HIGH COURT OF EAST PAKISTAN
Appeal for Original Order No. 100 of 1962
Decided On: 08.05.1968
Appellants: Government of East Pakistan
Vs.
Respondent: Sarwar Ali Biswas and Another
Hon’ble Judges:M.R. Khan and A.M. Sayem, JJ.
Subject: Contract
Catch Words
Mentioned IN
Counsels:
For Appellant/Petitioner/Plaintiff: Md. Jani Alam with S.M. Haque
For Respondents/Defendant: Md. Abdul Haque
Disposition:
Appeal allowed
JUDGMENT
M.R. Khan, J.
- This First Miscellaneous Appeal arises out of O. C. Suit No. 9 of 1954 of the Court of the Subordinate Judge, Kushtia and has been preferred by the defendants. The material facts giving rise to the suit are as follows: The plaintiffs entered into a contract with the General Manager, E. B. Railway representing the Governor-General of Pakistan. The contract was made on 17-11-50. By the contract, the plaintiffs undertook to do earth work and other works at Jessor-Darsana section of the E. B. Railway. Before the execution of the formal agreement, the Executive Engineer of the said Railway, Jessor section asked the plaintiffs on 7-10-50 to start the work at once as their tender had already been accepted. Accordingly, the plaintiffs engaged 200 laborers on 9-11-50 for commencement of the work. As the work to be done was not pointed out, the plaintiff’s laborers remained idle for three days for which they suffered loss. However, the plaintiffs subsequently did earth work and other works worth Rs. 10,421-5-6 plea. While the work was being carried out by the plaintiffs, the said Executive Engineer, by his telegram dated 16-3-51, removed the plaintiffs from the work and cancelled the contract. This was subsequently confirmed by the Executive Engineer’s letter, dated 22-3-51. For the works already done by the plaintiffs, a bill for Rs. 10,421-5-6 pies was passed by the railway authorities, but no payment was made. The matter rested there. But on 14-3-54, the plaintiffs sent a notice in writing to the Chief Engineer, E. B. Railway proposing to appoint Mr. Shamsuzzoha, Advocate Kushtia and, in ease of his inability. Mr. Nalinakhya Bhattacharya to be their arbitrator and requested the said Chief Engineer to nine an arbitrator on behalf of the defendants within fifteen days. The Chief Engineer, however, did not respond to this notice. Then on 25-9-54, the plaintiffs made an application under section 20 of the arbitration Act for arbitration of the matter in dispute between the parties through the intervention of the Court. This application was registered as O. C. Suit No. 9 of 1954 in terms of subsection (2) of section 20 of the arbitration Act. Thereafter the plaintiffs appointed Mr. Shamsuzzoha, Advocate, Kushtia, as their arbitrator and the defendants appointed Mr. K. C. Sen, Government Pleader, Pabna, at their arbitrator. As these two arbitrators of the two parties could not agree, the matter in dispute was referred to the arbitration of the umpire Mr. Torab Ali. Before the umpire, the plaintiffs claimed a sum of Rs. 20,931-5-6 pies on different counts including a sum of Rs. 10,421-5-6 pies for the work actually done by the plaintiffs and for which a bill was passed. The umpire made his award on 23-8-60. By this award, the umpire disallowed all the sums claimed by the plaintiffs except the sum of Rs. 10,421-5-6 pies which, according to the umpire, was due to the plaintiffs on account of the work actually done by them. But the umpire refused to make an award even for the said sum on the ground that the plaintiffs' claim for that sum was barred by limitation. Accordingly, the umpire made an award stating that the plaintiffs were not entitled to any relief.
- On 8-9-59 the plaintiffs made a petition to the trial Courts for setting aside the award on the ground that the question of limitation was not referred to the umpire for arbitration and that the opinion of the umpire with regard to limitation was in any case wrong. The defendants also made a petition to the Court on 15-11-60 opposing the plaintiffs' petition for setting aside the award made by the umpire. The Court framed the followings points for determination in the suit:
(1) Whether the umpire acted beyond jurisdiction in deciding the point of limitation.
(2) Whether the umpire wrongly decided the question of limitation.
On the first point, the Court took the view that the umpire exceeded his jurisdiction in deciding the question of limitation inasmuch as no specific direction was given to him about it in the order of reference. With regard to the second point, the Court held that, in view of section 37 (3) of the arbitration Act, the plaintiffs' claim was not barred by limitation inasmuch as the plaintiffs appointed their arbitrator and requested the defendants to appoint their arbitrator within three years from the last date of the work done by the plaintiffs. Accordingly, the Court allowed the plaintiffs objection against the award, set aside the umpire’s finding on the point of limitation and passed a decree in their favor for a sum of Rs. 10,421-5-6 pies.
- The present Miscellaneous Appeal by the defendants is against the said order of the trial Court.
- Subsection (1) of section 37 of the arbitration Act provides that all the provisions of the Limitation Act, 1908 shall apply to arbitrations as they apply to proceedings in Court. This provision itself gives an authority to an arbitrator appointed under the arbitration Act to consider and decide the question of limitation raised in arbitration proceedings. The trial Court was not, therefore, correct in holding that the umpire in this case acted without jurisdiction in deciding the question of limitation.
- As already stated, the umpire was of the opinion that the plaintiff’s claim was barred by limitation. But the Court trying the suit took the contrary view and held that the plaintiffs claim, in view of section 37 (3) of the arbitration Act, was not time-barred. For the reasons stated hereinafter, the view of the trial Court with regard to limitation is not correct. The contract between the parties giving rise to arbitration proceedings in this case was cancelled on 16-3-51. Therefore, the plaintiffs, cause of action under the said contract arose on the said date, and the limitation prescribed for enforcement of the plaintiff" claim is the period of three years from the date of the cancellation of the contract under Article 115 of the First Schedule of the Limitation Act. Even if Article 56 of the Limitation Act is taken to be applicable in this case, the period of limitation remained the same inasmuch as the plaintiffs worked for the defendants for the last time on 16-3-51. An application under section 20 of the arbitration Act was made by the plaintiff on 25-9-54 which date was beyond the period of three years commencing from 16-3-51 the starting point of limitation. It is well-settled that once limitation begins to run, it is not arrested or suspended unless some provision is there for its arrest or suspension. The provision of sub-section (3) of section 37 of the arbitration Act on which the trial Court relied in support of its view that the plaintiff’s claim was not time-barred, is not a provision of that kind. This provision itself does not arrest or suspend limitation, but merely prescribes the time when an arbitration shall be deemed to be commenced. Subsection (3) of section 37 runs thus:
(3) For the purposes of this section and of the Limitation Act, 1908, an arbitration shall be deemed to be commenced when one party to the arbitration agreement serves on the other parties thereto a notice requiring the appointment of an arbitrator, or where the arbitration agreement provides that the reference shall be to a person named or designated in the agreement, requiring that the difference be submitted to the person so named or designated.
- The plain meaning of this subsection is that for the purposes of section 37 of the Limitation Act, an arbitration shall be deemed to be commenced when one party to the arbitration agreement gives to the other party a notice requiring him to appoint an arbitrator or to submit the dispute to the arbitrator named in the agreement.
- It appears that subsection (5) of section 37 of the arbitration Act provides for exclusion of time in computing the period of limitation under the Limitation Act. The said subsection (5) reads thus:
(5) Where the Court orders that an award be set aside or orders, after the commencement of an arbitration, that the arbitration agreement shall cease to have effect with respect to the difference referred, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1908, for the commencement of the proceedings (including Arbitration) with respect to the difference referred.
- The period of exclusion that may be available under subsection (5) of section 37 in any given case is required to be calculated from the date of commencement of the arbitration. It, therefore, becomes necessary to find out when arbitration is to be deemed to have commenced. Subsection (3) of section 37 makes provision for the same, and this is one of the purposes of that subsection.
- The other purpose of subsection (3) of section 37 concerns limitation under the Limitation Act. in the present case, the plaintiffs appointed their own arbitrator and sent a notice to the Chief Engineer, E. B. Railway on 14-3-54, requiring him to appoint an arbitrator on behalf of the defendant within 15 days. Obviously, this notice was given by the plaintiffs wider section 9 of the arbitration Act. Hence, it might be said that that arbitration in this case, in view of subsection (3) of section 37 of that Act, commenced on 14-3-54. No doubt, this date was within the normal period of limitation in this ease which was three years from the date of cancellation of the contract on 16-3-51. But this is of no assistance to the plaintiffs in saving limitation. By serving a notice under section 9 of the arbitration Act, the plaintiffs waited arbitration without the intervention of Court, because section 9 occurs in Chapter If of the Act, which relates to arbitration without the intervention of Court. When the defendants, in spite of the plaintiff’s notice, did not appoint their arbitrator, the plaintiffs could and ought to have appointed their own arbitrator as the sole arbitrator in the matter under section 9 of the Act. But the plaintiffs neglected to appoint their arbitrator as the sole arbitrator and, in fact, abandoned arbitration in the matter without the intervention of Court and, after the expiry of the normal period of limitation, made an application under section 20 of the arbitration Act on 25-9-54, seeking arbitration this time with the intervention of Court. Thus, arbitration, without the intervention of Court originally initiated by the plaintiffs was not pursued by them and the same became abortive for their own laches.
- The plaintiff’s second attempt to have an arbitration in. the matter in dispute was made by an approach to the Court with an application under section 20 of the arbitration Act. This Application was made on 25-9-54 which date was beyond the normal period of limitation of three years. Section 20 itself makes it perfectly clear that arbitration with the intervention of Court is an alternative to arbitration without the intervention of Court. When the plaintiffs abandoned their intention to have arbitration without the intervention of Court and subsequently sought arbitration with the intervention of Court by making an application under section 20 of the arbitration Act, arbitration in this case can no mote be deemed to have commenced on 14-3-54 on which date the plaintiffs required the defendants to appoint their arbitrator. Hence, the application under section 20 of the arbitration Act having been made after the expiry of the period of three years from the date of cancellation of the contract, the plaintiffs' claim thereunder was barred by limitation.
- Now let us see if the plaintiffs are entitled to any exclusion of time under subsection (5) of section 37 of the arbitration Act which, in order to be operative, must be read with subsection (3) of that section. Subsection (5) of section 37, as quoted earlier, provides that when an award is set aside by the Court or when, after the commencement of an arbitration, the Court orders that the arbitration agreement shall cease to have effect the period between the commencement of the arbitration and the date of the Court’s order shall be excluded in computing the time prescribed by the Limitation Act for a remedy with respect to the dispute. This subsection (5) appears to be analogous to section 14 of the Limitation Act, but the benefit conferred by it is not available to the plaintiffs in the facts and circumstances of the present case. As already stated, the plaintiffs, though they initiated arbitration on 14-3-54 without the intervention of Court, did not proceed with such arbitration and abandoned it and, by their own neglect and laches, allowed the same to become abortive. Thus there was no award, under that arbitration to be set aside by the Court, nor did the arbitration agreement cease to have effect under any order of the Court. Thus neither of the conditions laid down in subsection (5) of section 37 of the arbitration Act was satisfied in this case. Accordingly, no time is liable to be excluded under the said subsection in calculating the period of limitation under the Limitation Act. In a similar case, namely, the case of Purushattam Das v. Impex (India) Limited AIR 1954 Bom. 309 the Bombay High Court took the view that the time taken in arbitration proceeding which proved abortive could not be excluded under subsection (5) of section 37 of the arbitration Act. Thus the plaintiffs' claim was barred by limitation as held by the umpire in this case.
- When the plaintiffs' claim was time-barred, the umpire made a correct award that the plaintiffs were, not entitled to any relief. The trial Court, however, having taken an erroneous view with regard to limitation, set aside the award and passed a decree in the plaintiffs' favor for a sum of Rs. 10,421-5-6 pies. As, however, the plaintiffs' claim was clearly time-barred, the Court was not correct in setting aside the award and passing a decree in the plaintiff’s favor.
- In the result, we allow this appeal and set aside the order of the trial Court. We, however, leave the parties to bear their own costs. Before parting with this case, we would like to observe that a sum of Rs. 10,421-5-6 pies, on the Railway authorities own admission, was due to the plaintiffs for the work actually done by them. In fact, a bill for the said sum was admittedly passed in favor of the plaintiffs, but the claim for that sum became time-barred in the meantime. In view of these facts, the Railway authorities might like to consider if the admitted amount should not be paid to the plaintiffs as a token of good gesture.
A.M. Sayem, J.
I agree.