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PETITIONER: WAZIRCHAND MAHAJAN AND ANR.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT: 12/09/1966

BENCH: SHAH, J.C. BENCH: SHAH, J.C. WANCHOO, K.N. BACHAWAT, R.S.

CITATION:  1967 AIR  990            1967 SCR  (1) 303  CITATOR INFO :  C&F        1969 SC 474  (2,4)  R          1976 SC 287  (23)  E          1988 SC1172  (4)

ACT: Inaian  Limitation  Act, 1908, art. 181-Whether  applies  to applications under Arbitration Act, s. 20. Indian  Arbitration  Act,  1940,  s.  37(1)-Whether  governs applications under s. 20 of the Act.

HEADNOTE: The  second  appellant purchased from the  Himachal  Pradesh Government   the  right  to  extract  and  collect   certain medicinal  herbs from the forests of Chamba  District.   The period  of  agreement was one year from September  1,  1960. Under  an arbitration clause in the agreement  all  disputes between  the  parties  were to be  referred  to  the  Deputy Commissioner,  Mandi District Himachal Pradesh.  The  second appellant transferred all his rights under the agreement  to the  first  appellant  with  the consent  of  the  State  of Himachal  Pradesh.   Disputes arose between the  parties  in October  1950.  On May 30, 1952 the appellants  addressed  a letter to the Chief Conservator of Forests Himachal  Pradesh requiring  that officer to submit the matters in  difference to  the  arbitration  of  the  Deputy  Commissioner,   Mandi District.   By  his  reply dated June  23,,1952,  the  Chief Conservator declined to agree to a reference contending that the  matters  desired  to  be  referred  were  outside   the arbitration clause.  On June 22, 1955 the appellants applied to  the  District  Court of Chamba for  an  order  that  the agreement  be filed in Court and that the  disputes  between them  and the State be referred to the sole  arbitration  of the  Deputy  Commissioner,  Mandi District.   The  State  of Himachal Pradesh contended, inter alia that the  application for  filing the arbitration agreement was barred by the  law of limitation as the right to apply if any arose in the year 1950  and  not on June 23, 1952 as alleged.   The  Court  of First Instance held in favour of the appellants.  In  appeal the  Judicial Commissioner reversed the order of  the  trial court.   In  the  view  of  the  Judicial  Commissioner   an application for filing an arbitration agreement under s.  20

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of  the  Arbitration  Act was governed by Art.  181  of  the Limitation  Act  1908, and since the period of  three  years prescribed  thereby commenced to run from the date on  which the  differences arose between the parties i.e.,  about  the month  of  September  October  1950,  and  in  any  case  on September  1, 1951, the application for references filed  by the appellants was barred. HELD:     The   Judicial  Commissioner  was  in   error   in rejecting  the application of the appellants for filing  the arbitration  agreement  as  barred under  Art.  181  of  the Limitation Act, 1908. (i)  The  terms of Aft. 181, though general  and  apparently not  restricted  to  applications under the  Code  of  Civil Procedure  have  always been interpreted as  so  restricted. There is a catenate of authorities holding that in Art.  181 the  expression "under the Code of Civil Procedure" must  be deemed to be necessarily implied. [305 H] Hansraj  Gupta  and  Ors. v.  Official  Liquidators  of  the Dehradun  Mussoorie Electric Tramway Co. Ltd., L.R. 60  I.A. 13, Sha Mulchand & Company Ltd. (in Liquidation) v.  Jawahar Mills Ltd., [1953] S.C.R. 351 and Bombay Gas Company Ltd. v. Gopal Bhiya Ors., [1964] 3 S.C.R. 709, referred to. 304 If  Art.  181  of  the Limitation  Act,  1908  only  governs applications under the Code if Civil Procedure for which  no period  of  limitation  is  provided  in  the  schedule   an application  under  the Arbitration Act, 1940 not  being  an application under the Code of Civil Procedure, unless  there is  Some  provision,  which by express  enactment  or  plain intendment to the contrary-in the Arbitration Act, will  not be governed by that Article. [307 E] (ii) Section 37(1) of the Arbitration Act, 1940 which  makes the provisions of the Indian Limitation Act, 1908 applicable to arbitrations as they apply to proceedings in court,  does not   govern  an  application  for  filing  an   arbitration agreement  under s. 20 of the Arbitration Act.  The  section deals only with the authority of the arbitrator to deal with and  decide any dispute referred to him : it has no  concern with an application made to the court to file an arbitration agreement to refer a dispute to the arbitrator. [308 E]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 601 of 1964. Appeal from the judgment and order dated May 27, 1961 of the Judicial  Commissioner,  Himachal Pradesh,  in  first  Civil Appeal Order No. 16 of 1958. H.   L. Gosain and Harbans Singh, for the appellants. V.   D. Mahajan and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Shah, J. Under an agreement dated November 1, 1950, with the State   of  Himachal  Pradesh,   Triloknath   Mahajan-second appellant in this appeal-purchased the right to extract  and collect  certain medicinal herbs from the forests of  Chamba District.   The  period of the agreement was one  year  from September  1,  1950.   By cl. 22 of  the  agreement  it  was provided that all disputes between the parties arising under the  agreement  or  under any clause thereunder  or  in  any manner connected with or arising out of the agreement or the operation  thereof, or the rights, duties or liabilities  of either  parties thereunder including the dispute  or  diffe- rence  as  to  the construction of the  agreement  shall  be referred to the sole arbitration of the Deputy Commissioner, Mandi  District,  Himachal Pradesh, and if that  officer  be

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unable or unwilling to act, to such Assistant as the  Deputy Commissioner   shall   appoint  as  the   sole   arbitrator. Triloknath  Mahajan  transferred all his rights,  title  and interest under the agreement to Wazirchand Mahajan-the first appellant-with  the  permission  of the  State  of  Himachal Pradesh. Disputes  arose in October 1950 between the  appellants  and the State of Himachal Pradesh regarding the right to collect herbs  from  certain  areas and the  failure  of  the  State authorities to prevent trespassers from removing herbs,  the right to which was 305 granted to the second appellant.  The appellants addressed a letter on May 30, 1952 to the Chief Conservator of  Forests, Himachal  Pradesh,  requring  that  Officer  to  submit  the matters  in  difference  to the arbitration  of  the  Deputy Commissioner,  Mandi District.  By his reply dated June  23, 1952, the Chief Conservator declined to agree to a reference contending  that the matters desired to be referred to  were outside  the  arbitration  clause.  On  June  22,  1955  the appellants  applied to the District Court of Chamba  for  an order that the agreement dated November 1, 1950 be filed  in the  Court and that the disputes between them and the  State be   referred  to  the  sole  arbitration  of   the   Deputy Commissioner,   Mandi  District.   The  State  of   Himachal Pradesh,  contended,  inter alia, that the  application  for filing  the arbitration agreement was barred by the  law  of limitation as the right to apply, if any, arose in the  year 1950  and  not on June 23, 1952, as alleged.  The  Court  of First  Instance held that the Limitation Act did not  govern an application for filing an arbitration agreement under  s. 20  of  the  Arbitration Act, 1940, and  that  even  if  the application  was  governed  by Art. 181 of Sch.   1  of  the Limitation Act, 1908, since the application was made  within three years from the date on which the Chief Conservator  of Forests, Himachal Pradesh, declined to make a reference,  it was  not  barred.  The Court accordingly  ordered  that  the agreement  be  filed  and the disputes be  referred  to  the arbitrator  named in the agreement.  During the pendency  of this application before the Trial Court, the Part ’C’  State of Himachal Pradesh became Union Territory, and the Union of India  was substituted as a party in place of the  State  of Himachal  Pradesh.   In appeal by the Union  of  India,  the Judicial Commissioner, Himachal Pradesh, reversed the  order of   the  Trial  Court.   In  the  view  of   the   Judicial Commissioner  an  application  for  filing  an   arbitration agreement under s. 20 of the Arbitration Act is governed  by Art.  181  of the Limitation Act, and since  the  period  of three  years  prescribed thereby commences to run  from  the date  on  which the differences arose between  the  parties, i.e., about the month of September-October 1950, and in  any case  on  September 1, 1951, the application  for  reference filed by the appellants was barred. The  terms of Art. 181 are general, and are  apparently  not restricted   to  applications  under  the  Code   of   Civil Procedure.   But  that Article is included in the  group  of articles   which  fall  under  the  head   "Third   Division Applications".   As  originally  enacted  all   applications contemplated  to  be  made  under Arts.  158  to  180,  were applications  made  under the Code of  Civil  Procedure  and there  was a catena of authorities holding that in Art.  181 the expression."under the Code of Civil Procedure", must  be deemed to be necessarily implicit. 306 In  Hansraj Gupta and Others v. Official Liquidators of  the

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Dehradun-Mussoorie  Electric  Tramway  Company  Ltd.(1)  the Judicial Committee of the Privy Council observed at p. 20 :               " but a series of authorities commencing  with               Bai Manekbai v. Manekji Kayasji (I.L.R. 7 Bom.               213) has taken the view that art. 181 only re-               lates to applications under the Code of  Civil               Procedure,   in  which  case  no   period   of               limitation   has  been  prescribed   for   the               application."               In   Sha   Mulchand   &   Company   Ltd.   (In               liquidation)  v. Jawahar Mills  Ltd.,(2)  this               Court  observed  after  referring  to  certain               decisions:               ,,This  long catena of decisions may  well  be               said  to  have, as it were,  added  the  words               ’under  the Code’ in the first column of  that               article (Art. 181).",               and in Bombay Gas Company Ltd. v. Gopal  Bhiva               & Others(1) this Court observed :               "It is well settled that art. 181 applies only               to applications which are made under the  Code               of Civil Procedure.........." It  is  true that in Hansraj Gupta’s case,(1)  the  Judicial Committee  was  dealing with the period  of  limitation  for filing  an  application  under  s.  186(1)  of  the   Indian Companies Act, 1913, to order a contributory in a winding-up to  pay  a debt; and Sha Mulchand’s case(2)  related  to  an application  under  the  Indian  Companies  Act,  1913,  for rectification  of the share-register and restoration of  the name of a member whose shares were forfeited for non-payment of  calls.  In the Bombay Gas Company’s case(1)  this  Court was dealing with an application for enforcement of an  order under  s. 33C (2) of the Industrial Disputes Act 14 of  1947 for  computation  of benefit in terms. of money  and  for  a direction  to  the employers to pay the same.  But  in  each case  the decision of the Court proceeded upon  the  general ground  that Art. 181 of the Limitation Act, 1908,  governed applications under the Code of Civil Procedure.  This  Court impliedly  rejected  in each case the argument  that  merely because  powers  under the Code of Civil  Procedure  may  be exercised  by  a  Court  entertaining  an  application,  the application  could not be deemed to be one under  the  Code. It is true that in the Limitation Act originally enacted  in 1908,  by  the group of Arts. 158 to 180  only  applications under  the Code of Civil Procedure were dealt with.  By  the amendment made by the Arbitration Act 10 of 1949, Arts. (1) L. R. 60 1. A. 13. (2) [1953] S. C. R. 351. (3)  [1964] 3 S. C. R. 709.                             307 158  and  178  were modified and in  the  articles  for  the expression  "under  the Code of Civil Procedure,  1908"  the words  "under  the Arbitration Act 1940"  were  substituted. The  reason which persuaded the Courts from time to time  to hold that the expression "under the Code" must be deemed  to be  added  in Art. 181 did not continue to apply  after  the amendment of Arts. 158 and 178.  It may be recalled that the law relating to consensus arbitration, except in respect  of cases governed by Arbitration Act, 1899, was enacted in Sch. 11  of the Code of Civil Procedure, 1908.  By the  enactment of  Act 10 of 1940, Sch. 11 of the Code of  Civil  Procedure and  the Indian Arbitration Act, 1899, were repealed and  an Act  dealing with all arbitrations was enacted, and  it  was found  necessary on that account to amend Arts. 158 and  178 so as to make them consistent with the legislative  changes.

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The  reason  which  persuaded the Courts to  hold  that  the expression "under the Code" was deemed added to Art. 181 has now   disappeared,  but  on  that  account  the   expression "applications for which no period of limitation is  provided elsewhere  in this Schedule" in Art. 181 cannot be  given  a connotation  different  from  the one  which  prevailed  for nearly 60 years before 1940. If Art. 181 of the Limitation Act only governs  applications under  the  Code of Civil Procedure for which no  period  of limitation  is provided under the Schedule,  an  application under  the  Arbitration Act, 1940 not being  an  application under  the  Code of Civil Procedure, unless  there  is  some provision, which by express enactment or plain intendment to the contrary in the Arbitration Act, will not be governed by that Article. Counsel  for the Union of India contended that s.  37(1)  of the  Arbitration Act, 1940, indicates a contrary  intention. That sub-section provides               "All  the provisions of the Indian  Limitation               Act, 1908, shall apply to arbitrations as they               apply to proceedings in Court." In our judgment, this clause does not govern an  application for  filing  an arbitration agreement under, s.  20  of  the Arbitration Act.  In terms, it provides, that the provisions of  the Indian Limitation Act apply to arbitrations as  they apply   to  proceedings  in  Court.   In  other  words,   an arbitrator  in  dealing with a matter submitted  to  him  is bound  to  apply the provisions of the Limitation Act  :  s. 37(1)   has  no  reference  to  an  application  under   the Arbitration   Act  for  effectuating  a  reference  to   the arbitration,   such   as  an  application  for   filing   an arbitration  agreement.  The genesis of this sub-section  is to be found in the judgment of the Judicial Committee of the Privy Council in Ramdutt Ramkissen- 308 dass  v.  F.  D. Sasson and Company(1).  In  that  case  the Judicial  Committee  observed that even though s. 3  of  the Limitation  Act  deals  primarily with  suits,  appeals  and applications  made in law courts and\ makes no reference  to arbitration  proceedings and, therefore, the Limitation  Act does  not  in  terms apply  to  arbitrations  in  mercantile references,  it  would be "an implied term of  the  contract that the arbitrator must decide the dispute according to the existing law of contract, and that every defence which would have been open in a Court of law can be equally proposed for the arbitrator’s decision unless the parties have agreed  to exclude that defence.  Were it otherwise, a claim for breach of a contract containing a reference clause could be brought at  any time, it might be twenty or thirty years  after  the cause  of  action had arisen although  the  Legislature  had prescribed  a  limit of three years for the  enforcement  of such  a claim in any application that might be made  to  the law  courts."  In  enacting the Arbitration  Act,  1940  the Legislature  incorporated, with some modification, the  rule which was regarded by the Judicial Committee as implicit  in a commercial reference under an arbitration agreement.   The Legislature provided that all the provisions of the  Limita- tion Act, 1908, shall apply to arbitrations as they apply to proceedings in Court. There  is no doubt that cl. (1) of s. 37 of the  Arbitration Act deals only with the authority of the arbitrator to  deal with  and  decide  any dispute referred to  him  it  has  no concern  with  an application made to the Court to  file  an arbitration  agreement  and  to  refer  a  dispute  to   the arbitrator.   After an agreement is filed in Court  and  the

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matter  is referred to the arbitrator, it is for  the  arbi- trator to decide by the application of the law contained  in the  Limitation  Act, whether the claim is barred.   But  s. 37(1) does not confer authority upon the Court to reject the application for filing of an arbitration agreement under  s. 20  of  the Arbitration Act because the claim  is  not  made within three years form the date on which the right to apply arose.   In  dealing  with an application  for  ’filing  ’an arbitration  agreement, the Court must satisfy itself  about the existence of a written agreement which is valid and sub- sisting  and which has been executed before the  institution of any suit, and also that a dispute has arisen with  regard to  the subjectmatter of the agreement which is  within  the jurisdiction  of the Court.  But the Court is not  concerned in  dealing with that application to deal with the  question whether the claim of a party to the arbitration agreement is barred by the law of limitation : that question falls within the  province  of  the arbitrator to  whom  the  dispute  is referred. The Judicial Commissioner was, in our judgment, in error  in rejecting  the application of the appellants for filing  the arbitra- (1)  L.R. 561. 128. 309 tion  agreement as barred under Art. 181 of  the  Limitation Act, 1908. We  direct that the appeal be allowed, the order  passed  by the Judicial Commissioner be set aside and the order  passed by the Trial Court for filing the arbitration agreement  and referring  the matters to the arbitrator be  restored.   The appellants will be entitled to their costs in this Court and in the Court of the Judicial Commissioner. G.C.                                         Appeal allowed. 310