Duty Of Courts To Examine And Reject Time Barred Claims To Prevent Parties From Being Drawn Into Costly Arbitration Processes: Gauhati High Court

Brief Facts:

The Petitioner approached the Gauhati High Court (“High Court”) and filed an application Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for appointment of an Arbitrator as per the Arbitration Clause in a Contract Agreement. The Petitioner contended that Clause 15.0 of the contract agreement stipulated arbitration and dispute settlement governed by Clauses 63 and 64 of the General Conditions of Contract. It argued that the it fulfilled all contractual obligations by completing the work in June 2017. However, despite submitting requests for the release of the security deposit and PVC bill, the Respondents did not comply. It stated that letters requesting release were submitted on multiple occasions, including one dated 11.05.2021. As there was no action from the Respondents, the Petitioner invoked the Arbitration Clause via a letter dated 28.01.2023 to resolve the dispute.

Furthermore, the Petitioner highlighted that although a final bill for the contract work was signed by the Deputy Chief Engineer/Con/SPTR on 19.11.2018, the Petitioner disputed its content. Allegedly, the Respondents did not honor the Arbitration Clause which prompted the Petitioner to seek court intervention for the appointment of an Arbitrator to settle the disagreement.

On the other side, the Respondents argued that the application under Section 11(6) of the Arbitration Act was time-barred according to Section 21 and Section 43(1) & 43(2) of the Arbitration Act.

Observations by the High Court;

The High Court referred to Section 21 of the Arbitration Act which states that arbitral proceedings concerning a specific dispute begin upon the receipt of a request for arbitration by the Respondent unless otherwise agreed upon by the parties. The High Court noted that the Petitioner's letters indicated the completion of the contract work in June 2017 and the signing of the final bill by the Deputy Chief Engineer/Con/SPTR on 19.11.2018. However, the Petitioner's request for the appointment of an Arbitrator was made only on 28.01.2023, well beyond the three-year period from the completion of the contract and the signing of the final bill.

Referring to the Supreme Court's decision in B and T AG vs. Ministry of Defence, the High Court emphasized the application of Article 137 of the Limitation Act, which imposes a three-year limitation period for actions where no specific limitation is provided elsewhere. The Supreme Court in this case held that the claim for arbitration must be raised promptly when the right to require arbitration accrues, akin to the initiation of a civil action when the cause of action arises.

Moreover, the High Court held that Section 43(1) and (2) of the Arbitration Act, which aligns arbitration proceedings with the provisions of the Limitation Act, confirmed that the Petitioner's request for arbitration made on 28.01.2023 fell outside the permissible time frame which exceeded the three-year limitation.

Further, the High Court held that it is the duty of courts to examine and reject time-barred claims to prevent parties from being ensnared in protracted and costly arbitration processes (referred to M/s Arif Aziz Co. Ltd. vs. M/s Aptech Ltd. and Vidya Drolia and Others v. Durga Trading Corporation).

Thus, the application under Section 11(6) of the Arbitration Act was dismissed on grounds of limitation.

Case Title: M/S. Jcl Infra Pvt. Ltd., Vs The Union Of India And Anr

Citation: 2024 LiveLaw (Gau) 36

Case Number: Arb.P./22/2023

Advocate for the Petitioner: R A Choudhury

Advocate for the Respondent: NA

Date of Judgment: 03.06.2024

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