Globe Motors Ltd. v. Mehta Teja Singh & Co., (1984) 55 Comp Cas 445 (Del)

Two big questions: Was the request under Section 20, Arbitration Act filed in time? And was the 1 June 1967 agreement still valid?

The Court said the Section 20 move was within time because Article 137 gives a 3-year limit from when the right to apply arises, and continuing defaults can refresh it. But the 1967 agreement was found bad for the company and used for private gain—so it was declared void and fit for rescission.

• Is the Section 20 request to refer disputes to arbitration time-barred?
• Is the June 1, 1967 marketing agreement effective and valid?

• Article 137 (Limitation Act): Residual 3-year period applies where no specific article fits; time runs from when the right to apply accrues.
• Recurring defaults: Each fresh default can give a fresh starting point for limitation regarding the application.
• Arbitrator’s role: Once referred, the arbitrator can decide limitation for parts of the claim.
• Directors’ fiduciary duty: Directors must place the company’s interest first; self-serving arrangements are voidable/void.

Held (Limitation): The Section 20 application is in time. Under Article 137, a three-year period applies from accrual; continuing defaults renew limitation. The arbitrator may decide limitation for specific claim slices.

Held (1967 Agreement): No statutory need to place it before the general body; Section 299 not violated (interests disclosed) and Section 294 not triggered (not a sole selling agent appointment). Still, looking at fiduciary standards, the arrangement was bad for the company. The agreement is null/void; rescission allowed.

• Article 137 supplies a 3-year limit for Section 20 applications; recurring defaults can refresh time.
• Arbitrability unaffected by some time-barred parts; the arbitrator can filter them.
• Fiduciary duty first: Even if formalities are met, a self-benefit deal that harms the company is void/voidable and liable to rescission.

It clarifies two exam staples: how Article 137 works for arbitration references and how courts police directors’ self-dealing even without technical violations.

Mnemonic: “3-D-R” — 3 years (Art. 137) • Defaults refresh • Rescind harmful insider deals.

1. Spot accrual and continuing defaults.
2. Refer disputes; let the arbitrator prune time-barred parts.
3. Review director benefit vs company interest; rescind if harmful.

Issue: (i) Is the Section 20 arbitration request time-barred? (ii) Is the 1 June 1967 agreement valid?

Rule: Article 137 → 3 years from accrual; recurring defaults refresh. Directors owe strict fiduciary duties; self-serving harmful arrangements are void/voidable.

Application: Continuing non-performance kept limitation alive for applying; directors’ conduct showed benefit without real work—harm to company.

Conclusion: Application in time; agreement void; rescission available. Arbitrator to examine limitation for components.

Article 137

Residual limitation rule: 3 years from when the right to apply accrues.

Section 20 (Arbitration Act)

Provision (old Act) to seek a court order sending disputes to arbitration.

Rescission

Undoing a contract and restoring parties due to unfairness or breach.

• Arbitration limitation precedents (Art. 137)
• Directors’ fiduciary duty & self-dealing
• Company interest vs insider benefit cases