreed on 19-7-1980.
Issues:
(i)
Whether the suit barred by
limitation u/A47 of LimAct1963 or not?
(ii)
Whether Ex B-4 and A-8 contain
any acknowledgement of liability by appellant or not so as to attract S18.
Court Observed: A47 talks about suit
of description for money paid upon an existing consideration afterwards failed
and limitation period is 3 years which begins to run from the date of failure.
The effect of acknowledgement u/S18 is that the period of limitation has to be
computed from the time the when the acknowledgement was signed.
Date of failure in present case is
21-2-1974. Suit filed on 28-7-1977. It is clearly barred by limitation unless acknowledgement
in exhibits. On careful reading of exhibits court could not find that the
refund of bid amount was a result of acknowledgement of that claim.
Hence suit barred by limitation
(17) Tilak Ram vs Nathu AIR 1967 SC
935
Period of redemption of certain
mortgages(60 years) expired – appellants relied on certain documents alleging
that they constituted acknowledgements by the predecessors-in-title of the
respondents and which gave them a fresh period of limitation saving their suit
from being time barred. The statements contained an admission by party in a
court that he holds a property as a mortgage or what he is disposing off are
his mortgage rights therein(sub mortgage) – A sale deed, besides deed of
sub-mortgage, by which the party sold his mortgage rights were also produced as
evidence of acknowledgement.
Court observed none of the
statements expressly admitted the appellant’s rights or the liability of the
respondent – The statements were clearly made for the purpose of describing
respondent’s own rights which he sold and not to admit a jural relationship
with the mortgagors and therefore of his subsisting liability as mortgagee
there under of being redeemed – Held that none of the statements can be
regarded as acknowledgement within the meaning of S18, hence the suit was time
barred.
Khan Bahadur Shapoor Freedom Mazda v
Durga Prasad – court examined the contents and scope of S18 & stated that
an acknowledgement may be sufficient by reason of Explanation even if it omits
to specify the exact nature of rights.
(18) Sampuran Singh vs Niranjan Kaur
(Smt), AIR 1999 SC 1047
Apex Court held that if the
acknowledgment of liability is made after the expiration of the prescribed
period, it will not revive the period of limitation and that acknowledgment of
liability should be made before the expiration of the prescribed period for a
suit or other proceeding.
Facts: Appellant purchased suit
property from original mortgager by registered sale deed in 1959 -
11-1-1960 Original Mortgagee sold
his right by a registered sale deed to the respondents who acknowledged the
existence of the mortgage in question (original oral mortgage was executed for
a sum of Rs 53 in 1893)
1980 the appellants filed the
present suit for possession by way of redemption of the suit land as against
respondents – the respondents contended the suit was time barred – appellants
contended that since there is acknowledgement by mortgagee on 11-1-1960 a fresh
limitation starts from that date – Apex court disagreed and held
acknowledgement after expiration of limitation period hence suit remains time
barred.
(19) Karuppaswamy vs C Ramamurthy
AIR 1993 SC 2324
It was observed that normally, if
the plaintiff had known about the death of defendant, he would have filed the
suit in the first instance against his heirs and legal representatives and that
the High Court too recorded a finding that there was nothing to show that the
plaintiff was aware of the death of the defendant and yet knowing well about
it, he would persist in filing the suit against a dead person and held that
since the plaintiff had taken prompt action and had acted in good faith, the
Proviso to Section 21(1) of the Limitation Act could be invoked in his favour
and the legal representatives of the deceased defendant could be impleaded
(when Court permits).
Facts: Plaintiff ignorant of death
of respondent and filed suit u/O 22 R4 CPC on Nov 14, 1974
Topic 3: Acquisition of Ownership by Possession (Ss 25 - 27) [omitted
from syllabus]
Section 25. Acquisition of easement by prescription -
(1) Where the access and use of light or air to and for any building
have been peaceable enjoyed there with as an easement, and as of right, without
interruption and for twenty years, and where any way or watercourse or the use
of any water or any other easement (whether affirmative or negative) has been
peaceably and openly enjoyed by any person claiming title thereto as an
easement and as of right without interruption and for twenty years, the right
to such access and use of light or air, way, watercourse, use of other easement
shall be absolute and indefeasible.
(2) Each of the said periods of twenty years shall be taken to be a
period ending within two years next before the institution of the suit wherein
claim to which such period relates is contested.
(3) Where property over which a right is claimed under sub-section (1)
belongs to the Government that sub-section shall be read as if for the words
"twenty years" the words "thirty years" were substituted.
Explanation - Nothing is an interruption within the meaning of the
section, unless where there is an actual discontinuance of the possession or
enjoyment by reason of an obstruction by the act of some person other than the
claimant and unless such obstruction is submitted to or acquiesced in for one
year after the claimant has notice thereof and of the person making or
authorizing the same to be made.
Section 26. Exclusion in favour of reversionary of servant tenement -
Where any land or water upon, over or from, which any easement has been
enjoyed or derived has been held under or by virtue of any interest for life or
in terms of years exceeding three years from the granting thereof the time of
the enjoyment of such easement during the continuance of such interest or term
shall be excluded in the computation of the period of twenty years in case the
claim is, within three years next after the determination of such interest or
term, resisted by the person entitled on such determination to the said land or
water.
Section 27. Extinguishments of right to property -
At the determination of the period hereby limited to any person for
instituting a suit for possession of any property, his right to such property
shall be extinguished.
(20) Rajender Singh vs Santa Singh AIR 1973 SC 2537 (omitted from
syllabus)
The respondents had filed a suit
in 1940 claiming title to and possession of certain lards in the possession of
the appellants and the suit ended in favour of the appellants in 1958.
In 1959, the appellants filed a
suit for possession against the respondents asserting that the respondents had
taken illegal and forcible possession of those lands after the decision of the High Court in
1958. The respondents, however, claimed
that they had taken possession of the lands even in 1944 and that they had been
since then in adverse possession openly, continuously and exclusively as
owners. Hence according to the defendants the appellants suit was barred by
limitation(12yrs).
The trial court found that the
respondents had been in possession of the lands from 1946 to the date, of the
appellants' suit. The first appellate court, however, held that the doctrine of
lis pendens prevented the rights of the respondents from maturing. The High
Court, accepting the concurrent findings as to the fact of possession of the
respondents held that the adverse possession of the defendants commenced during
the pendency of the earlier suit and once having begun to run would not stop
running merely because of the pendency of the defendants' suit for possession
which was dismissed in 1958.
Issue: Does doctrine of lis
pendens S52 TPA arrest the running period of limitation during the pendency of
the suit of the defendants filed in 1940 and finally deiced in 1958?
Lis pendens means pending suit –
to prevent attempts to circumvent the jurisdiction of the court – not meant to
serve indirectly as a provision or a substitute for a provision of the
Limitation Act – Continued illegal possession ripens into a legally enforceable
right only after the prescribed period of time has elapsed – it matures into a
right due to inaction and not due to the action of the injured party which can
approach a court for redress by a suit to regain possession. However injured
party must approach court within time period of limitation.
Held suit barred by limitation.
Defendant’s suit will not help plaintiffs seek exclusion of time under S14 of
the Lim Act as cause of action and relief sought would be different in that
case.
Topic 4: Saving of Other Laws (S 29)
Section 29. Savings -
(1) Nothing in this Act, shall
affect section 25 of the Indian Contract Act,1872.
(2) Where any special or local law
prescribes for any suit, appeal or application a period of limitation different
from the period prescribed by the Schedule, the provisions of section 3 shall
apply as if such period were the period prescribed by the Schedule and for the
purpose of determining any period of limitation prescribed for any sit, appeal
or application by any special or local law, the provisions contained in section
5 to 24 (inclusive shall apply only in so far, as and to the extent to which,
they are not expressly excluded by such special or local law.
(3) Save as otherwise provided in
any law for the time being in force with respect to marriage and divorce,
nothing in this Act shall apply to any suit or other proceeding under any such
law.
(4) Sections 25 and 26 and the
definition of "easement" in section 2 shall not apply to cases
arising in the territories to which the Indian Easements Act,1882 may for the
time being extend.
(21) Shantilal M Bhayani vs Shanti
Bai 1995 Supp (4) SCC 578
Issue: Whether the provisions of S5
Lim Act would apply to an appeal filed under TN Building (Lease & Rent
Control) Act 1960 before the appellate authority – Held that S5 of the Lim Act
will apply to an appeal filed before the appellate authority under the TN Act.
(22) Mukri Gopalan vs Cheppilat
Puthanpurayil Aboobacker AIR 1995 SC 2272
SC held that the appellate authority
u/ S18 Kerala Rent Act, 1965 function as a court and the period of limitation
prescribed therein under S18 governing appeals by aggrieved parties will be
computed keeping in view the provisions of Ss4-24 Lim Act. Such proceedings will
attract S29(2) of the Lim Act and consequently S5 of Lim Act would also be
applicable to such proceedings – appellate authority have ample jurisdiction to
consider the question of delay in filing appeals and delay could be condoned on
sufficient cause shown. It may be noted that the appellate authority took the
view that provisions of S5 of Lim Act are not applicable in the case as it was
not a court but persona designate.
Well settled that a situation
wherein a period of limitation is prescribed by a special/local law for an
appeal application and for which there is no provision made in the schedule to
the limitation act, the 2nd condition for S29(2) would get satisfied
– In other words S29(2) would apply even to a case where a difference between
the special law and Lim Act arose by the omission to provide for limitation to
a particular proceeding under the Lim Act.
Following two requirements have to
be satisfied by the authority invoking the said provision.
(i) There must be a provision for
period of limitation under any special or local law in connection with any
suit, appeal or application.
(ii) The said prescription of period of limitation under such special or local
law should be different from the period prescribed by the schedule to the Limitation Act.
If the aforesaid two requirements
are satisfied the consequences contemplated by
Section 29(2) would automatically follow. These consequences are as under: (i)
In such a case Section 3 of the Limitation Act would apply as if the period
prescribed by the special or local law was the period prescribed by the
schedule. (ii) For determining any period of limitation prescribed by such
special or local law for a suit, appeal
or application all the provisions containing Sections 4 to 24(inclusive) would apply
insofar as and to the extent to which they are not expressly excluded by such
special or local law.
Topic 5: The Schedule - Period of
Limitation
(a) Article 54 - Limitation for
specific performance of contract
Article 54.
For specific performance of a
contract. Three years
Time when period begins to run - The
date of fixed for the performance, or, if no such date is fixed, when the
plaintiff has notice that performance is refused.
(23) Venkappa Gurappa Hosur vs
Kasawwa AIR 1997 SC 2630
Held that mere issuance of notice
does not stop the running of the period of limitation. Once same has begun to
run its full course. Facts: Suit having been filed after 3 years from the date
of the knowledge of denial by operation of A54 of the schedule of the Limitation
Act 1963 is barred by Limitation.
(b) Article 113 - Any suit for which
no period of limitation is provided elsewhere,
Any suit for which no period of
limitation is provided elsewhere in this Schedule. Three years. Time when
period begins to run :- When the right to sue accrues.
(24) St of Punjab vs Gurdev Singh
(1991) 4 SCC 1
The respondent-plaintiff in C.A. No.
18S2/89 was appointed as an ad hoc Sub-inspector in the District Food and
Supply Department. He absented himself from duty from 29 September 1975. On 27
January 1977, his services were terminated. On 18 April 1984, he instituted
'the mir for declaration that the termination order was against the principles
of natural Justice, terms and conditions of employment, void and inoperative
and be continued to be in service. The State-the appellant-defendant contended
that the plaintiff's services were terminated in accordance with the terms and
conditions of his ad hoc appointment and the suit was barred by time.
The trial Court dismissed the Suit on the ground of limitation, but on appeal
the Additional District Judge decreed the suit, holding that the termination
order though simplicitor in nature was passed as a measure of punishment
without an 'enquiry and he should have been given an opportunity to explain his
conduct by holding proper enquiry
and that, since the order of termination was bad, the suit was not barred by
time.
The second appeal preferred by the
State was dismissed by the High Court holding that as the dismissal of the employee was illegal, void or
inoperative-being in contravention of the mandatory provisions of any rules or conditions
of service, there was.no limitation to bring a suit for declaration of continuance
in service.
SC setting aside the HC & TC
order, observed:
First of all, to say that the suit
is not governed by the law of Limitation runs afoul of our Limitation Act. The
statute of limitation was intended to provide a time limit for all suits
conceivable. Section 3 of the Limitation Act provides that a suit, appeal or application
instituted after the prescribed "period of limitation" must subject
to the provisions of Sections 4 to 24 be dismissed although limitation has not
been set up as a defence, Section-2(J) defines the expression "period of
limitation" to mean the period of limitation prescribed in the Schedule
for suit, appeal or application. Section 2(J) also defines, "prescribed
period" to mean the period of limitation computed in accordance with the
provisions of the Act. The Court's
function on the presentation
of plaint is simply to examine whether, on
the assumed facts the plaintiff is within time. The Court has to find out when
the "right to sue" accrued to the plaintiff. If a suit is not covered
by any of the specific articles prescribing a period of limitation, it must
fail within the residuary article. The
purpose of the residuary article is to provide for cases which could not be
covered by any other provision in the Limitation Act. The residuary article is
applicable to every variety of suits not otherwise provided for. Article 113
(corresponding to Article 120 of the Act 1908) is a residuary article for cases
not covered by any other provisions in the Act. It prescribes a period of three
years when the right to sue accrues. Under Article 120 it was six years which
has been reduced to three years under Article 113. According to the third
column in Article 113, time commences to run when the right to sue accrues. The
words "right to sue" ordinarily mean the right to seek relief by
means of legal proceedings. Generally, the right to sue accrues only when the
cause of action arises, that is, the right to prosecute to obtain relief by
legal means. The suit must be instituted when the right asserted in the suit is
infringed or when there is a clear and unequivocal threat to infringe that
right by the defendant against whom the suit is instituted.
(c) Article 136 - for execution of
any decree (other than decree granting a mandatory injunction) or order of any
civil court.
For the execution of any decree
(other than a decree granting a mandatory injunction) or order of any civil
court.
Twelve years
Where the decree or order becomes
enforceable or where the decree or any subsequent order directs any payment of
money or the delivery of any property to be made at a certain date or at
recurring period, when default in making the payment or delivery in respect of
which execution is sought, takes place:
Provided that an application for the
enforcement or execution of a decree granting a perpetual injunction shall not
be subject to any period of limitation.
(d) Article 137 - Limitation where
no period is prescribed
Any other application for which no
period of limitation is provided elsewhere in this Division.
3 yrs
When the right to apply accrues.
(25) Ajaib Singh vs Sirhind
Cooperative Marketing - cum - processing service society ltd AIR 1999 SC 1351
The services of the
appellant-workman were terminated on 16-7-1974 by the respondent-management
allegedly without compliance of the mandatory provisions of the Industrial Disputes
Act, 1947. The dispute regarding his termination of services was referred to
the Labour Court by the appropriate government on 19.3.1982. The management
justified their action on the ground that as the workman, being a salesman, had
embezzled thousands of rupees, the termination of his services was justified.
The jurisdiction of the Labour Court to entertain and adjudicate the reference
was also disputed. However, after the evidence of the parties, the labour court
vide its award dated 16.4.1986 directed reinstatement of the workman with full
back wages from 8.12.1981. it may be worth noticing that the issue regarding
jurisdiction of the labour court to entertain the reference was not pressed by
the management. Not satisfied with the award of the labour court, the
management filed a writ petition in the High Court praying for quashing the
award of the labour court mainly on the ground of the workman having approached
the court for the grant of the relief after a prolonged delay. The learned
single Judge of the High Court held that the workman was not entitled to any
relief as he was allegedly shown to have slept over the matter for 7 years and
confronted with the management at a belated stage when it might have been
difficult for the employer to prove the guilt of the workman. The judgment of
the learned Single Judge was upheld by the Division Bench vide the judgment
impugned in this appeal.
SC observed that no plea regarding
the delay had been made by the management before the Labour court and held the
provisions of Article 137 of the Schedule to Limitation Act, 1963 are not
applicable to the proceedings under the act and that the relief under it cannot
be denied to the workman merely on the ground of delay.
Scope of the various articles in
this division cannot be held to have been so enlarged as to include within them
applications to bodies other than Courts, such as a quasi-judicial tribunal, or
even an executive authority. An industrial tribunal or a Labour Court dealing
with applications or references under the Act are not courts. The alterations
made in the Article and in the new Act cannot, in our opinion, justify the
interpretation that even applications presented to bodies, other than courts,
are now to be governed for purposes of limitation by Article 137.
Part
B: Arbitration and Conciliation
The Arbitration and Conciliation Act
1996
Topic 1: Importance of Arbitration
and Conciliation
General provisions (Ss 2 - 6) - Definitions, waiver of right of object,
extent of judicial intervention in arbitration matters
Section 2. Definitions.—
(1) In this Part, unless the context
otherwise requires,—
(a) “arbitration” means any
arbitration whether or not administered by permanent arbitral institution;
(b) “arbitration agreement” means an
agreement referred to in section 7;
(c) “arbitral award” includes an
interim award;
(d) “arbitral tribunal” means a sole
arbitrator or a panel of arbitrators;
(e) “Court” means the principal
Civil Court of original jurisdiction in a district, and includes the High Court
in exercise of its ordinary original civil jurisdiction, having jurisdiction to
decide the questions forming the subject-matter of the arbitration if the same
had been the subject-matter of a suit, but does not include any civil court of
a grade inferior to such principal Civil Court, or any Court of Small Causes;
(f) “international commercial
arbitration” means an arbitration relating to disputes arising out of legal
relationships, whether contractual or not, considered as commercial under the law
in force in India and where at least one of the parties is—
(i) an individual who is a national
of, or habitually resident in, any country other than India; or
(ii) a body corporate which is
incorporated in any country other than India; or
(iii) a company or an association or
a body of individuals whose central management and control is exercised in any
country other than India; or
(iv) the Government of a foreign
country;
(g) “legal representative” means a
person who in law represents the estate of a deceased person, and includes any
person who intermeddles with the estate of the deceased, and, where a party
acts in a representative character, the person on whom the estate devolves on
the death of the party so acting;
(h) “party” means a party to an arbitration
agreement.
Scope
(2) This Part shall apply where the
place of arbitration is in India.
(3) This Part shall not affect any
other law for the time being in force by virtue of which certain disputes may
not be submitted to arbitration.
(4) This Part except sub-section (1)
of section 40, sections 41 and 43 shall apply to every arbitration under any
other enactment for the time being in force, as if the arbitration were
pursuant to an arbitration agreement and as if that other enactment were an
arbitration agreement, except in so far as the provisions of this Part are
inconsistent with that other enactment or with any rules made thereunder.
(5) Subject to the provisions of
sub-section (4), and save in so far as is otherwise provided by any law for the
time being in force or in any agreement in force between India and any other
country or countries, this Part shall apply to all arbitrations and to all
proceedings relating thereto.
Construction of references
(6) Where this Part, except section
28, leaves the parties free to determine a certain issue, that freedom shall
include the right of the parties to authorise any person including an
institution, to determine that issue.
(7) An arbitral award made under
this Part shall be considered as a domestic award.
(8) Where this Part—
(a) refers to the fact that the
parties have agreed or that they may agree, or
(b) in any other way refers to an
agreement of the parties, that agreement shall include any arbitration rules
referred to in that agreement.
(9) Where this Part, other than
clause (a) of section 25 or clause (a) of sub-section (2) of section 32, refers
to a claim, it shall also apply to a counter-claim, and where it refers to a
defence, it shall also apply to a defence to that counter-claim.
Comments
International Commercial
Arbitration: Scope of
Where at least one of the parties is
an individual having nationality of another country other than India or a body
corporate which is incorporated in any country other than India or an
association or a body of individuals whose central management and control is
exercised in any country other than India or the government of a foreign
country, the same would be a case of international commercial arbitration. The
respondent here in is a body corporate which is incorporated in a country other
than India and therefore, in terms of the aforesaid definition the present
admittedly is a case of international commercial arbitration; Dominant Offset
Pvt. Ltd. v. Adamovske Strojirny A.S., 1997 (2) Arb LR 335.
Section 3. Receipt of written
communications.—
(1) Unless otherwise agreed by the
parties,—
(a) any written communication is
deemed to have been received if it is delivered to the addressee personally or
at his place of business, habitual residence or mailing address, and
(b) if none of the places referred
to in clause (a) can be found after making a reasonable inquiry, a written
communication is deemed to have been received if it is sent to the addressee’s
last known place of business, habitual residence or mailing address by
registered letter or by any other means which provides a record of the attempt
to deliver it.
(2) The communication is deemed to
have been received on the day it is so delivered.
(3) This section does not apply to
written communications in respect of proceedings of any judicial authority.
Section 4. Waiver of right to
object.—
A party who knows that—
(a) any provision of this Part from
which the parties may derogate, or
(b) any requirement under the
arbitration agreement,has not been omplied with and yet proceeds with the
arbitration without stating his objection to such non-compliance without undue
delay or, if a time limit is provided for stating that objection, within that
period of time, shall be deemed to have waived his right to so object.
Section 5. Extent of judicial
intervention.—
Notwithstanding anything contained
in any other law for the time being in force, in matters governed by this Part,
no judicial authority shall intervene except where so provided in this Part.
Comments
Interim relief—Grant of
In the present case, it was held
that courts in India have no power to issue interim order under section 9 of
the Act in the matter when arbitration is held at a place outside India. If
court is not having jurisdiction to pass any interim order, in such cases,
inherent powers not to be exercised, to confer jurisdiction upon itself. To
exercise any inherent power court must have jurisdiction over the proceedings
before it; Marriat International Inc. v. Ansal Hotels Ltd., 2000 (3) Arb LR
369.
Section 6. Administrative
assistance.—
In order to facilitate the conduct
of the arbitral proceedings, the parties, or the arbitral tribunal with the
consent of the parties, may arrange for administrative assistance by a suitable
institution or person.
Arbitration Agreement (Ss 7 - 9) -
power to refer parties to arbitration where there is an arbitration agreement;
interim measures, etc by court
Section 7. Arbitration agreement.—
(1) In this Part, “arbitration
agreement” means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between them in respect
of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the
form of an arbitration clause in a contract or in the form of a separate
agreement.
(3) An arbitration agreement shall be in
writing.
(4) An arbitration agreement is in writing if
it is contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams
or other means of telecommunication which provide a record of the agreement; or
(c) an exchange of statements of claim and
defence in which the existence of the agreement is alleged by one party and not
denied by the other.
(5) The reference in a contract to a
document containing an arbitration clause constitutes an arbitration agreement
if the contract is in writing and the reference is such as to make that
arbitration clause part of the contract.
COMMENTS
Competence of Arbitrator
The arbitrator is competent to
decide the objection on its own jurisdiction whether appointed as per the terms
of the agreement within the provisions of section or appointed under the
provisions of section 11; State of Jharkhand v. R.K. Construction (Pvt.) Ltd .,
AIR 2006 Jhar 98.
What constitute an arbitration
agreement, well settled principles in respect thereof In regard to what
constitutes an arbitration agreement, the well settled principles are—
(i) The intention of the parties to
enter into an arbitration agreement shall have to be gathered from the terms of
the agreement. If the terms of the agreement clearly indicate an intention on
the part of the parties to the agreement to refer their disputes to a private
tribunal for adjudication and an willingness to be bound by the decision of
such tribunal on such disputes, it is arbitration agreement. While there is no
specific form of an arbitration agreement, the words used should disclose a
determination and obligation to go to arbitration and not merely contemplate
the possibility of going for arbitration. Where there is merely a possibility
of the parties agreeing to arbitration in future, as contrasted from an
obligation to refer disputes to arbitration, there is no valid and binding
arbitration agreement.
(ii) Even if the words ‘arbitration'
and ‘arbitral tribunal (or arbitrator)' are not used with reference to the
process of settlement or with reference to the private tribunal which has to
adjudicate upon the disputes, in a clause relating to settlement of disputes,
it does not detract from the clause being an arbitration agreement if it has
the attributes or elements of an arbitration agreement. They are: (a) The
agreement should be in writing, (b) The parties should have agreed to refer any
disputes (present or future) between them to the decision of a private
tribunal, (c) The private tribunal should be empowered to adjudicate upon the
disputes in an impartial manner, giving due opportunity to the parties to put
forth their case before it. (d) The parties should have agreed that the
decision of the Private Tribunal in respect of the disputes will be binding on
them.
(iii) Where the clause provides that
in the event of disputes arising between the parties, the disputes shall be
referred to Arbitration, it is an arbitration agreement. Where there is a
specific and direct expression of intent to have the disputes settled by
arbitration, it is not necessary to set out the attributes of an arbitration
agreement to make it an arbitration agreement. But where the clause relating to
settlement of disputes, contains words which specifically excludes any of the
attributes of an arbitration agreement or contains anything that detracts from
an arbitration agreement, it will not be an arbitration agreement. For
example, where an agreement requires or permits an authority to decide a claim
or dispute without hearing, or requires the authority to act in the interests
of only one of the parties, or provides that the decision of the Authority will
not be final and binding on the parties, or that if either party is not
satisfied with the decision of the Authority, he may file a civil suit seeking
relief, it cannot be termed as an arbitration agreement.
(iv) But mere use of the word
‘arbitration' or ‘arbitrator' in a clause will not make it an arbitration
agreement, if it requires or contemplates a further or fresh consent of the
parties for reference to arbitration. For example, use of words such as
“parties can, if they so desire, refer their disputes to arbitration” or “in
the event of any dispute, the parties may also agree to refer the same to
arbitration” or “if any disputes arise between the parties, they should
consider settlement by arbitration” in a clause relating to settlement of
disputes, indicate that the clause is not intended to be an arbitration
agreement. Similarly, a clause which states that “if the parties so decide, the
disputes shall be referred to arbitration” or “any disputes between parties, if
they so agree, shall be referred to arbitration” is not an arbitration
agreement. Such clauses merely indicate a desire or hope to have the disputes
settled by arbitration, or a tentative arrangement to explore arbitration as a
mode of settlement if and when a dispute arises. Such clauses require the
parties to arrive at a further agreement to go to arbitration, as and when the
disputes arise. Any agreement or clause in an agreement requiring or
contemplating a further consent or consensus before a reference to arbitration,
is not an arbitration agreement, but an agreement to enter into an arbitration
agreement in future; Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719.
Section 8. Power to refer parties to
arbitration where there is an arbitration agreement.—
(1) A judicial authority before
which an action is brought in a matter which is the subject of an arbitration
agreement shall, if a party so applies not later than when submitting his first
statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in
sub-section (1) shall not be entertained unless it is accompanied by the
original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an
application has been made under sub-section (1) and that the issue is pending
before the judicial authority, an arbitration may be commenced or continued and
an arbitral award made.
Comments
Appointment of Arbitrator
It is not duty of court to adjourn a
matter to enable parties to report to court about appointment of Arbitrator and
then make reference; Pawan Sharma v. Tarkeshwar Shah, AIR 2007 (NOC) 156 (HP).
Expression—First statement on the
substance of the dispute
The expression ‘first statement on
the substance of the dispute’ contained in sub-section (1) of section 8 must be
contra-distinguished with the expression ‘written statement’. It employs
submission of the party to the jurisdiction of the judicial authority. What is,
therefore, needed is a finding on the part of judicial authority that the party
has waived his right to invoke the arbitration clause. If an application is
filed before actually filing the first statement on the substance of the
dispute, the party cannot be said to have waived his right or acquiesced
himself to the jurisdiction of the court; Rashtriya Ispat Nigam Ltd. v. Verma
Transport Company, AIR 2006 SC 2800.
Jurisdiction of Civil Court
(i) The language of section 8 is
peremptory in nature. Therefore, in cases where there is an arbitration clause
in the agreement, it is obligatory for the court to refer the parties to
arbitration in terms of their arbitration agreement and nothing remains to be
decided in the original action after such an application is made except to
refer the dispute to an arbitrator; P. Anand Gajapathi Raju v. P.V.G. Raju
(Dead), 2000 (4) SCC 539.
(ii) Mere existence of arbitration
clause in agreement does not bar jurisdiction of Civil Court automatically;
Mahesh Kumar v. Rajasthan State Road Transport Corporation, AIR 2006 Raj 56.
Power of Court to appoint Arbitrator
Power of Court to refer parties for
arbitration would and must necessarily include, imply and inhere in it the
power and jurisdiction to appoint Arbitrator also; Afcons Infrastructure Ltd.
v. Cherian Varkey Construction Co. (P) Ltd., Kochi, AIR 2007 (NOC) 233 (Ker).
Scope and object
Scope and object of section 8 of the
Arbitration and Conciliation Act, 1996 and section 34 of the Arbitration Act,
1940 is different. Therefore, these two respective provisions of different Acts
have no application to deprive the party of the legitimate right to invoke
section 8 of the Arbitration and Conciliation Act to have the matter relating
to the disputes referred to arbitration, in terms of the arbitration agreement;
Kalpana Kothari v. Sudha Yadav, AIR 2001 SC 404.
Section 9. Interim measures, etc. by
Court.—
A party may, before or during
arbitral proceedings or at any time after the making of the arbitral award but
before it is enforced in accordance with section 36, apply to a court—
(i) for the appointment of a
guardian for a minor or a person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in
respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale
of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the
arbitration;
(c) the detention, preservation or inspection
of any property or thing which is the subject-matter of the dispute in
arbitration, or as to which any question may arise therein and authorising for
any of the aforesaid purposes any person to enter upon any land or building in
the possession of any party, or authorising any samples to be taken or any
observation to be made, or experiment to be tried, which may be necessary or
expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a
receiver;
(e) such other interim measure of protection
as may appear to the court to be just and convenient,and the Court shall have
the same power for making orders as it has for the purpose of, and in relation
to, any proceedings before it.
Comments
Interim protection
A party or a person is entitled to interim
protection if action of the other party is either in breach of the terms of the
agreement or militates against equity, fair play or natural justice, otherwise
not; Baby Arya v. Delhi Vidyut Board, AIR 2002 Del 50.
Pendency of any arbitral proceedings
is not a pre-condition for an exercise of power by the court
Pendency of any arbitral proceedings is not a
pre-condition for exercise of power by court. The court may grant interim
relief before or during arbitral proceedings or at anytime after making of the
arbitral award but before it is enforced; Globe Cogeneration Power Ltd. v. Sri
Hiranyakeshi Sahkari Sakkere Karkhane Niyamit, AIR 2005 Kant 94.
Scope
Section 9 of the Arbitration and
Conciliation Act, 1996, only deals with the interim measure by the court.
Obviously it is not within the scope of this section to inquire into the claim
and the counter-claim made by both the parties in regard to the custody of the
articles beyond what has been admitted by the respondent; Narain Sahai Aggarwal
v. Santosh Rani, 1997 (2) Arb LR 322.
(26) KK Modi vs KN Modi (1998) 3 SCC
573 (Imp)
Cl 9 of MoU between the parties came
up in question whether the parties intended to make the arbitration binding and
enforceable between them.
Clause 9 "Implementation will
be done in consultation with the
financial institutions. For all disputes, clarifications etc, in respect of
implementation of this agreement, the same shall be referred to the Chairman IFCI
or his nominees whose decisions will be final and binding on both the
groups."
Brief facts leading to the case were
that differences and disputes arose between the two groups of Modi’s family
controlling interest of public sector undertakings and various assets.
Negotiations took place with the help of financial institutions to resolve the
differences. The MoU was arrived at containing inter alia, the valuation of
assets, transfer and splitting of certain companies and in the occasion of
dispute regarding the implementation of MOU, the chairman of IFCI was given the
power to decide as per Cl 9. The dispute arose as in the manner of splitting and
the Chairman of IFCI formed a committee to assist him to decide the question
and gave his report. It was held that there was no animus arbitrandi and the
parties did not choose to be bound by the award.
Apex Court in this case laid down
guidelines wrt artibitration agreement
1. The arbitration agreement must
contemplate that the decision of the tribunal will be binding on the parties to
the agreement,
2. that the jurisdiction of the
tribunal to decide the rights of parties must be derived either from the consent
of the parties or from an order of the Court or from a statute, the terms of
which make it clear that the process is to be an arbitration,
3. the agreement must contemplate
that substantive rights of parties will be determined by the agreed tribunal,
4. that the tribunal will determine
the rights of the parties in an impartial and judicial manner with the tribunal
owing an equal obligation of fairness towards both sides,
5. that the agreement of the parties
to refer their disputes to the decision of the tribunal must be intended to be
enforceable in law and lastly,
6. the agreement must contemplate
that the tribunal will make a decision upon a dispute which is already
formulated at the time when a reference is made to the tribunal.
(27) Bhatia International vs Bulk
Trading S.A. AIR 2002 SC 1432 ( vv imp) (Now overruled)
The Appellant entered into a
contract with the 1st Respondent on 9th May, 1997. This contract contained an
arbitration clause which provided that arbitration was to be as per the rules
of the International Chamber of Commerce (for short ICC). On 23rd October, 1997
the 1st Respondent filed a request for arbitration with ICC. Parties agreed
that the arbitration be held in Paris, France. ICC has appointed a sole
arbitrator.
1st Respondent filed an application
under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter
called the said Act) before the IIIrd Additional District Judge, Indore, M. P.
against the Appellant and the 2nd Respondent. One of the interim reliefs sought
was an order of injunction restraining these parties from alienating,
transferring and/or creating third party right, disposing of, dealing with
and/or selling their business assets and properties. The Appellant raised the
plea of maintainability of such an application.
The said Act nowhere provides that
its provisions are not to apply to international commercial arbitrations which
take place in a non-convention country. Admittedly Part II only applies to
arbitrations which take place in a convention country.
Thus the Legislature has not
provided that Part I is not to apply to arbitrations which take place outside
India. The use of the language is significant and important. The Legislature is
emphasising that the provisions of Part I would apply to arbitrations which
take place in India, but not providing that the provisions of Part I will not
apply to arbitrations which take place out of India. The wording of sub-section
(2) of Section 2 suggests that the intention of the Legislature was to make
provisions of Part I compulsorily applicable to an arbitration, including an
international commercial arbitration, which takes place in India. Parties
cannot, by agreement, override or exclude the non-derogable provisions of Part
I in such arbitrations. By omitting to provide that Part I will not apply to
international commercial arbitrations which take place outside India the affect
would be that Part I would also apply to international commercial arbitrations
held out of India. But by not specifically providing that the provisions of
Part I apply to international commercial arbitrations held out of India, the
intention of the Legislature appears to be to ally parties to provide by
agreement that Part I or any provision therein will not apply.
Section 5 provides that a judicial
authority shall not intervene except where so provided in Part I. Section 8 of
the said Act permits a judicial authority before whom an action is brought in a
matter to refer parties to arbitration. If the matters were to be taken before
a judicial authority in India it would be a Court as defined in Section 2(e).
Thus if Part I was to only apply to arbitrations which take place in India the
term "Court" would have been used in Sections 5 and 8 of the said
Act. The Legislature was aware that, in international commercial arbitrations,
a matter may be taken before a judicial authority outside India. As Part I was
also to apply to international commercial arbitrations held outside India the
term "judicial authority" has been used in Sections 5 and 8.
An award passed in an arbitration
which takes place in India would be a "domestic award". There would
thus be no need to define an award as a "domestic award" unless the
intention was to cover awards which would otherwise not be covered by this
definition.
Bharat Aluminium Co v Kaiser
Aluminium Technical Services Inc over ruling the doctrine laid down in 2002 by
the same Court in Bhatia International v Bulk Trading S.A. (Bhatia
International).
In Bhatia International, the Supreme
Court had held that Part I of the Indian Arbitration and Conciliation Act,
dealing with the power of a court to grant interim relief, could be applied to
arbitration disputes with a foreign seat unless the parties specifically opted
out of such an arrangement. Today’s judgment marks the culmination of a hearing
which began in January 2012.
The concluding paragraphs of the
190-page judgment are as follows:
"198. …..We are of the
considered opinion that Part I of the Arbitration Act, 1996 would have no
application to International Commercial Arbitration held outside India.
Therefore, such awards would only be subject to the jurisdiction of the Indian
courts when the same are sought to be enforced in India in accordance with the
provisions contained in Part II of the Arbitration Act, 1996. In our opinion,
the provisions contained in Arbitration Act, 1996 make it crystal clear that
there can be no overlapping or intermingling of the provisions contained in
Part I with the provisions contained in Part II of the Arbitration Act, 1996.
199. With utmost respect, we are
unable to agree with the conclusions recorded in the judgments of this Court in
Bhatia International (supra) and Venture Global Engineering (supra). In our
opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996
is not in conflict with any of the provisions either in Part I or in Part II of
the Arbitration Act, 1996. In a foreign seated international commercial
arbitration, no application for interim relief would be maintainable under
Section 9 or any other provision, as applicability of Part I of the Arbitration
Act, 1996 is limited to all arbitrations which take place in India. Similarly,
no suit for interim injunction simplicitor would be maintainable in India, on
the basis of an international commercial arbitration with a seat outside India.
200. We conclude that Part I of the
Arbitration Act, 1996 is applicable only to all the arbitrations which take
place within the territory of India.
201. The judgment in Bhatia
International (supra) was rendered by this Court on 13th March, 2002. Since
then, the aforesaid judgment has been followed by all the High Courts as well
as by this Court on numerous occasions. In fact, the judgment in Venture Global
Engineering (supra) has been rendered on 10th January, 2008 in terms of the
ratio of the decision in Bhatia International (supra). Thus, in order to do
complete justice, we hereby order, that the law now declared by this Court
shall apply prospectively, to all the arbitration agreements executed hereafter."
(28) Sukanya Holdings Pvt Ltd vs
Jayesh H Pandya JT 2003 (4) SC 58
Facts & Issue: Along with a suit
for dissolution of a partnership firm and accounts, conveyance deeds executed
by the firm & 3rd parties (defendants) who purchased the flats
were also challenged. Thus a suit was commenced in respect of a matter which
fell partly within the arbitration agreement and partly outside it. Only some
of the parties involved in the agreement were also parties to the arbitration
agreement and some others were outside it. Appellants’ arbitration petition u/S
8 of the Act was opposed on the ground that the suit consists of various
reliefs along with dissolution and all the defendents to the suit are not
parties or partners in a firm. Only part of the subject matter could be
referred to arbitration. The High Court dismissed the appellants’ application.
Apex Court held that S8 is not
attracted. No provision in the act that where the subject matter of a suit
included subject of the arbitration agreement as well as other disputes, matter
was required to be referred to arbitration. No power conferred on the court to
add parties who are not parties to the agreement in the arbitration
proceedings. Object of the act is to avoid multiplicity of the proceedings and
not to allow the forums (arbitration and civil courts) simultaneously to
proceed with the matter.
Observations: For interpretation of
Section 8, Section 5 would have no bearing because it only contemplates that in
the matters governed by Part-I of the Act, Judicial authority shall not
intervene except where so provided in the Act.
Except Section 8, there is no other provision in the Act that in a pending
suit, the dispute is required to be referred to the arbitrator. Further, the
matter is not required to be referred to the arbitral Tribunal, if (1) the
parties to the arbitration agreement have not filed any such application for
referring the dispute to the arbitrator; (2) in a pending suit, such
application is not filed before submitting first statement on the substance of
the dispute; or (3) such application is not accompanied by the original
arbitration agreement or duly certified copy thereof. This would, therefore, mean that Arbitration Act does not oust
the jurisdiction of the Civil Court to decide the dispute in a case where
parties to the Arbitration Agreement do not take appropriate steps as
contemplated under sub- sections (1) & (2) of Section 8 of the Act.
Secondly, there is no provision in
the Act that when the subject matter of the suit includes subject matter of the
arbitration agreement as well as other disputes, the matter is required to be
referred to arbitration. There is also no provision for splitting the cause or
parties and referring the subject matter of the suit to the arbitrators.
Thirdly, there is no provision as to
what is required to be done in a case where some parties to the suit are not
parties to the arbitration agreement. As against this, under Section 24 of the
Arbitration Act, 1940, some of the parties to a suit could apply that the
matters in difference between them be referred to arbitration and the Court may
refer the same to arbitration provided that the same can be separated from the
rest of the subject matter of the suit. Section also provided that the suit
would continue so far as it related to parties who have not joined in such
application.
The relevant language used in
Section 8 is "in a matter which is the subject matter of an arbitration
agreement", Court is required to refer the parties to arbitration.
Therefore, the suit should be in respect of 'a matter' which the parties have
agreed to refer and which comes within the ambit of arbitration agreement.
Where, however, a suit is commenced - "as
to a matter" which lies outside the arbitration agreement and is also
between some of the parties who are not parties to the arbitration agreement,
there is no question of application of Section 8. The words 'a matter'
indicates entire subject matter of the suit should be subject to arbitration
agreement.
The next question which requires
consideration is even if there is no provision for partly referring the dispute
to arbitration, whether such a course is possible under Section 8 of the Act?
In our view, it would be difficult to give an interpretation to Section 8 under
which bifurcation of the cause of action that is to say the subject matter of
the suit or in some cases bifurcation of the suit between parties who are
parties to the arbitration agreement and others is possible. This would be
laying down a totally new procedure not contemplated under the Act. If
bifurcation of the subject matter of a suit was contemplated, the legislature
would have used appropriate language to permit such a course. Since there is no
such indication in the language, it follows that bifurcation of the subject
matter of an action brought before a judicial authority is not allowed.
Secondly, such bifurcation of suit
in two parts, one to be decided by the arbitral tribunal and other to be
decided by the civil court would inevitably delay the proceedings. The whole
purpose of speedy disposal of dispute and decreasing the cost of litigation
would be frustrated by such procedure. It would also increase the cost of
litigation and harassment to the parties and on occasions there is possibility
of conflicting judgments and orders by two different forums.
(29) P Anand Gajapathi Raju vs PVG
Raju (Dead) AIR 2000 SC 1886
Facts & Issue:- During the
pendency of appeal matter the parties entered into an arbitration agreement and
agreed to refer this appeal and others to a sole arbitrator. Question for
consideration is whether this court in appeal can refer the parties to
arbitration under the act. In other words whether the court can stay the
judicial proceedings in such a situation and refer the parties to arbitration.
Observation & Decision: Court
held that a reference during the pendency of appeal matter can be referred to
arbitration. This view is in accordance with the provision of S5 of the act
which defines the extent of judicial intervention in arbitration proceedings.
S5 brings out the object of the 1996 act, namely that of encouraging resolution
of disputes expeditiously and less expensively and when there is an arbitration
agreement the courts intervention should be minimal.
Court observed that S5 confers on
the plaintiff (claimant) or the defendant a right to apply to the judicial
authority to stay the legal proceedings before submitting the 1st
statement on the substance of the dispute.
The conditions for application of S8
in which the Court can exercise its power to refer parties to arbitration are:
(1) there is an arbitration agreement; (2) a party to the agreement brings an
action in the Court against the other party; (3) subject matter of the action
is same as the subject matter of the arbitration agreement; (4) the other party
moves the Court for referring the parties to arbitration before it submits his
first statement on the substance of the dispute
This last provision creates a right
in the person bringing the action to have the dispute adjudicated by the court,
once the other party has submitted his 1st statement of defense. But
if the party, even after making the statement of defense prays that the matter
be referred to arbitration and the other party has no objection( as was the
situation in this case), there is no bar on the court referring the parties to
arbitration.
The court was of the view that the
phrase “which is the subject matter of an arbitration agreement” does not
necessarily require that the agreement must be already in existence before the
action is brought in the court. This phrase would also cover the situation
where the arbitration agreement is brought into existence while the action is
pending. However the judicial authority, before entertaining an application for
stay, has to satisfy itself that an arbitration agreement does actually exist.
Incase the validity of the agreement is challenged, the judicial authority will
also have to satisfy itself about the validity of the agreement.
Court explained that the arbitration
agreement in the present case covers all the disputes between the parties in
the proceedings before us and even more than that. The language of S8 is
preemptory. It is therefore obligatory for the court to refer the parties to
arbitration in terms of their arbitration agreement. Nothing remains to be
decided in the original action or the appeal arising there from. There is no
question to stay of the proceedings till the arbitration proceedings conclude
and the award becomes final in terms of the provisions of the new Act.
(30) Haryana Telecom Ltd vs Sterlite
Industries (India) Ltd, AIR 1999 SC 2354
On a winding up petition having been
filed by the respondent before the High Court, the petitioner herein moved an
application under Section 8 of the Arbitration and Conciliation Act, 1996,
inter alia, contending that the High Court should refer the matter to
arbitration.
Sub-section (1) of Section 8
provides that where the judicial authority before whom an action is brought in
a matter, will refer the parties to arbitration the said matter in accordance
with the arbitration agreement. This, however, postulates, in our opinion, that
what can be referred to the arbitrator is only that dispute or matter which the
arbitrator is competent or empowered to decide.
The claim in a petition for winding
up is not for money. The petition filed under the Companies Act would be to the
effect, in a matter like this, that the company has become commercially
insolvent and, therefore, should be wound up. The power to order winding up of
a company is contained under the Companies Act and is conferred on the court.
An arbitrator, notwithstanding any agreement between the parties would have no
jurisdiction to order winding up of a company. The matter which is pending
before the High Court in which the application was filed by the petitioner
herein was relating to winding up of the company. That could obviously not be
referred to the arbitration and, therefore, the High Court, in our opinion was
right in rejecting the application.
Topic 2: Composition of Arbitral
Tribunal (Ss 10 - 15) - Number of arbitrators, Appointment of arbitrators,
Grounds for Challenge, Challenge procedure, failure of impossibility to act and
termination of mandate and substitution of arbitrator
Section 10. Number of arbitrators.—
(1) The parties are free to
determine the number of arbitrators, provided that such number shall not be an
even number.
(2) Failing the determination
referred to in sub-section (1), the arbitral tribunal shall consist of a sole
arbitrator.
Comments
Number of arbitrators
The parties are at liberty to
determine the number of arbitrators, but such number shall not be an even
number. If the parties fail to provide for an odd number of arbitrators, the
arbitral tribunal shall be constituted by a sole arbitrator; Sri Venkateshwara
Construction Co. v. Union of India, AIR 2001 AP 284.
In the present case, a contract
between the two parties M and S provided that each party shall nominate one
arbitrator and the two arbitrators shall then appoint an umpire before
proceeding with the reference. S invoked arbitration clause and appointed an
arbitrator under the agreement after the 1996 Act came into force. It was
contended by the M that the arbitration agreement provided for the appointment
of two arbitrators while section 10(1) of the 1996 Act does not envisage the
appointment of an even number of arbitrators and that the only remedy in such a
case was by way of suit and not by arbitration. The Supreme Court held that
there is nothing in section 7 to indicate the requirement of the number of
arbitrators as a part of the arbitration agreement. Thus the validity of an
arbitration agreement does not depend on the number of arbitrators specified
therein. The number of arbitrators is dealt with separately in section 10 which
is a part of machinery provision for the working of the arbitration agreement.
It is, therefore, clear that an agreement specifying an even number of
arbitrators cannot be a ground to render the arbitration agreement invalid
under the 1996 Act. In view of the term in the arbitration agreement that the
two arbitrators would appoint an umpire, the requirement of section 10(1) was
satisfied. In other words, the arbitration agreement was not for an even number
of arbitrators and section 10(2) was not attracted. The arbitration agreement
was deemed to be one providing for three arbitrators; M.M.T.C. Ltd. v. Sterlite
Industries (India) Ltd., AIR 1997 SC 605.
Section 11. Appointment of
arbitrators.—
(1) A person of any nationality may be an
arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the
parties are free to agree on a procedure for appointing the arbitrator or
arbitrators.
(3) Failing any agreement referred
to in sub-section (2), in an arbitration with three arbitrators, each party
shall appoint one arbitrator, and the two appointed arbitrators shall appoint
the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in
sub-section (3) applies and—
(a) a party fails to appoint an
arbitrator within thirty days from the receipt of a request to do so from the
other party; or
(b) the two appointed arbitrators
fail to agree on the third arbitrator within thirty days from the date of their
appointment, the appointment shall be made, upon request of a party, by the
Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred
to in sub-section (2), in an arbitration with a sole arbitrator, if the parties
fail to agree on the arbitrator within thirty days from receipt of a request by
one party from the other party to so agree the appointment shall be made, upon
request of a party, by the Chief Justice or any person or institution
designated by him.
(6) Where, under an appointment
procedure agreed upon by the parties,—
(a) a party fails to act as required
under that procedure; or
(b) the parties, or the two
appointed arbitrators, fail to reach an agreement expected of them under that
procedure; or
(c) a person, including an
institution, fails to perform any function entrusted to him or it under that
procedure,a party may request the Chief Justice or any person or institution
designated by him to take the necessary measure, unless the agreement on the
appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted
by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice
or the person or institution designated by him is final.
(8) The Chief Justice or the person
or institution designated by him, in appointing an arbitrator, shall have due
regard to—
(a) any qualifications required of
the arbitrator by the agreement of the parties; and
(b) other considerations as are
likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of
sole or third arbitrator in an international commercial arbitration, the Chief
Justice of India or the person or institution designated by him may appoint an
arbitrator of a nationality other than the nationalities of the parties where
the parties belong to different nationalities.
(10) The Chief Justice may make such
scheme1 as he may deem appropriate for dealing with matters entrusted by
sub-section (4) or sub-section (5) or sub-section (6) to him.
(11) Where more than one request has
been made under sub-section (4) or sub-section (5) or sub-section (6) to the
Chief Justices of different High Courts or their designates, the Chief Justice
or his designate to whom the request has been first made under the relevant
sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred
to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international
commercial arbitration, the reference to ‘‘Chief Justice’’ in those sub-sections
shall be construed as a reference to the ‘‘Chief Justice of India’’.
(b) Where the matters referred to in
sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration,
the reference to “Chief Justice” in those sub-sections shall be construed as a
reference to the Chief Justice of the High Court within whose local limits the
principal Civil Court referred to in clause (e) of sub-section (1) of section 2
is situate and, where the High Court itself is the Court referred to in that clause,
to the Chief Justice of that High Court.
Comments
‘A party’—Meaning of
As per the Webiters Dictionary ‘A party’ in
context of legal affairs is one of the litigants in legal proceeding, the
plaintiff or defendant or a signatory to a legal instrument.
The Chambers Dictionary defines ‘a party’ as
each of the individuals or groups concerned in a contract agreement, law suit,
etc.
As per Oxford Dictionary the word ‘parties’
refers to a person or persons forming one side in an agreement or dispute.
Whartons Law Lexicon, 14th edition defines the
word ‘parties’ as persons jointly concerned in any deed or act; litigants.
’Agreement’—Meaning of
As per Oxford Dictionary the word ‘agreement’
means an arrangement between the parties as to a course of action.
As per Wharton’s Law Lexicon ’agreement’ means
a consensus of two or more minds in anything done or to be done.
Chambers Dictionary describes the word
‘agreement’ as a contract or term; a joint decision made after discussion.
Discretion for appointment of arbitrator
Exercise of discretion for appointment of same
arbitrator even after forfeiture of right is improper; Suri Constructions v.
State of Rajasthan, AIR 2006 Raj 53.
Scope
It is well settled that where an
arbitrator is named in the arbitration agreement, the provisions of section 11
of the Act are not attracted and the court will not have jurisdiction to try
and decide the petition filed by party for appointment of another arbitrator;
Kamla Solvent v. Manipal Finance Corpn. Ltd., AIR 2001 Mad 440.
Under section 11, there is no
provision fixing any time limit except under sub-section (5) which provides the
time limit of 30 days from the receipt of the request from the party for
appointment of an arbitrator. Under sub-section (6) no such time limit have
been fixed. It is required under the procedure, a party may request the Chief
Justice or any person or institution designated by him to take the necessary
measure, unless the agreement on the appointment procedure provides other means
for securing the appointment; Ansal Properties & Industries Ltd. v.
Himachal Pradesh State Electricity Board, AIR 1997 Arb LR 11.
Existence of arbitration clause and
validity of reference
The existence of the arbitration
clause and the validity of reference shall only be decided by the Arbitrator.
It is also within the domain of the Arbitrator to decide whether the claim of
the petitioner has already been settled on full satisfaction; Navratandas &
Co. (P) Ltd. v. Tata Iron & Steel Co., AIR 2006 Jhar 7.
Section 12. Grounds for challenge.—
(1) When a person is approached in connection
with his possible appointment as an arbitrator, he shall disclose in writing
any circumstances likely to give rise to justifiable doubts as to his
independence or impartiality.
(2) An arbitrator, from the time of his
appointment and throughout the arbitral proceedings, shall, without delay,
disclose to the parties in writing any circumstances referred to in sub-section
(1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if—
(a) circumstances exist that give rise to
justifiable doubts as to his independence or impartiality, or
(b) he does not possess the qualifications
agreed to by the parties.
(4) A party may challenge an arbitrator
appointed by him, or in whose appointment he has participated, only for reasons
of which he becomes aware after the appointment has been made.
Section 13. Challenge procedure.—
(1) Subject to sub-section (4), the parties
are free to agree on a procedure for challenging an arbitrator.
(2) Failing any agreement referred
to in sub-section (1), a party who intends to challenge an arbitrator shall,
within fifteen days after becoming aware of the constitution of the arbitral
tribunal or after becoming aware of any circumstances referred to in
sub-section (3) of section 12, send a written statement of the reasons for the
challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged
under sub-section (2) withdraws from his office or the other party agrees to
the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any
procedure agreed upon by the parties or under the procedure under sub-section
(2) is not successful, the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award.
(5) Where an arbitral award is made
under sub-section (4), the party challenging the arbitrator may make an
application for setting aside such an arbitral award in accordance with section
34.
(6) Where an arbitral award is set
aside on an application made under sub-section (5), the Court may decide as to
whether the arbitrator who is challenged is entitled to any fees
Section 14. Failure or impossibility
to act.—
(1) The mandate of an arbitrator
shall terminate if—
(a) he becomes de jure or de facto
unable to perform his functions or for other reasons fails to act without undue
delay; and
(b) he withdraws from his office or
the parties agree to the termination of his mandate.
(2) If a controversy remains concerning
any of the grounds referred to in clause (a) of sub-section (1), a party may,
unless otherwise agreed by the parties, apply to the Court to decide on the
termination of the mandate.
(3) If, under this section or
sub-section (3) of section 13, an arbitrator withdraws from his office or a
party agrees to the termination of the mandate of an arbitrator, it shall not
imply acceptance of the validity of any ground referred to in this section or
sub-section (3) of section 12.
Section 15. Termination of mandate
and substitution of arbitrator.—
(1) In addition to the circumstances referred
to in section 13 or section 14, the mandate of an arbitrator shall terminate—
(a) where he withdraws from office for
any reason; or
(b) by or pursuant to agreement of the
parties.
(2) Where the mandate of an
arbitrator terminates, a substitute arbitrator shall be appointed according to
the rules that were applicable to the appointment of the arbitrator being
replaced.
(3) Unless otherwise agreed by the
parties, where an arbitrator is replaced under sub-section (2), any hearings
previously held may be repeated at the discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the
parties, an order or ruling of the arbitral tribunal made prior to the
replacement of an arbitrator under this section shall not be invalid solely
because there has been a change in the composition of the arbitral tribunal.
(31) M.M.T.C Limited vs Sterlite
Industries (India) Ltd (1996) 6 SCC 716
Inter alia the validity of
arbitration agreement providing for even number of arbitrators came before the
Apex Court – Held that Chapter II deals with Arbitration agreement and in order
to qualify an agreement to be valid it need not give the number of arbitrators
to be appointed and therefore the agreement specifying even number of
arbitrators does not render the Arbitration agreement invalid. Further it was
held that in case parties chose to provide for even number of Arbitrators each
party shall appoint one arbitrator and appointed arbitrators shall appoint
presiding arbitrator.
(32) Narayan Prasad Lohia vs Nikunj
Kumar Lohia AIR 2002 SC 1139
The Appellant and the Respondents
are family members who had disputes and differences in respect of the family
businesses and properties. All the parties agreed to resolve their disputes and
differences through one Mr. Pramod Kumar Khaitan. Subsequently, on 29th
September 1996 they agreed that the said Mr. Pramod Kumar Khaitan and one Mr.
Sardul Singh Jain resolve their disputes. For the purposes of this Order we are
not deciding whether these two persons acted as Arbitrators or Mediators. That
is a matter of contention between the parties which we are, at present, not
called upon to decide. For the purposes
of this order we are presuming that the parties had agreed to the Arbitration
of these two persons. The parties made their respective claims before these two
persons. All parties participated in the proceedings. On 6th October, 1996 an
Award came to be passed by the said Mr. Pramod Kumar Khaitan and Mr. Sardul
Singh Jain.
Award was challenged by the
respondents on the ground that the number of arbitrators were even and the
award should be set aside. Learned single judge of HC agreed with above
contention n set aside arbitral award. Appeal to SC.
Issue: Whether mandatory provision
of the Arbitration act can be waived by the parties.
Observations:
The said Act was enacted to
consolidate and amend the law relating to domestic and international commercial
arbitration and for matters connected therewith and incidental thereto. One of
the objects of the said Act is to minimise the role of Courts in the
arbitration process. It is
with this object in mind that Section 5 has been provided. Judicial authorities
should not interfere except where so provided in the Act. Further Section 34
categorically provides that the award can be set aside by the Court only on the
grounds mentioned therein.
S10 provides number of arbitrators
to be even – arbitration creation of an agreement – no arbitration unless there
is an arbitration agreement in writing between the parties.
In the said Act, provisions have
been made in Sections 12, 13, and 16 for challenging the competence,
impartiality and jurisdiction. Such challenge must however be before the arbitral
tribunal itself. It has been held by a Constitution Bench of this Court, in the
case of Konkan Railway Corporation Ltd. vs. Rani Construction Pvt. Ltd.
(Judgment dated 30th January, 2002 in Civil Appeal Nos. 5880- 5889 of 1997)
that Section 16 enables the arbitral tribunal to rule on its own jurisdiction.
It has been held that under Section 16 the arbitral tribunal can rule on any
objection with respect to existence or validity of the arbitration agreement. It is held that the arbitral tribunals
authority under Section 16, is not confined to the width of its jurisdiction
but goes also to the root of its jurisdiction. Not only this decision is
binding on this Court, but we are in respectful agreement with the same. Thus
it is no longer open to contend that, under Section 16, a party cannot
challenge the composition of the arbitral tribunal before the arbitral tribunal
itself. Such a challenge must
be taken, under Section 16(2), not later than the submission of the statement
of defence.
A conjoint reading of Sections 10
and 16 shows that an objection to the composition of the arbitral tribunal is a
matter which is derogable. It is derogable because a party is free not to
object within the time prescribed in Section 16(2). If a party chooses not to so object there will be a deemed
waiver under Section 4.
Award passed by arbitral tribunal
cannot be set aside by S34(2)(a)(v) of this act.
Section 34(2)(a)(v) only applies if
"the composition of the arbitral tribunal or the arbitral procedure was
not in accordance with the agreement of the parties". These opening words
make it very clear that if the composition of the arbitral tribunal or the
arbitral procedure is in accordance with the agreement of the parties, as in
this case, then there can be no challenge under this provision.
The question of "unless such
agreement was in conflict with the provisions of this Act" would only
arise if the composition of the arbitral tribunal or the arbitral procedure is
not in accordance with the agreement of the parties. When the composition or
the procedure is not in accordance with the agreement of the parties then the
parties get a right to challenge the award. But even in such a case the right
to challenge the award is restricted. The challenge can only be provided the
agreement of the parties is in conflict with a provision of Part I which the
parties cannot derogate. In other words, even if the composition of the
arbitral tribunal or the arbitral procedure is not in accordance with the
agreement of the parties but if such composition or procedure is in accordance
with the provisions of the said Act, then the party cannot challenge the award.
The words "failing such agreement" have reference to an agreement
providing for the composition of the arbitral tribunal or the arbitral
procedure. They would come into play
only if there is no agreement providing for the composition of the arbitral
tribunal or the arbitral procedure. If
there is no agreement providing for the composition of the arbitral tribunal or
the arbitral procedure and the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with Part I of the said Act then also
a challenge to the award would be available.
Held: Respondents not having raised
any objection to the composition of arbitral tribunal as provided in S16, they
must deem to have waived their right to object.
(33) Datar Switchgears Ltd vs Tata
Finance Ltd 2000 (3) Arb LR 44 (SC)
Question: for purposes of Section 11(6)
the party to whom a demand for appointment is made, forfeits his right to do so
if he does not appoint an arbitrator within 30 days. Whether in a case falling
under S11(6) the opposite party cannot appoint an arbitrator after the expiry
of 30 days from the date of demand.
In cases arising under Section
11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not
forfeited but continues, but an appointment has to be made before
the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. We do not,
therefore, agree with the observation in the above judgments that if the
appointment is not made within 30 days of demand, the right to appoint an
arbitrator under Section 11(6) is forfeited.
Held :- In the present case the respondent made the appointment before the
appellant filed the application under Section 11(6) though it was beyond 30
days from the date of demand. In our view, the appointment of the arbitrator by
the respondent is valid and it cannot be said that the right was forfeited after expiry of 30 days from the date of
demand.
(34) SBP & Co vs Patel Engg Ltd
2005 (8) SCC 618 (imp)
Facts & Issue: What is the
nature of the function of the CJ or his designate u/ S11 of the Arbitration
& Conciliation Act 1996? 3 Judge Bench in Konkan railway Corporation Ltd v
Mehul Construction Company as approved by the Constitution bench in Konkan
railway Corporation Ltd v Rani Construction (P) Ltd held that it is an
administrative function and is neither judicial nor quasi judicial and the CJ
or his designate cannot decide any contentious issue between the parties.
SC also disagreed with division
bench view that the arbitral award could be set aside by the HC u/A226/227.
Held minimum intervention by court would have no meaning if every arbitral
award can be set aside by the HC u/A226.
Court looked into the meaning of the
term ‘Persona designata’
The Apex Court ( 7 judge bench)
disapproved of the above view and summed up its conclusions as follows:
( i ) The power exercised by the
Chief Justice of the High Court or the Chief Justice of India under Section
11(6) of the Act is not an administrative power. It is a judicial power.
( ii ) The power under Section 11(6)
of the Act, in its entirety, could be delegated, by the Chief Justice of the
High Court only to another Judge of that Court and by the Chief Justice of
India to another Judge of the Supreme Court.
( iii ) In case of designation of a
Judge of the High Court or of the Supreme Court, the power that is exercised by
the designated Judge would be that of the Chief Justice as conferred by the
statute. ( iv ) The Chief Justice or the designated Judge will have the right
to decide the preliminary aspects as indicated in the earlier part of this
judgment. These will be his own jurisdiction to entertain the request, the
existence of a valid arbitration agreement, the existence or otherwise of a
live claim, the existence of the condition for the exercise of his power and on
the qualifications of the arbitrator or arbitrators. The Chief Justice or the
designated Judge would be entitled to seek the opinion of an institution in the
matter of nominating an arbitrator qualified in terms of Section 11(8) of the
Act if the need arises but the order appointing the arbitrator could only be
that of the Chief Justice or the designated Judge.
(v ) Designation of a District Judge
as the authority under Section 11(6) of the Act by the Chief Justice of the
High Court is not warranted on the scheme of the Act.
(vi ) Once the matter reaches the
Arbitral Tribunal or the sole arbitrator, the High Court would not interfere
with the orders passed by the arbitrator or the Arbitral Tribunal during the
course of the arbitration proceedings and the parties could approach the Court
only in terms of Section 37 of the Act or in terms of Section 34 of the Act.
(vii ) Since an order passed by the
Chief Justice of the High Court or by the designated Judge of that Court is a
judicial order, an appeal will lie against that order only under Article 136 of
the Constitution to the Supreme Court.
(viii ) There can be no appeal
against an order of the Chief Justice of India or a Judge of the Supreme Court
designated by him while entertaining an application under Section 11(6) of the
Act.
( ix ) In a case where an Arbitral
Tribunal has been constituted by the parties without having recourse to Section
11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide
all matters as contemplated by Section 16 of the Act.
( x ) Since all were guided by the
decision of this Court in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd.
2 and orders under Section 11(6) of the Act have been made based on the
position adopted in that decision, we clarify that appointments of arbitrators
or Arbitral Tribunals thus far made, are to be treated as valid, all objections
being left to be decided under Section 16 of the Act. As and from this date,
the position as adopted in this judgment will govern even pending applications
under Section 11(6) of the Act.
(xi ) Where District Judges had been
designated by the Chief Justice of the High Court under Section 11(6) of the
Act, the appointment orders thus far made by them will be treated as valid; but
applications if any pending before them as on this date will stand transferred,
to be dealt with by the Chief Justice of the High Court concerned or a Judge of
that Court designated by the Chief Justice.
(xii ) The decision in Konkan Rly.
Corpn. Ltd. v. Rani Construction (P) Ltd. is overruled.
(35) Citation Infowares Limited vs
Equinox Corporation 2009(6) SCALE 430 (Pt 1 appl to intl arb ....) related to
Bhatia international (omitted)
(36) Bhatia INternational vs Bulk
Trading S.A. AIR 2002 SC 1432 ( discussed in topic 1)
Topic 3: Jurisdiction of Arbitral
Tribunal (Ss 16- 17); Competence of arbitral Tribunal to rule on its
jurisdiction and interim measures ordered by arbitral Tribunal Conduct of
arbitral proceedings (Ss 18 - 27); Making of arbitral award and termination of
proceedings (Ss 28 - 33)
Section 16. Competence of arbitral
tribunal to rule on its jurisdiction.—
(1) The arbitral tribunal may rule
on its own jurisdiction, including ruling on any objections with respect to the
existence or validity of the arbitration agreement, and for that purpose,—
(a) an arbitration clause which
forms part of a contract shall be treated as an agreement independent of the
other terms of the contract; and
(b) a decision by the arbitral
tribunal that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral
tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defence; however, a party shall not be precluded
from raising such a plea merely because that he has appointed, or participated
in the appointment of, an arbitrator.
(3) A plea that the arbitral
tribunal is exceeding the scope of its authority shall be raised as soon as the
matter alleged to be beyond the scope of its authority is raised during the
arbitral proceedings.
(4) The arbitral tribunal may, in
either of the cases referred to in sub-section (2) or sub-section (3), admit a
later plea if it considers the delay justified.
(5) The arbitral tribunal shall
decide on a plea referred to in sub-section (2) or sub-section (3) and, where
the arbitral tribunal takes a decision rejecting the plea, continue with the
arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an
arbitral award may make an application for setting aside such an arbitral award
in accordance with section 34.
Comments
Jurisdiction of Civil Court
During pendency of arbitration,
civil court has no jurisdiction to entertain petition and decide nature of
objections raised therein. Questions can be raised before and decided by
arbitrator; State of Jharkhand v. Himachal Construction Co. Pvt. Ltd., AIR 2006
NOC 249 (Jhar).
Power of the arbitrator to decide
jurisdiction
The Arbitrator himself in exercise
of power conferred on him by or under section 16 can decide the question
whether or not the arbitration clause in question was scored out at the time of
agreement between the parties and as such, whether or not he has jurisdiction
to decide the matter or adjudicate the dispute; State of Orissa v. Surendranath
Kanungo, AIR 2004 Ori 153.
Section 17. Interim measures ordered
by arbitral tribunal.—
(1) Unless otherwise agreed by the
parties, the arbitral tribunal may, at the request of a party, order a party to
take any interim measure of protection as the arbitral tribunal may consider
necessary in respect of the subject-matter of the dispute.
(2) The arbitral tribunal may
require a party to provide appropriate security in connection with a measure
ordered under sub-section (1).
(37) Krishna Bhagya Jala Nigam Ltd
vs G Harischandra Reddy (2007) 2 SCC 720
Conflict between Jala Nigam &
Contractor over extension of contract and extra work being allotted to him–
Contractor asks for Chief Engineer to be arbitrator in accordance with Cl 29(a)
of agreement – Chief Engineer declines on the ground that Cl 29(a) is not an
arbitration agreement – Jal Nigam approaches HC and HC issues direction for
Chief Engineer to be arbitrator – Arbitration proceedings take place –
Aggrieved by the arbitral award Jal Nigam approaches Court on the ground that
Cl 29(a) was not an arbitration agreement and hence the Chief Engineer could
not act as an arbitrator and the award issued by him should not stand – Court
rejects contention says that Jal Nigam nowhere objected against the appointment
of Chief Engineer as arbitrator, they also submitted to the jurisdiction of the
arbitral proceedings by appearance and submission of evidence. – Court also
observed that the Chief Engineer went over the arbitral trial in a fair and
impartial manner and meticulously examined the claims of the contractor on all
the heads before giving the award – The Court did not wish to interfere with
the arbitral award but reduced the interest rate from 18% to 9% for the
pre-arbitration, pendente lite period and the future interest. Also reduced the
award from INR 1.47 Crore to INR 1 Crore.
(38) UoI vs Popular Construction Co
(2001) 8 SCC 470
Issue: Whether the provisions of
Section 5 of the Limitation Act, 1963 are applicable to an application challenging
an award, under Section 34 of the Arbitration and Conciliation Act, 1996
Facts: The award in this case was
made by the Arbitrator on 29^th August, 1998. Under the impression that the
Arbitration act, 1940 applied, the Arbitrator forwarded the original Award to
the appellant with a request to file the Award in the High Court of Bombay so
that a decree could be passed in terms of the Award under the provisions of the
Arbitrator Act, 1940. The Award was accordingly field by the appellant in the Bombay
High court on 29^th March, 1999. The appellant filed an application challenging
the Award on 19^th April, 1999 under Section 30 read with Section 16 of the
Arbitration Act, 1940. Subsequently, the application was amended by inserting
the words "Arbitration and Conciliation Act, 1996" in place of
"Arbitration Act, 1940". The application was dismissed by the learned
Single Judge on 26^th October, 1999 on the ground that it was barred by
limitation under Section 34 of the 1996 Act. The Division Bench rejected the
appeal and upheld the findings of the learned Single Judge.
Observation & Decision of the
Apex Court.
The appellant has not disputed the
position that if the Limitation Act, 1963 and in particular Section 5, did not
apply to Section 34 of the 1996 Act, then its objection to the award was time
barred and the appeal would he to be dismissed The submission however is that
Section 29(2) of the Limitation Act makes the provisions of Section 5 of the
Limitation Act applicable to special laws like the 1996 Act since the 1996 Act
itself did not expressly excludes its applicability and that there was
sufficient cause for the delay in filing the application under Section 34.
Counsel for the respondent, on the other hand, has submitted that the language
of Section 34 plainly read, expressly excluded the operation of Section 5 of
the Limitation Act and that there was as such no scope for assessing the
sufficiency of the cause for the delay beyond the period prescribed in the
proviso to Section 34.
The issue will have to be resoled
with reference to the language used in Sections 29(2) of the Limitation Act,
1963 and Section 34 of the 1996 Act. Section 29(2) provides that:
"Where any special or local law
prescribes for any suit, appeal or application a period of limitation different
from the period prescribed by the Schedule, the provisions of section 3 shall
apply as if such period were the period prescribed by the Schedule and for the
purpose of determining any period of limitation prescribed for any suit, appeal
or application by any special or local law, the provisions contained in
sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent
to which, they are not expressly excluded by such special or local law."
On an analysis of the section, it is
clear that the provisions of section 4 to 24 will apply when:
(i) there is a special or local law
which prescribes a different period of limitation for any suit, apply or
application; and
(ii) the special or local law does
not expressly exclude those Sections.
There is no dispute that the 1996
Act is a "Special Law' and that Section 34 provides for a period of
limitation different form that prescribed under the Limitation Act. The
question then is such exclusion expressed in Section 34 of the 1996 Act? The
relevant extract of Section 34 reads:
34 "Application for setting
aside arbitral award - (1) xxx xxx xxx xxx xxx
(2) xxx xxx xxx xxx xxx
(3) An application for setting aside
may not be made after three months have elapsed from the date on which the
party making that application had received the arbitral award or, if a request
had been made under section 33, from the date on which that request had been
disposed of by the arbitral tribunal:
Provided that if the court is
satisfied that the applicant was prevented by sufficient cause from making the
application within the said period of three months it may entertain the
application within a further period of thirty days, but not thereafter."
Appeal dismissed the S5 of the
Limitation Act does not apply to S34 of the arbitration and conciliation
act. S34 (1) clearly says that it is
subject to S34 (2) & (3) and S34 (3) clearly allows a delay of 30 days on
sufficient cause but no further.
Court compared S116A of
Representation of people act which clearly excluded the limitation act in its
pro
(39) UoI vs GS Atwal & Co AIR
1996 SC 2965
Issue: Whether the arbitrator had
power to enlarge the scope of reference unilaterally. What was the power of the
arbitrator to award the amount in non-speaking award. It was argued since
appellant had participated in the arbitration proceedings before the arbitrator
and after finding the award unfavorable to them cannot question now. The
conduct on part of the appellant amounts to acquiescence to the power and
jurisdiction of the arbitrator to make the award.
Held: Principle of acquiescence is
inapplicable to the jurisdiction of the arbitrator to unilaterally enlarge
power to arbitrate. The parties by express agreement referred the arbitrability
of claims for refund of the hire charges but the arbitrator upon entering into
the reference enlarged its scope. The fact that the party had participated in
the proceedings does not amount to acquiescence. To constitute arbitration the
agreement between the parties must be ad idem. Once appointed the arbitrator
has the duty to adjudicate the matter brought before it by the parties. Since
arbitrator went on adjudicating the disputes, despite objections, the parties
were left with no option but to participate and therefore the same did not
amount to acquiescence. Award is set aside as the arbitrator has misdirected
himself and committed legal misconduct which vitiated the entire award.
(40) New India Civil Erectors (P)
Ltd vs ONGC (1997) 11 SCC 75
Facts: The appellant entered into a contract
for construction of 304 pre-fabricated housing units for the Respondent. The
contract could not be completed even within an extended period, The contract
was terminated by the Respondent and the work was done through another agency.
There were disputes between the Appellant and Respondent which were referred to
a team of two Arbitrators.
The Appellant had made claims under
19 heads, out of which a total sum of Rs.1,09,04,789 was awarded on 11 claims
only. The Respondents made 3
claims, out of which one claim was
rejected and two claims were allowed partly to an extent of Rs. 41,22,178.
Therefore, the Appellant was held
entitled to a net amount of Rs.
67,82,620 with interest at the rate of 18% p.a. from date of award till date of
payment.
The Appellant moved the single judge
for making the award a rule of Court. The Respondent filed objections seeking
to have the award set aside. The single judge over ruled the objection and made
the Award a rule of Court.
On Appeal before the Division Bench,
the Respondent confined its challenge to claims under five heads only and did
not contest other claims. The Division Bench upheld the Respondent's
contentions as regards three claims and rejected the rest.
On Appeal before this Court, the
Appellant contended that there were shortages of cement in the bags supplied by
the Respondent and that the Appellant had in their correspondences specifically
stipulated that each bag shall contain 50 kg. of cement, that the arbitrators
exceeded their authority in awarding the amount under this head, that the
Division bench had erred in not including the area of the balconies in the
measurement of the built-up area since there were no balconies at all as per
the modified plan, and that the claim under escalation charges were wrongfully
rejected by the Division Bench. The Respondents contested the appeal on the
ground that supply of cement was irrespective of variation in weight, that the
stipulation in the Tender was not modified by the Appellant's letter, that as
regards area covered by balconies, the tender conditions stipulate that it is
liable to be excluded from the measurements, that the claim of escalation
charges is not admissible under the contract till completion of work and that
the arbitrators could not have awarded any amount on this ground.
Since there is formal contract and
the terms of agreement have to be inferred from the Tender notice and the
correspondence between parties, and the attempt of the court is always to
support the award within the letter of law, the award is upheld as regards
variation in cement bags.
The findings of the Division Bench
that the arbitrators overstepped their authority by including the area of the
balconies in the measurement of the built up area is upheld. The arbitrators
being a creature of the agreement, must operate within the four corners of the
agreement and cannot travel beyond it. The arbitrators cannot award any amount
which is ruled
out or prohibited by the terms of
the agreement.
The decision of Division Bench as
regards rejection of escalation charges is affirmed. The Single Judge was not
right in holding that the prohibition of claiming escalation charges is
confined to the original contract period and does not operate thereafter. It is
not a case of the arbitrators construing the agreement. It is a clear case of
the arbitrators acting contrary to the specific stipulation/condition contained
in the agreement between the parties.
(41) Oil & Natural Gas
Corporation Ltd vs Saw Pipes Ltd 2003 (4) SCALE 92
Issue: The ambit and scope of
Court's jurisdiction in case where award passed by the Arbitral Tribunal is
challenged under Section 34 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as "the Act") as the decision in this appeal
would depend upon the said finding. In other words - whether the Court would
have jurisdiction under Section 34 of the Act to set aside an award passed by
the Arbitral Tribunal which is patently illegal or in contravention of the
provisions of the Act or any other substantive law governing the parties or is
against the terms of the contract?
Observations and Decision:
In the result, it is held that:-
A. (1) The Court can set aside the arbitral
award under Section 34(2) of the Act if the party making the application
furnishes proof that:-
(i) a
party was under some incapacity, or
(ii) the
arbitration agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law for the time
being in force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral proceedings or
was otherwise unable to present his case; or
(iv) the
arbitral award deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration, or it contains decisions on matters
beyond the scope of the submission to arbitration;
2) The
Court may set aside the award:-
(i) (a) if the composition of the
arbitral tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the arbitral tribunal was
not in accordance with Part-I of the Act.
(ii) if the arbitral procedure was
not in accordance with:-
(a)
the agreement of the parties, or
(b)
failing such agreement, the arbitral procedure was not in accordance
with Part-I of the Act. However, exception for setting aside the award on the
ground of composition of arbitral tribunal or illegality of arbitral procedure
is that the agreement should not be in conflict with the provisions of Part-I of
the Act from which parties cannot derogate.
(c) If the award passed by the
arbitral tribunal is in contravention of provisions of the Act or any other substantive
law governing the parties or is against the terms of the contract.
(3) The
award could be set aside if it is against the public policy of India, that is
to say, if it is contrary to:-
(a) fundamental
policy of Indian law;
(b) the
interest of India; or
(c) justice
or morality, or
(d) if
it is patently illegal.
(4) It
could be challenged:-
(a) as
provided under Section 13(5); and
(b) Section
16(6) of the Act.
B. (1)The
impugned award requires to be set aside mainly on the grounds:-
(i)there is specific stipulation in
the agreement that the time and date of delivery of the goods was the essence
of the contract;
(ii) in case of failure to deliver
the goods within the period fixed for such delivery in the schedule, ONGC was
entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly
understood that the agreed liquidated damages were genuine pre-estimate of
damages;
(iv) on the request of the
respondent to extend the time limit for supply of goods, ONGC informed
specifically that time was extended but stipulated liquidated damages as agreed
would be recovered;
(v)
liquidated damages for delay in supply of goods were to be recovered by
paying authorities from the bills for payment of cost of material supplied by
the contractor;
(vi) there is nothing on record to
suggest that stipulation for recovering liquidated damages was by way of
penalty or that the said sum was in any way unreasonable.
(vii) In certain contracts, it is
impossible to assess the damages or prove the same. Such situation is taken
care by Sections 73 and 74 of the Contract Act and in the present case by
specific terms of the contract.
Topic 5: International Commercial
Arbitration
(a) Foreign Awards under New York
convention (S 44) and Geneva Convention (S 53)
(b) Foreign Awards when binding and
when enforcement may be refused (Ss 46, 48, 55 and 57) and their enforcement
(Ss 49 & 58)
Section 44. Definition.—
In this Chapter, unless the context
otherwise requires, “foreign award” means an arbitral award on differences
between persons arising out of legal relationships, whether contractual or not,
considered as commercial under the law in force in India, made on or after the
11th day of October, 1960—
(a) in pursuance of an agreement in
writing for arbitration to which the Convention set forth in the First Schedule
applies, and
(b) in one of such territories as
the Central Government, being satisfied that reciprocal provisions have been
made may, by notification in the Official Gazette, declare to be territories to
which the said Convention applies.44. Definition.—In this Chapter, unless the
context otherwise requires, “foreign award” means an arbitral award on
differences between persons arising out of legal relationships, whether
contractual or not, considered as commercial under the law in force in India,
made on or after the 11th day of October, 1960— (a) in pursuance of an
agreement in writing for arbitration to which the Convention set forth in the
First Schedule applies, and (b) in one of such territories as the Central
Government, being satisfied that reciprocal provisions have been made may, by
notification in the Official Gazette, declare to be territories to which the
said Convention applies.
Section 53. Interpretation.—
In this Chapter “foreign award”
means an arbitral award on differences relating to matters considered as
commercial under the law in force in India made after the 28th day of July,
1924,—
(a) in pursuance of an agreement for
arbitration to which the Protocol set forth in the Second Schedule applies, and
(b) between persons of whom one is
subject to the jurisdiction of some one of such Powers as the Central
Government, being satisfied that reciprocal provisions have been made, may, by
notification in the Official Gazette, declare to be parties to the Convention
set forth in the Third Schedule, and of whom the other is subject to the
jurisdiction of some other of the Powers aforesaid, and
(c) in one of such territories as
the Central Government, being satisfied that reciprocal provisions have been
made, may, by like notification, declare to be territories to which the said
Convention applies, and for the purposes of this Chapter an award shall not be
deemed to be final if any proceedings for the purpose of contesting the
validity of the award are pending in the country in which it was made.
Section 46. When foreign award
binding.—
Any foreign award which would be
enforceable under this Chapter shall be treated as binding for all purposes on
the persons as between whom it was made, and may accordingly be relied on by
any of those persons by way of defence, set off or otherwise in any legal
proceedings in India and any references in this Chapter to enforcing a foreign
award shall be construed as including references to relying on an award.
Section 48. Conditions for
enforcement of foreign awards.—
(1) Enforcement of a foreign award may be
refused, at the request of the party against whom it is invoked, only if that
party furnishes to the court proof that—
(a) the parties to the agreement
referred to in section 44 were, under the law applicable to them, under some
incapacity, or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of
the country where the award was made; or
(b) the party against whom the award
is invoked was not given proper notice of the appointment of the arbitrator or
of the arbitral proceedings or was otherwise unable to present his case; or
(c) the award deals with a
difference not contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on matters beyond the scope
of the submission to arbitration:
Provided that, if the decisions on
matters submitted to arbitration can be separated from those not so submitted,
that part of the award which contains decisions on matters submitted to
arbitration may be enforced; or
(d) the composition of the arbitral
authority or the arbitral procedure was not in accordance with the agreement of
the parties, or, failing such agreement, was not in accordance with the law of
the country where the arbitration took place; or
(e) the award has not yet become
binding on the parties, or has been set aside or suspended by a competent
authority of the country in which, or under the law of which, that award was made.
(2) Enforcement of an arbitral award
may also be refused if the Court finds that—
(a) the subject-matter of the
difference is not capable of settlement by arbitration under the law of India;
or
(b) the enforcement of the award would be
contrary to the public policy of India.
Explanation.—Without prejudice to
the generality of clause (b) of this section, it is hereby declared, for the
avoidance of any doubt, that an award is in conflict with the public policy of
India if the making of the award was induced or affected by fraud or
corruption.
(3) If an application for the
setting aside or suspension of the award has been made to a competent authority
referred to in clause (e) of sub-section (1) the Court may, if it considers it
proper, adjourn the decision on the enforcement of the award and may also, on
the application of the party claiming enforcement of the award, order the other
party to give suitable security.
Comments
Awarded has been set aside
An interim award was made at London
by an arbitral tribunal constituted by the international Chamber of Commerce.
The agreement was made at New Delhi and agreement was governed by the law in
force in India. Court held that the law expressly chosen by the parties in
respect of all matters arising under their contract, which must necessarily
include the agreement contained in the arbitration clause, being Indian law and
the exclusive jurisdiction of the courts in Delhi having been expressly recognized
by the parties to the contract in all matters arising under it, and the
contract being most intimately associated with India, the proper law of
arbitration and the competent courts are both exclusively Indian, while matters
of procedure connected with the conduct of arbitration are left to be regulated
by the contractually chosen rules of the ICC to the extent that such rules are
not in conflict with the public policy and the mandatory requirements of the
proper law and of the place of arbitration; National Thermal Power Corpn. v.
Singer Co., AIR 1993 SC 998.
Enforcement of foreign award
For enforcement of a foreign award,
there is no need to take separate proceedings such as one for deciding
enforceability of award to make rule of court or decree and other to take up
execution thereafter; Fuerst Day Lawson Ltd. v. Jindal Export Ltd., AIR 2001 SC
2293.
Invalidity of the arbitration
agreement
A foreign award will not be enforced
if it is proved by the party against whom it is sought to be enforced that the
parties to the agreement were, under the law applicable to them, under some
incapacity, or, the agreement was not valid under the law to which the parties
have subjected it, or, in the absence of any indication thereon, under the law
of the place of arbitrations; or there was no due compliance with the rules of
fair hearing; or the award exceeded the scope of the submission to arbitration;
or the composition of the arbitral authority or its procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was
not in accordance with the law of the place of arbitration; or the award has
not yet become binding on the parties, or has been set aside or suspended by a
competent authority or the country in which, or under the law of which, that
award was made. The award will not be enforced by a court in India if it is
satisfied that the subject matter of the award is not capable of settlement by
arbitration under Indian law or the enforcement of the award is contrary to the
public; National Thermal Power Corpn. v. Singer Co., AIR 1993 SC 998.
Section 55. Foreign awards when
binding.—
Any foreign award which would be
enforceable under this Chapter shall be treated as binding for all purposes on
the persons as between whom it was made, and may accordingly be relied on by
any of those persons by way of defence, set off or otherwise in any legal
proceedings in India and any references in this Chapter to enforcing a foreign
award shall be construed as including references to relying on an award.
Section 57. Conditions for
enforcement of foreign awards.—
(1) In order that a foreign award may be
enforceable under this Chapter, it shall be necessary that—
(a) the award has been made in pursuance of a
submission to arbitration which is valid under the law applicable thereto;
(b) the subject-matter of the award is capable
of settlement by arbitration under the law of India;
(c) the award has been made by the arbitral
tribunal provided for in the submission to arbitration or constituted in the
manner agreed upon by the parties and in conformity with the law governing the
arbitration procedure;
(d) the award has become final in the country
in which it has been made, in the sense that it will not be considered as such
if it is open to opposition or appeal or if it is proved that any proceedings
for the purpose of contesting the validity of the award are pending;
(e) the enforcement of the award is not
contrary to the public policy or the law of India.
Explanation.—Without prejudice to
the generality of clause (e), it is hereby declared, for the avoidance of any
doubt, that an award is in conflict with the public policy of India if the
making of the award was induced or affected by fraud or corruption.
(2) Even if the conditions laid down
in sub-section (1) are fulfilled, enforcement of the award shall be refused if
the Court is satisfied that—
(a) the award has been annulled in the country
in which it was made;
(b) the party against whom it is sought to use
the award was not given notice of the arbitration proceedings in sufficient time
to enable him to present his case; or that, being under a legal incapacity, he
was not properly represented;
(c) the award does not deal with the
differences contemplated by or falling within the terms of the submission to
arbitration or that it contains decisions on matters beyond the scope of the
submission to arbitration:
Provided that if the award has not
covered all the differences submitted to the arbitral tribunal, the Court may,
if it thinks fit, postpone such enforcement or grant it subject to such
guarantee as the Court may decide.
(3) If the party against whom the
award has been made proves that under the law governing the arbitration
procedure there is a ground, other than the grounds referred to in clauses (a)
and (c) of sub-section (1) and clauses (b) and (c) of sub-section (2) entitling
him to contest the validity of the award, the Court may, if it thinks fit,
either refuse enforcement of the award or adjourn the consideration thereof,
giving such party a reasonable time within which to have the award annulled by
the competent tribunal.
Section 49. Enforcement of foreign
awards.—
Where the Court is satisfied that
the foreign award is enforceable under this Chapter, the award shall be deemed
to be a decree of that Court.
Comments
Court is required to record its
satisfaction that a foreign award is enforceable
Before proceeding to execute a foreign award
as a decree of a court, the court is required to record its satisfaction that
such a foreign award is enforceable. This, however, does not mean that court
cannot pass any interim order in order to protect interest of person applying
for enforcement and execution of a foreign award; Centrotrade Minerals &
Metals Inc. v. Hindustan Copper Ltd., AIR 2004 Cal 142.
Section 58. Enforcement of foreign
awards.—
Where the Court is satisfied that
the foreign award is enforceable under this Chapter, the award shall be deemed
to be a decree of the Court.
(42) Bhatia INternational vs Bulk
Trading S.A. AIR 2002 SC 1432 (discussed in topic 1)
Topic 6: Conciliation ( Ss 61 - 81 )
Section 61. Application and scope.—
(1) Save as otherwise provided by
any law for the time being in force and unless the parties have otherwise
agreed, this Part shall apply to conciliation of disputes arising out of legal
relationship, whether contractual or not and to all proceedings relating
thereto.
(2) This Part shall not apply where by virtue
of any law for the time being in force certain disputes may not be submitted to
conciliation.
Section 62. Commencement of
conciliation proceedings.—
(1) The party initiating
conciliation shall send to the other party a written invitation to conciliate
under this Part, briefly identifying the subject of the dispute.
(2) Conciliation proceedings shall
commence when the other party accepts in writing the invitation to conciliate.
(3) If the other party rejects the
invitation, there will be no conciliation proceedings.
(4) If the party initiating
conciliation does not receive a reply within thirty days from the date on which
he sends the invitation, or within such other period of time as specified in
the invitation, he may elect to treat this as a rejection of the invitation to
conciliate and if he so elects, he shall inform in writing the other party
accordingly.
Section 63. Number of conciliators.—
(1) There shall be one conciliator
unless the parties agree that there shall be two or three conciliators.
(2) Where there is more than one
conciliator, they ought, as a general rule, to act jointly.
Section 64. Appointment of
conciliators.—
(1) Subject to sub-section (2),—
(a) in conciliation proceedings with
one conciliator, the parties may agree on the name of a sole conciliator;
(b) in conciliation proceedings with
two conciliators, each party may appoint one conciliator;
(c) in conciliation proceedings with
three conciliators, each party may appoint one conciliator and the parties may
agree on the name of the third conciliator who shall act as the presiding
conciliator.
(2) Parties may enlist the
assistance of a suitable institution or person in connection with the
appointment of conciliators, and in particular,—
(a) a party may request such an
institution or person to recommend the names of suitable individuals to act as
conciliator; or
(b) the parties may agree that the
appointment of one or more conciliators be made directly by such an institution
or person:
Provided that in recommending or
appointing individuals to act as conciliator, the institution or person shall
have regard to such considerations as are likely to secure the appointment of
an independent and impartial conciliator and, with respect to a sole or third
conciliator, shall take into account the advisability of appointing a
conciliator of a nationality other than the nationalities of the parties.
Section 65. Submission of statements
to conciliator.—
(1) The conciliator, upon his
appointment, may request each party to submit to him a brief written statement
describing the general nature of the dispute and the points at issue. Each
party shall send a copy of such statement to the other party.
(2) The conciliator may request each party to
submit to him a further written statement of his position and the facts and
grounds in support thereof, supplemented by any documents and other evidence
that such party deems appropriate. The party shall send a copy of such
statement, documents and other evidence to the other party.
(3) At any stage of the conciliation
proceedings, the conciliator may request a party to submit to him such
additional information as he deems appropriate.
Explanation.—In this section and all the
following sections of this Part, the term “conciliator” applies to a sole
conciliator, two or three conciliators as the case may be.
Section 67. Role of conciliator.—
(1) The conciliator shall assist the
parties in an independent and impartial manner in their attempt to reach an
amicable settlement of their dispute.
(2) The conciliator shall be guided by
principles of objectivity, fairness and justice, giving consideration to, among
other things, the rights and obligations of the parties, the usages of the
trade concerned and the circumstances surrounding the dispute, including any
previous business practices between the parties.
(3) The conciliator may conduct the
conciliation proceedings in such a manner as he considers appropriate, taking
into account the circumstances of the case, the wishes the parties may express,
including any request by a party that the conciliator hear oral statements, and
the need for a speedy settlement of the dispute.
(4) The conciliator may, at any stage of the
conciliation proceedings, make proposals for a settlement of the dispute. Such
proposals need not be in writing and need not be accompanied by a statement of
the reasons therefor.
Section 68. Administrative
assistance.—
In order to facilitate the conduct
of the conciliation proceedings, the parties, or the conciliator with the
consent of the parties, may arrange for administrative assistance by a suitable
institution or person.
Section 69. Communication between
conciliator and parties.—
(1) The conciliator may invite the
parties to meet him or may communicate with them orally or in writing. He may
meet or communicate with the parties together or with each of them separately.
(2) Unless the parties have agreed upon the
place where meetings with the conciliator are to be held, such place shall be
determined by the conciliator, after consultation with the parties, having
regard to the circumstances of the conciliation proceedings.
Section 70. Disclosure of
information.—
When the conciliator receives
factual information concerning the dispute from a party, he shall disclose the
substance of that information to the other party in order that the other party
may have the opportunity to present any explanation which he considers
appropriate:
Provided that when a party gives any
information to the conciliator subject to a specific condition that it be kept
confidential, the conciliator shall not disclose that information to the other
party.
Section 71. Co-operation of parties
with conciliator.—
The parties shall in good faith
co-operate with the conciliator and, in particular, shall endeavour to comply
with requests by the conciliator to submit written materials, provide evidence
and attend meetings.
Section 72. Suggestions by parties
for settlement of dispute.—
Each party may, on his own
initiative or at the invitation of the conciliator, submit to the conciliator
suggestions for the settlement of the dispute.
Section 73. Settlement agreement.—
(1) When it appears to the
conciliator that there exist elements of a settlement which may be acceptable
to the parties, he shall formulate the terms of a possible settlement and
submit them to the parties for their observations. After receiving the
observations of the parties, the conciliator may reformulate the terms of a
possible settlement in the light of such observations.
(2) If the parties reach agreement on a
settlement of the dispute, they may draw up and sign a written settlement
agreement. If requested by the parties, the conciliator may draw up, or assist
the parties in drawing up, the settlement agreement.
(3) When the parties sign the settlement
agreement, it shall be final and binding on the parties and persons claiming
under them respectively.
(4) The conciliator shall authenticate the settlement
agreement and furnish a copy thereof to each of the parties.
Section 74. Status and effect of
settlement agreement.—
The settlement agreement shall have
the same status and effect as if it is an arbitral award on agreed terms on the
substance of the dispute rendered by an arbitral tribunal under section 30.
Section 75. Confidentiality.—
Notwithstanding anything contained
in any other law for the time being in force, the conciliator and the parties
shall keep confidential all matters relating to the conciliation proceedings.
Confidentiality shall extend also to the settlement agreement, except where its
disclosure is necessary for purposes of implementation and enforcement.
Section 76. Termination of
conciliation proceedings.—
The conciliation proceedings shall
be terminated—
(a) by the signing of the settlement agreement
by the parties on the date of the agreement; or
(b) by a written declaration of the
conciliator, after consultation with the parties, to the effect that further
efforts at conciliation are no longer justified, on the date of the
declaration; or
(c) by a written declaration of the
parties addressed to the conciliator to the effect that the conciliation
proceedings are terminated, on the date of the declaration; or
(d) by a written declaration of a
party to the other party and the conciliator, if appointed, to the effect that
the conciliation proceedings are terminated, on the date of the declaration.
Section 77. Resort to arbitral or
judicial proceedings.—
The parties shall not initiate,
during the conciliation proceedings, any arbitral or judicial proceedings in
respect of a dispute that is the subject-matter of the conciliation proceedings
except that a party may initiate arbitral or judicial proceedings where, in his
opinion, such proceedings are necessary for preserving his rights.
Section 78. Costs.—
(1) Upon termination of the conciliation
proceedings, the conciliator shall fix the costs of the conciliation and give
written notice thereof to the parties.
(2) For the purpose of sub-section (1),
“costs” means reasonable costs relating to—
(a) the fee and expenses of the conciliator
and witnesses requested by the conciliator with the consent of the parties;
(b) any expert advice requested by the
conciliator with the consent of the parties;
(c) any assistance provided pursuant to clause
(b) of sub-section (2) of section 64 and section 68;
(d) any other expenses incurred in connection
with the conciliation proceedings and the settlement agreement.
(3) The costs shall be borne equally by the
parties unless the settlement agreement provides for a different apportionment.
All other expenses incurred by a party shall be borne by that party.
Section 79. Deposits.—
(1) The conciliator may direct each
party to deposit an equal amount as an advance for the costs referred to in
sub-section (2) of section 78 which he expects will be incurred.
(2) During the course of the
conciliation proceedings, the conciliator may direct supplementary deposits in
an equal amount from each party.
(3) If the required deposits under
sub-sections (1) and (2) are not paid in full by both parties within thirty
days, the conciliator may suspend the proceedings or may make a written
declaration of termination of the proceedings to the parties, effective on the
date of that declaration.
(4) Upon termination of the
conciliation proceedings, the conciliator shall render an accounting to the
parties of the deposits received and shall return any unexpended balance to the
parties.
Section 80. Role of conciliator in
other proceedings.—
Unless otherwise agreed by the
parties,—
(a) the conciliator shall not act as
an arbitrator or as a representative or counsel of a party in any arbitral or
judicial proceeding in respect of a dispute that is the subject of the conciliation
proceedings;
(b) the conciliator shall not be
presented by the parties as a witness in any arbitral or judicial proceedings.
Section 81. Admissibility of
evidence in other proceedings.—
The parties shall not rely on or
introduce as evidence in arbitral or judicial proceedings, whether or not such
proceedings relate to the dispute that is the subject of the conciliation
proceedings,—
(a) views expressed or suggestions made by the
other party in respect of a possible settlement of the dispute;
(b) admissions made by the other party in the
course of the conciliation proceedings;
(c) proposals made by the conciliator;
(d) the fact that the other party had
indicated his willingness to accept a proposal for settlement made by the
conciliator.
(43) Haresh Dayaram Thakur vs State
of Maharashtra AIR 2000 SC 2281
Conciliator drew up the conciliation
agreement himself in secrecy and sent it to the court in a sealed cover without
informing the parties. The proposal by
the conciliator was not signed by the parties, nor its terms disclosed to the
parties by the conciliator. Appellant filed objection against the conciliator
report – HC summarily rejected the objection, referring to the statement that
the parties agreed to undertake settlement agreement as final and binding.
Observation & Decision: Apex
court observed that Arbitration and Conciliation Act deals with two types of
proceedings: Arbitration and Conciliation. A conciliator is a person who is to
assist the parties to settle the dispute between them amicably in independent
and impartial manner. Conciliator is vested with wide powers to decide the
procedure untrammeled by the procedural laws. However in accordance with S73,
the conciliator formulate the terms of a settlement and make it over to the
parties for their observations, and settlement is drawn up in light of the
observations made by the parties to the terms formulated by him. The settlement
takes shape only when the parties draw up the settlement agreement or request
the conciliator to prepare the same and affix their signature to it.
U/s 73(3) the settlement agreement
signed by the parties is final and binding on the parties and persons claiming
under them. It follows therefore that a successful conciliation proceeding
comes to an end only when the settlement agreement signed by the parties comes
into existence. It is such an agreement which has the status and effect of
legal sanctity of an arbitral award under Section 74. Under 76(a) the
conciliation proceedings are terminated only after the parties have signed the
settlement agreement.
Held: No procedure as prescribed
under Part III of the Act has been followed by the conciliator. The conciliator
appears to have held some meetings with the parties in which there was
discussion and thereafter drew up the so called settlement agreement which does
not bear the signature of the parties.
The position is well settled that if
the statute prescribes a procedure for doing a thing, a thing has to be done
according to that procedure. Thus the order passed by the High Court confirming
the settlement agreement received from the conciliator is wholly unsupportable.
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