Case Note & Summary
The appellant, M/s. Premlaxmi & Co., placed an order with respondent No.1, Ingersoll Rand (India) Limited, for purchase of portable compressors. Four machines were supplied between 1992 and 1993. The appellant alleged that the machines were defective and filed a complaint before the National Consumer Disputes Redressal Commission on 8 February 1994. The Consumer Forum dismissed the complaint on 22 January 1996, holding that the appellant was not a 'consumer' as the machines were purchased for commercial purpose. The appellant received the order on 25 February 1996. Thereafter, the appellant invoked the arbitration clause and a reference was made on 19 January 1999. The learned Arbitrator passed an award in favor of the appellant. The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The learned single Judge set aside the award on three grounds: (i) the award suffered from non-application of mind, (ii) it was in breach of principles of natural justice, and (iii) the claim was barred by limitation. The appellant appealed against this order. The Division Bench considered the submissions. The court held that the learned single Judge erred in setting aside the award on the ground of non-application of mind and breach of natural justice, as the arbitrator had considered the evidence and both parties were heard. However, the court upheld the finding on limitation. The court noted that the cause of action arose when the machines were supplied and defects were noticed, which was in 1992-1993. The arbitration reference was made in 1999, beyond the period of three years under Article 137 of the Limitation Act, 1963. The court rejected the appellant's argument that time spent before the Consumer Forum should be excluded under Section 14 of the Limitation Act, as that section applies only to civil proceedings. The court also noted that the appellant could have filed a civil suit or invoked arbitration earlier. Consequently, the appeal was dismissed, and the order of the learned single Judge setting aside the award was upheld, though on the ground of limitation alone.
Headnote
A) Arbitration - Limitation - Cause of Action - Limitation Act, 1963, Article 137 - The period of limitation for filing a claim in arbitration commences from the date when the cause of action arises, not from the date of exhaustion of other remedies like consumer complaints. The court held that the cause of action arose when the machines were supplied and defects were noticed, and the arbitration reference made in 1999 was beyond the period of limitation. (Paras 2-4, 10-12) B) Arbitration - Setting Aside Award - Non-application of Mind - Arbitration and Conciliation Act, 1996, Section 34 - The learned single Judge set aside the award on the ground of non-application of mind by the arbitrator. However, the Division Bench found that the arbitrator had considered the evidence and passed a reasoned award, and thus the single Judge's finding was not sustainable. (Paras 5-9) C) Arbitration - Principles of Natural Justice - Breach - Arbitration and Conciliation Act, 1996, Section 34(2)(a)(iii) - The learned single Judge held that the award was in breach of principles of natural justice. The Division Bench reversed this finding, noting that both parties were heard and evidence was led. (Paras 5-9) D) Limitation - Exclusion of Time - Limitation Act, 1963, Section 14 - The appellant argued that time spent in pursuing the consumer complaint should be excluded. The court held that Section 14 applies only to civil proceedings, not to consumer complaints, and thus the time spent before the Consumer Forum cannot be excluded. (Paras 10-12)
Issue of Consideration
Whether the learned single Judge was justified in setting aside the arbitral award on the grounds of non-application of mind, breach of principles of natural justice, and the claim being barred by limitation.
Final Decision
The appeal is dismissed. The order of the learned single Judge setting aside the arbitral award is upheld, but only on the ground of limitation. The findings on non-application of mind and breach of natural justice are set aside.
Law Points
- Limitation for arbitration
- Cause of action
- Principles of natural justice
- Non-application of mind by arbitrator
- Commercial purpose exclusion under Consumer Protection Act
