Author: Nikitha Panchagnula, Student at University College of Law, Osmania University.
Citation: AIR 1957 Bom 178
Date of Decision: February 4, 1957
Bench: Shah, Gokhale
Original Copy: N/A
Statutes Involved: Co-operative Societies Act, 1912, Indian Limitation Act, 1963, The Arbitration and Conciliation Act, 1940
Issue in Question:
- Whether the Indian Limitation Act applies for adjudication of claims referred under Section 54 of the Bombay Co-operative Societies Act?
Background of the Case:
- The Nagar Agricultural Sale and Purchase Cooperative Society is a society registered under the Bombay Co-operative Societies Act which carries on the business infruits on commission basis. The petitioner who is a member of the society was given the position of Honorary Secretary of the society. Being the office bearer, he could not conduct the business in his own name hence he handed over the charge to conduct the business of the society to a commission agent-Mr. Pawle who on behalf of the petitioner purchased the fruits from the society and sold them at Bombay. Pawle was liable to pay Rs. 1,051/5/6 to the society failing which the petitioner passed an agreement covenanting to pay the amount due from Pawle. The petitioner, in part satisfaction of the payment, paid an amount of Rs. 240 and 200/- respectively. As the petitioner failed to pay the remaining amount of Rs. 611/5/6 plus interest, the society filed an application before the Assistant Registrar of Co-operative Societies requesting for an order to pay the balance due from the petitioner. This dispute between the petitioner and the society was referred to the Board of Arbitrators under Section 54 of Bombay Co-operative Societies Act.
- The petitioner contended that since the claim was not made by the society before the Assistant Registrar within 3 years from the date on which the cause of action arouse, the said application was barred by limitation.
- The nominees of the Registrar and the nominees of the society contended that the claim made by the society was proved and it was barred by limitation. The arbitrators passed the award in favour of the society. Aggrieved by this award, the petitioner filed a revision application before the Bombay Co-operative Tribunal. He urged before the tribunal that the claim made by the society was barred by limitation and thus the Board of Arbitrators had no jurisdiction to pass an award on that claim. The Tribunal held that the law of limitation does not apply to the arbitration proceedings under Section 54 of the Co-operative Societies Act and confirmed the majority award passed by the Board of Arbitrators. There upon, the petitioner filed an application under Article 227 before the Hon’ble High Court of Bombay against this order.
- The Court held that the Indian Limitation Act has no direct application to arbitral proceedings and that it applies only to suits, appeals, applications. Evidently, a proceedings before an arbitrator is not a suit, appeal or application. Therefore, it cannot be concluded that the provisions of Limitation Act prohibit an arbitrator from entertaining a claim which if made in a Court may be barred by limitation.
- The Court reiterated that Section 37(1) of the Indian Arbitration Act, 1940 states that “all the provisions of the Indian Limitation Act, 1908, shall apply to arbitrations as they apply to proceedings in Court”. But Section 46 of the Arbitration Act excludes the application of Section 37 to statutory arbitrations. Eventually, arbitration under Section 54 of Bombay Co-operative Societies Act is a statutory arbitration to which Section 37 shall not be applicable. Hence, the court concluded that the Board of Arbitrators are not bound to apply the law of limitation in deciding the claim made before it by the society under Section 54. It also held that the contention raised by the society regarding the failure to apply the law of limitation cannot be considered patently as an objection to the legality of award under Section54-A of the Act.
- The sole and the primary aim of encouraging arbitration over litigation in India is to see that disputes between the parties are resolved in a quick manner with less cost. When Legislature enacts provisions relating to arbitration which highlight that law of limitation does not apply to statutory arbitrations the very purpose of arbitration as an alternate dispute resolution mechanism is defeated. In such a scenario, the parties to a dispute would be at liberty to refer the dispute to arbitration even after a decade from the date of cause of action. In such a case, due to a prolonged period of time, the crucial or the requisite evidence the parties use, in support of their claim, would get misplaced or lost. Therefore, seeking adjudication of claims by the parties which are preferred after a long lapse of time would cause more injustrice than justice as the legal maxim goes- “Justice delayed is justice denied”. Hence, the legislature ought to have in mind the fundamental purpose of dispute resolution mechanisms like arbitration while framing new laws and amending the existing statutes and rules.