Case: M/S. Jupitor Chit Fund (Pvt.) Ltd Vs. Sri Shiv Narain Mehta(Dead)By Lrs

Appellant is a Chit Fund Private Limited Company. Respondent No. 1 subscribed to the appellants chit fund scheme for the value of Rs. 1000- which was to be repaid in instalments. Respondent Nos. 2 and 3 were the sureties for Respondent No. 1. On a dispute having arisen between the parties for non-payment of instalments, the matter was referred by the appellant to the named arbitrator who passed an award. In proceedings for making the award a rule of the Court, it was held that the award was liable to be set aside on the ground that the reference to the arbitration was not proper as there could not be a unilateral reference without notice to the respondents.

Court's reasoning:
Sub-section (5) and Sub-section (3) of Section 37 are to be read together to find out the period which is liable to be excluded in computing the time prescribed by the Indian Limitation Act, 1908. Sub-section (5) speaks of the period between "commencement of the arbitration" and the "date of the order of the Court" which is to be excluded in computing the period of limitation for initiating the proceedings in a Court with respect to the subject matter of "difference" which was referred to arbitration. The phrase "commencement of an arbitration", used in Sub-section (5), has been given a fictional meaning in Sub-section (3) which provides that for purposes of the Indian Limitation Act, 1908, an arbitration shall be "deemed to be commenced" when one party to the arbitration agreement serves on the other parties thereto a notice requiring theappointment of an arbitratorwhere an arbitrator has already been named in the arbitration agreement, the notice should be for requiring the difference to be submitted to the named arbitrator.