2023 0 Supreme(SC) 535
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, J. B. PARDIWALA, JJ.
M/S B AND T AG - PETITIONER
VERSUS
MINISTRY OF DEFENCE - RESPONDENT
ARBITRATION PETITION (C) NO. 13 OF 2023
Decided On : 18-05-2023
IMPORTANT POINTS
(1) Appointment of Arbitrator – Limitation – There is a fine distinction between plea that claims raised are barred by limitation and plea that application for appointment of Arbitrator is barred by limitation.
(2) Claim for arbitration must be raised as soon as cause for arbitration arises as in case of cause of action arisen in a civil action.
(3) Mere negotiations will not postpone “cause of action” for the purpose of limitation.
(A) Arbitration and Conciliation Act, 1996 – Section 11(6) – Limitation Act, 1963 – Article 137 – Appointment of Arbitrator – Limitation – Period of limitation in cases covered by Article 137 is three years and said period would begin to run when right to apply accrues – There is a fine distinction between plea that claims raised are barred by limitation and plea that application for appointment of Arbitrator is barred by limitation – What is important for Court is to find out what was “Breaking Point” at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of dispute for arbitration – Even if arbitration clause contains a provision that no cause of action shall accrue in respect of any matter agreed to be referred to until award is made, time still runs from normal date when cause of action would have accrued if there had been no arbitration clause – Claim for arbitration must be raised as soon as cause for arbitration arises as in case of cause of action arisen in a civil action. (Paras 33, 44, 52, 56 and 57)
(B) Arbitration and Conciliation Act, 1996 – Sections 11(6), 9 and 43 – Limitation Act, 1963 – Article 137 of Schedule and Section 14 – Appointment of Arbitrator – Limitation – Whether any particular facts constitute a cause of action has to be determined with reference to facts of each case and with reference to substance rather than form of action – If infringement of a right happens at a particular time, whole cause of action will be said to have arisen then and there – In such a case, it is not open to a party to sit tight and not to file an application for settlement of dispute of his right which had been infringed, within time provided by Limitation Act and allow his right to be extinguished by lapse of time and thereafter, to wait for another cause of action and then file application under Section 11 of Act 1996 for establishment of his right which was not then alive and which had been long extinguished – In present case, disputes arose between parties in relation to wrongful encashment of bank guarantee – Disputes between parties had cropped up way back in year 2014 itself – When bank guarantee came to be encashed in year 2016 and requisite amount stood transferred to Government account that was end of the matter – This “Breaking Point” should be treated as date at which cause of action arose for the purpose of limitation – Mere negotiations will not postpone “cause of action” for the purpose of limitation – Case on hand is clearly one of a hopelessly barred claim as petitioner by its conduct slept over its right for more than five years – Petition rejected. (Paras 58, 59, 61, 62, 63, 66 and 67)
Facts of the case:
Only question that falls for reconsideration is whether time-barred claims or claims which are barred by limitation, can be said to be live claims, which can be referred to arbitration?
Findings of Court:
Cause of arbitration arises when claimant becomes entitled to raise the question, i.e. when the claimant acquires the right to require arbitration. Limitation would run from the date when cause of arbitration would have accrued, but for the agreement.
Result : Petition rejected.
Act Referred :ARBITRATION AND CONCILIATION ACT : S.11(6), S.9, S.43, S.11LIMITATION ACT : Art.137
Cases Referred:Click Here to Read the rest of this document with a free account to LawCanvas