Case Note & Summary
The dispute arose from an agreement dated November 1, 1950, between the State of Himachal Pradesh and Triloknath Mahajan, the second appellant, for the extraction and collection of medicinal herbs from forests in Chamba District for one year from September 1, 1950. The agreement contained an arbitration clause (clause 22) providing that all disputes be referred to the sole arbitration of the Deputy Commissioner, Mandi District. Triloknath Mahajan transferred his rights under the agreement to Wazirchand Mahajan, the first appellant, with the permission of the State of Himachal Pradesh. Disputes arose in October 1950 regarding the right to collect herbs from certain areas and the failure of State authorities to prevent trespassers from removing herbs. On May 30, 1952, the appellants wrote to the Chief Conservator of Forests, Himachal Pradesh, requesting reference of the disputes to arbitration. On June 23, 1952, the Chief Conservator declined, contending that the matters were outside the arbitration clause. On June 22, 1955, the appellants applied to the District Court, Chamba, under Section 20 of the Arbitration Act, 1940, for filing the arbitration agreement and reference of disputes to arbitration. The State of Himachal Pradesh contended that the application was barred by limitation, arguing that the right to apply arose in 1950. The Trial Court held that the Limitation Act did not govern an application under Section 20 and, even if Article 181 applied, the application was within three years from the refusal, so it was not barred. The Trial Court ordered filing of the agreement and reference to arbitration. During pendency, Himachal Pradesh became a Union Territory and Union of India was substituted as party. On appeal, the Judicial Commissioner, Himachal Pradesh, reversed, holding that Article 181 of the Limitation Act, 1908 applied to applications under Section 20, and since the period of three years commenced when differences arose in 1950 or at latest September 1, 1951, the application filed in 1955 was barred. The Supreme Court considered the interpretation of Article 181. Despite its general wording, long-standing authorities, including Hansraj Gupta, Sha Mulchand, and Bombay Gas, had consistently held that Article 181 applies only to applications under the Code of Civil Procedure for which no period of limitation is prescribed elsewhere. The Court noted that the historical reason for implying 'under the Code' disappeared after amendments to Articles 158 and 178 by the Arbitration Act, 1940, but the settled connotation of Article 181 for nearly sixty years could not be altered without legislative change. Since an application under the Arbitration Act is not an application under the Code of Civil Procedure, Article 181 does not govern it in the absence of a contrary provision in the Arbitration Act. Regarding Section 37(1) of the Arbitration Act, which provides that all provisions of the Indian Limitation Act apply to arbitrations as they apply to proceedings in Court, the Court held that this provision directs arbitrators to apply the Limitation Act to matters submitted to them, but has no reference to applications to court for filing an arbitration agreement. The Supreme Court allowed the appeal, set aside the Judicial Commissioner's order, and restored the Trial Court's order. The application under Section 20 was not barred by limitation.
Headnote
A) Limitation Law - Applicability of Article 181 - Article 181 of Limitation Act, 1908 applies only to applications under Code of Civil Procedure, 1908, not to applications under Arbitration Act, 1940 - Limitation Act, 1908, Article 181; Arbitration Act, 1940, Section 20 - The appellants sought filing of arbitration agreement under Section 20; State contended application barred by limitation under Article 181. The Supreme Court held that Article 181, despite general wording, has been consistently interpreted as restricted to CPC applications, following Hansraj Gupta, Sha Mulchand, and Bombay Gas cases. Held that in absence of express contrary provision in Arbitration Act, Article 181 does not apply (Paras 9-14). B) Arbitration Law - Scope of Section 37(1) - Section 37(1) of Arbitration Act, 1940 applies Limitation Act to arbitrations as they apply to court proceedings, but does not govern applications for filing arbitration agreement under Section 20 - Arbitration Act, 1940, Sections 20 and 37(1); Limitation Act, 1908 - Union argued Section 37(1) indicates contrary intention. Court held that Section 37(1) only directs arbitrator to apply Limitation Act to matters submitted to him; it has no concern with applications to court to file agreement. Held that Section 37(1) does not make Article 181 applicable to Section 20 applications (Paras 15-16).
Issue of Consideration
Whether an application for filing an arbitration agreement under Section 20 of the Arbitration Act, 1940 is governed by Article 181 of the Limitation Act, 1908; Whether Section 37(1) of the Arbitration Act, 1940 makes the Limitation Act applicable to such an application
Final Decision
The Supreme Court allowed the appeal, set aside the Judicial Commissioner's order, and restored the Trial Court's order directing filing of the arbitration agreement and reference of disputes to the arbitrator. Held that Article 181 of Limitation Act, 1908 does not apply to applications under Section 20 of Arbitration Act, 1940, and Section 37(1) does not govern such applications. The application was not barred by limitation.
Law Points
- Legal points not extracted
- Article 181 of Limitation Act
- 1908 applies only to applications under Code of Civil Procedure
- 1908
- An application under Section 20 of Arbitration Act
- 1940 is not an application under Code of Civil Procedure
- Section 37(1) of Arbitration Act
- 1940 does not govern applications to court under Section 20
- Long standing judicial interpretation added words 'under the Code' to Article 181
- Absence of contrary intention in Arbitration Act prevents application of Article 181
