Gyan Chandra Vidyasagar vs Smt. Krishna Kumari Jain
2008 Latest Caselaw 1376 Del

 37
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         CS (OS) No.2567A/1998


      GYAN CHANDRA VIDYASAGAR                               ....Plaintiff

                     Through Mr.D.D. Singh with Mr. Praveen
                     Mehndiratta, Advocates

                     versus


      SMT. KRISHNA KUMARI JAIN                      ....... Defendant

                     Through Mr. N.K. Kantawala, Advocate

CORAM:

Mr. Justice S. Ravindra Bhat


1.    Whether reporters of local papers may be
      allowed to see the judgment?                          Yes

2.    To be referred to the Reporter or not?                Yes

3.    Whether the judgment should be reported
      in the Digest?                                        Yes


Mr. Justice S. Ravindra Bhat (Oral)

+IA No.5945/1999 in CS (OS) No.2567A/1998

*1.   In this suit, the award of sole arbitrator, appointed pursuant to

an arbitration agreement dated 26.04.1993, published on 28 th October,

1998 is challenged by the defendant/objector.


CS (OS) 2567A/1998                                                          Page 1
 2.    The brief facts necessary for deciding this case are that the

claimant/defendant had entered into certain share purchase and sale

transactions with the plaintiff, who was a stock broker.            For this

purpose she had constituted her husband as attorney through a deed.

The claimant asserted that in the normal course of business at the

relevant time, the broker used to conduct trading on "Badla" basis

and issues a "kacha parcha", indicating      the current deals and also

reflecting the profit or loss in    unsettled deals which were carried

forward.    She asserted that one such        document was issued on

29.05.1978 reflecting the account which showed some outstanding and

a resulting profit of Rs.5,008/-.   According to her the document also

reflected some carry forward to the next trading cycle containing

details of shares which had remained unsettled on 29.05.1978. She,

therefore, claimed a sum of Rs.49,479.36; and in respect of 100 shares

of Century Spinning and 100 shares of SRF which were allegedly shown

as carried forward she claimed Rs.7,76,186.74 and Rs.4,22,641.43

respectively.


3.    It was not disputed that the claimant by a cheque dated

31.05.1978 paid the respondent a sum of Rs.10,289.73 and placed

orders for purchase of three companies, shares of different lots. The

claimant apparently approached the Police authorities alleging

CS (OS) 2567A/1998 Page 2 misappropriation and cheating. Investigations and other criminal

proceedings arising out of her complaint were pending for almost 15

years. When so, on 26.04.1993, the claimant entered into an

agreement with the respondent/broker, which after recounting, briefly

the inter se transactions, stated that the disputes pending between

them would be referred for arbitration by Mr. M.L. Jain.

4. The material part of the arbitration agreement is as follows :

"WHEREAS the party of the First part have/had dealings in stock & shares with the party of the other part and there has been differences and disputes regarding the settlement of their accounts.

AND WHEREAS the party of the first has filed a criminal complaint against the party of the other part which is pending before Shri H.S. Sharma, Metropolitan Magistrate, Delhi under section 420 of the Indian Penal Code and is fixed for hearing on 9th August, 1993.

And whereas the parties have agreed to refer all the disputes and differences for arbitration for settlement, to Shri M.L. Jain,Retired Additional District & Sessions Judge, Delhi and practicing Advocate in the Delhi High Court, of 7, Lawyers Chambers, Delhi High Court, New Delhi (Resident : C-178, Madhuvan, Patparganj Road, Delhi).

And whereas the parties have agreed to withdraw all their proceedings pending in the Courts after execution of this agreement and agree that the decision/award made by Shri M.L.

Jain, as Sole Arbitrator shall be final and binding

CS (OS) 2567A/1998 Page 3 on the parties hereto and shall not be open to question in any court of law.

And whereas Dr. S.C. Jain is a constituted attorney of the party of the First Part, being her husband and is legally authorized to sign this Agreement which shall be binding on the party of the first part for all instants and purposes.

IT IS MUTUALLY AGREED BY AND BETWEEN THE PRTIES AS UNDER

1. The parties hereto agree and undertake to withdraw all their proceedings, complaints and applications in the respective courts after execution of this Agreement and shall make a formal statement jointly to this effect and file a copy of this Agreement.

2. That all the disputes and differences relating t o the purchase and sale of the shares between the parties hereto shall be referred to the sole Arbitration of Shri M.L. Jain, retired Addl.. District & Sessions Judge, who shall decide it after taking such evidence as he may consider necessary and shall make an award which shall be final and binding between the parties and shall not be open to question by either party in any court of law.

3.It is agreed that the cost of the arbitration proceedings to be determined by Shri M.L. Jain shall be shared equally by both the parties."

5. The sole arbitrator thereafter entered upon reference; after

considering the materials on record and the contentions of the parties,

he struck three points for determination namely (1) whether the claims

were time barred; (2) whether the badla transactions between the

CS (OS) 2567A/1998 Page 4 parties as alleged were proved; and lastly (3) whether the claimant

had placed any order for purchase of 300 shares of Reliance Industries

on 27.05.1978 and its delivery.

5. The arbitrator published the impugned award in which he held

against the claimant on Ist and 3rd points but upheld the contentions so

far as second point was concerned; the net effect of findings were that

even though the respondent was held liable to account the total profit

reported and Rs.37,750/- with effect from 1978 with interest @ 12%,

the same could not be recovered since the claims were held to be time

barred. These findings are challenged by the claimant in the present

suit in her application being IA No.5945/1999.

6. Mr. Kantawala, learned counsel for the claimant contends that

the findings so far as it relate to the issue of limitation are untenable

and amount to the arbitrator's legal misconduct. The counsel contends

that when the parties agreed to submit disputes to arbitration on 26 th

April, 1993, there was an implicit understanding that the claims were

adjudicable. Learned counsel drew substance from Section 19 of the

Limitation Act and submitted that the agreement itself amounted to

acknowledgement of a debt or at the worst acknowledgement of

CS (OS) 2567A/1998 Page 5 existence of arbitrable dispute and therefore the award is in error of

law inasmuch as it proceeds to hold that the claims were time barred.

7. Mr. Kantawala, relies upon the judgments of Allahabad and

Nagpur High Courts reported as Jwala Prasad and Another Vs. Sher

Singh & Others, AIR 1927 All 488 (1) and Fatechand Ganeshram

Agarwal Vs. Wasudeo Shrawan Dalal & Another, AIR (35) 1948 Nagpur

334. He contends by citing relevant passages from these judgments

that the agreement between the parties, by which reference of their

pending disputes was made to arbitrator amounted to

acknowledgements, thereby extending the period of limitation.

Learned counsel also relied upon the judgment of the Punjab High

Court reported in Mst. Biro W/o Anokha Mal Mahajan Vs. Dulla Singh

S/o Phula Singh, AIR 1961 Punjab 175 (V 48 C 58), to say that

acknowledgement should be construed liberally to give effect to the

intention of the parties rather than their strict legal rights.

8. It was lastly contended that the arbitration was under orders of

this Court; reliance was placed on the order of Court in OMP 151/1993

dated 12.12.1997. Counsel submitted that this too implied that the

disputes raised by the claimant, and referred to arbitration, were not

time-barred.

CS (OS) 2567A/1998 Page 6

9. The arbitrator, in his award while discussing the first issue of

limitation reasoned that Section 37 of the Arbitration Act, 1940,

applied as it were, across the board to all kinds of arbitration. He also

held that by reason of the said provisions, Section 3 of the Limitation

Act (which casts duty upon every Court and in case of an arbitration,

upon an arbitrator who is no less than an agreed adjudicator) to apply

the provisions of Limitation Act. The relevant discussion concerning

limitation, by the arbitrator culminating in his finding that the claims

were time barred are as follows :

As noticed above, long before entering into the Arbitration agreement the claimant had filed a complaint and the respondent a revision petition.

As per stipulations in the arbitration agreement the parties had to withdraw earlier proceedings filed by each against the other. The arbitration proceedings started on reference by the parties. The claimant did not withdraw the complaint against the respondent, who filed OMP 151/93 under Section 33 Arbitration Act for declaring the arbitration proceedings as null and void for that default of the complainant. The Hon'ble High Court stayed the making of the award in arbitration proceedings and late by order dated 12.11.1997, on agreement between the parties, directed the withdrawal of the criminal proceedings pending in the Criminal Court by the claimant herein and the revival of the arbitration proceedings and making of the award therein. The contention raised is that in the order there being no reference to determine the issue of limitation, is should not be adjudicated. As noticed above the plea of limitation having already been raised in arbitration proceedings, there was no

CS (OS) 2567A/1998 Page 7 occasion to refer it, again, in any case in OMP No. 151/93. The objection is repelled. There is nothing to indicate that the plea of limitation has been or could be deemed as given up. The arbitrator's jurisdiction is not barred.

The first and the second objections against the plea of limitation equally have no substance. Cause of action for a suit or claim in arbitration arises not on the date the suit is filed or arbitration agreement is made or the arbitrator enters on the reference but obviously on a date when the cause of sue or raise a dispute or claim occures. Limitation has to be calculated from the date on which the original cause of action to sue or claim occurs, even not with standing a clause in the arbitration agreement that the making of award is a condition precedent to sue or lay a claim aginst the respondent. (AIR 1949 Mad.559). The dispute and the cause of action, both for the forward deals in Kacha Parcha and for compensation for non delivery, on delivery based trading, regarding 300 RIL shares, arose to the claimant in the year 1978 itself, when delivery was not made and the demand made in claimant's letters dated 18.07.78 was not met. She made complaints against the respondent to the Delhi Stock Exchange and the Ministry of Finance, attributing fraud to the respondent and sought their intervention' there was considerable correspondence, discussion in meetings with high functionaries of the Stock Exchange, the disputes could not be resolved and the claimant was advised by the Ex. Director in letter dated 25.04.79 to have the matter adjudicated by arbitration under the Rules Regulations and Byelaws of the Delhi Stock Exchange. The cause of action having once arisen in 1978, making of arbitration agreement dated 26.04.93 for adjudication of the said disputes or filing of claim statement there under does not furnish a fresh cause of action to proceed. The first objection raised is meritless. The second leg of the alternative contention of the Ld. Counsel for the

CS (OS) 2567A/1998 Page 8 claimant is equally misconceived. AIR 1992 SC 1815 set up in support by the Ld. Counsel, does not advance her case and is distinguishable. In that case the right to file suit by the bank for recovery against the principal debtor having become barred by time, he did not repay the bank loan, it was held (relying on the principal that the bar of limitation only takes away, the remedy) that the bank as creditor can adjust the debtor's account, at maturity of the Fixed Deposit Receipts deposited by the guarantor with the bank as security, though the debt had become barred by limitation at the time of the maturity of the said Fixed Deposit Receipts. Obviously so, because for making adjustments a creditor need not file a suit or proceed in arbitration to recover the debt and a creditor can make adjustment.

15. The contentions raised in support for the claimant are devoid of force and are repelled. The claims, subject matter of arbitration are clearly barred by time. I hold accordingly."

10. The claim in arbitration was for statement of account and

recovery of amounts from the plaintiff. It is undisputed by the parties

that the period of limitation in such case is three years, under various

items in the schedule to the Limitation Act 1963. Undoubtedly the

claimant had filed a complaint to the Police authroties which were

pending investigation. The parties appear to have agreed to refer their

disputes in regard to such claims to arbitration. However, this

agreement took place on 26.04.1993.

11. The plaintiff has relied on two judgments of the Allahabad and

Nagur High Courts to say that such agreement to refer disputes to CS (OS) 2567A/1998 Page 9 arbitration would amount to acknowledgment thereby, extending the

period of limitation. In the opinion of this Court those judgments are of

no avail because in the facts of each case unequivocally point to the

agreement to refer disputes having been arrived at within the basic

three years period. Therefore, even if one were to assume that an

agreement to refer disputes to arbitration per se amounts to

acknowledgement under Section 19 of the Act yet the other condition

of such acknowledgement/agreement itself being arrived at within the

period of limitation would squarely apply. The facts here speaks

otherwise; the agreement was arrived at about 15 years after the

dispute. It was only to refer the dispute to arbitration. It is of course a

fact that the claimant perhaps banking on the criminal proceedings

which she chose to initiate instead of civil proceedings, yet the law of

limitation is inexorable in its operation. Hard though the case may be,

(since the claimant has succeeded in part) the argument on her behalf

that the time for preferring the claim stood implicitly extended by the

reference to arbitration in 1993 cannot for the reasons discussed

above be accepted. For the same reasons the argument that the Court

had ordained that disputes should be arbitrable and therefore the

limitation being pleaded cannot be accepted is insubstantial. The

terms of the order of Court dated 12.11.1997 in OMP 151/1993

CS (OS) 2567A/1998 Page 10 nowhere show such intention; in fact the merits of the case were not

discussed at all.

12. As a result of the above discussion, it is held that the objections

of the claimant to the award are unfounded and unmerited.

Mr.Kantawala, at this state submits that the defendant/claimant would

take appropriate steps for recovery of admitted amount in accordance

with law initiating either civil or criminal proceedings. IA

No.5945/1999 is therefore dismissed in above terms.

CS (OS) No.2567A/1998

The suit is decreed in terms of the award which is made Rule of

Court. No costs.

August 19, 2008                                        S.RAVINDRA BHAT, J.
mb




CS (OS) 2567A/1998                                                        Page 11