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United India Insurance Co. Ltd. Vs. J.A.Infra Structure Pvt.Ltd. [2006] Insc 552 (30 August 2006)

Dr. Ar. Lakshmanan & Tarun Chatterjee

(Arising out of SLP(C) No.6470 of 2006) Dr. AR. LAKSHMANAN, J.

Leave granted.

Heard learned counsel appearing on behalf of both sides.

This appeal is directed against the final judgment and order dt.21.12.2005 passed by the High Court of Judicature at Bombay, Nagpur Bench in Writ Petition No.5454 of 2005. The respondent is the insured.

The respondent invoked arbitration as per Condition No.7 of the Policy. The respondent appointed one Shri V.P.Shah as Arbitrator. The appellant-Insurance Company appointed Shri A.Sankaran as Arbitrator. Both the Arbitrators appointed Shri B.R.Mehta as Presiding Arbitrator.

On 10.10.2003, the Majority Award was passed by the Presiding Arbitrator, Shri B.R.Mehta and Co-Arbitrator Shri V.P.Shah awarding Rs.2,12,49,336.00 (Rupees two crore twelve lakh forty nine thousand three hundred thirty six only) with future interest @ 18%. The Minority Award was passed by Co-Arbitrator Shri A.Sankaran who awarded a sum of Rs.1,23,08,104/- and interest of Rs.43,57,066/- upto 10.10.2003 and cost of arbitration of Rs.4 lacs and further interest on the aggregate of all these amounts @ 15% from the date of Award till the date of payment of decree whichever is earlier.

Aggrieved by both the Awards, the appellant filed Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') in the High Court of Judicature at Bombay. The petition was listed before a learned Single Judge of the High Court who after hearing the parties dismissed the petition for want of jurisdiction.

The appellant-Insurance Company thereafter filed a fresh petition under Section 34 of the Act before the District Court, Nagpur along with application under Section 14 of the Limitation Act on 17.01.2005. The District Court, Nagpur dismissed the application filed by the appellant- Insurance Company under Section 14 of the Limitation Act and consequently, the application filed under Section 34 of the Act also stood dismissed. Aggrieved against the order passed by the District Court, the appellant filed again a Writ Petition before the High Court of Bombay at Nagpur Bench which was also dismissed on 21.12.2005.

Aggrieved by the said Judgment dt.21.12.2005, the appellant preferred the above appeal.

The High Court by the impugned judgment dismissed the Writ Petition No.5454 of 2005 following the earlier judgment of the Bombay High Court in H.M.P.Engineers Ltd. and Ors. vs. Ralies India Ltd. and Ors., reported in 2003(4) MH.L.J.931. Learned counsel for the appellant submitted that in view of the recent judgment of this Court in State of Goa vs. M/s.Western Builders, reported in JT 2006 (6) SC 125, the view taken by the Bombay High Court in H.M.P.Engineers Ltd. and Ors. vs. Ralies India Ltd. and Ors. (supra) and followed by the High Court in the impugned judgment is not correct.

This Court in the Judgment in State of Goa vs. M/s.Western Builders (supra) was considering the question as to what extent Section 14 of the Limitation Act, 1963 which deals with exclusion of time spent in prosecuting the remedy before wrong forum is applicable to the Arbitration and Conciliation Act, 1996 or not. Section 14 of the Limitation Act reads thus :-

  1. "Exclusion of time of proceeding bona fide in court without jurisdiction

  1. In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligences another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

  2. In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

  3. Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted on the ground that the first suit must fail by reasons of a defect in the jurisdiction of the court of other cause of a like nature."

This Court also in para 13 of the said Judgment has observed that Section 14 of the Limitation Act has been excluded by this special enactment i.e. Arbitration and Conciliation Act, 1996 and that Section 43 of the Arbitration and Conciliation Act, 1996 clearly says that the Limitation Act, 1963 shall apply to arbitration as it applies to the proceedings in court. This Court has also followed few other Judgments of this Court in support of the view taken by them. In the concluding portion this Court has observed that in the present context, there is no two opinion in the matter that the Arbitration and Conciliation Act, 1996 does not expressly excluded the applicability of Section 14 of the Limitation Act and that the prohibitory provision has to be construed strictly.

In the result, this Court was of the opinion that the view taken by the court below excluding the applicability of Section 14 in the said proceeding was not correct. This Court held that Section 14 of the Limitation Act, 1963 was applicable in the Arbitration and Conciliation Act, 1996 and accordingly this Court set aside the judgments and order and remanded the matters back to the District Court for deciding the application under Section 14 of the Limitation Act on merit. In view of the Judgment in State of Goa vs. M/s.Western Builders (supra), the counsel for the respondent has not seriously opposed to the applicability of Section 14 of the Limitation Act which deals with exclusion of time spent in prosecuting the remedy before the wrong forum bona fide. Therefore, we set aside the order passed by the High Court and remit the matter back to the District Court, Nagpur to decide the objections raised by the appellant-Insurance Company under Section 34(3) of the Arbitration and Conciliation Act, 1996 and decide the same on merit after affording opportunity to the respondent herein.

Since the matter is pending for very long time before one forum or the other, we direct the District Court, Nagpur to dispose of the matter within six months from today.

We make it clear that we have not decided the objections and other issues raised on merits.

The Civil Appeal stands disposed of accordingly with the above observation. However, pending disposal of the matter by the District Court, we direct the appellant-Insurance Company to deposit the amount awarded by the Arbitrator Shri A.Sankaran to the credit of Arbitration Petition No.164/2005 on the file of the District Court, Nagpur. The Appellant-Insurance Company shall now deposit Rs.1,70,65,170/- (Rupees one crore seventy lakhs sixty five thousands, one hundred seventy only) to the credit of Arbitration Petition No.164/2005 within one month from today. On such deposit, the District Court shall invest the same in a nationalised bank in a short term deposit.

We also reserve liberty to the respondent to move an application for withdrawal of the said amount before the said court and if such an application is filed, the District Court is directed to dispose of the same on merits and in accordance with law.

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