Arbitration and Conciliation Act, 1996 – s.11 – Limitation Act, 1963 – s. 9 and Art.137 – Appellant floated a notice inviting tender for a term of annual contract – Three agreements were entered into with the respondent – Agreements had arbitration clause – Work orders were issued – Thereafter, final contract certificates were issued by the appellant and final payment was received by the respondent of the works in question – Respondent then started making demands for reimbursement on account of variation in prices of material, labour and fuel – By letter dated 07.11.2006, respondent requested for appointment of arbitrator – Respondent issued another letter dated 13.01.2007 and stated that it had no option but to rescind contract and have an arbitrator appointed within 30 days – It is not disputed that 30 day period was over by 12.02.2007, however, respondent kept on writing letters in 2007-2009, reiterating its claim – Finally, respondent issued a legal notice dated 30.01.2010 and ‘clarification notice’ dated 20.03.2010 – Appellant by letter dated 10.11.2010, rejected the claim of reimbursement and stated that they have made final payments towards the work order – On 06.11.2013, the respondent filed applications u/s.11 of the Act – The Single Judge of the High Court allowed the application and an arbitrator was appointed – On appeal, held: It is clear that demand for arbitration was made by letter dated 07.11.2006 – Thereafter, another letter dated 13.01.2007 informed the appellant that appointment would have to be made within 30 days – The time begin to run on and from 12.02.2007 – Once the time started running, any final rejection by the appellant (letter dated 10.11.2010) would not give any fresh start to a limitation period which was already running, following the mandate of s. 9 of the Limitation Act – This being the case, the High Court was clearly in error in stating that since applications were filed on 06.11.2013, they were within the limitation period of three years starting from 10.11.2010 – Even otherwise, the claim of the respondent was also ex facie time barred – Thus, judgment of the High Court is set aside.
Allowing the appeals, the Court
HELD: 1. Limitation is not a jurisdictional issue but is an admissibility issue. So far as the applicability of Article 137 of the Limitation Act to the applications under Section 11 of the Arbitration Act is concerned, it is clear that the demand for arbitration in the present case was made by the letter dated 07.11.2006. This demand was reiterated by a letter dated 13.01.2007, which letter itself informed the Appellant that appointment of an arbitrator would have to be made within 30 days. At the very latest, therefore, on the facts of this case, time began to run on and from 12.02.2007. The Appellant’s laconic letter dated 23.01.2007, which stated that the matter was under consideration, was within the 30-day period. On and from 12.02.2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the Respondent and time began running from that day. Obviously, once time has started running, any final rejection by the Appellant by its letter dated 10.11.2010 would not give any fresh start to a limitation period which has already begun running, following the mandate of Section
9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section
11 of the Arbitration Act were filed on 06.11.2013, they were within the limitation period of three years starting from 10.11.2020. On this count, the applications under Section 11 of the Arbitration Act, themselves being hopelessly time barred, no arbitrator could have been appointed by the High Court. [Paras 19, 20][83-A; 85G-H; 86-A-D]
2. Even otherwise, the claim made by the Respondent was also ex facie time barred. It is undisputed that final payments were received latest by the end of March 2003 by the Respondent. That apart, even assuming that a demand could have been made on account of price variation, such demand was made on 08.09.2003. Repeated letters were written thereafter by the Respondent, culminating in a legal notice dated 30.01.2010. Vide the reply dated 16.02.2010 to legal notice, it was made clear that such demands had been rejected. Even taking 16.02.2010 as the starting point for limitation on merits, a period of three years having elapsed by February 2013, the claim made on merits is also hopelessly time barred. For all these reasons, the appeals are allowed and the impugned judgment of the High Court dated 20.08.2019 is set aside. [Paras 21, 22][86-E-F] Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd., (2020) 14 SCC 643 : [2019] 11 SCR 1108; Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1; Bharat Sanchar Nigam Ltd. & Anr. v. M/s Nortel Networks India Pvt. Ltd. 2021 (4) SCALE 11 – relied on.
Deepdharshan Builders Pvt. Ltd. v. Saroj, (2019) 1 AIR Bom R 249 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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