1. This is an appeal by the plaintiff arising out of the following facts:
2. The plaintiff had borrowed some money from the Sahkari Samiti, Balua Mahson. The plaintiff failed to pay the money. The Circle Officer was appointed as an Arbitrator. He decided the case against the plaintiff. The plaintiff then filed the suit on the allegation that the award by the Arbitrator was null and void on the ground that the rule of limitation was not considered as the loan on the basis of which the award was made had been taken beyond three years from the date of the award. It was also contended that the Arbitrator did not follow the procedure laid down under the Co-operative Societies Act.
3. The suit was contested by the defendant-respondent on the ground that the award was valid; that the rule of limitation does not apply to awards made under the Co-operative Societies Act and that the Arbitrator gave the award in accordance with rule.
4. The learned Munsif held that the loan was taken beyond three years and as the rule of limitation was not followed, therefore, the Arbitrator misconducted himself and the award was bad in law. He, therefore, decreed the suit. Being dissatisfied, Sahkari Samiti, Balua Mahson filed an appeal.
5. The lower Appellate Court held that the Limitation Act does not apply to statutory arbitrations and, therefore, the suit was barred by Rule 134 of the Co-operative Societies Rules. On these findings, the appeal was allowed, the judgment and decree passed by the learned Munsif was set aside and the plaintiff's suit was dismissed. Being dissatisfied, the plaintiff has filed this appeal.
6. The main contention of the learned Counsel for the appellant was that the Limitation Act applied to arbitration proceedings under the Co-operative Societies Act and, as such the finding by the trial Court was wrong. In the Limitation Act, under Section 2(j), 'period of limitation' has been defined and it means the period of limitation prescribed for suit, appeal and application under the schedule. There is no difficulty in coming to the conclusion that the arbitration proceeding under the Co-operative Societies Act is neither a suit nor an appeal nor an application in the schedule.
7. My attention was drawn to Section 3 of the Limitation Act which lays down that subject to provisions of Sections 4 to 25, every suit, appeal or application made after the prescribed period of limitation shall be dismissed although limitation has not been set up as a defence. The Limitation Act bars the remedy. It does not cease the liability which one incurs. All that Section 3 says is that if a law court finds that prima facie a case is not within the period of limitation it shall dismiss it although no such plea is taken in defence. This simply means that the court concerned may say that your remedy is barred but the liability would exist and the man who is liable may choose to fulfil the liability even though the remedy is barred by limitation and the limitation would not stand in his way.
8. It has next to be seen as to whether this arbitration under the U. P. Cooperative Societies Act is an arbitration to which Section 37 of the Arbitration Act applied. Section 37 of the Arbitration Act lays down that all the provisions of the Indian Limitation Act shall apply to arbitrations as they apply to proceedings in court. In view of this section, the entire Limitation Act would apply to proceedings under the Indian Arbitration Act. But Section 46 lays down that the provisions of Section 37 would not apply to cases of statutory arbitration.
9. The Arbitration Act deals with arbitrations outside the court, arbitration in pending suits and arbitrations in suits where the dispute relates on the basis of a contract and the contract contains an agreement of arbitration clause. Thus is all the three cases, the arbitration is with the consent of the parties and it is a contractual arbitration.
10. The arbitration under the U. P. Co-operative Societies Act is not a contractual arbitration or an arbitration by agreement. There is a provision in the Co-operative Societies Rules given under Rule 115 about a statutory arbitration between certain class of persons mentioned in that rule and no suit between the persons mentioned in that class and connected with the Co-operative Societies can be filed and decided in the Civil Court. Under the U. P. Co-operative Societies Act and the rules, the Arbitrator is appointed by the Registrar where the other party's consent or contract is not necessary. Thus an arbitrator appointed under the U. P. Co-operative Societies Act is a statutory Arbitrator. It was for this reason that Section 46 was added in the Arbitration Act limiting the application of Section 37 to only those arbitration cases, which were governed under the Arbitration Act. Section 46, therefore, clearly lays down that Section 37 of the Arbitration Act which applies Limitation Act to the Arbitration proceedings does not apply to statutory arbitrations. Except Section 37 of the Arbitration Act, there is no other provision, so far as I know, and no such provision was shown to me under which the provision of the Limitation Act shall be applied to the statutory arbitration as well.
11. The learned Counsel for the appellant relied on a decision of the Privy Council Ramdutt Ramkissen v. E. D. Sassoon & Co., AIR 1929 PC 103 where it was held that the Limitation Act applied to arbitration proceedings. In the Privy Council case, there was an arbitration by contract and not a statutory arbitration. Therefore, even though there was no provision in Schedule 2 of the Civil Procedure Code, equivalent to Section 27 and Section 46 of the Arbitration Act, yet the above principle was rightly laid down. Their Lordships of the Privy Council were not concerned with the statutory arbitration and, therefore, the facts of the Privy Council case is of no help in determining the point in issue in this case.
12. The learned Counsel for the appellant also referred a decision of the Rangoon High Court, U. Kyaw Tha v. Co-operative Town Bank of Hanzada, AIR 1940 Rang 157 wherein it was held that where the Arbitrator failed to apply the law of limitation, the Civil Court has power to set aside the award. In this Single Judge decision of the Rangoon High Court, the distinction between a contractual arbitration and statutory arbitration was not brought to the notice of the learned Judge who decided this case and, therefore, this case too does not apply to the facts of the present case.
13. The learned Counsel for the appellant next referred to Section 42-A of the U. P. Co-operative Societies Act in support of its contention that law of limitation was applied to arbitration under the Co-operative Societies Act. All that this section says is that in a case against a member who has ceased to be a member or who has died, the period shall be computed from the date from which he ceased to be a member. The Limitation Act has not been applied and a method of computing limitation given under Section 42 is foreign to period of limitation under the Limitation Act in suits based on loan or for recovery of money. In the Limitation Act, the period of limitation starts from the date of the loan or the date of demand and refusal. This only means that special kind of limitation was applied to a particular kind of suit under the U. P. Co-operative Societies Act. This will not mean that the Limitation Act was applied to the arbitrations under the U. P. Co-operative Societies Act.
14. For this reason, I am, therefore, of the opinion that the lower appellate Court rightly held that the arbitrator's award was not vitiated because the law of limitation was not taken into account by him in making the award.
15. It was next argued that the Civil Court had jurisdiction to try all suits unless they are exempted under some special law. In support of this contention, the learned counsel for the appellant relied on a Supreme Court decision Dharni Dhar Bhalla v. District Co-operative Bank Ltd., (1969) 3 SCC 694. All that was held in this case was that the Deputy Registrar gathered information regarding an alleged embezzlement behind the back of the appellant and has based his award without giving an opportunity to defend himself nor a copy of the complaint was furnished to him. He was also not given reasonable opportunity to file a written statement. Therefore, in the Supreme Court case, there was miscarriage of justice as the award was against the principles of natural justice. It was, therefore, held that the award was not given within the four corners of the U. P. Co-operative Societies Act and as such the Civil Court had jurisdiction to give a declaration that the award was bad in law. The principle laid down in the Supreme Court case has nothing to do with the present case because there is no iofa of evidence or suggestion that the award in this case was vitiated on any such ground or it was beyond the authority which the Arbitrator had in him under the U. P. Co-operative Societies Act and Rules.
16. In the result, the appeal fails. It is hereby dismissed with costs. The stay order is vacated.