S. Seshadri and another vs H.N. Narasihmadass

Gangadhara Rao, J.—The substantial question of law that arises in this Second Appeal is whether the time taken in arbitration proceedings and the appeal and the revision therefrom, can excluded while computing the period of limitation for a suit filed by one partner against another for rendition of accounts. The plaintiff is a resident of Anantapur and the defendant is a resident of Mysore. They entered into a partnership in December, 1948 under the name and style of ''Timber Trading Company; Anantapur'' for carrying on business in the purchase and sale of timber. Disputes arose between them. On 28th November,1954, the plaintiff and the defendant referred the dispute for decision by four named arbitrators and executed an arbitration agreement in their favour S. A. No. 261/1977 dt. 24-11-1978. The arbitrators passed an award on 13th, December, 1954, whereby the plaintiff was directed to pay a sum of Rs. 2800/- to the defendant within three months from that date. The defendant filed O. S. No. 9/1955 in the Sub-Court, Anantapur on 23rd February 1955 for passing a decree in terms of the Award. The plaintiff filed 0. P. No. 27/1955 in the Sub-Court, Anantapur u/s 30 of the Arbitration Act to set aside the Award. Both the suit and O. P. were tried together by the Sun-Court, Anantapur, and on 25th February 1957, O. P. No. 27/1955 was dismissed and the suit was decreed. Thereupon, the plaintiff filed in the District Court, Anantapur, A. S. No. 91/1957 against the decree in O. S. No. 9/1955, and C. M. A. No. 19/1957 against the order in O. P. No. 27/1955, Both the appeals were heard together by the Additional District Judge, Anantapur. He delivered a common judgement on 14th November, 1958 allowing both the appeals by dismissing 0. S. No. 9/1955 and setting aside the Award made by arbitrators. The defended then preferred C. R. P. Nos. 7811/1959 and 1681/1960 in the High Court of Andhra Pradesh against the judgment and decree of the Additional District Judge, Ananathapur. Both the Civil Revision Petitioners were dismissed by the High Court by a common order dated 26th October, 1962. The plaintiff instituted the present suit, O. S. No. 81/1965 on 23rd August, 1965 for dissolution of partnership and for taking accounts thereof in the Court of the Subordinate Judge, Ananthapur. He alleged that the partnership firm was not dissolved and the accounts were not finalized, and that the defendant who was incharge of the accounts had not accounted to him. He claimed to exclude for the purpose of limitation the period from 28th November, 1954, the date of the reference to the arbitration till 26th October, 1962, when the High Court passed orders in C. R. Ps. confirming the judgment of the Additional District Judge, Ananthapur setting aside the award. The defendant contended that the partnership stood dissolved in 1954, and the prior arbitration proceedings and the consequential legal proceedings did not give the plaintiff any extended period of limitation and the suit was barred by limitation. He submitted that the plaintiff was the managing partner of Firm and he had to account. On a consideration of the evidence on record, the learned Subordinate Judge held that the firm was dissolved in 1954. He also held that the Suit was not barred by limitation, for until the matter was finally decided by the High Court the plaintiff did not acquire a right to take appropriate legal proceeding for settlement of accounts produced by the plaintiff, Exs. A-12 to A-17 were true and correct and the period for which accounts had to be taken was from 1st August, 1952 to 30th September, 1954. He held that the defendant was the accounting party in respect of purchase of timber made by him in Mysore State with the partnership funds or on behalf of the partnership, and the plaintiff was the accounting party in respect of sales of timber and other stock-in trade of the partnership at Ananthapur. He observed that the defendant was at liberty to produce accounts and satisfy the Commissioner and the Court at the time of taking accounts that they were genuine, and the patti, Ex. B. 5 given by the plaintiff to the defendant in September, 1954 should also be considered along with the accounts and that neither the plaintiff nor the defendant could be said to be in exclusive possession of all the partnership accounts, nor could be deemed to be the manager of the partnership. Therefore, he passed a preliminary decree for taking account of the dissolved partnership in terms of Ms findings.

Questioning that decree the defendant tiled A, S. No. 20/1971 in the Court of the District Judge, Ananthapur. The learned Judge agreed with the trial Court that the partnership was dissolved in Sept 1954. On the question of limitation he held that Sec. 14 of the Limitation Act was applicable, that from the date of the Additional District Judge''s decision on 14th November, 1958 there was no impediment in the way of the plaintiff from filing this suit, that the period of limitation started running from that date, and since the suit was filed beyond three years from that dale, it was barred by limitation. In view of that finding, he allowed the appeal and dismissed the suit. He did not go into merits.

Aggrieved by that judgment, the plaintiff has filed this second appeal. The learned counsel for the appellant has submitted that it is Sec. 37(5) of the Arbitration Act that applies, but not Section 14 of the Limitation Act, and the suit is in time. On the other hand, the learned counsel for the respondent has submitted that the defendant had no stay in the Civil Revision Petitions, and there was no legal impediment for the plaintiff to file a suit after 14th November, 1958, and therefore, the suit was barred by limitation.

It is not disputed by the learned counsel for both the parties that for account and a share of profits of a dissolved partnership, the period of limitation is three years to be reckoned from the date or dissolution under Art. 5 of the Limitation Act of 1903. It correspondents to Article 106 of the Limitation Act of 1908, In this case, the finding of both the lower courts was that the partnership firm was dissolved in September, 1954. The suit was filed on 23rd August, 1965. It is barred by limitation, for it is more than three years. But the plaintiff claims exclusion of time from 28th November, 1954, when the dispute was referred to Arbitration, to 26th October, 1962 when the High Court dismissed the two Revision Petitions. The point for consideration is whether he can exclude that time. Section 37 (5) of the Arbitration Act reads as follows:-

"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 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 proceedings (including arbitration) with respect to the difference referred".

Since this is a special section applicable to arbitration proceedings, Sec. 14 of the Limitation Act cannot be invoked.

In Purshottamdas Hassaram Sabnani Vs. Impex (India) Ltd., Chagla, C. J., and Dixit J., held that in view of the provisions of Section 37(5) of the Arbitration Act, Section 14 of the Limitation Act, could not be made applicable to arbitration proceedings, and the time taken up in arbitration proceedings could be excluded u/s 37 (5) of the Arbitration Act, provided the tests laid down therein were satisfied.

In order to attract Sec. 37 (5) of the Arbitration Act, the Court must order that the award be set aside, or that the arbitration shall cease to have effect with respect to the difference referred. Then the period between the commencement of the arbitration and the date of the order of the Court can be excluded in computing the time prescribed by the Indian Limitation Act for the commencement of proceedings, including arbitration, with respect to the difference referred. In this case, the award given by the arbitrators was set aside and the arbitration agreement ceased to have effect. The present suit was filed with respect to the difference that was referred to the arbitrators.

The next point for consideration is whether the date of the order of the ''Court'' in Section 37 (5) of the Arbitration Act means, the order of the original Court or of the appellate and the revisional Court as well. In Babulal and Another Vs. Ramswarup, Rajasthan High Court held that, the word ''Court'' in Sec. 37 (5) included the appellate and revisional Court and the plaintiff was entitled to the exclusion of the period taken by him in failing appeal or revision against the order of the Court setting aside the award Following these decisions, I hold that the plaintiff is entitled to exclude the time from 28th November, 1954, when the reference was made to arbitration, to 26th October, 1962 when the revision petitions were dismissed by the High Court. In the view I have taken, it is unnecessary for me to refer to the decisions referred to by the learned counsel for the respondent with reference to Section 14 of the Limitation Act. In the result, I allow the appeal and set aside the judgment of the learned District Judge, Ananthapur. Since he has not disposed of the appeal on merits, the. matter is remanded to him for that purpose. In the circumstances of the case, I direct each party to bear his costs in this appeal. Court fee to be refunded to the appellant.