Case: Indian Drugs &amp; Pharmaceuticals Vs. Indo Swiss Synthetic Gem Mfg. Co.

assist the respondents. On the other hand, the ratio of Kishorilal Gupta squarely applies. We, therefore, hold that clause 19 dealing with arbitration did survive despite the contract having come to an end with effect from 1.4.1984. 11. Whether the arbitration clause, if held to be operative, could be invoked for the purpose at hand ? On this, the contention of the respondent is that the clause 19 visualises arbitration on "any difference about the quality of the material", whereas in the present case the dispute is about the vials as filled up containing less quantity and not as per specification. As to this, the stand of the appellant is that if the quantity would be less and not as per specification, the quality would get affected. We do not propose to express any opinion on this aspect of the matter. Suffice to say in this proceeding that if the case of the appellant be correct the arbitration clause would get attracted. 12. Whether the Court of Sub-ordinate Judge at Coimbatore had jurisdict ion to entertain the application under section 33 of the Arbitration Act ?On the question of jurisdiction being raised by the appellant, a queer view was taken inasmuch as the court stated that the petitioner before him (who is respondent herein) having business at Coimbatore, the court there had jurisdiction. This has really put section 20 of the Code of Civil Procedure on its head, as it permits assumption of jurisdiction by that court where the opposite party carries o n business, and not the petitioner or plaintiff. The other point urged to sustain jurisdiction was that the respondents letter dated 27.11.1987 had been issued from Coimbatore. This fact could not have conferred jurisdiction because the fact of mere reply to the notice of the appellant did not give rise to any part of "cause of action" within the jurisdiction of Coimbatore court. We are, therefore, of the view that Coimbatore court had no jurisdiction. 13. Was t he reference to the arbitrator barred by limitation ? The plea of limitation had not been urged earlier. That, however, is not material as a plea of limitation can be raised virtually at any point of time because it is relatable to jurisdiction to entertain a matter. According to Shri Desai as the appellant had for the first time required the respondent to reimburse the supposed loss by its letter of 10.11.1987, which was after about 4 years of the supply, the invocation of arbitration clause was apparently barred by limitation, which period could at best at three years as provided by Article 137 of the Limitation Act, 1963. We are referred in this connection to a Bench decision of this Court to which one of us (K.Ramaswamy, J.) was a party- the same being in the case of Panchu Gopal Bose vs. Board of Trustees for Port of Calcutta, 1993 (4) SCC 338. This decision has held the Limitation Act applies to arbitration proceedings and the period visualised by different provisions of the Limitation Act would decide the question of limitation in an arbitration proceeding. 14. In reply, the learned Attorney General brings to our notice the averments finding place in the Rejoinder of the appellant. We are referred to the Rejoinder because the plea of limitation was raised for the first time in the counter-affidavit of the respondent in its para 14. The relevant reply in the Rejoinder is as below: "It is stated that the respondents were informed of the rejection of the frugs supplied by them as early as in 1985 on account of short filling of vials by reference to the complaints received from the customers particularly Defence Department. Following this, Shri Chander Sekharan of the Respondent Company visited the petitioners office at Madras on 3.5.1985 and 10.7.1985 for discussions in the matter. It is mutually agreed that a joint inspect ion of samples from all the batches should be conducted in the laboratory of IDPL at Madras. Accordingly, the reference samples from the respondents factory were brought for the purpose of joint inspection to the petitioners factory at Madras. However, the respondent did not sent any representative for participation in the joint inspection and ultimately after waiting for considerable time, the petitioner had to undertake inspection and tests on 22.7.1985 by itself and found that the drugs had not been filled as per the specifications and the weight verification was also not within the permissible limit." * 15. Thus, the complaint from the customers, particularly Defence Department, came to be known by the appellant in early 1985 whereafter the matter was taken up with the respondent and the tests ultimately were done in July, 1985. If these facts be correct, it has to be held that the cause of action to claim damages really accrued by July, 1985 which was thereafter made by a letter of November, 1987 followed by appointment of arbitrator in May, 1988. The arbitration was thus not "manifestly barred" as contended by Shri Desai. We do not propose to say anything more on this aspect at this stage.16. In the aforesaid premises, we do not find any threshold infirmity in the invocation of clause 19 and to the reference of the dispute to respondent No.3. Shri Desai submits that respondent No.3 may not be required to arbitrate inasmuch as he being an appointee of the Chairman and Managing Director of the appellant himself, respondents case may not be fairly examined. He prays that any retired High Court Judge may be appointed as an arbitrator by us. We have not felt inclined to accept this submission, because arbitration clause states categorically that the difference/dispute shall be referred "to an arbitrator appointed by the Chairman and Managing Director of IPDL" (Indian Drugs &Pharmaceutical Limited) who is the appellant. This provision in the arbitration clause cannot be given a go-bye merely at the askance of the respondent unless he challenged its binding nature in an appropriate proceeding which he did not do.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. So, an arbitration clause, howsoever comprehensive in terms, can be operative only if the contract is in existence (vide point (2) above). Under point No.6, however, it has been stated that when a question of breach of contract, inter alia, is raised after the termination of the contract, it is the performance of the contract that comes to an end on termination of the contract, but the same remains in existence for certain purposes in respect of disputes arising under it or in connection with it. It was, therefore, stated under this point that as the contract subsist for certain purposes, the arbitration clause operates in respect of these purposes.This shows that the arbitration clause would perish in case where either there is substitution of a new contract, or rescission or alteration of the original contract. The present is apparently and admittedly not such a case. Therefore, what has been stated in this decision cannot assist the respondents. On the other hand, the ratio of Kishorilal Gupta squarely applies. We, therefore, hold that clause 19 dealing with arbitration did survive despite the contract having come to an end with effect fromdo not propose to express any opinion on this aspect of the matter. Suffice to say in this proceeding that if the case of the appellant be correct the arbitration clause would getthe question of jurisdiction being raised by the appellant, a queer view was taken inasmuch as the court stated that the petitioner before him (who is respondent herein) having business at Coimbatore, the court there had jurisdiction. This has really put section 20 of the Code of Civil Procedure on its head, as it permits assumption of jurisdiction by that court where the opposite party carries o n business, and not the petitioner or plaintiff. The other point urged to sustain jurisdiction was that the respondents letter dated 27.11.1987 had been issued from Coimbatore. This fact could not have conferred jurisdiction because the fact of mere reply to the notice of the appellant did not give rise to any part of "cause of action" within the jurisdiction of Coimbatore court. We are, therefore, of the view that Coimbatore court had noplea of limitation had not been urged earlier. That, however, is not material as a plea of limitation can be raised virtually at any point of time because it is relatable to jurisdiction to entertain a matter. According to Shri Desai as the appellant had for the first time required the respondent to reimburse the supposed loss by its letter of 10.11.1987, which was after about 4 years of the supply, the invocation of arbitration clause was apparently barred by limitation, which period could at best at three years as provided by Article 137 of the Limitation Act, 1963. We are referred in this connection to a Bench decision of this Court to which one of us (K.Ramaswamy, J.) was a party- the same being in the case of Panchu Gopal Bose vs. Board of Trustees for Port of Calcutta, 1993 (4) SCC 338.  This decision has held the Limitation Act applies to arbitration proceedings and the period visualised by different provisions of the Limitation Act would decide the question of limitation in an arbitration proceeding.Thus, the complaint from the customers, particularly Defence Department, came to be known by the appellant in early 1985 whereafter the matter was taken up with the respondent and the tests ultimately were done in July, 1985. If these facts be correct, it has to be held that the cause of action to claim damages really accrued by July, 1985 which was thereafter made by a letter of November, 1987 followed by appointment of arbitrator in May, 1988. The arbitration was thus not "manifestly barred" as contended by Shri Desai. We do not propose to say anything more on this aspect at this stage.16. In the aforesaid premises, we do not find any threshold infirmity in the invocation of clause 19 and to the reference of the dispute to respondent No.3. Shri Desai submits that respondent No.3 may not be required to arbitrate inasmuch as he being an appointee of the Chairman and Managing Director of the appellant himself, respondents case may not be fairly examined. He prays that any retired High Court Judge may be appointed as an arbitrator by us. We have not felt inclined to accept this submission, because arbitration clause states categorically that the difference/dispute shall be referred "to an arbitrator appointed by the Chairman and Managing Director of IPDL" (Indian Drugs &Pharmaceutical Limited) who is the appellant. This provision in the arbitration clause cannot be given a go-bye merely at the askance of the respondent unless he challenged its binding nature in an appropriate proceeding which he did not do.