Rasiklal H. Narechania and Another vs Union of India and Others

This petition is filed by the Arbitrators under the provisions of S. 13 of the Arbitration Act, 1940 (for short/the" Act") stating a special case for the opinion of this Court on the question of law involved in the arbitration proceedings before them. The facts giving rise to this Petition are as under:

A Charter party dated 28th September, 1983 was entered into between the Scindia Steam Navigation Company Limited, Bombay and the President of India for and on behalf of the Union of India, under which a motor vessel ''Walchand'' was chartered for carnage of bulk cargo for the benefit of the Food Corporation of India on the terms and conditions mentioned therein. The Food Corporation of India was acting as the handling agents in respect of the cargo for the carriage of which the said vessel was chartered. Disputes and differences arose between the Union of India and the Food Corporation of India on one side and the Scindia Steam Navigation Company Limited, Bombay (''SSNL''for short) on the other side in respect of the carriage of the cargo under the said Charter party. Clause 53 of the said Charter party which constituted arbitration agreement between the claimants and the respondents reads as under:

"53. Arbitration clause.

Any dispute arising under this charter shall be settled in accordance with the provisions of the Indian Arbitration Act, 1940 in India, each party appointing an Arbitrator, and the two Arbitrators in the event of disagreement appointing an Umpire whose decision shall be final and binding upon both parties hereto. The Arbitrators shall be commercial men."

The arbitration agreement as contained in the said Charter party has been incorporated in the bill of lading since the bill of lading contains a clause to the following effect:

"SUBJECT TO ALL TERMS, INCLUDING ARBITRATION CLAUSE, CONDITIONS AND EXCEPTIONS OF THE RELEVANT CHARTER PARTY AND ANY ADDENDA THERETO TO BE CONSIDERED AS INCORPORATED HEREIN AS IF FULLY WRITTEN, ANYTHING TO THE CONTRARY IN THIS BILL OF LADING NOTWITHSTANDING."

In accordance with the arbitration agreement between the parties, the claimants made reference of their claim to arbitration and the present Petitioners were appointed as Arbitrators. Since the Respondents have contended before the Petitioners that the claim of the Claimants is not maintainable as it is barred by limitation or stand, extinguished by reason of provisions contained in U. S. Carriage of Goods by Sea Act, 1936 (''US Act 1 for short), the Petitioners, finding it a difficult question of law, have referred the following questions to this Court for its opinion under the provisions of S. 13 of the Act:

"a) What is the correct interpretation of the word "Suit" as appearing in S. 5 of the U. S. Carriage of Goods by Sea Act, 1936 and whether the Arbitration proceedings are included within the meaning of the word "suit" in that section.

(b) Whether the claim of the claimants for damages suffered by them is barred by limitation/extinguishment as contended by the respondents."

Mr. Shah, the learned counsel for the respondents, has submitted that under S. 3 sub-clause (6) of the US Act, the carrier and the ship get discharged from all liability in respect of the loss or damage unless the suit is brought within one year after delivery of the goods or the date when the goods should have been delivered and as the claimants invoked arbitration on 18th April 1985 when the vessel completed discharge on 23rd February 1984, the claimants'' claim is barred by limitation. Mr. Shah has further submitted that the word ''suit'' in the section includes ''arbitration'' and since the claimants did not commence arbitration proceedings within a period of one year from the date of completion of the discharge and delivery of the cargo, the claimants'' claim got extinguished. Ms. Srivastava, the learned counsel for the claimants, submitted that the arbitration proceedings commenced by the claimants are governed by clause (53) of the Charter party and accordingly they are to be conducted as per the provisions of the Act. It is further submitted on behalf of the claimants that the ''arbitration proceedings'' invoked by the claimants being not a ''suit'' as contemplated under the provisions of S. 3(6) of the US Act, neither the claim of the claimants is barred nor it is extinguished.

A suit includes such proceedings as are under that description, dealt with by the Code of Civil Procedure, 1908 or such as are by the operation of the particular Act are to be treated as suits. Such proceedings generally terminate in a decree. The arbitration proceedings commenced by reason of existence of arbitration agreement between the parties, though adjudicate dispute between the parties, do not terminate in a decree. In the case of Son Shipping Co. Inc. v. De Fosse & Tanghe reported in 199 F 2d 687. United States Court of Appeals has held that an arbitration proceeding is not a suit and as such S. 3, sub-sec. (6) of US Act which bars the suit after the lapse of period of one year as mentioned therein does not apply to the arbitration proceeding. The said judgment has been followed by Court of Appeal in the case of the "Merak" reported in (1964) 2 L LR 13. In the case of the ''Merak'' Lord Justice Sellers has held that -- "The Hague Rules are of international application, arbitration has long been a method of settling disputes agreed by parties to contracts for carriage by sea and while it was agreed that there should be a period of limitation there is nothing to indicate that a step in an arbitration would not be as effective as a writ in an action unless ''suit'' can only have the meaning in our Courts of an action. I do not find any authority which requires us so to hold. In their context I think the words mean "unless proceedings are brought within one year", and that the commencement of arbitration proceedings would meet the requirement." However, so far as the legal position as governed by the provisions of the Act in India is concerned, an award is not as effective as a writ in an action in a Court of law inasmuch as for the award to be as effective as a writ in an action, under S. 17 of the Ad judgment has,'' to be pronounced and decree in terms thereof is required to be passed. That being so, the distinction between a ''suit'' and an ''arbitration proceeding'' is apparent. Section 3, sub-clause (6) of US Act does not use the words "unless proceedings are brought within one year", it specifically uses the word ''suit'' and therefore what is contemplated by the user of the word ''suit'' in that section is an action in a Court of law which can be effective as a writ of the Court and in that view of the matter, in my opinion, an arbitration proceeding is not included in the word ''suit'' within the meaning of S. 3(6) of US Act.

Mr. Shah has submitted that the sub-clause (6) of S. 3 of US Act provides for extinction of right to compensation and not merely a rule of limitation. The words ''discharge from liability'', in the submission of Mr. Shah, do not cannot free from remedy as regards liability'' but are mere apt to mean a total extinction of the liability following upon an extinction of the right. In the submission of Mr. Shah since the arbitration was even not invoked by the claimants within a period of one year from the last date of completion of discharge, the respondents are discharged from liability and the right of the claimants to recover any amount from the respondents get extinguished. In support of his submission. Mr. Shah has put reliance on the judgment of the Supreme Court in the case of The East and West Steamship Company, George Town, Madras Vs. S.K. Ramalingam Chettiar, . In ''that case, suit was filed beyond the period mentioned in sub-clause (6) of Section 3 of US Act. The Supreme Court took the view that since the suit was filed beyond the period mentioned in sub-clause (6) of Section 3 of US Act, the right of the plaintiff therein to claim compensation was extinguished before the date of the suit. Since, in my view, the institution of arbitration proceeding is distinct from the institution of suit and the provisions of sub-clause (6) of Section 3 of US Act contemplates suit, merely because the claimants commenced the arbitration proceedings after expiration of the period of one year from the date of completion of discharge, the claimants'' claim against the respondents has not been extinguished.

Accordingly, the questions referred by the petitioners are answered as under:

(a)The arbitration proceedings are not included in the word ''suit'' as appearing in sub-sec. (6) of S. 3 of U. S. Carriage of Goods by Sea Act, 1936;

(b) The claim of the claimants is neither barred by limitation nor extinguished as contended by the respondents.

The Prothonotary and Senior Master of this Court is directed to forward to the petitioners the papers received from them in the matter along with a copy hereof within a period of four weeks from today.

Order accordingly.