It is settled law that the provisions of Limitation
Act apply to arbitrations and the period of limitation for
commencement of an arbitration runs from the date on which, had there
been no arbitration clause, the cause of action would have accrued. In
fact, ‘action’ and ‘cause of action’ have been construed as ‘arbitration’
and ‘causes of arbitration’. The cause of arbitration has been held to
accrue when the claimant becomes entitled to raise the question, that is,
when the claimant acquires right to require arbitration. Accordingly, it
has been held that the claim for arbitration must be raised as soon as the
‘cause of arbitration arises’ as the ‘case of cause of action’ in a civil
action.
IN THE HIGH COURT OF DELHI AT NEW DELHI
ARB.P. 402/2008
SMT. KRISHNA MITTAL
versus
MUNICIPAL CORPORATION
OF DELHI & ANR.
Date of Decision : MAY 21, 2010
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
Present petitions have been filed under Section 11 of Arbitration
and Conciliation Act, 1996 for reference of disputes to arbitration.
2.
Though the arbitration clauses in the contracts are not disputed,
Mr. Nalin Tripathi, learned counsel for respondents submits that the
present petitions are ex facie barred by limitation.
3.
He points out that the present arbitration petitions have been filed
in respect of work orders issued in the year, 2001 which were
completed in the year, 2002. In fact, the notices invoking arbitration
clauses were issued only in February 2008, i.e., beyond the limitation
period of three years. Accordingly, it is submitted that there is no live
claim which can be referred to arbitration.
4.
On the other hand, Mr. Ranjeet Kumar, learned counsel for
petitioners submits that in response to a Right to Information query in
March, 2008, respondents had admitted that petitioners’ bills could not
be passed or processed due to non-submission of the bills and other
records by the petitioners. Mr. Ranjeet Kumar further submits that law
of limitation for civil matters is entirely different from those of
arbitration matters. In this connection, he relies upon the judgments of
Supreme Court in Groupe Chimique Tunisien SA Vs. Southern
Petrochemicals Industries Corpn. Ltd. reported in (2006) 5 SCC 275
and National Aluminum Company Limited And Another reported in
(2009) 14 SCC 365.
5.
In my opinion, the submissions advanced by Mr. Ranjeet Kumar
are untenable in law. It is settled law that the provisions of Limitation
Act apply to arbitrations and the period of limitation for
commencement of an arbitration runs from the date on which, had there
been no arbitration clause, the cause of action would have accrued. In
fact, ‘action’ and ‘cause of action’ have been construed as ‘arbitration’
and ‘causes of arbitration’. The cause of arbitration has been held to
accrue when the claimant becomes entitled to raise the question, that is,
when the claimant acquires right to require arbitration. Accordingly, it
has been held that the claim for arbitration must be raised as soon as the
‘cause of arbitration arises’ as the ‘case of cause of action’ in a civil
action.
6.
The only difference in civil and arbitration matters is that by
consent of parties, the Court of law is substituted for an arbitrator. The
Supreme Court in Panchu Gopal Bose Vs. Board of Trustees for Port
of Calcutta reported in AIR 1994 SC 1615 has held as under:-
“8. ........It would, therefore, be clear that the provisions
of the Limitation Act would apply to arbitrations and
notwithstanding any term in the contract to the contrary,
cause of arbitration for the purpose of limitation shall be
deemed to have accrued to the party in respect of any such
matter at the time when it should have accrued but for the
contract.......
11. In West Riding of Yorkshire County Council v.
Huddersfield Corporation, (1957) 1 All ER 669, the Queens
Bench Division, Lord Goddard, C.J. (as he then was) held
that the Limitation Act applies to arbitrations as it applies to
actions in the High Court and the making, after a claim has
become statute-barred, of a submission of it to arbitration,
does not prevent the statute of limitation being pleaded.
Russell on Arbitration, 19th Edition, reiterates the above
proposition. At page 4 it was further stated that the parties to
an arbitration agreement may provide therein, if they wish,
that an arbitration must be commenced within a shorter
period than that allowed by statute; but the court then has
power to enlarge the time so agreed. The period of limitation
for commencing an arbitration runs from the date on which
the cause of arbitration accrued, that is to say, from the date
when the claimant first acquired either a right of action or a
right to require that an arbitration takes place upon the
dispute concerned.
12. Therefore, the period of limitation for the commencement
of an arbitration runs from the date on which, had there been
no arbitration clause, the cause of action would have
accrued. Just as in the case of actions the claim is not to be
brought after the expiration of a specified number of years
from the date on which the cause of civil action accrued, so in
the case of arbitrations, the claim is not to be put forward
after the expiration of the specified number of years from the
date when the claim accrued.
14. The Law of Arbitration by Justice Bachawat in Chapter
XXXVII at p. 549 it is stated that just as in the case of actions
the claim is not to be brought after the expiration of a
specified number of years from the date when the claim
accrues, as also in the case of arbitrations, the claim is not to
be put forward after the expiration of a specified number of
years from the date when the claim accrues. For the purpose
of Section 37(1) „action‟ and „cause of action‟ in the
Limitation Act should be construed as arbitration and cause
of arbitration. The cause of arbitration, therefore, arises
when the claimant becomes entitled to raise the question, i.e.
when the claimant acquires the right to require arbitration.
The limitation would run from the date when cause of
arbitration would have accrued, but for the agreement.
15. Arbitration implies to charter out timous commencement
of arbitration availing the arbitral agreement, as soon as
difference or dispute has arisen. Delay defeats justice and
equity aid the promptitude and resultant consequences.
Defaulting party should bear the hardship and should not
transmit the hardship to the other party, after the claim in the
cause of arbitration was allowed to be barred. The question,
therefore, as posed earlier is whether the court would be
justified to permit a contracting party to rescind the contract
or the court can revoke the authority to refer the disputes or
differences to arbitration. Justice Bachawat in his Law of
Arbitration, at p.
552 stated that “in an appropriate case
leave should be given to revoke the authority of the
arbitrator”. It was also stated that an ordinary submission
without special stipulation limiting or conditioning the
functions of the arbitrator carried with it the implication that
the arbitrator should give effect to all legal defences such as
that of limitation. Accordingly the arbitrator was entitled and
bound to apply the law of limitation. Section 3 of the
Limitation Act applied by way of analogy to arbitration
proceedings, and like interpretation was given to Section 14
of the Limitation Act. The proceedings before the arbitration
are like civil proceedings before the court within the meaning
of Section 14 of the Limitation Act. By consent the parties
have substituted the arbitrator for a court of law to arbiter
their disputes or difficulties. It is, therefore, open to the
parties to plead in the proceedings before him of limitation as
a defence.”
(emphasis supplied)
7.
Since in the present cases the contracts had been completed in the
year 2002, petitioners should have invoked the arbitration clauses
within three years from the date they became entitled to raise their
claims, i.e., in the year 2002.
subsequent
acknowledgment
As in the present cases there is no
of
debt
by
the
respondents
as
contemplated by Section 18 of the Limitation Act, the period of
limitation does not get extended.
8.
However, I may clarify that petitioners could have availed of
extended limitation if they could show that their claims were either
under negotiation or under consideration during this period.
9.
In fact, the Supreme Court in Shree Ram Mills Ltd. vs. Utility
Premises (P) Ltd. reported in (2007) 4 SCC 599 has held that if the
disputes under a contract are under negotiation or consideration, then
the limitation for arbitration purpose would be deemed to have not
commenced. But in the present case, petitioner has not filed any
evidence to show that petitioners’ claims were being considered by the
respondents during the period 2002 to 2008.
10.
Consequently, in my opinion, the claims of the petitioners as
sought to be referred by the present petitions are not ‘live claims’ but
‘stale claims’ as they are ex facie barred by limitation. Accordingly,
present petitions are dismissed but with no orders as to costs.
MANMOHAN,J
MAY 21, 2010
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