Case: Mohd. Usman Military Contractor, Jhansi Vs. Union of India, Ministry of Defence

1. By a contract dated March 8, 1945, the appellant agreed to supply meat to the Government of India. The contract contained an arbitration clause for reference of disputes arising out of the contract to the officer named in the contract. The appellant claims that a sum of Rs. 8,38,994/10/6 is due to him in respect of the supplies of meat made by him during period between April 1, 1945 and March 31, 1946. He made representations to the Government for payment and for Arbitration of the disputes. On or about July 10, 1958, the Government refused to refer the matter to arbitration. On July it 1961 the appellant filed an application in the Court of the District Judge, Jhansi under Ss. 8 and 20 ofthe Arbitration Act, 1940 for filing the arbitration agreement and for an order of reference of the disputes to an arbitrator appointed by the Court. The respondent contended that the application was barred by limitation. The District judge allowed the application. He held that there was no period of limitation for making an application under Ss. 8 and 20. The defendant filed an appeal against the order. The High Court dismissed the appeal as incompetent in so far as it challenged the order under S. 8, and allowed it in so far as it challenged the order under S. 20. The High Court held that the application was governed by Art. 181 of the Indian Limitation Act, 1908 and was barred by limitation as it was made more than three years after the disputes had arisen. The appellant has filed this appeal after obtaining a certificate from the High Court.

Court's reasoning:
6. The Arbitration Act, 1940 was passed with a view to consolidate and amend the law relating to arbitration. Formerly the general law relating to arbitration was to be found in the Indian Arbitration Act, 1899 and theCode of Civil Procedure 1908. Paragraphs 1 to 16 of the second schedule to the Code applied to all arbitrations in suits. As to arbitrations otherwise than in suits, the Indian Arbitration Act 1899 applied to cases where, if the subject-matter submitted to arbitration were the subject of a suit, the suit could be instituted in a Presidency town: in other cases, theCode of Civil Procedure 1908 applied. The Arbitration Act, 1940 repealed both the enactments. It extends to the whole of India except the State of Jammu and Kashmir, and save as provided in Section 47 applies to all arbitrations. As to the provisions of the new Act under which applications can be made to Court, Ss. 8, 14, 16, 28 and 30 correspond to provisions which are found in both the repealed enactments, Ss. 5 and 9 correspond to similar provisions in the Indian Arbitration Act,1899, and Ss. 15 and 20 correspond to similar provisions in the second schedule to the Code and some sections such as Section 11, are entirely new. In the circumstances, a question may arise whether the provisions of the new Act can be regarded as reenactments of the repealed provisions of the Indian Arbitration Act, 1899 or of the Code. But for the purpose of this case we shall assume that S. 20 of the new Act is a re-enactment with modification of paragraph 17 of the second schedule to the Code.We shall also assume that Art. 181 of the Limitation Act as construed by the Courts should be regarded as containing a reference to theCode of Civil Procedure including paragraph 17 of the second schedule thereof. Even after making those two assumptions it appears to us that the implied reference in Art. 181 to theCode of Civil Procedure cannot be construed as a reference to the Arbitrationis manifest that the legislature intended that save as provided in articles 158 and178 there would not be any limitation for other applications under the Act. Take the case of an application under S. 28 of the Act for enlargement of the time for making the award. A similar application under paragraph 8 of the second schedule to the Code was governed by Art. 181 but a like application under S. 12 of the Indian Arbitration Act, 1899 was not subject to any period of limitation. There is nothing to indicate that for the purpose of limitation S. 20 of the new Act should be regarded as a re-enactment of the corresponding provision of the Code and not of the Indian Arbitration Act, 1899. An application under S. 8 of the new Act corresponding to paragraph 5 of the second schedule to the Code and S. 8 of the Indian Arbitration Act, 1899 stand on the same footing. In the circumstances, it is not possible to construe the implied reference in Art. 181 to theCode of Civil Procedure as a reference tothe Arbitration Act, 1940, or to hold that Art. 181 applies to applications under that Act. The rule of construction given in S. 8 (1) of the General Clauses Act cannot be applied, as it appears that the-legislature had a different intention.It follows that an application under Ss. 8 and 20 ofthe Arbitration Act, 1940 is not governed by Art. 181. The Limitation Act does not prescribe any period of limitation for such an application. It follows that the present application under Ss. 8 and 20 is not barred by limitation.8. In conclusion we must observe that the appellants claim relates to supplies during the period between April 1, 1945 and March 31, 1946. There is a serious contention whether the claim is barred by limitation. It will be the duty of the arbitrator to consider this matter carefully and to decide whether or not the claim is so barred.