Author: Samarth Sharma, 2nd Year student at Bennett University.
Citation: 1994 AIR 1615
Date of decision: 23rd April 1993
Bench: K. Ramaswamy
Background of the case:
- The arbitration agreement on 27th May 1978 was responsible to give rise to three special leave petitions which were under execution by the petitioner, this agreement was done for carrying out the work in a period of 9 months.
- It was observed that the petitioner after the execution of his work sent the bills on 12th July 1979. But post the sending of bills the payment was not made. On 28th November 1989 a notice was given to the respondent for the completion of the agreement referencing towards arbitration.
- Whether permission be granted to a party by the High Court for rescinding an arbitration agreement?
- Whether delay in the performance of the agreement is a ground for rescinding such agreement?
- Arbitration suits were filed by the respondent under the jurisdiction of the Calcutta HC under section 12, 33 and 5 of the Arbitration Act, 1940. The judge was responsible to derive the fact that the claim was being subject to be barred by limitations.
- There was lack of evidence from the petitioner for claiming the bills on 12th July 1979. Furthermore, it was a case of interference which led to the cancellation of the arbitration clause 68 on 23rd November 1990.
- Clause 68 is responsible for providing reference towards arbitration for the settlement of disputes between the two parties. Any one of the two parties has the ability for issuing a notice to call the Engineer for settling the disputes which have arisen. The claim for the payment by the petitioner was first made on 12th July 1979.
- There was no proof which was ascertaining the payment of bills and the respondent was of the view that the petitioner was responsible for abandoning the said agreement, the petitioner was not responsible to take this matter and settle it before hand and waited for ten long years.
- According to Section 5 of the Arbitration Act, deals with the appointment of an arbitrator and cannot be a subject to be revoked excluding the case where a leave is provided by the court. Section 12 of the Arbitration Act, in this by the authority and power of the court the arbitrator is revoked of his duty. Taking into account the two sections it is to be seen that the court is having the authority for granting a leave to a party, removing the arbitrator in the said agreement and revoking the contract entered into with the party.
- Section 37 of the Arbitration Act, is in concern with the fact that the provisions which are mentioned under the Indian Limitations Act of 1908 shall be applicable to arbitrations the same way they are applicable in court. As a result, the statute of limitations for initiating an arbitration begins on the date on which the cause of action would have accrued if there had been no arbitration provision. In the same way as civil lawsuits cannot be taken after a certain number of years have passed after the cause of action arose, arbitration claims cannot be made after a certain number of years have passed since the claim arose.
- The petitioner did not take any action for a span of ten years and the courts were responsible for exercising their discretionary power under Section 5 and Section 12 of the Arbitration Act for granting permission to the respondent for rescinding the arbitration agreement while dismissing the special leave petitions.
- It is to be seen that the arbitration agreement between the contracting parties took place on 27th May 1978 in which the work was to be finished in a span of nine months, further the application for pending bills was sent on 12th July 1979.
- Under the conditions laid down in Section 5 and 12 of the Arbitration Act, the court is vested with the requisite power for rescinding such agreement between the contracting parties.
- This power which is exercised by the court is only a subject to special circumstances which were laid down by the court in M/s Amarch and Lalit Kumar V Shree Ambica Jute Mills Ltd ranging from where the arbitrator is responsible to be charged with fraud, the arbitrator is responsible for misconduct of his duties, disqualifying the said arbitrator, refusing the jurisdiction of the matter by the said arbitrator and cases which are exceptional in nature. These conditions will be take into account while exercising the powers under section 12 and 5.
- Clause 68 is responsible for denoting the fact, that when there is a dispute between the contracting parties in an arbitration, this matter should be approached by the Umpire, and if the said Umpire is under refusal for carrying on forward with the said dispute the under a 15 day notice, then the Civil Court should be approached for the proceeding of the arbitration agreement.
- The cause took place on 12th July 1979 but no action was taken forward by the petitioner and furthermore on the issuance of the notice the respondent approached the court with immediate effect for rescinding the said agreement.
- Rescinding the said agreement by the court is justified in accordance with Section 37 of the Arbitration Act, as the conditions which are laid down in the Indian Limitation Act will be a subject to be applicable to arbitration agreements are they are applicable to court proceedings.
- After the issuance of the notice for the appointment of an arbitrator, the cause of arbitration would be started. It is to be observed that the claim is not in a position to be brought post the expiry of the number of years which are specifically stated, starting since the date the cause of action accrued. Due to the petitioner not taking action for a span of ten years the case is barred by limitations.