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
(1949) 2 All ER 226
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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