Report No. 176
2.35.1 Section 43: Regarding application of the Limitation Act, 1963:
Proposed sub-section (5) and (6) in section 43 A lacuna under sec. 43 was pointed out in the Bombay seminar. For purposes of the Limitation Act, 1963, sec. 43(4) now excludes the period spent in arbitration proceedings where the award is ultimately set aside.
2.35.2 But there are other situations where the arbitral agreement might be held to be not in existence or that it is null and void or invalid. Such issues can arise, before the stage of the arbitral award, at the stage of applications under sec. 11 of the Act before the Supreme Court or the High Court, in view of the flexible provision now proposed.
If either of these two courts hold that there is no agreement for arbitration or that it is null and void or inoperative or not capable of enforcement, there can be no arbitration. (The position is similar to sec. 33 of the old Act of 1940 in respect of which the Law Commission proposed in the 76th Report, a separate provision for excluding the period for purposes of the 1996 Act of Limitation).
2.35.3 Such a situation can also arise under sec. 16(2) and (3) of 1996 Act where the pleas of want of jurisdiction or the matter being beyond the scope of the arbitration clause, are accepted by the arbitral tribunal or affirmed on appeal by the Court. (If the pleas are refused, the matter can arise only after the award, which situation is covered by sec. 43(4).
Hence we propose to add clauses (5) & (6) to cover such cases arising under sec. 11 and sec. 16(2) and 16(3). Under sec. 8 such a question does not arise because if the arbitration does not go on, the action under sec. 8 gets revived. It is not necessary to intervene in cases where no dispute is in existence.