Limitation and defective arbitration proceedings: time spent in an improper reference could not be excluded for the later civil suit.

The Supreme Court considered whether time spent in defective arbitration proceedings could be excluded when computing limitation for a civil suit under the Limitation Act, where the reference to arbitration had been made unilaterally without notice to the respondents. Reading Section 37 of the Arbitration Act, 1940, particularly sub-sections (3) and (5), with the limitation provisions, the Court treated the absence of notice and the improper reference as final findings. On that basis, the period spent in the arbitration proceedings was not automatically excludable for the later suit, and exclusion of the entire period was rejected, leaving the suit barred by limitation.

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Issues: Whether the period spent by the appellant in defective arbitration proceedings could be excluded in computing limitation for the civil suit, where the reference to arbitration had been made unilaterally without notice to the respondents.

Analysis: The provisions of Section 37 of the Arbitration Act, 1940 were read together, particularly sub-sections (3) and (5), to determine the period eligible for exclusion under the Indian Limitation Act, 1908. The earlier finding that no notice had been issued for the reference to arbitration had attained finality, and the reference itself was held to be improper. On that basis, the time spent in the arbitration proceedings could not be excluded as a matter of course for the subsequent civil suit.

Conclusion: The exclusion of the entire period spent in the arbitration proceedings was rejected, and the suit remained barred by limitation.

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