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REPORTABLE

IN THE SUPREME COURT OF INDIA

  CIVIL APPELLATE JURISDICTION

CIVIL      APPEAL     NO.     4360     OF     2006       

    MINERALS & METALS TRADING CORPORATION OF   INDIA LTD.

...   APPELLANT(s)

                       Versus

OCEAN KNIGH MARITIME CO. LTD. AND OTHERS ...   RESPONDENT(s)

J     U     D     G     M     E     N     T    

   R.M.     LODHA,J.   

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 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 between the  

appellant and respondent No.1.

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

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carriage of a cargo of Rock Phosphate in bulk.  The  

disputes arose between the parties in respect of  

demurrage charges.  Clause 56 of the Charter Party which  

contains arbitration clause, reads as follows:

“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  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.”

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.

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.

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.

7.    The two arbitrators concluded the hearing on May

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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  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 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.

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 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.

11. By  the impugned order, the Single Judge

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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.

13. We have heard Mr. Jay Savla, learned counsel  

for the appellant.

14. The sole question that requires consideration  

by us is 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  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 proceedings in  Court.  

(2) Notwithstanding any term in an arbitration  agreement 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 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

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only one Article namely; Article 137 which reads as  

follows:

PART     II   –   OTHER     APPLICATIONS   

137 Any other application  for which no period of  limitation is provided  elsewhere in this  division.

Three years When the right  to apply  accrues.

17. The above Article  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 three years commences when  the  

right  to apply accrues. We have, therefore, to 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 under Article 137 would begin to  

run.

18. The High Court in the impugned order has noted  

that the arbitration proceedings could not reach  the  

desired destination and the two arbitrators became  

functus officio due to the reason that the  time granted  

for publishing the award had  expired.    The High  

Court, further noted that there had been a dead-lock  

since 1992 when last hearing was held.   

19. As noted above,  the parties extended the time

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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-in-reply to the Petition  

under Sections 5,11 and 12 of the 1940 Act  before the  

High Court, categorically stated that the 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 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.

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 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

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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 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 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-aside. The Arbitration Petition  (O.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.  

          .....................J.                           (R.M. LODHA)   

                     .....................J.                       (H.L. GOKHALE)

  NEW DELHI    MARCH 29, 2012.