2000 (2) TMI 854 - SC - Indian Laws

Chit fund company appeal dismissed due to arbitration delay impacting civil suit filing time.

The Supreme Court dismissed the appeal of a chit fund company as the arbitration award was set aside due to improper reference. The court ruled that the ... Exclusion of time spent in arbitration from limitation computation - validity of unilateral reference to arbitration without notice - application of the Indian Limitation Act to arbitration proceedings under Section 37 of the Arbitration Act, 1940 - effect of prior final judgment holding arbitration reference invalid on limitationExclusion of time spent in arbitration from limitation computation - application of the Indian Limitation Act to arbitration proceedings under Section 37 of the Arbitration Act, 1940 - Whether the period during which the appellant pursued a reference to arbitration is to be excluded in computing limitation for a subsequent civil suit under Section 37 of the Arbitration Act read with the Limitation Act - HELD THAT: - The Court held that sub-sections (3) and (5) of Section 37 must be read together to determine what period, if any, is to be excluded when computing limitation. Where the reference to arbitration is invalid - here because no notice was given and a unilateral reference was therefore improper - the period spent in pursuing that invalid arbitration cannot be excluded from computation of limitation. The earlier proceedings which set aside the award on the ground that the reference was improper have become final between the parties, and on that basis the period consumed before the award was set aside does not operate to extend or suspend the limitation for bringing the civil suit. The Court approved the decision of the Allahabad High Court in Pandit Daya Shankar v. Sheo Rami and found no error in the High Court's conclusion that the suit was time-barred because the period spent in the invalid arbitration was not excluded. [Paras 4, 5, 6]Period spent in an invalid/unilateral arbitration without notice is not excluded under Section 37 read with the Limitation Act; the suit was time-barred and the High Court's judgment is upheld.Final Conclusion: Appeal dismissed; where a reference to arbitration is held to have been improper (unilateral reference without notice) and that finding is final, the time spent pursuing such arbitration is not excluded when computing limitation under Section 37 of the Arbitration Act, 1940 read with the Limitation Act. The Supreme Court dismissed the appeal of a chit fund company in a case where the arbitration award was set aside due to improper reference without notice to the respondents. The court held that the time taken for arbitration could not be excluded for filing a civil suit, as the reference to arbitration was deemed improper. The appellant's suit was held to be beyond the time limit, and the appeal was dismissed.