Citation: 2022 SCC OnLine Del 3123
Court: The High Court of Delhi
Coram: Anup Jairam Bhambhani, J.
Date: 27th September 2022
Keywords: Section 11, Arbitration & Conciliation Act, 1996 (the ‘A&C Act’), Limitation Act, 1963, Consent of Parties
A Single Judge bench of the Delhi High Court adjudicated that despite the consent of parties, arbitration proceedings cannot be initiated if such an application is time-barred.
The Petitioner and the Respondent entered into an Agreement dated 02.05.2014 (“the Agreement”) for the sale, implementation, and installation of multi-media accessory systems and software for 24 Hour Smart Live classes in the schools owned by the Respondents. The Petitioners terminated the Agreement via notice dated 04.01.2017 and sent subsequent reminder notices on 24.03.2017 and 22.08.2017. However, the current petition was filed under Section 11 of the A&C Act for the appointment of an Arbitrator for a dispute stemming from the Agreement only on 21.01.2022, thereby crossing the three-year limitation as encapsulated within Article 137 of the Limitation Act, 1963.
Whether the invocation of arbitration via the current petition is time-barred?
Analysis: The Respondents relied on BSNL v. Nortel Networks India to argue that the limitation period for the notice of arbitration would not get extended by correspondence through letters between the parties. It was further emphasised that a claim would be time-barred unless a “clear notice invoking arbitration setting out the particular dispute” is sent to the other party within three years. However, the Petitioner brought to the attention of the Court that in the aforementioned judgment it was noted that the Court may only refuse to refer the matter to arbitration “where there is no vestige of doubt that the claim is time-barred” and that in the event of even the slighted doubt, the rule is to refer the dispute to arbitration.
The Court noted that the invocation notice dated 28.07.2021 for payment of arrears, which was built upon the termination notice dated 04.01.2017, denotes that the cause of action first arose in the latter. Hence, the invocation notice should have been issued before 03.01.2020, as against 28.07.2021, which is beyond the prescribed period of limitation. The Court relied upon N. Balakrishnan v. M. Krishnamurthy and observed that limitation only “bars a legal remedy and not a legal right” since it has been founded upon a policy to ensure that remedies are not available “endlessly”.
The Court held that arbitration cannot be invoked once a claim is ex-facie time-barred under the Limitation Act, 1963 despite the consent of the parties. It also affirmed that communication between parties does not extend the period of limitation. This decision is in compliance with the Apex Court’s order dated 03.09.2019 in M/s Geo Miller & Co. Pvt. Ltd. vs. Chairman, Rajasthan Vidyut Utpadan Nigam, where it notes that limitation must be calculated from the date of the first cause of action such that any further negotiations must be pleaded and explained for its exclusion from the limitation period.
[This case note has been authored by Vatsala Poddar, an Editor at Mapping ADR.]