Jupitor Chit Fund (P) Ltd. vs Sri Shiv Narain Mehta (Dead) By Lrs. And Ors.

The appellant is a chit fund private limited company. Respondent 1 subscribed to the appellant's chit fund scheme for the value of Rs. 1000 which was to be repaid in instalments. Respondents 2 and 3 were the sureties for Respondent 1. On a dispute having arisen between the parties for non-payment of instalments, the matter was referred by the appellant to the named arbitrator who passed an award. In proceedings for making the award a rule of the court, it was held that the award was liable to be set aside on the ground that the reference to the arbitration was not proper as there could not be a unilateral reference without notice to the respondents

2. On the award being set aside, the appellant filed a civil suit which was held to be barred by time

3. Learned counsel for the appellant has placed reliance upon the provisions of Section 37 of the Arbitration Act, 1940 and has contended that the entire period taken by it in pursuing the matter before the arbitrator ought to be excluded under Section 14 of the Limitation Act which has been made applicable to the proceedings under the Arbitration Act. The relevant provisions of Section 37 are quoted below

"37. Limitations. - (1) All the provisions of the Indian Limitation Act, 1908 (9 of 1908), shall apply to arbitrations as they apply to proceedings in court

(3) For the purposes of this section and of the Indian Limitation Act, 1908

4. In view of the provisions of sub-section (5) extracted above, it is contended that for purposes of commencement of the proceedings in a civil suit for the recovery of the amount due from the respondents, the appellant was entitled to exclusion of the entire period from the date on which the arbitration commenced to the date when the award was set aside or when it was held that there could not have been an arbitration between the parties as the dispute in question was not covered by the arbitration agreement

5. We are not prepared to accept this contention. Sub-section (5) and sub- section (3) of Section 37 are to be read together to find out the period which is liable to be excluded in computing the time prescribed by the Indian Limitation Act, 1908

6. Admittedly, in the instant case, notice was not issued by the appellant to the respondents for making a reference to arbitration. Thus, reference to arbitration itself was not proper as was held in the earlier proceedings which have become final between the parties and it was on that basis that the suit was held to be beyond time as the period taken by the appellant in pursuing its remedy before the arbitration was not excluded on the ground that the reference to arbitration itself was bad. We approve the decision of the Allahabad High Court in Pandit Daya Shankar v. Sheo Rami which was cited before us by the counsel for the respondents. We find no infirmity in the judgment passed by the High Court. The appeal is dismissed.