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Morena Mandal S.S.K Ltd. v. New India Assurance Co. Ltd. .
Factual and Procedural Background
The appellant, a cooperative society, insured the transportation and erection of plant and machinery for a new sugar factory with New India Assurance Company Limited in 1969. The insurance policy contained an arbitration clause. Disputes later arose between the parties. An initial attempt by the appellant to proceed under the Madhya Pradesh Cooperative Societies Registration Act was found to be untenable. On 27-12-1975 the appellant served notice on the respondent to concur in appointing an arbitrator, but the respondent declined. Consequently, on 5-4-1976 the appellant filed an application under Section 8(2) of the Indian Arbitration Act, 1940 before the District Judge, Morena, seeking court appointment of an arbitrator. The District Judge dismissed the application as time-barred and the High Court upheld that dismissal in revision. The present appeal challenges those findings.
Legal Issues Presented
- Whether the appellant’s application under Section 8(2) of the Indian Arbitration Act, 1940 was barred by limitation in terms of Article 137 of the Limitation Act, 1963.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Utkal Commercial Corporation v. Central Coal Fields Ltd., (1999) 2 SCC 571 | The right to apply under Section 8 arises only after the expiry of fifteen clear days from the service of notice requesting concurrence in appointing an arbitrator. | The Court adopted this principle to hold that limitation begins after the 15-day period and therefore assessed the timeliness of the appellant’s application accordingly. |
Court's Reasoning and Analysis
The Court began by identifying Article 137 of the Limitation Act, 1963 as the only relevant limitation provision, providing a three-year period for applications when no specific period is prescribed elsewhere. It then examined Section 8 of the Arbitration Act, which allows a party, after serving notice to concur in appointing an arbitrator, to move the court if no appointment is made within fifteen clear days.
Relying on Utkal Commercial Corporation, the Court reasoned that the “right to apply” under Article 137 accrues only after the statutory 15-day window expires without concurrence. Here, notice was served on 27-12-1975; therefore, the right to apply arose on the sixteenth day thereafter. Because the appellant filed its Section 8(2) application on 5-4-1976—well within three years of that accrual—the application was timely. The Courts below erred in computing limitation from an earlier date.
Holding and Implications
Holding: The Supreme Court set aside the High Court’s judgment and the District Judge’s order, holding that the appellant’s application under Section 8(2) was filed within the prescribed limitation period. The matter was remitted to the District Judge, Morena, to appoint an arbitrator in accordance with the insurance policy, without prejudice to any other legal pleas the respondent may raise.
Implications: The decision clarifies that, for applications under Section 8 of the Arbitration Act, the limitation period under Article 137 commences only after the fifteen-day notice period expires. While the ruling directly affects the parties by reviving the arbitration mechanism, it also reinforces the precedent on when the cause of action accrues for such applications, offering guidance for future arbitration-related limitation disputes.
1. This appeal is directed against the judgment of the Madhya Pradesh High Court dismissing the civil revision filed by the appellant herein. The facts giving rise to this appeal are as under:
The appellant herein is a cooperative society. In the year 1969, the appellant decided to set up a sugar factory and for that reason insured the transportation and erection of plant and machinery with New India Assurance Company Limited for any damage that may be caused during transit and erection thereof. The insurance policy contained an arbitration clause for references of disputes arising out of the agreement to an arbitrator. It appears that certain disputes arose between the appellant and the respondent and the appellant took proceedings under the Madhya Pradesh Cooperative Societies Registration Act. Ultimately, it was found that the said proceedings were not maintainable. On 27-12-1975, the appellant sent a notice to the respondent to concur with appointment of an arbitrator in view of the differences/disputes having arisen. The respondent declined to concur with the request of the appellant. Under such circumstances, the appellant filed an application under sub-section (2) of Section 8 of the Indian Arbitration Act, 1940 (hereinafter referred to as “the Act”) before the District Judge, Morena on 5-4-1976. It appears that on the objection taken by the respondent, the said application of the appellant was rejected on the ground that it was barred by time. The revision filed by the appellant was also rejected. It is in this way, the appellant is in appeal before us.
2. The short question which arises for consideration in this appeal is whether the application filed by the appellant under sub-section (2) of Section 8 of the Act was barred by limitation. We have heard learned counsel for the parties. To resolve the controversy it is necessary to look into the provisions of the Limitation Act, 1963 and the Arbitration Act. The counsel for the parties could not lay their hands on any other provisions of the Limitation Act excepting Article 137 which is extracted below:
Description of suit Period of limitation Time from which period begins to run 137. Any other application for which no period of limitation is provided elsewhere in this Division.” Three years When the right to apply accrues.
3. The reading of Article 137 shows that the limitation for filing an application under Section 8 of the Act would begin when the right to make such an application accrues. Section 8 of the Arbitration Act runs as under:
“8. Power of court to appoint arbitrator or umpire.—(1) In any of the following cases—
(a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or
(b)-(c)***
any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.
(2) If the appointment is not made within fifteen clear days after service of the said notice, the court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties.”
4. A perusal of Section 8 of the Act would show that if parties do not concur in the appointment of an arbitrator and if one party serves a notice to another to concur in the appointment of an arbitrator and no appointment is made within 15 days of service of the notice, the right to file an application under Section 8 of the Act accrues. Thus the limitation for filing application under Section 8 of the Act would begin from the date when the right to file application arises. In the case of Utkal Commercial Corpn. v. Central Coal Fields Ltd. (1999) 2 SCC 571 it was held as thus:
“9. In view of the express language of Section 8, it is quite clear that unless a party who desires to apply has resorted to the process set out in Section 8, and has failed to secure the concurrence of the other party to the appointment of an arbitrator within the prescribed period, the court will not intervene under Section 8. The right to apply under Section 8, therefore, would accrue when, within 15 clear days of the notice, the other parties do not concur in the appointment of an arbitrator.”
5. Following the aforesaid decision, we hold that the limitation for the purpose of filing application under Section 8 of the Act would begin only when the period of 15 days' notice expires, as contemplated under Section 8 of the Act. In this case, we find that the appellant had sent a notice on 27-12-1975 and the respondent failed to concur to the appointment of an arbitrator and, therefore, on the expiry of 15 days the right to file application under Section 8(2) of the Act accrued to the appellant. Since the application was filed within three years of the respondent's failure to concur with the appointment of an arbitrator, the application filed by the appellant under Section 8(2) of the Act was well within the period of limitation.
6. Accordingly, for the reasons mentioned above, we set aside the order under appeal and send the case back to the District Judge, Morena who shall appoint an arbitrator as per Condition 5 of the insurance policy. It will, however, be open to the respondent to take any other plea which may be permissible under law.
7. The appeal is thus disposed of. There shall be no order as to costs.
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