Case Note & Summary
The appellant, M/s Geo Miller & Co. Pvt. Ltd., was awarded three work orders by the respondent, Chairman, Rajasthan Vidyut Utpadan Nigam Ltd., for execution of work on a water treatment plant. The contracts contained a common arbitration clause providing for reference of disputes to the Chairman, Rajasthan State Electricity Board, under the Indian Arbitration Act, 1940. The appellant claimed that the respondent failed to make payments due under the contracts. The appellant raised final bills in 1983 but continued discussions and correspondence with the respondent regarding outstanding payments. In 1997, the appellant approached a Settlement Committee constituted by the respondent, but the committee did not respond. The respondent, by letters dated 17/18.12.1999, partly allowed one claim and requested details for verification of other claims. The appellant replied on 6.1.2000. After further correspondence, the appellant sent a final communication on 5.10.2002 and 10.10.2002 requesting payment. When payment was not made, the appellant sent a notice on 22.11.2002 requesting appointment of an arbitrator. The respondent did not appoint an arbitrator within 30 days, prompting the appellant to file Arbitration Applications under Section 11(6) of the Arbitration and Conciliation Act, 1996. The High Court dismissed the applications, holding that the claims were barred by limitation as the final bills were raised in 1983 and the request for arbitration was made only in 2002. The Supreme Court allowed the appeals, holding that the cause of action for arbitration arose not from the date of final bills but from the date of repudiation of the claim by the respondent via letters dated 17/18.12.1999. The court noted that the parties were continuously negotiating and corresponding, which extended the limitation period. The court also held that since the notice for arbitration was served in 2002, the 1996 Act applies, not the 1940 Act. The court set aside the High Court's order and remanded the matter for appointment of an arbitrator.
Headnote
A) Arbitration Law - Limitation for Appointment of Arbitrator - Section 11(6) read with Section 43 of the Arbitration and Conciliation Act, 1996 - Limitation Act, 1963, Article 137 - The period of limitation for seeking appointment of an arbitrator is three years from the date when the cause of arbitration accrues, i.e., when the claimant first acquires a right to require arbitration. In the present case, the cause of action arose not from the date of final bills (1983) but from the date of repudiation of the claim by the respondent via letters dated 17/18.12.1999, as the parties were continuously negotiating and corresponding. The High Court erred in holding that the applications were barred by limitation. (Paras 5-10) B) Arbitration Law - Applicable Act - Sections 21 and 85(2)(a) of the Arbitration and Conciliation Act, 1996 - The date of commencement of arbitral proceedings is the date on which notice requesting arbitration is received by the respondent. Since the notice was served in 2002, the 1996 Act applies, even though the arbitration clause contemplated the 1940 Act. (Paras 6-7) C) Arbitration Law - Condonation of Delay - Section 43(3) of the Arbitration and Conciliation Act, 1996 - The court may extend time for commencing arbitration if undue hardship would otherwise be caused. However, in this case, since the applications were within limitation, the question of condonation does not arise. (Para 10)
Issue of Consideration
Whether the Arbitration Applications filed by the appellant under Section 11(6) of the Arbitration and Conciliation Act, 1996 are barred by limitation.
Final Decision
Appeals allowed. Impugned judgment of the High Court set aside. The matter is remanded to the High Court for appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. No order as to costs.
Law Points
- Limitation for arbitration commences from date of repudiation of claim
- not from final bill date
- continuous correspondence and negotiations extend limitation period
- Section 43 of Arbitration and Conciliation Act
- 1996 applies Limitation Act
- 1963
- Article 137 of Limitation Act provides three years from cause of action
- 1996 Act applies if notice for arbitration served after 25.1.1996.
