MINERALS & METALS TRADING CORPORATION OF INDIA LTD.versusOCEAN KNIGH MARITIME CO. LTD. AND OTHERS

                    [2012] 3 S.C.R. 965


  MINERALS & METALS TRADING CORPORATION OF                       A
                  INDIA LTD.
                              v.
   OCEAN KNIGH MARITIME CO. LTD. AND OTHERS
          (Civil Appeal No. 4360 of 2006)
                                                                 B
                      MARCH 29, 2012

         [R.M. LODHA AND H.L. GOKHALE, JJ.)

      Arbitration Act, 1940 - ss. 5, 11, 12 and 37 - Time barred
arbitration petition - By a Charter Party, respondent No. 1 had C
let its vessel to appellant for carriage of cargo - Disputes
between appellant and respondent No. 1 - Arbitration clause
in Charter Party invoked - Respondent no. 1 appointed
respondent no. 2 as its arbitrator whereas appellant appointed
respondent No.3 as its arbitrator- Time for giving the award o
by the arbitrators was up to March 31, 1993 - Arbitral award
could not be passed for want of consensus between the
arbitrators - On July 3, 1999, respondent No. 1 filed
application ulss. 5, 11 and 12 of the Act seeking removal of
respondent No. 3 as co-arbitrator and for declaration that E
respondent No. 2 was the sole arbitrator and in the alternative
seeking revocation of authority of respondent No.3 as co-
arbitrator and appointment of a new arbitrator in his place -
High Court allowed the application and after revoking the
authority of both the arbitrators appointed a former retired F
Judge of that Court as a sole arbitrator- Whether application
ulss. 5, 11 and 12 of the Act filed on July 3, 1999 by respondent
No.1 was within limitation - Held: S.37 of the Act makes
provisions of Limitation Act applicable to arbitrations - The
Limitation Act does not expressly provide for limitation for an G
application u/ss. 5, 11 and 12 of the Act - Article 137 is a
residuary provision which prescribes the period of three years
for an application for which no period of limitation is provided
elsewhere in the Limitation Act - Period of three years
commences when the right to apply. accrues - In the instant
                                 965                              H
    966     SUPREME COURT REPORTS                  [2012) 3 S.C.R.

A   case, right to apply for removal of respondent No.3 as co-
    arbitrator or for revocation· of his authority accrued on expiry
    of March 31, 1993 when the two arbitrators became functus
    officio - It was thus, on April 1, 1993 that respondent No.1
    became entitled to apply for the reliefs claimed in the
B   application u/ss. 5, 11 and 12 of the Act - Such application
    could have been made by respondent No.1 within three years
    from April 1, 1993 and not thereafter - Application ulss. 5, 11
    and 12 of the Act filed by respondent No.1 was clearly time
    barred and desetved to be dismissed as such - Limitation
c   Act, 1963 - Article 137.
        By a Charter Party, respondent No.1 had let its
   vessel to appellant for carriage of cargo. Disputes arose
   between the parties in respect of demurrage charges.
   Clause 56 of the Charter Party contained arbitration
D clause. Respondent No.1 invoked the above arbitration
   clause and vide a letter communicated the appointment
   of respondent No. 2 as its arbitrator whereas the
   appellant appointed respondent No. ·3 as its arbitrator.
   The time for giving the award by the arbitrators was up
E. to March 31, 1993. Arbitral award, however, could not be
   passed for want of consensus between the arbitrators.
   On July 3, 1999, respondent No.1 filed application under
   Sections 5, 11 and 12 of the Arbitration Act, 1940 seeking
   removal of respondent No.3 as co-arbitrator and for
F declairation that respondent No. 2 was the sole arbitrator
   and in the alternative seeking revocation of the authority
   of respondent No.3 as co-arbitrator and appointment of
   a new arbitrator in his place. The appellant raised
   objection that the application was beyond the prescribed
G period of limitation and, was liable to be dismissed on
   that ground alone. By the impugned order, the High Court
   allowed the application filed by respondent No.1 under
   Sections 5,11 and 12 of the 1940 Act and after revoking
   the authority of both the arbitrators appointed a former
H Judge of that Court Justice Usha Mehra (retired) as a sole
. MINERALS & METALS TRADING CORPN. OF INDIA LTD. 967
         v. OCEAN KNIGH MARITIME CO. LTD.

arbitrator to decide the disputes between appellant and          A
respondent No.1.
    Jn the instant appeal, the question that arose for
consideration .was whether the application under
Sections 5, 11 and 12 of the 1940 Act filed on July 3, 1999
                                                                 8
by respondent No.1 was within limitation.
     Allowing the appeal, the Court
     HEL.D: 1. Section 37 of the Arbitration Act, 1940
makes the provisions of Limitation Act, 1963 applicable
to the arbitrations. The Limitation Act does not expressly       C
provide for limitation for an application under Sections
5,11 and 12 of the 1940 Act. In this view of the matter, Part
II, Third Division of the Schedule gets attracted. This part
has title "Other Applications" and it has only one Article
namely Article 137. [Paras 15, 16] [970-G; 972-B]                D
        2. Article 137 is a residuary provision in respect of
  the applications. It prescribes the period of three years
  for an application for which no period of limitation is
  provided elsewhere in the Limitation Act. The period of        E
  three years commences when the right to apply accrues.
· One, therefore, has to s.ee as to when did respondent No .
. 1 become entitled to apply for the relief claimed in the
  application under Sections 5, 11 and 12 of the 1940 Act.
  It is from such date that limitation under Article 137 would
                                                                 F
  begin to run. [Para 17] [972-D-E]
      3. In the instant case, the parties extended the time
  for passing the award by the arbitrators till March 31,
  1993. No extension of time was sought after March 31,
. 1993. In the backdrop of the factual position, the right to    G
  apply for removal of respondent No. 3 as co-arbitrator or
.for revocation of his authority accrued on expiry of March
 31, 1993 when the two arbitrators became functus officio.
  It was thus, on April 1, 1993 that the respondent No. 1
·became entitled to apply for the reliefs claimed in the         H
    968        SUPREME COURT REPORTS .              (2012] 3 S.C.R
          1
                                                    •''         "'
A application under Sections 5,11 and 12 of the 1940 ..Act.
  Such application could have been made by respon'dent
  No. 1 within three years from April 1, 1993 and.. not
  thereafter. The limitation for making application under
  Sections 5,11 and 12 of the 1940 Act, thus, expired on
B March 31, 1996. Respondent No.1 made the application
  under above provisions on July 3, 1999. The application
  under Sections 5, 11 and 12 of the 1940 Act filed by the
  respondent No. 1 was clearly time barred and deserved
  to be dismissed as such. The High Court was in error in
C allowing that application which was filed after1,the
  prescribed period of limitation. [Paras 19, 21) [972-H; 973-
    D-FJ ..J                                                     ,,

           '                                                         J
        CIVIL APPELLATE JURISDICTION : Civil AppeaL-No.
    4360 ·of 2006.
D
        From the Judgment & Order dated 04.02.2005 of the High
    Court of Delhi at New Delhi in OMP No. 193 of 1999.
                                                          ·1
        ~~Y Savla, Renuka Sahu for the Appellant.

E         The Judgment of the Court was delivered by            .':
                                                                 •t

        R.M. LODHA, J. 1. The present appeal by special leave
                                                                 "
  arises from the order dated February 4, 2005 passed ·by:the
  Delhi High Court whereby the Single Judge of that court allowed
F the petition filed by the present respondent No.1 under Sections
  5, 11 and 12 of the Arbitration Act, 1940 (for short "the 1940
  Act") and appointed a former Judge of that Court Justice Usha
  Mehra (retired) as a sole arbitrator to decide the disputes
  betwe~n the appellant and respondent No.1.                  b·
G    · 2:' Bereft of unnecessary details, suffice it to notice for:the
  purposes of the present appeal that by a Charter Party dated
  October 14, 1987, the respondent No. 1 let its vessel ·'MV
  Ocean· Knight' to the appellant for carriage of a cargo of Rock
  Phosphate in bulk. The disputes arose between the parties in
H respect of demurrage charges. Clause 56 of the Charter Party
MINERALS & METALS TRADING CORPN. OF INDIA LTD. 969
v. OCEAN KNIGH MARITIME CO. LTD. [R.M. LODHA, J]

Nhich contains arbitration clause, reads as follows:                A

    "Clause 56: All disputes arising under this Charter shall be
    settled in India in accordance with the provisions of the
    Arbitration Act, 1940 in India, each party appointing an
    Arbitrator from out of the panel of Arbitrators maintained      B
    by the Indian Council of Arbitration, New Delhi and the two
    Arbitrators appointing an Umpire whose decision, in the
    event of disagreement between the Arbitrators, shall be
    final and binding upon both parties hereto. The Arbitrators
    and the Umpire shall be commercial men."
                                                                    c
     3. The respondent No.1 invoked the above arbitration
clause and vide its letter dated May 30, 1989 communicated
the appointment of Shri K.P. Patel (respondent No. 2) as its
arbitrator.
                                                                    D
    4. On August 14, 1989, the appellant appointed Captain
D.K. Verma (respondent No. 3) as its arbitrator.

   5. The above arbitrators jointly appointed Shri R.S.
Cooper as the Umpire.
                                                                    E
     6. On October 13, 1989, the respondent No. 1 filed a
statement of claim claiming US$ 1, 12, 136.28 along with interest
@ 18% p.a The appellant traversed the claim of respondent
No. 1 and raised diverse pleas in opposition thereto.
                                                                    F
     7. The two arbitrators concluded the hearing on May 12,
1992. It appears that the draft of the award was prepared by
one of the arbitrators and sent to the other but for want of
consensus, the award could not be given by them. It is an
admitted position that the time for giving the award by the         G
arbitrators was up to March 31, 1993. The fact, therefore, is
that the arbitrators became functus officio w.e.f. April 1, 1993.

    8. On July 3, 1999, the respondent No. 1 filed a Petition
(application) under Sections 5, 11 and 12 of the 1940 Act
seeking removal of respondent No. 3- Captain D.K. Verma as          H
    970       SUPREME COURT REPORTS                 [2012] 3 S.C.R.


A   co-arbitrator and for declaration that respondent·No. 2 - K.P.
    Patel was the sole arbitrator for deciding the disputes between
    the appellant and respondent No. 1 and in the alternative
    revoking the authority of respondent No. 3 as co-arbitrator and ·
    for appointment of a new arbitrator in his place.
B
      9. The appellant contested the above petition filed by the
  respondent No. 1 by filing an affidavit-in-reply. Inter alia an
  objection was raised by the appellant that the petition was
  beyond the prescribed period of limitation and, was liable to
C be dismissed on that ground alone.

         10. On November 26, 2001, the petition filed by the
    respondent No. 1 was dismissed in default but later on, it was
    restored.

0        11. By the impugned order, the Single Judge revoked the
    authority of both the arbitrators and appointed a former Judge
    of that Court Justice Usha Mehra (retired) as the sole arbitrator.

         12. Despite service of notice, the respondent No. 1 has
    not chosen to appear.
E
      . 13. We have heard Mr. Jay Savla, learned counsel for the
    appellant.

        14. The sole question that requires consideration by us is
F whether the application under Sections 5, 11 and 12 of the 1940
  Act filed on July 3, 1999 by the respondent No.1 was within
  limitation.

       15. Section 37 of the 1940 Act makes the provisions of
  Limitation Act, 1963 (for short " the Limitation Act") applicable
G to the arbitrations. It reads as follows:

          "37. Limitations.

          (1) All the provisions of the Indian Limitation Act, 1908 ,
          (9 of 1908 .) shall apply to arbitrations as they apply to
H
          proceedings in Court.
MINERALS & METALS TRADING CORPN. OF INDIA LTD. 971
v. OCEAN KNIGH MARITIME CO. LTD. [R.M. LODHA, J.]

   (2) Notwithstanding any term in an arbitration agreement        A
   to the effect that no cause of action shall accrue in respect
   of any matter required by the agreement to be referred until
   an award is made under the agreement, a cause of action
   shall, for the purpose of limitation, be deemed to have
   accrued in respect of any such matter at the time when it       B
   would have accrued but for that term in the agreement.
   (3) For the purposes of this section and of the Indian
   Limitation Act, 1908 , (9 of 1908 .) an arbitration shall be
   deemed to be commenced when one party to the
   arbitration agreement serves on the other parties thereto       c
   a' notice requiring the appointment of an arbitrator, or
   where the arbitration agreement provides that. the
   reference shall be to a person named or designated in the
   agreement, requiring that the difference be submitted to
   the person so named or designated.                              o
    (4) Where the terms of an agreement to refer future
    differences to arbitration provide that any claims to which
    the agreement applies shall be barred unless notice to
    appoint an arbitrator is given or an arbitrator is appointed
  · or some other step to commence arbitration proceedings         E
    is taken within a time fixed by the agreement, and a
    difference arises to which the agreement applies, the
    Court, if it is of opinion that in the circumstances of the
    case undue hardship would otherwise be caused, and
    notwithstanding that the time so fixed has expired, may on     F
    such terms, if any, as the justice of the case may require,
   extend the time for such period as it thinks proper.
    @ 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          G
  · respect to the difference referred, the period between the
    commencement of the arbitration and the date of the order
    of the Court shall be excluded in computing the time
    prescribed by the Indian Limitation Act, 1908, for the
    commencement of the proceedings (including arbitration)        H
                                                            '
    972      SUPREME COURT REPORTS                     [2012] 3 S.C.R. ~


A         with respect
                ,,     to the difference referred."

        16. The Limitation Act does not expressly provide for
  limitation for an application under Sections 5, 11 and 12 of the
  1940 Act.' In this view of the matter, Part II, Third Division of the
  Schedule gets attracted. This part has title "Other Applications"
8 and it has only one Article namely; Article 137 which reads as
  follows: ;t:;                                     . · .
               ,."'.i
                    1
                        PART II - OTHER APPLICATIONS
               (I'
c   137      Any other application Three years        When the right to
             for which no period of                   apply accrues'.
             limitation is provided
             elsewhere in this
             division.
D       17. The above Article is a residuary provision in respect
  of the applj_cations. It prescribes the period of three years for
  an applica,tion for which no period of limitation is provided
  elsewher~ :in the Limitation Act. The period of three years.
  commenc~s when the right to apply accrues. We have,
E therefore, ,t9 see as to when did the respondent No. 1 become
  entitled to apply for the relief claimed in the application under
  Sections 5, 11 and 12 of the 1940 Act. It is from such date that
  limitation ~pder Article 137 would begin to run.

F      18. The High Court in the impugned order has noted that
  the arbitr~tion proceedings could not reach the desired
  destinationtand the two arbitrators became functus officio due
  to the reasgh that the time granted for publishing the award had
  expired. The High Court, further noted that there had been a
G dead-lock since 1992 when last hearing was held.
                 r:
        19. As;noted above, the parties extended the time for
  passing the. award by the arbitrators till March 31, 1993. No
  extension of time was sought after March 31, 1993. As a matter.
  of fact, respondent No. 3 (one of the arbitrators), in his affidavit-·
H in-reolv to th.e Petition under Sections 5.11 and ,12 of the 1940
 MINERALS & METALS TRADING CORPN. OF INDIA LTD. 973
 v. OCEAN KNIGH MARITIME CO. LTD. [R.M. LODHA, J.]
· Act before the High Court, categorically stated that the          A
  arbitrators became functus officio on March 31, 1993.

     20. Section 5 of the 1940 Act postulates that the authority
of an appointed arbitrator or umpire shall not be revoked
without the leave of the Court unless arbitration arbitration
                                                                    8
agreement indicates contrary intention. Section 11 empowers
the Court to remove arbitrator or umpire in the circumstances
incorporated therein. Section 12 confers consequential power
on the Court where it grants leave and revokes the authority of
the appointed arbitrator or umpire under Section 5 or removes
the arbitrator/umpire in exercise of its power under Section 11.    C
      21. Insofar as the present case is concerned, in the
backdrop of the factual position noted above, the right to apply
for removal of respondent No. 3 as co-arbitrator or for
revocation of his authority accrued on expiry of March 31, 1993     D
when the two arbitrators became functus officio. It was thus,
on April 1, 1993 that the respondent No. 1 became entitled to
apply for the reliefs claimed in the application under Sections
5, 11 and 12 of the 1940 Act. Such application could have been
made by respondent No. 1 within three years from April 1, 1993
and not thereafter. The limitation for making application under     E
Sections 5, 11 and 12 of the 1940 Act, thus, expired on March
31, 1996. The respondent No. 1 made the application under
above provisions on July 3, 1999. The application under
Sections 5, 11 and and 12 of the 1940 Act filed by the
respondent No. 1 was clearly time barred and deserved to be         F
dismissed as such. In our opinion, the High Court was in error
in allowing that application which was filed after the prescribed
period of limitation.
     20. Civil Appeal is, accordingly, allowed. The impugned
order dated February 4, 2005 passed by the High Court is set-       G
aside. The Arbitration Petition (0.M.P. No. 193 of 1999) filed
by the respondent No. 1 is dismissed as time barred. As the
respondent No. 1 has not chosen to appear, parties shall bear
their own costs.
8.8.8.                                         ~ppeal allowed.      H