This Article has been written by Aakriti Singh, a 3rd Year student of LLB (Hons.) from Amity Law School, Amity University Noida. 

INTRODUCTION 

The law of limitation is an act in the civil law system that sets a maximum period after the happening of an event in which legal action can be started. The event, which is also known as the cause of action, is a collection of facts that show the violation of a right. In India, the Limitation Act, 1963 governs the law of limitation, and Section 3 of the Limitation Act prohibits the filing of suits, appeals, and applications after the stipulated period of time has passed. Subsequently, a party may not initiate an action if the prescribed period has elapsed after the cause of action has occurred.

The law of limitation is based on the maxim vigilantibus non dormientibus jura subveniunt, which translates to “laws serve the vigilant, not those who sleep.” In addition, Halsbury’s Laws of England states that there are three reasons for the existence of statutes of limitation: (a) long dormant claims have more of cruelty than justice in them; (b) a defendant might have lost the evidence to dispute the State claim; and (c) persons with good causes of actions should pursue them with. 

The Delhi High Court in Satender Kumar v. MCD further highlighted the aims of the law of limitation, stated that, due to the passage of time, vital evidence which may be used in defence by the opposite party is likely to be lost or misplaced. As such, adjudication of claims after a considerable lapse of time could result in more injustice than justice.

Arbitration is no exception to this principle, and the law of limitation applies to it as well. Section 43(1) of the Arbitration and Conciliation Act, 1996 stipulates that “the Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in court”.

USE OF  LIMITATION ACT FOR INITIATION OF ARBITRATION

When does the cause of action to initiate arbitration arise and when does it stop? To answer this question, we will examine the application of the law of limitation in relation to the initiation of arbitration. Generally, arbitration can be initiated in three ways:

(i) By sending a notice of invocation in accordance with Section 21 of the Arbitration Act, which marks the start of an arbitration proceeding.

(ii) By filing an application under Section 11 of the Arbitration Act. This section allows a party to approach the Court to appoint an arbitrator when both parties fail to do so, either pursuant to an agreed procedure or upon notice of invocation of arbitration.

(iii) By filing an application under Section 8 of the Arbitration Act. This section provides a party with the ability to apply to a Court, in a case where an arbitration agreement exists, to refer the parties to arbitration. Therefore, if an arbitration agreement exists between the parties, and one party has initiated a legal action before the court or judicial authority, the opposing party may submit an application under Section 8 requesting for the matter to be referred to arbitration.

The question now to be analysed is what the time period for initiation of arbitration is, and when does the limitation for this begin. One of the early judgments which sets the law in this regard is the judgment of Inder Singh Rekhi v. DDA, the Court observed that:

It is essential for an order of reference under Section 20 (Section 11 of the Arbitration Act, which was previously Section 20 of the Arbitration and Conciliation Act, 1940) there should be an arbitration agreement and secondly, difference must arise to which this agreement applies. The existence of a dispute is, therefore, essential for appointment of an arbitrator under Section 8 or a reference under Section 20 of the Act.

The Court deliberated on Section 20 of the Arbitration and Conciliation Act, 1940 which is essentially Section 11 of the Arbitration Act, and Section 21 of the Arbitration Act. In order to refer a dispute under Section 11 of the Arbitration Act, two elements must exist; a dispute, and an arbitration agreement. The Court also articulated a definition of a dispute as “A dispute arises where there is a claim and a denial and repudiation of the claim.”

Prior to the Inder Singh Rekhi judgment, the Supreme Court of India had already established that Article 137 (formerly Article 181) of the Limitation Act, 1963 would be applied to petitions presented before the Court under the Arbitration Act. This principle was articulated in Wazir Chand Mahajan v. Union of India, which outlined that Article 181 of the old Limitation Act, 1908 would be applicable to applications filed under Section 20 of the old Act.

Apart from this, disputes could arise when one party serves the other with a notice of invocation/appointment of an arbitrator and the other party either does not respond or fails to agree on an appointment. The limitation period for filing petitions under Section 11 or Section 8 would then begin at this point.

It is clear from the discussion that the commencement of arbitration is from the time the dispute arises, up until the notice of invocation is given, or an application is filed under Section 11 or Section 8.

APPLICABILITY OF THE LIMITATION ACT TO SUBSTANTIVE CLAIMS IN ARBITRATION

The next thing to consider is how to define the start and end of the substantive claim period. Unlike the section previously discussed, which discussed the appropriate time frame for initiating arbitration, this section focuses on the time period for filing a substantive claim within the arbitration. 

This was addressed in Panchu Gopal Bose v. Board of Trustees for Port of Calcutta (“Panchu Gopal”), wherein the petitioner first made their claim in 1979, but did not take any further action until 1989. The court determined that the cause of arbitration arose when the claimant became entitled to raise the issue, i.e. when they acquired the right to demand arbitration. The Court asserted that “the limitation would run from date when the cause of arbitration would have accrued, but for the agreement”, thus indicating that the cause of arbitration had actually occurred in 1979. Consequently, the limitation period had been exceeded.

In J.C. Budhraja v. Orissa Mining Corpn. Ltd., the Court took notice of the date of invocation of arbitration and considered when the claim arose. The Court determined that the claim had arisen on 14-4-1977 with the preparation of the final bill, and not on 4-6-1980 when the notice of arbitration was sent. Similarly, in Satender Kumar it was observed that the cause of action would vary according to the facts and circumstances of each case and the nature of the jural relationship between the parties. The Court held Article 18 of the Limitation Act to be applicable and the cause of action to arise upon completion of work. Lastly, in Gurbachan Singh it was noted that a claim pertaining to work completed in 1994, but only filed in 2000, was barred by limitation since the cause of action arose in 1994.

Therefore, what becomes apparent from this discourse is, that as far as the starting of limitation period for a substantive claim is concerned, the instance where the cause of action arises, depends on the facts and circumstances of each case, and is not merely the point where the dispute arises.

CONCLUSION

The law of limitation is applicable to arbitration proceedings much in the same way that it applies to proceedings initiated under the Code of Civil Procedure, 1908. However, the difference lies in the dates on which the dispute arises and the request for arbitration is made to the respondent. These dates are of utmost importance for determining the validity of the application made to the court, with respect to the law of limitation. Therefore, the Courts are empowered to dismiss the application even if it is within time, should the substantive claim be time barred on admitted facts. This may save the party from the cost of arbitration, particularly in cases where the arbitrator mistakenly holds a time-barred claim as being within time, resulting in the inability to enforce such a claim.

REFERENCES

• Applicability of the law of limitation to Arbitration Proceedings SCC Blog, https://www.scconline.com/blog/post/2021/01/16/applicability-of-the-law-of-limitation-to-arbitration-proceedings/ (last visited Feb 24, 2023) 
• 2010 SCC OnLine Del 424.
• (1988) 2 SCC 338.
• (1996) 2 SCC 216.
• (2008) 2 SCC 444. 
• 2010 SCC OnLine Del 424.
• 2014 SCC OnLine Del 19.
• Application of limitation act,1963 to arbitration and conciliation act, 1996 Arbitration Workshop, https://www.thearbitrationworkshop.com/post/application-of-limitation-act-to-arbitration-and-conciliation-act-1996 (last visited Feb 24, 2023) 

Aishwarya Says:

Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems to aishwarya@aishwaryasandeep.com

Join our  Whatsapp Group for latest Job Opening