ial Leave Petition C Nos
4304 06 of 1993
From the Judgment and Order dated 18121992 of the Calcutta High Court in Appeal from Original Order Nos
and 106 of 1991
Panchugopal Bose in person for the Petitioner
DP Gupta Solicitor General AK Sil and G joshi for the Respondent
The Judgment of Court was delivered by K RAMASWAMY
J These three Special Leave Petitions arise out of Arbitration Agreement said to be executed by the petitioner on May 27 1978 which provided that the petitioner had to execute the work within 9 months
It is 363 his claim that while executing the work he sent the bills on July 12 1979 but payment was not made
For the first time he sent notice on Nov 28 1989 to the respondent for reference to the arbitration
On receipt thereof the respondent filed an arbitration suits in the Calcutta High Court under sections 5 12 and 33 of the for short the Act
The learned Single Judge held that the claim was hopelessly barred by limitations There was no proof that the petitioner had sent any claim in July 1979
Since the Claim was made long after 10 years the arbitration cannot be proceeded with
Accordingly finding that it to be an exceptional case for interference the learned Single Judge cancelled the arbitration clause 68 of the contract in matter Nos 1326 1364 and 136590 dated November 23 1990
On further appeals the division bench by its order dated December 18 1992 in Appeal Nos 10490 etc
dismissed the appeals
Thus these special leave petitions
The contention of the petitioner appearing in person is that Clause 68 of the Contract provides for appointment of an arbitrator and when the petitioner has legally invoked clause 68 and issued notice to the respondent the respondent is duty bound to appoint an arbitrator and on its failure it is open to him to approach the Court for appropriate remedy under section 8 of the Act for appointment of an arbitrator
The High Court scuttled this procedure in exercising the power under section 5 of the Act which is illegal and ultra vires
He further contented that Section 5 has no application to the facts of this case
We have heard also Shri DP Gupta the learned Solicitor General for the respondent
The question for consideration is whether the High Court was justified in permitting the respondent to rescind the contract of Arbitration provided in Clause 68 of the Contract
Undoubtedly Clause 68 provides reference to arbitration of all or any of the disputes or differences enumerated therein that have arisen between the parties at the instance of either party to the contract
It empowers either party to issue notice calling upon the Engineer to refer the dispute or difference for arbitration
In this case as found by the High Court that though the petitioner was said to have made the claim for payment for the first time in July 12 1979
Though there is no proof in that behalf and the respondent claimed that the petitioner had abandoned the contract even assuming that any claim was as a fact made in July
1979 and payment was not made the petitioner had not taken follow up action thereafter for well over 10 years
It was open to him to avail Clause 68 of the contract seeking reference to the arbitration
No such action was taken till November 28 1989 Immediately on receipt of the notice the respondent invoked the jurisdiction of the Calcutta High Court under sections 5 and 12 at 330 of the Act
Section 5 provides thus 364 The authority of an appointed arbitrator or umpire shall not be revocable except with the leave of the Court unless a contrary intention is expressed in the arbitration agreement
Therefore Section 5 postulates that there must be an order of appointing an arbitrator or umpire and thereafter the same cannot be revoked except with the leave of the Court unless a contrary intention is expressed in the agreement
Exfacie it would appear that appointment of an arbitrator is a condition to avail the remedy under s5
Section 12 accords consequential power which postulates that the power of the Court where Arbitrator is removed or his authority revoked
Subsection 2 says that Where the authority of an arbitrator or arbitrators or an umpire is revoked by leave of the Court or where the Court removes an umpire who has entered on the reference or a sole arbitrator or all the arbitrators the Court may on the application of any party to the arbitration agreement either border that the arbitration agreement shall cease to have effect with respect to the difference referred Therefore by a conjoint reading of sections 5 and 12 2 b it is clear that the court has been given power in given circumstances to grant leave to a contracting party to have the arbitrator or umpire removed and the arbitration agreement entered into with other contracting part revoked
Where the Court grants such authority consequentially arbitration agreement shall cease to have effect with respect to the difference or dispute
It flows therefrom that there exist implied power vested in the court permitting a party to avail the remedy under sections 5  12 to rescind the arbitration agreement
In all cases it is not a condition precedent that there should in the first instance be an order appointing an arbitrator or he should enter upon reference for adjudication
In given circumstances and the factual background the court may be justified to exercise the power under ss5 and 12
The question then is under what circumstances such power would be exercised
This Court in Ms Amarch and Lalit Kumar vs Shree Ambica Jute Mills Ltd  at 969 held thus In exercising its discretion cautiously and sparingly the Court has no doubt kept these circumstances in view and consider that the parties should not be relieved from a tribunal they have chosen because they fear that the arbitrator s decision may go against them
The grounds on which leave to revoke may be given have been put under five heads 365 1
Excess or refusal of jurisdiction by arbitrator 2
Misconduct of arbitrator 3
Disqualification of arbitrator 4
Charges of Fraud and 5
Exceptional cases
Thus it could be seen that the Court has the power and jurisdiction under sections 5 and 12 to grant leave to the applicant in exceptional circumstances to revoke the contract of arbitration
The court should exercise the power sparingly cautiously and with circumspection to permit a party to the contract of a arbitration voluntarily entered into to relieve the party from dispute or difference and to order that the arbitration agreement shall cease to have effect in respect of the dispute or difference
In this case we have seen that even assuming that the petitioner had putforward his claim in July 1979 and the respondent had not acted thereon till November 28 1989 for long 10 years he did not move his little finger to approach the Engineer and later the Court
For the first time on November 28 1989 he issued notice to the respondent to refer the case for arbitration
Clause 68 of the Contract provides that when any disputes or differences has arisen he should approach the Engineer in the first instance seeking reference of it to an arbitration and if the Engineer refuses to act upon or omits to refer the dispute to the arbitration within 15 days from the date of the receipt of notice then it is open to him to approach a Civil Court for reference to the arbitration
On his own showing cause of arbitration has arisen in July 1979 the petitioner did not take any action from then
On the other hand when notice was issued in November 1989 the respondent immediately approached the Court and sought its leave to rescind the agreement explaining the circumstances
The Court exercised the jurisdiction in permitting the respondent to revoke the arbitration agreement
The question then is whether it is justified Section 37 1 of the Act provides that all the provisions of the Indian Limitation Act 1908 since amended Act came into force in 1963 shall apply to arbitrations as they apply to the proceedings in court
Sub section 2 employing non obstenti clause says that notwithstanding any term in an arbitration agreement to the effect that no cause of action shall accrue in respect of any matter required by the agreement to be referred until an award is made under the agreement a cause of action shall for the purpose of limitation be deemed to have accrued in respect of any such matter at the time when it would have accrued but for that term in the agreement
Sub section 3 thereof states that for the purposes of this section and of the Indian Limitation Act 1908 an arbitration shall be 366 deemed to be commenced when one party to the arbitration agreement serves on the other party thereto a notice requiring the appointment of an arbitrator or where the arbitration agreement provides that the reference shall be to a person named or designated in the agreement requiring that the difference be submitted to the person so named or designated
Sub sections 4 and 5 are omitted as being not material
It would therefore be clear that the provisions of the Limitation Act would apply to arbitrations and notwithstanding any term in the contract to the contrary cause of arbitration for the purpose of limitation shall be deemed to have accrued to the party in respect of any such matter at the time when it should have accrued but for the contract
Cause of arbitration shall be deemed to have commenced when one party serves the notice on the other party requiring the appointment of an arbitrator
The question is when the cause of arbitration arises in the absence of issuance of a notice or omits to issue for long time or contract to the contrary It is stated in Robertson s History that honest men dread arbitration more than they dread law suits
The arbitrations differ from legal proceedings proper only in the choice of tribunal and all ordinary defences legally permissible are available to the Parties
Parties to an arbitration may voluntarily determine among themselves the procedure to be followed including the constitution of the arbitral tribunal to adjudicate the dispute or differences arising from the contract including the power of the arbitrator
They could also contract restricting the limitation for adjudication
Subject to the above section 37 of the Act regulates the limitation for the arbitration proceedings
In Ram Dutt Ramkissendass vs Sassoon ED  Co 1929 56 Indian Appeals 128 the Privy Council held that although it is indisputable that in a modern arbitration the principles of equity must be applied just as they would now be applied in a court of law since upon a special case for the opinion of the court under Sec 7 if the or the Judicature Act 1925 s94 replacing sec
19 of the  the court is and has long been bound to apply equitable rules and relief
It is difficult to see how the equitable view of the applicability of Limitation Act 1908 to a case of debt can be excluded in a legal arbitration
Although the Limitation Act does not in terms apply to arbitrations they their Lordships of the Judicial Committee think that in mercantile reference of the kind in question it is an implied term of the contract that the arbitrator must decide the dispute according to the existing law of contract and that every defence which would have been open in a court of law can be equally proponed for the arbitrator s decision unless the parties have agreed which is not suggested here to exclude that defence
Were it otherwise a claim for breach of contract containing a reference cause could be brought at any time it might be 20 or 30 years after the cause of action had arisen although the legislature has prescribed a limit of three years for the enforcement of such a claim in any application that 367 might be made to the law courts
This ratio was approved by House of Lords in Naamlooze Vennootschap Handels En Transport Maatschappij Vulcaan  vs AS J Ludwig Mowinckels Rederi 19382 All ER 152 Lord Maugham LC speaking for the unanimous Court held that in considering whether the Limitation Act would apply to arbitration pre statutory arbitrations it was held that this seems to be a good reason for holding that there may well be cases where the object of both parties to the arbitration might be to determine whether a sum was due though possible or certainly not recoverable by legal Proceedings
We are however here concerned with an arbitration in which legal rights are being advanced or denied If the defence of the statute is to be deemed in admissible it would seem that the claims of one party or the other might be put forward long after the persons who could give useful evidence had died and the most relevant documents had been destroyed If the legal defence were to be excluded it was in this agreement that one would expect to find such a provision The matter does not rest cause we have to consider how far the suggested elimination of defences available at law or in equity must logically be held to extent in other arbitrations
If the party defending may not rely on the Statute of Limitations can he rely on the Statute of Frauds or the Act partially replacing it Could he rely in a commercial arbitration on the Garming Act A number of like questions might be asked It is indisputable that in a modem arbitration the principles of equity must be applied just as they would now be applied in a court of law
In the concluding findings it is said thus In the circumstances of this case as above stated it is I think impossible to come to the conclusion that there was an implied agreement between the parties to exclude any defence under any Statute of Limitations
In the absence of such an implied agreement the Limitation Act was open to the respondents and the consequence must follow that the arbitrator was acting rightly in admitting the defence under the statute
In Pegler vs Railway Executive 1948 Appeal Cases 332 at 338 House of Lords held that just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued so in the case of arbitrations the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued
While accepting the interpretation put up by Atkinson J as he then was in the judgment under appeal learned Law Lords accepted the conclusion of Atkinson in the Language thus the cause of arbitration corresponding to the cause of action in litigation treating a  cause of arbitration in the same way as a cause of action would be treated if the proceeding were in a court of law
368 In West Riding of Yorkshirs Country Council vs Huddersfield Corporation  the Queens Bench Division Lord Goddard C J as he then was held that the Limitation Act applies to arbitrations as it applies to actions in the High Court and the making after a claim has become statute barred of a submission of it to arbitration does not prevent the statute of limitation being pleaded
Russell on Arbitration 19th Edition reiterates the above proposition
At page 4 it was further stated that the parties to an arbitration agreement may provide therein if they wish that an arbitration must be commenced within a shorter period than that allowed by statute but the court then has power to enlarge the time so agreed
The period of limitation for commencing an arbitration runs from the date on which the cause of arbitration accrued that is to say from the date when the claimant first acquired either a right of action or a right to require that an arbitration takes place upon the dispute concerned
Therefore the period of limitation for the commencement of an arbitration runs from the date on which had there been no arbitration clause the cause of action would have accrued
Just as in the case of civil actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued so in the case of arbitrations the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued
In Russell on Arbitration at pages 72 and 73 it is stated thus Disputes under a contract may also be removed in effect from the jurisdiction of the court by including an arbitration clause in the contract providing that any arbitration under it must be commenced within a certain time or not at all and going on to provide that if an arbitration is not so commenced the claim concerned shall be barred
Such provisions are not necessarily found together
Thus the contract may limit the time for arbitration without barring the claim depriving a party who is out of time of his right to claim arbitration but leaving open a right of action in the courts
Or it may make compliance with a time limit a condition of any claim without limiting the operation of the arbitration clause leaving aparty who is out of time with the right to claim arbitration but so that it is a defence in the arbitration that the claim is out of time and barred
369 Nor since the provisions concerned are essentially separate is there anything to prevent the party relying on the limitation clause waiving his objection to arbitration whilst still relying on the clause as barring the claim
 At page 80 it is stated thus An extension of time is not automatic and it is only granted if undue hardship would otherwise be caused
Not all hardship however is undue hardship  it may be proper that hardship caused to aparty by his own default should be borne by him and not transferred to the other party by allowing a claim to be reopened after it has become barred
The mere fact that a claim was barred could not be held to be undue hardship
 The Law of Arbitration by Justice Bachawat in Chapter XXXVII at p549 it is stated that just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date when the claim accrues as also in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues
For the purpose of section 37 1 action  and cause of action  in the Limitation Act should be construed as arbitration and cause of arbitration
The cause of arbitration therefore arises when the claimant becomes entitled to raise the question ie when the claimant acquires the right to require arbitration
The limitation would run from the date when cause of arbitration would have accrued but for the agreement
Arbitration implies to charter out timous commencement of arbitration availing the arbitral agreement as soon as difference or dispute has arisen
Delay defeats justice and equity aid the promptitude and resultant consequences
Defaulting party should bear the hardship and should not transmit the hardship to the other party after the claim in the cause of arbitration was allowed to be barred
The question therefore as posed earlier is whether the court would be justified to permit a contracting party to rescind the contract or the court can revoke the authority to refer the disputes or differences to arbitration
Justice Bachawat in his Law of Arbitration at p 552 stated that in an appropriate case leave should be given to revoke the authority of the arbitrator 
It was also stated that an ordinary submission without special stipulation limiting or conditioning the functions of the arbitrator carried with it the implication that the arbitrator should give effect to all legal defences such as that of limitation
Accordingly the arbitrator was entitled 370 and bound to apply the law of limitation
Section 3 of the Limitation Act applied by way of analogy to arbitration proceedings and like interpretation was given to section 14 of the Limitation Act The Proceedings before the arbitration are like civil proceedings before the court within the meaning of section 14 of the Limitation Act By consent the parties have substituted the arbitrator for a court of law to arbiter their disputes or differences
It is therefore open to the parties to plead in the proceedings before him of limitation as a defence
In Mustiu and Boyd s Commercial Arbitration 1982 Edition under the heading Hopeless Claim in Chapter 31 at page 436 it is stated thus There is no undoubtedly jurisdiction to interfere by way of injunction to prevent the respondent from being harassed by claim which can never lead to valid award for example in cases where claim is brought in respect of the alleged Arbitration agreement which does not really exist or which has ceased to exist
So also where the dispute lies outside the scope of Arbitration agreement
The case on hand is clearly and undoubtedly hopelessly barred claim as the petitioner by his conduct slept over his right for more than 10 years
Statutory arbitrations stand apart
In these circumstances it is an exceptional case and the courts below have justifiably exercised their discretionary power and jurisdiction under sections 5 and 122 b to permit the respondent to rescind the arbitration agreement and declared that the arbitration agreement shall cease to have effect with respect to the difference or dispute referred to in the notice of the petitioner and relieved the parties from the arbitration agreement
The Special Leave Petitions are accordingly dismissed without costs
UR Appeal dismissed


Summary:
The name of the respondent auction purchaser was entered as raiyat in respect of certain lands on the basis of auction sales dated 6111954 and 3 12 1954 in execution of the decree for arrears of rent in respect thereof
In 1970 the Assistant Settlement Officer initiated proceedings under section 442a of the West Bengal Estate Acquisition Act 1953 for revision of the record of rights in respect of the lands taking the view that the rent execution sales being effected after 161954 were invalid under section 5B of the Act
Accordingly he ordered correction of the record of rights by substituting the names of the original raiyats for the auction purchaser
The respondent filed appeals which were allowed by the appellate authority holding that section 5B of the Act had no application to raiyati interests
The State filed writ petition under Article 227 of the Constitution before the 344 High Court
The Special Bench of the High Court confirming the decision of the appellate authority held that the effective date in section 5B of the Act in respect of sale of raiyati and under raiyati holdings under the relevant statutes mentioned therein was 161954 that section 5B did not operate as a bar to execution of decree for arrears of rent as a money decree against raiyati or under raiyati interests and section 168A 1 of the Bengal Tenancy Act 1885 was impliedly repealed by the vesting of the interests of the intermediary including raiyats and under raiyats in the State and that the initiation of the proceedings unders
442aof the Act was without jurisdiction
The State filled the appeals by special leave
The State challenged the judgment of the High Court on the ground that the High Court was not right in holding thats
5B of the Act would not operate as a bar against the sale of raiyati or under raiyati interests if the execution of the rent decree is treated as an execution of money decree under the Code of Civil Procedure and that the sale made pursuant to the execution of the money decree under the Code even though for rent and of the raiyati or under raiyati interest holder would not he a sale under the statutes men tioned in section 5B including the Tenancy Act
Allowing the appeals this Court HELD11 The proceedings initiated by the Assistant Settlement Officer to revise the entries in the record of rights made in favour of the respondent auction purchaser and the orders passed by him recording the names of the former raiyats as raiyats with possession of the lands and deleting the name of the auction purchaser were valid as the raiyati interests were sold after 16
1954 in execution of the decree for arrears of rent in respect of the lands in question
360 C E 12By virtue of the notification issued under section 49 section 52 makes the provisions of sections 4 5 5A and 5B among others of Chapter 11 of the Act applicable to the raiyati and the under raiyati interests on the issuance of such notification
351 H 13In the instant case the Notification No 680 dated 941956 issued under section 49 was brought into force with effect from 1041956
It was not given retrospective effect from 1541955
The effect of this notification was that by 345 virtue of section 4 the intermediary interests stood vested in the State at the latest from 1541955 while the raiyati and under raiyati interests stood vested in the State with effect from 1041956
The restriction on transfer of the said interests however came into effect retrospectively on or from 161954 by virtue of section 5B since that date is mentioned in the section itself
352 AB 14
In view of section 5B of the Act no estate tenure or under tenure including raiyati and under raiyati interests could be sold under the statutes mentioned in s 5B including the Tenancy Act on and after 161954 and a sale after that date under any of those statutes would he void and have no effect under that section
352 C 15 The present auction sales being of raiyati interests and effected on 6111954and 3121954 in execution of the decrees for the arrears of rent under the Tenancy Act were obviously invalid
352 D 21 The decree pursuant to the suit under the Tenancy Act cannot he executed except under the provisions of that Act
There cannot therefore be sale of the property in question pursuant to such decree under the provisions of the Code of Civil Procedure
358 B 22 The intention of the legislature in enacting section 5B was to prevent sales of the intermediary interests after 161954
In view of the provisions of the Tenancy Act the said interests could be sold only under and in accordance with the provisions of that Act
The sale of such interests in the land pursuant to a decree for arrears of rent in respect of that land could not therefore he made under the Code of Civil Procedure
360 D 23 The Bengal Tenancy Act 1885 is a self contained code governing the relations between the landlord and the tenant and for resolution of their disputes
The Act incorporates certain provisions of the Code of Civil Procedure in toto while others with modification
The Tenancy Act by implication prevents any suit between landlord and tenant to be filed otherwise than under its provisions
All proceedings in the suit filed under the Bengal Tenancy Act from its inception to the satisfaction of the decree are to be governed by its provisions and the provisions of the Code are applicable to such proceedings only to the extent and subject to the conditions stated therein
The Code as such is not applicable to the proceedings or to any part of it and hence no part of the proceedings can be prosecuted under the Code
Even if simple money decree is obtained for the arrears of rent no interest of 346 the tenant can he brought to sale in execution of such decree except under Abe provisions of the Tenancy Act
In other words no such interest can be sold under the Code and independently of the Tenancy Act
357 H 358 A C 24 Besides Section 168A of the Tenancy Act removes the doubt if any and provides the procedure for attachment and sale of tenure or holding for arrears of rent due thereon and liability of purchasers thereof
The nonobstante clause of the Section excludes all other provisions of the Tenancy Act itself as well as of any other law and the provisions of any contract as well
Clause a of the Section states that a decree for arrears of rent whether having the effect of a rent decree or a money decree or even a certificate for such arrears under the Bengal public Demands Recovery Act 1930 shall not be executed by the attachment and sale of any movable or immovable property other than the entire tenure or holding to which the decree or certificate relates
That provision will not apply only if the term of the tenure has expired before an application is made for the execution of such decree or certificate
When the entire tenure or holding is purchased in execution of a decree for arrears of rent in respect thereof clause b of section 168A 1 provides that the purchaser shall pay to the decree holder the deficiency if any between the purchase price and the amount due under the decree together with the cost incurred for the auction sale and also the rent which may have become due between the date of the institution of the suit and the date of confirmation of the sale
This provision in inconsistent with the provisions of the Code
358 C F 25 The High Court was not right in holding that the sales can be treated as being pursuant to a money decree and therefore under the Code and independently of the Tenancy Act
The High Court unfortunately missed the vital fact that whether it is a money decree or rent decree the entire raiyati interests of the judgement debtor in the land in question had to be sold under Section 168A of the Tenant Act but could not be sold in view of the bar imposed by Section 5B of the Act
The bar cannot be over come by treating the sale under the Code to circumvent the provisions of the Tenancy Act and in particular of Section 168A of that Act
359 H 360 A B 26 After the intermediary interests vest in the State they cannot be brought to sale and the remedy of the decree holder is to proceed against other property of the judgment debtor if any
In that event Section 168A would not come in the picture
358 G H