Arbitration limitation defence applies by implication, and bona fide time spent in earlier defective proceedings is excluded.

In mercantile arbitration, the submission is treated as importing the ordinary law of contract, including the limitation defence, even though the Limitation Act, 1908 does not expressly refer to arbitral proceedings. The Court also applied Section 14 by analogy to exclude time spent in earlier arbitration proceedings pursued with due diligence and good faith before a forum lacking jurisdiction. On that basis, the later claim was held to be within limitation, and the award was sustained.

---

---

Issues: (i) Whether the Indian Limitation Act, 1908 applies to arbitration proceedings and whether a contractual submission to arbitration imports the ordinary limitation defence. (ii) Whether the time spent in prosecuting earlier arbitration proceedings, which failed for want of jurisdiction, is excluded in computing limitation for the later arbitration claim.

Issue (i): Whether the Indian Limitation Act, 1908 applies to arbitration proceedings and whether a contractual submission to arbitration imports the ordinary limitation defence.

Analysis: Section 3 of the Indian Limitation Act, 1908 is directed primarily to suits, appeals and applications in courts, but the Court held that in mercantile references of this kind the submission to arbitration is subject by implication to the existing law of contract, including every defence that would have been available in a court of law, unless the parties exclude it. The limitation defence therefore applies in arbitration even though the Act does not in terms mention arbitral proceedings.

Conclusion: The issue was answered in the affirmative in favour of the respondent.

Issue (ii): Whether the time spent in prosecuting earlier arbitration proceedings, which failed for want of jurisdiction, is excluded in computing limitation for the later arbitration claim.

Analysis: The Court held that the later arbitration was not a mere continuation of the earlier abortive reference, but the protection afforded by Section 14(1) of the Indian Limitation Act, 1908 was applicable by analogy. Time spent with due diligence and in good faith in a prior proceeding founded on the same cause of action, but before an authority lacking jurisdiction, must be excluded in computing limitation, so that a bona fide claimant is not prejudiced by the earlier jurisdictional mistake.

Conclusion: The issue was answered in favour of the respondent, and the claim was held to be within limitation after exclusion of the relevant period.

Final Conclusion: The appeal failed and the award was sustained after holding that limitation applies to arbitration and that the time spent in the prior defective proceedings is excluded under the statutory analogy.

Ratio Decidendi: In mercantile arbitration, the submission is taken to incorporate the ordinary law of limitation and all available legal defences, and time bona fide spent in earlier proceedings before a forum lacking jurisdiction is excluded in computing limitation where the same cause of action is pursued with due diligence.

---