Case Note & Summary
The appeal arose from an order dated 1 October 2012 passed by a learned Single Judge under Section 34 of the Arbitration and Conciliation Act, 1996, dismissing the appellant's petition challenging an interim award dated 26 July 2012. The interim award had rejected the appellant's counterclaim as time-barred. The appellant, Rolta India Limited, had entered into a civil construction contract with the respondent, Voltas Limited, on 2 February 2001 for construction of two buildings and modifications to an existing building. On 3 December 2004, the appellant terminated the contract due to the respondent's failure to complete work within the stipulated time, invoked a bank guarantee, and notified the respondent of its intention to claim compensation and damages. The respondent denied any delay on 5 December 2004. On 10 December 2004, the appellant reiterated its position and stated it was determining the amount recoverable. On 1 March 2005, the respondent forwarded its final bill and sought compensation. The appellant disputed this on 18 March 2005. The respondent invoked arbitration, and the appellant filed a counterclaim on 26 July 2012. The Arbitral Tribunal rejected the counterclaim as time-barred, holding that the cause of action arose on 3 December 2004. The learned Single Judge upheld this. The appellant argued that the cause of action arose only on 18 March 2005 when the respondent quantified its claim, but the court rejected this, holding that the termination on 3 December 2004 gave rise to the cause of action for damages. The court also noted that the appellant's own letters of 3 and 10 December 2004 asserted a claim for damages. The court found that the counterclaim was clearly barred by limitation under Section 3 of the Limitation Act, 1963, as it was filed more than three years after the cause of action. The appeal was dismissed.
Headnote
A) Arbitration - Limitation - Counterclaim - Section 34 of Arbitration and Conciliation Act, 1996 - The court considered whether the counterclaim filed by the appellant was barred by limitation. The cause of action for the counterclaim arose on 3 December 2004 when the contract was terminated, and the counterclaim filed on 26 July 2012 was beyond the three-year limitation period. The court held that subsequent correspondence did not extend limitation. (Paras 2-10)
B) Limitation Act - Section 3 - Bar of Limitation - The court held that the counterclaim was clearly barred by limitation under Section 3 of the Limitation Act, 1963, as the cause of action arose on 3 December 2004 and the counterclaim was filed after more than seven years. (Paras 8-10)
Issue of Consideration
Whether the counterclaim made by the appellant before the Arbitral Tribunal was barred by limitation and whether the learned Single Judge correctly upheld the interim award rejecting the counterclaim as time-barred.
Final Decision
Appeal dismissed. The order dated 1 October 2012 of the learned Single Judge and the interim award dated 26 July 2012 of the Arbitral Tribunal rejecting the counterclaim as time-barred are upheld.
Law Points
- Limitation for counterclaim in arbitration runs from date of cause of action
- not from subsequent correspondence
- Section 34 of Arbitration and Conciliation Act
- 1996
- Section 3 of Limitation Act
- 1963
Case Details
2013 LawText (BOM) (08) 65
APPEAL NO. 7 OF 2013 IN ARBITRATION PETITION LODGING NO.1239 OF 2012
MOHIT S. SHAH, C.J., M.S. SANKLECHA, J.
Mr. J.D. Dwarkadas, Senior Advocate with Mr. S. Ganoo with Mr. A.R. Aswin i/by Kanga & Co. for the Appellant. Mr. Atul Rajadhyaksha, Senior Advocate with Mr. G. R. Joshi, Mr. K. Shroff, Mr. B. A. Antra, Mr. Avinash Joshi and Mr. Vipul Bilve i/by Mulla & Mulla for the Respondent.
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Nature of Litigation
Appeal against order under Section 34 of Arbitration and Conciliation Act, 1996 dismissing petition challenging interim award rejecting counterclaim as time-barred.
Remedy Sought
Appellant sought to set aside the interim award dated 26 July 2012 and the order dated 1 October 2012 dismissing its petition.
Filing Reason
Appellant's counterclaim in arbitration was rejected as time-barred by the Arbitral Tribunal and the learned Single Judge upheld that decision.
Previous Decisions
Arbitral Tribunal passed interim award on 26 July 2012 rejecting counterclaim as time-barred. Learned Single Judge dismissed appellant's petition under Section 34 on 1 October 2012.
Issues
Whether the counterclaim filed by the appellant before the Arbitral Tribunal was barred by limitation.
Whether the learned Single Judge correctly upheld the interim award rejecting the counterclaim as time-barred.
Submissions/Arguments
Appellant argued that the cause of action for the counterclaim arose only on 18 March 2005 when the respondent quantified its claim, and therefore the counterclaim filed on 26 July 2012 was within limitation.
Respondent argued that the cause of action arose on 3 December 2004 when the contract was terminated and the appellant asserted a claim for damages, and the counterclaim was filed beyond three years.
Ratio Decidendi
The cause of action for a counterclaim for damages arising from termination of a contract accrues on the date of termination when the party asserts a claim for damages, not on the date when the other party quantifies its claim. Subsequent correspondence does not extend the limitation period. The counterclaim filed more than three years after the cause of action is barred by limitation under Section 3 of the Limitation Act, 1963.
Judgment Excerpts
The cause of action for the counterclaim arose on 3 December 2004 when the contract was terminated and the appellant asserted a claim for damages.
The counterclaim filed on 26 July 2012 is clearly beyond the three-year limitation period from the date of cause of action.
Procedural History
On 2 February 2001, contract between appellant and respondent. On 3 December 2004, appellant terminated contract and asserted claim for damages. On 5 December 2004, respondent denied delay. On 10 December 2004, appellant reiterated claim. On 1 March 2005, respondent forwarded final bill. On 18 March 2005, appellant disputed respondent's claim. Respondent invoked arbitration. Appellant filed counterclaim on 26 July 2012. Arbitral Tribunal passed interim award on 26 July 2012 rejecting counterclaim as time-barred. Appellant filed petition under Section 34 of Arbitration and Conciliation Act, 1996, which was dismissed on 1 October 2012. Appellant filed present appeal.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 34
- Limitation Act, 1963: 3
