P L D 1972 Supreme Court 123 (PLP)

(On appeal from the judgment and order of the High Court of West Pakistan, Lahore, dated the 11th October 1968, in Civil Revisions Nos. 45 and 46 of 1964). (a) Arbitration Act (X of 1940), Ss. 20 & 37 and Limitation Act (IX of 1908), Art. 181‑‑Arbitration agreement, filing of, in Court‑Article 181, Limitation Act applicable to proceedings under S. 20, Arbitration Act‑Provisions of S. 37, Arbitration Act attracted only where award set aside after commencement of arbitration or where arbitration agreement declared to have ceased to have elect‑[Shah Mulchand & Co. Ltd. v. Jawahar Mills Ltd. A I R 1953 S C 98 dissented from]. D, a building contractor entered into two contracts with T. The contracts were completed in June 1954, and payments were made by T in July 1956, after making some deductions. D accepted these payments under protest, the dispute regarding the balance amount could not be resolved and D applied to the Court for filing of the agreement under section 20 of the Arbit ration Act, 1940, for the appointment of an arbitrator. The arbitrator so appointed gave his award on 27‑11‑

59. Objections were filed by both parties against award being made rule of the Court. During pendency of these proceedings D on 3‑2‑60 applied for permission to withdraw his application with libarty to file fresh application for the purpose. T consented to the proposal. The Court gave the permission and on the same day a fresh application under section 20, Arbitration Act, 1940, was filed. Thereafter T objected to the initiation of the fresh proceeding on the ground that (i) fresh application was not competent until the previous award was set aside, (il) the fresh application was time‑barred under Article 181, Limitation Act, because the right to apply under section 20, Arbitration Act accrued in July 1956, whereas the application under section 20, Arbitration Act was being moved on 3‑2‑

60. Against this it was contended that (i) Article 181, Limitation Act applied only to proceed ings under the Civil Procedure Code ; (ii) the parties had agreed to the revocation of the earlier proceedings and, therefore, no question of limitation arose, and (iii) the provisions of section 37(5), Arbitration Act had to be taken into account. The questions for consideration before the Supreme Court, there fore, were : (i) whether Article 181, Limitation Act applied to proceedings under section 20, Arbitration Act ; (ii) whether the applicant was entitled under section 37, Arbitration Act to exclude the period between commencement of the first arbitration proceeding and the order permitting withdrawal of the application ; and (iii) whether Q' was estopped from raising the question of limitation having once consented to the withdrawal of the previous application. Held; After the incorporation of Articles 158 and 178 In the First Schedule to the Limitation Act, which make specific provision for applications under the Arbitration Act, 1940, it Is no longer possible to say that the Articles contained in the Third Division of the First Schedule to the Limitation Act apply only to applications under the Code of Civil Procedure, because, all the other Articles contained in this Division apply to such applications. With the incorporation of Articles 158 and 178, that reason no longer holds good, and, therefore, the scope of Article 181, which Is in the nature of a residuary Article, must necessarily be extended to all kinds of applica tions for which no specific period of limitation has been provided for either in the First Schedule to the Limitation Act or in any other Statute. To hold otherwise would lead to the anomalous result that for applications which have not been expressly provided for in the Third Division of the First Schedule to the Limitation Act there will be no period of limitation at all. This could not have been the intention of the Legislature. An application under section 20 of the Arbitration Act, 1940, has to be filed within the time prescribed under Article 181 of the Limitation Act. The point of time at which the right to apply under section 20 accrues is, therefore, the point of time at which "a difference has arisen" and the difference arises when one party does not agree with the other on any particular question covered by the arbitration agreement. In the present case, the difference arose when the Authority refused to pay the bill of the contractor in full, and, therefore, the dates of the payments made under the two contracts determined the terminus a quo of the period of limitation and the period of limitation had to be computed from the said dates. The applications filed on the 3rd of February 1960, were, therefore, clearly, beyond the period of three years prescribed under Article 181 of the Limitation Act. The provisions of subsection (5) of section 37 of the Arbitra tion Act appear to be designed to provide for circumstances similar to those in which the provisions of section 14 of the Limitation Act might become attracted, but only in cases where the award has been set aside after the commencement of an arbitration, or the arbitration agreement has been declared to have ceased to have effect. Neither of these eventualities occurred in the present case, for, the awards were neither set aside nor were the arbitration agreements declared to have ceased to have effect. All that happened in the present case was that after the awards had been filed in Court for the purpose of being made rules of Court, one of the parties applied to withdraw his application under section 20 with permission to file a fresh application. The action taken was, therefore, in the nature of a withdrawal of a suit under Order XXIII, rule 1, of the Code of Civil Procedure, and in such cases, as has been expressly provided for by Order XXIII, rule 2, the limitation applies in the same manner as of the first suit or proceed ing had not been instituted. It is, no doubt, true that parties to an arbitration agreement can also by consent modify an award, but this does not mean that they can waive the statutory requirements of the Limitation Act. There can be no kind of estoppel against a statute, particularly where the question of limitation is involved, for section 3 of the Limitation Act clearly enjoins upon the Court that every suit, appeal or application made after the period of limitation prescribed therefore by the First Schedule shall be dismissed "although limitation has not been set up as a defence". The contention, therefore, that since the opposite party had consented to the withdrawal of the application with permission to file a fresh application amounted to an estoppel, had no force. Hansraj Gupta v. Dehra Dun M. E. T. Co. Ltd. A I R 1933 P C 63 ; Bai Manekbai v. Manekji Kavasji I L R 7 Born. 213 ; Peoples Bank of Northern India Ltd. v. Firm Lekhu Ram & Sons A I R 1941 Pesh. 3 ; Muhammad Abdul Latif Faruqi v. Nisar Ahmad P L D 1959 Kar. 465 ; Mian Omar Din v. Govern ment of Azad Jammu & Kashmir P L D 1968 Azad J & K 21 and West Pakistan Water and Power Development Authority, Lahore v. Messrs Omar Sons Ltd. P L D 1970 Lab. 398 ref. Shah Mulchand & Co. Ltd. v. Jawahar Mills Ltd. A I R 1953 S C 98 dissented from. (b) Thal Development Act (XV of 1949), S. 75‑‑Provisions of section to be strictly construed‑Suits mentioned in section‑ Confined to proceedings commenced by plaint only and does not embrace all manner of proceedings. HAMOODUR RAHMAN, C. J.‑The appellant in both these appeals, who is a contractor, entered into two contracts with the respondent‑Authority for construction of the Spinning sections of its Textile Mills at Liaquatabad and Bhakkar respectively. The contract works were completed on the 30th of April 1954 and the 30th of June 1954 respectively and final payments, in respect thereof, were made by the respondent‑Authority on the 14th of July 1956 and the 20th of August 1956, after making certain deductions from the bills submitted by the appellant. The appellant, it is said, accepted these payments under protest but no written record of such protest has beer produced before the Court. Not being able to get the dispute resolved, the appellant, on the 20th of February 1957, served a notice upon the respon dent to appoint an Arbitrator in terms of the Arbitration clause contained in each of his contracts. The respondent‑Authority failed and neglected to nominate the Arbitrator. The appellant, thereupon, on the 29th of April 1957, applied to the Senior Civil Judge, Sargodha, under section 20 of the Arbitration Act, for filing the agreement and for the appointment of an Arbitrator by the Court. The Arbitrator so appointed filed his Award in the Court on the 27th of November 1959. Both parties filed objections against the Award being made a rule of the Court. But during the pendency of these proceedings, the appellant, on the 3rd of February 1960, applied in both cases for permission to withdraw his earlier applications with liberty to file fresh applica tions for the same purpose. The learned Advocate, appearing for the respondent-- Authority, it is said, consented to this and a joint statement of both the learned Advocates appearing for the parties was recorded to the following effect:‑ "We agree on behalf of the petitioner and the respondent on the point that there subsists between the parties an agree ment about payment of some contractual money in respect of the Textile Mills situated at Bhakkar. It is agreed between both the parties that if any dispute would arise between them, it shall be settled through arbitration. We, the parties, have failed to appoint any arbitrator, required by the agreement owing to our difference of opinion, therefore, we authorize the Court to appoint whomsoever it chooses to be a sole arbitrator for complete adjudication of all the disputes between the parties. We shall accept whatever the arbitrator appointed by the Court will do in all eventualities." On the basis of this statement, the Court on the same day gave the permission sought for and fresh applications under section 20 were filed immediately. The Court, however, did not pass any final order and adjourned these new applications to the 12th of March 1960. On the latter date, the respondent‑Authority objected to the initiation of these fresh proceedings on the ground that this could not be done until the previous Award had been set aside and the appointment of the Arbitrator, who had made the Awards, revoked. It was also contended that the proceedings were hopelessly time‑barred, both under the Thal Development Act and Article 181 of the Limitation Act. According to the respondent‑Authority, the right to apply under section 20 accrued to the appellant as soon as the last payments were made, i. e., on the 14th of July 1956 and the 20th of August 1956, respectively. The applications filed on the 3rd of February 1960 were thus hopelessly barred by time. The learned Civil Judge held that the respondent‑Authority was not estopped from objecting to the initiation of fresh pro ceedings notwithstanding the statement of its Advocate on the 3rd of February 1960, and that applications for appointment of a new Arbitrator did not lie after an Award had actually been filed in Court, unless that Award was first set aside. The learned Civil Judge was also of the view that the applications were barred by reason of the provisions of subsection (3) of section 75 of the Thal Development Act. From this decision, the appellant went up on appeal to the District Judge, Sargodha who, disagreeing with the Civil Judge, held that the applications were wrongly dismissed. The appeal was, accordingly, accepted, the judgment and decree of the Civil Judge were] set aside and the case remanded for fresh decision. The respondent‑Authority then came up to the High Court in revision and a learned Single Judge of the former High Court of West Pakistan, Lahore Seat, disagreeing with the learned District Judge, set aside, his judgment and held that the fresh applications, filed by the appellant on the 3rd of February 1960, under section 20 of the Arbitration Act, 1940 for filing the arbitration agreement and for the appointment of an Arbitrator, were barred by time under Article 181 of the Limitation Act which was applicable to a proceeding under the said section. No other question was, however, examined or decided as the learned Single Judge was clearly of the view that, on this question of limitation alone, the applications under section 20 were bound to fail. Leave 'was granted by this Court in both these cases to consider, firstly, as to whether Article 181 of the Limitation Act applied to proceedings under section 20 of the Arbitration Act ; secondly, as to whether, in any event, under the provisions of section 37 of the Arbitration Act, the appellant was entitled to exclude the period between the commencement of the first Arbitration proceedings and the order permitting the withdrawal of the said proceedings, in computing the period of limitation for the subsequent applications and, thirdly, whether, even if the Limitation Act applied to these proceedings, the respondent Authority should have been held to be estopped from raising this question, by reason of the agreement given by its Advocate in the statement recorded by the Court. Learned counsel, appearing in support of these appeals, contends that Article 181 of the Limitation Act applies only to proceedings under the Code of Civil Procedure. In any event, since the parties had agreed to the revocation of the earlier proceedings, no question of limitation arose, as the previous proceedings stood completely wiped out by the consent of the parties. Lastly, learned counsel maintains that the provisions of section 37 of the Arbitration Act had been completely overlooked by the Courts below. The High Court has, of course, considered only the question of limitation and not adverted to the other questions raised and argued before it. The first question, therefore, that arises for consideration 9s as to whether Article 181 of the First Schedule to the Limitation Act of 1908 applies to such proceedings. This Article, which appears in the Third Division of the First Schedule dealing with applications, is to the following effect:‑ "Description of Period of Time from which application. limitation. period begins to run. 181.‑Application for which Three When the right to no period of limita‑ years. apply accrues." tion is provided elsewhere in this schedule or by section 48 of the Code of Civil Pro cedure, 1908. In support of his contention that the aforesaid Article applies only to applications under the Code of Civil Procedure learned counsel for the appellant has placed strong reliance on the observations of the Judicial Committee in the case of Hansraj Gupta v. Dehra Dun M. E. T. Co. Ltd. (AIR 1933PC63=60IA13), Lord Russell of Killowen, while delivering the opinion of the Board in that case, which arose out of an application under the Companies Act, observed that; "It is common ground that the only Article in that Schedule which could apply to such an application is Article 181" but a series of authorities commencing with Bai Manekbai v. Manekji Kavasji (ILR7Bom.213), has taken the view that "Article 181 only relates to applications under the Code of Civil Procedure in which case no period of limitation has been prescribed for the application". This view, learned counsel points out, has also been followed by the Supreme Court of a neighbouring country in the case of Shah Mulchand & Co. Ltd. v. Jawahar Mills Ltd. (AIR1953SC94), where, after noting that there is some divergence of judicial opinion even within the same High Court in this sub‑continent, it has been opined that "the preponderating view is undoubtedly to the effect that the said Article applies only to applications under the Code". The cases before the Privy Council and the aforementioned Supreme Court both arose out of applications under the Companies Act but even so the Privy Council did not express any definite opinion on this question, because it went on, after making the observation quoted above, to consider the position even if Article 181 of the Limitation Act did apply, and came to the conclusion that the application, having been filed within three years from the time when the right to apply accrued, was within time even under Article 181 and thus from "either point of view" the application was not one which could be dismissed by reason of the provisions of section 3 of the Limitation Act. Similarly, in the case before the Indian Supreme Court, although a more elaborate discussion was made with regard to the applicability of Article 181, it was again found that, even if Article 181 did apply, the application before that Court was within time. In 1933, when the Privy Council delivered its opinion, the Arbitration Act of 1940 had not come into existence nor had the Third Division of the First Schedule to the Limitation Act been amended to provide for applications under the Arbitration Act (vide Articles 158 and 178 in the Third Division of the First Schedule to the Limitation Act). Up to that stage all the Articles in this division of the Schedule to the Limitation Act dealt with applications under the Code of Civil Procedure. It may well be that for this reason it was held that Article 181 also applied to only such applications ejusdem generis. After the introduction of Articles 158 and 178 in the Third Division of the First Schedule to the Limitation Act, this reason no longer holds good. The divergence of opinion in British Indian and Indian Courts has arisen mainly because of these amendments introduced in 1940 and the view seems to be gaining ground that after the amendments made in 1940 it was no longer possible to restrict Article 181 only to applications under the Code of Civil Pro cedure. " . . . if we were to restrict the scope of Article 181 to applications under the Civil P. C. many applications will remain for which there will be no article in the Limita tion Act and the reductio ad absurdum would be that the applicants in those cases would have a free hand to put in applications whenever they liked. An application for filing of an award of this kind by an arbitrator would be a case in point. On this view an arbitrator may keep the award in his pocket for ten years and then he may file it with impunity." Next in the case of Muhammad Abdul Latlf Faruqi v. Nisar Ahmad (P L D 1959 Kar. 465), a learned Single Judge of the former West Pakistan High Court took the view that an application under section 20 of the Arbitration Act, 1940, has to be filed within the time prescribed under Article 181 of the Limitation Act. The same view was again taken by a Full Bench of the Azad Jammu and Kashmir High Court in the case of Mian Omar Din v. Government of Azad Jammu and Kashmir, (P L D 1968 Azad J & K 21), after noticing the decisions from the Indian jurisdiction including that of the Indian Supreme Court referred to above. Lastly, in the case of the West Pakistan Water and Power Development Authority, Lahore v. Messrs Omar Sons Ltd., (P L D 1970 Lah. 398), a Division Bench, after considering all the earlier decisions, came to the conclusion that the position had been materially altered by the incorporation of Articles 158 and 178 in the Third Division of the First Schedule to the Limitation Act and it was "no longer possible to say that the Third Division of Schedule I is confined to applications under the Code of Civil Procedure or to apply the ejusdem generis rule only". Having examined these decisions with care, we, too, have come to the conclusion that, after the incorporation of Articles 158 and 178 in the First Schedule to the Limitation Act, which make specific provision for applications under the Arbitra tion Act, 1940, it is no longer possible to say that the Article contained in the Third Division of the First Schedule to the Limitation Act apply only to applications under the Code of Civil Procedure, because, all the other Articles contained in this Division apply to such applications. With the incorpora tion of Articles 158 and 178, that reason no longer holds good, and therefore, the scope of Article 181, which is in the nature of a residuary Article, must necessarily be extended to all kinds of applications for which no specific period of limitation has been provided for either in the First Schedule to the Limitation Act or in any other Statute. To hold otherwise would lead to the anomalous result that for applications which have not been expressly provided for in the Third Division of the First Schedule to the Limitation Act there will be no period of Limitation at all. This could not have been the intention of the Legislature. We regret, with respect, our inability to agree with the Indian Supreme Court that in spite of the subsequent amendments of Articles 158 and 178 no change has been effected in the old construction of Article 181 even though the reason on which the old construction was founded is no longer available. The next question that arises for consideration is as to whether, if Article 181 applies, the applications filed in the present case by the appellant herein under section 20 of the Arbitration Act, 1940, were within time or not. The learned counsel, appearing for the respondent‑Authority, has supported the view of the High Court that the limitation began to run from the date of the final settlement of the bills of the contractor and the right to apply for arbitration accrued to the contractor from the moment the dispute arose as to the amounts payable to the contractor, i.e., on the 14th of July 1956 and the 20th of August 1956, respectively when such last payments were made, as has been held by the High Court. This view appears to be correct. A comparison of the provisions of sections 8 and 20 of the Arbitration Act itself will show that where the parties have entered into an agreement to refer their disputes to arbitration, they may either adopt the procedure laid down in section 8 or, alternatively, adopt the procedure laid down in section

20. Under section 8, a written notice has first to be given and the Court can be approached only after the expiry of 15 clear days from the service of a notice to concur in the appointment or appointments of Arbitrators or in supplying the vacancy. Under section 20, on the other hand, no such notice is necessary, and whenever a difference or dispute arises to which the arbitration agreement applies, any of the parties to the agreement may, instead of proceeding under section 8 of Chapter II of the Arbitration Act of 1940, straightaway apply to the Court having jurisdiction in the matter to which the agreement relates, for having the agreement filed in Court. The point of the time at which the right to apply under section 20 accrues is, therefore, the point of time at which "a difference has arisen" and the difference arises when one party does not agree with the other on any particular question covered by the Arbitration agreement. In the present case, the difference arose when the Authority refused to pay the bill of the contractor in full, and, therefore, the respective dates of the last payments (14th of July 1956 and 20th August 1956) made under the two contracts determined the terminus a quo of the period of limitation. We are, therefore, in agreement with the High Court that the period of limitation had to be computed from the said dates. The applications filed on the 3rd of February 1960, were, therefore, clearly beyond the period of three years prescribed under Article 181 of the Limitation Act. (5) Where the Court orders that an award be set aside or orders, after the commencement of an arbitration, that the arbitration agreement shall cease to have effect with respect to the difference referred, the period between the commence ment of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limi tation Act, 1908, for the commencement of the proceedings (including arbitration) with respect to the difference referred." The provisions of this subsection appear to be designed to provide for circumstances similar to those in which the provisions of section 14 of the Limitation Act might become attracted, but only in cases where the award has been set aside after the commencement of an arbitration, or the arbitration agreement has been declared to have ceased to have effect. Neither of these eventualities occurred in the present case, for, the awards were neither set aside nor were the arbitration agreements declared to have ceased to have effect. All that happened in the present case was that after the awards had been filed in Court for the purpose of being made rules of Court, one of the parties applied to withdraw his application under section 20 with permission to file a fresh application. The action taken, was there fore, in the nature of a withdrawal of a suit under Order XXIII, rule 1 of the Code of Civil Procedure, and in such cases, as has been expressly provided for by Order XXIII, rule 2, the limitation applies in the same manner as if the first suit or proceeding had not been instituted. This is not a case of a proceeding being conducted under some bona fide mistake in a Court which, either from defect of jurisdiction or some other cause of like nature, is unable to entertain it. Here the award was filed in the proper Court and that Court had every jurisdiction to deal with it, but it was withdrawn on the alleged ground of some technical defect. This was not a case therefore, to which either the provisions of section 14 of the Limitation Act or section 37 of the Arbitration Act could apply. It is, no doubt, true that parties to an arbitration agreement can also by consent modify an award, but this does not mean that they can waive the statutory requirements of the Limitation Act. There can be no kind of estoppel against a statute, particularly where the question of limitation is involved, for section 3 of the Limitation Act clearly enjoins upon the Court that every suit, appeal or application made after the period of limita tion prescribed therefore by the First Schedule shall be dismissed "although limitation has not been set up as a defence". The contention, therefore, that since the learned Advocate then appear ing for the respondent‑Authority had consented to the withdrawal of the application with permission to file a fresh application amounted to an estoppel, has no force. The respondent Authority, even assuming that the learned Advocate then appearing for it had the necessary authority to do so, is not estopped by the consent of the learned Counsel, so far as this question of law is concerned. In this view of the matter, it is unnecessary for us to consider as to whether the subsequent applications under section 20 of the Limitation Act were also barred under the provisions of section 75 of the Thal Development Act but since this question has been raised we would like to point out that we are inclined to agree with the High Court that as held in the case of Mohd. Abdul Latif Farooqi v. Nisar Ahmad and another, the provisions of this section, which are in the nature of an exception to the general law of limitation, should be strictly construed and, therefore, the suits mentioned therein should be confined to proceedings which are commenced by a plaint and this section should not be so interpreted as to embrace all manner of proceedings. We would also like to point out that in present case the learned Civil Judge acted in disregard of the provisions of section 20, subsection (3), of the Arbitration Act of 1940. Under these provisions, he was under a duty to give notice of the new applications to all parties to the agreement, other than the applicant, requiring them to show cause as to why the agreement should not be filed. There is nothing on the record to show that any such notice was given or waived by the learned Advocate then appearing for the respondent‑Authority. Learned counsel for the respondent has also raised the 'contention that the appeals before the District Judge were incompetent, because appeals lay from orders under the Arbitra tion Act only in accordance with the provisions of section 39 of the said Act, and since the proceedings out of which these appeals arise were not proceedings of any of the kinds mentioned in section 39, the appeals did not lye. This point was, of course, not taken in the grounds of revision before the High Court; but we are, in any event, unable to accept this contention, for, the order of the Civil Judge was, in effect, an order refusing permis sion to file the arbitration agreements. It was an order rejecting an application under section 20 for the filing of the agreement in Court and that was an appealable order under clause (4) of subsection (1) of section

39. These are all the contentions advanced in this case, and since we are in agreement with the High Court that the applications were barred by limitation under Article 181 of the First Schedule to the Limitation Act, we dismiss these appeals, but leave the parties to bear their respective costs. K. B. A. Appeals dismissed.