Claim For Arbitration Must Be Raised As Soon As Cause For Arbitration Arises As In Case Of Cause Of Action Arising In A Civil Action: Gauhati HC

The Gauhati High Court remarked that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of cause of action arising in a civil action.

The Court remarked thus in an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act), for appointment of an Arbitrator in terms of the Arbitration Clause provided in the Contract Agreement.

A Single Bench of Justice Michael Zothankhuma said, “In the case of B and T AG (Supra), the Supreme Court has held that as none of the articles in the Schedule to the Limitation Act provide a time period for filing an application for appointment of an Arbitrator under Section 11, it would be covered by the residual provision under Article 137 of the Limitation Act, which provides that the period of limitation is three years for any other application for which no period of limitation is provided elsewhere in the divisions. … It must, therefore, be clear that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of cause of action arising in a civil action. The Supreme Court thereafter held in the above case that the petition under Section 11(6) of the Arbitration Act was a hopelessly barred claim, as the petitioner by its conduct had slept over it’s right for more than 5 years.”

Advocates F. Hassan and R.A. Choudhury represented the petitioner while CGC H. Gupta represented the respondents.

In this case, the petitioner’s counsel submitted that as per Clause 15.0 of the contract agreement executed between the parties, arbitration and settlement of disputes is to be governed in terms of Clause 63 and 64 of the General Conditions of Contract. He submitted that the petitioner had completed the contract work in all respects in the month of June, 2017. However, the security deposit and PVC bill was not released by the respondents despite submitting letters of release for the same by the petitioner.

He submitted that the petitioner had submitted a letter for release of the security deposit and PVC bill and as the same was not acted upon by the respondents, the petitioner submitted letter to the respondents invoking the Arbitration Clause provided in the contract agreement, for appointment of an Arbitrator to decide the dispute between the parties. The petitioner’s counsel further submitted that in terms of the petitioner’s letter, the final bill for the contract work was signed by the Deputy Chief Engineer. He, however, submitted that the petitioner was not agreeable to the final bill made and signed by the respondents. As the respondents did not act upon the Arbitration Clause, the Court was requested appoint an Arbitrator to decide the dispute between the parties.

The High Court after hearing the contentions of the counsel observed, “Insofar as the period of limitation for filing an application under Section 11 of the Arbitration Act is concerned, the period of limitation would run from the date when a Section 11 petition is received by the other side. However, the Court can decline reference under Section 11, when the claims are ex-facie time barred.”

The Court further noted that Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to proceedings in Court. It added that Section 43(2) states that for the purpose of Section 42 of the Limitation Act, 1963, an arbitration proceeding shall be deemed to have commenced on the date on which a request for a dispute to be referred to arbitration is received by the respondent.

“As the letter under Section 21 of the Arbitration Act has been issued only on 28.01.2023, which is beyond the period of 3 years from the date of completion of the contract and signing of the final bill by the Deputy Chief Engineer on 19.11.2018, the same is beyond the period of 3 years for invoking the Arbitration Clause”, it also said.

The Court considering the fact that more than 3 years have elapsed from the date when the right to require arbitration is acquired by the petitioner, for payment of his PVC bill and release of security deposit which has been signed by the Deputy Chief Engineer, concluded that the claim for arbitration under Section 11(6) of the Arbitration Act is barred by limitation.

Accordingly, High Court dismissed the arbitration petition.

Cause Title- M/s JCL Infra Pvt. Ltd. v. The Union of India and Anr.

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