Court Can Decline To Refer Dispute To Arbitration When Time-Barred Claim Is Evident From Record: Calcutta High Court

Brief Facts:

This application has been filed under section 11 of the Arbitration Act seeking appointment of an arbitrator to adjudicate disputes arising from a notarised sale agreement dated June 12, 2015 wherein the petitioner agreed to purchase land from the Respondent for Rs. 16 lacs.

The vendor/respondent accepted such proposal and agreed to sell the land to the petitioner upon development of the same.

Certain terms and conditions in the said agreement were elaborated in the said agreement. Clause 14 of the said agreement deals with settlement of disputes and provides that all disputes and differences between the parties shall be settled amicably, failing which the matter shall be referred to the arbitration, in accordance with the Arbitration Act.

The petitioner invoked arbitration by a letter dated December 24, 2024.

The Petitioner submitted that although an amount of Rs. 16 lakhs had been paid, the vendor/respondent did not fulfill and/ or perform the obligations contained in the said agreement. Amicable settlement was attempted, but had failed.

Observations:

The court observed that the petitioner in this case is seeking specific performance of the contract executed on June 12, 2015. There is nothing on record which shows that the amount of Rs. 15 lacs has been paid or the liability was acknowledged by the respondent.

The court further observed that the period of limitation to invoke arbitration is three years from the date of accrual of the cause of action.

The Supreme Court in Bharat Sanchar Nigam Limited and Another vs. Nortel Networks India Private Limited (2021) while observing that although the arbitration petition was not barred by limitation, yet the cause of action for the underlying claims having arisen much earlier, the claims were clearly barred by limitation on the day notice for arbitration was invoked.

Further, the Supreme Court in the above case held that the limitation period for issuing notice of arbitration is not extended by mere exchange of letters. A clear notice invoking arbitration, specifying the particular dispute and claims must be received by the other party within 3 years from the rejection of the final bill otherwise the claim will become time barred for the purpose of section 21 of the Arbitration Act.

Based on the above, the court observed that the petitioner invoked arbitration on December 4 2024 after remaining silent for 9 years. While a referral court under section 11 of the Arbitration Act need not conduct a mini trial to determine if a claim is time barred, it should refrain from referring disputes that are ex-facie time barred. In the present case, the limitation is not a mixed question of law and fact but is evident from the records.

Accordingly, the present application was dismissed.

Case Title: SRI SWAPAN PAUL VS M/S. PAUL CONSTRUCTION

Case Number: AP NO. 28 OF 2025

Order Date: 27/03/2025

Mr. Partha Chakraborty, Adv. Mr. Rishabh Dutta Paul, Adv. For petitioner

Click Here To Read/Download The Order