In  ARB.P. 866/2019-DEL HC- Claims which are ex-facie barred by limitation need not be referred for decision in arbitration proceedings, rules Delhi High Court
Justice Mini Pushkarna [06-10-2022]

Read Order: V K DEWAN & CO v. DELHI JAL BOARD & ANR 

Mansimran Kaur

New Delhi, October 10, 2022: While dismissing a petition for appointment of an Arbitrator as the same was clearly barred by limitation, the Delhi High Court has restated the settled law that by virtue of Article 137 of the Limitation Act, 1963, limitation period for reference of a dispute to arbitration or for seeking appointment of an Arbitrator is three years from the date on which the cause of action arises.

The Single-Judge Bench of Justice Mini Pushkarna said, “In view of the detailed discussions as aforesaid, it is clear that the claims which are ex facie barred by limitation need not be referred for decision in the arbitration proceedings. Limitation commences when the cause of action accrues/ arises.”

Facts relevant for perusal of the present petition were that a contract was executed between the parties for the work of construction of Underground Reservoir and Booster Pumping Station at Surajmal Vihar, Trans Yamuna, Delhi. Time period for execution of the contract was extended several times by respondent and the said work was completed by petitioner on January 31, 2005. Completion certificate was issued by the respondent – Delhi Jal Board to the petitioner on March 1, 2005. 

After completion of the work, disputes arose between the parties in regard to the payments due to the petitioner by respondent. A notice was sent by the petitioner to respondent for appointment of an Arbitrator. Pursuant to the said notice, respondent – Delhi Jal Board by a letter  appointed Sh. Surinder Gandotra as sole Arbitrator to adjudicate upon the disputes.

 On the very first day of the proceedings, the Arbitrator issued an interim bill of Rs 1, 75,000 by applying Rules of Indian Council of Arbitration. The petitioner challenged the mandate of the Arbitrator by filing a petition on the ground that the contract in question did not provide for application of the Rules of Indian Council of Arbitration and the Arbitrator had exceeded his jurisdiction. 

By an order dated April 18, 2006, this Court stayed the proceedings before the said Arbitrator. However, subsequently the said petition was withdrawn by the petitioner. Thereafter, the petitioner wrote a letter to the sole Arbitrator thereby withdrawing all his claims before the Arbitrator without prejudice to his right to agitate elsewhere. 

 Subsequently, the sole arbitrator passed an Award thereby awarding costs of Rs 9,91, 550 against the petitioner on account of cost of litigation and arbitration fees. Aggrieved by the aforesaid Award, petitioner challenged the same before this Court. 

Pursuant to the aforesaid disposal of the petition under Section 34 of the Act by this Court, petitioner sent notice to the respondents thereby invoking the arbitration clause as contained in the contract agreement. Petitioner demanded appointment of Arbitrator as per the procedure given in the contract agreement for adjudication of its claims. Since no response was received from respondents, present petition came to be filed.

Cause of action in the present case arose in the year 2005, when completion certificate was issued by respondent- Delhi Jal Board and disputes arose in regard to payments payable to the petitioner.  Thereafter, though the matter was referred to the sole Arbitrator in the year 2005 itself, petitioner by way of the letter withdrew claims filed before the Arbitrator. Thus, this petition was instituted under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator.

After considering the rival contentions of the parties, the Court noted that the cause of action in favour of petitioner having arisen in the year 2005, plea of petitioner for reference of the claims to an Arbitrator by way of issuing a second notice dated July 26, 2019 was clearly barred by limitation. Withdrawal of claims by the petitioner before the Arbitrator by way of a letter dated January 14, 2008 did not stop the limitation period in any manner, the Court stated. 

No fresh cause of action can be said to have arisen in favour of the petitioner merely because the petitioner withdrew his claims by letter dated January 14, 2008, the Court noted. 

In the present case, the petitioner had withdrawn his claims before the Arbitrator. Thus, by way of Award dated June 18, 2008, the Arbitrator awarded costs towards litigation and cost of arbitration in view of the fact that the claims of petitioner kept on pending before the Arbitrator from 2005 till 2008 for a period of approximately three years.

The Award dated June 18, 2006 passed by the Arbitrator was not set aside by this Court but the costs imposed against the petitioner were reduced from Rs 9, 91,550 to Rs 1, 50,000 in favour of the respondent which would cover the fee of the Arbitrator as well as litigation costs before the Arbitrator.

It was further noted by the Court that the petitioner could not seek advantage of Section 43(4) of the Act in order to contend that his claims were within limitation. In the present case, the order dated October 16, 2018 passed by this Court  attained finality, as no appeal was filed against the said order. Even otherwise, in the present case, claims were withdrawn by the petitioner and it was not a case where the Award was set aside by this Court so as to attract the provisions of Section 43(4) of the Arbitration and Conciliation Act. 

Reliance was placed on the case of Bharat Sanchar Nigam Limited and Anr. Vs. Nortel Networks India Pvt. Ltd. Further, the Court took into account Order 23 Rule 1 of CPC  which deals with withdrawal and adjustment of suits. Order 23 Rule 1 CPC states that a party may at any time abandon the claims or part of the claims. Order 23 Rule 4 CPC categorically states that where a party abandons or withdraws any claims or part of the claims, he shall be liable for such costs as the Court may Award and shall be precluded from instituting any fresh suit in respect of such subject matter or such part of the claim. 

 In the present case, there is no explanation as to why petitioner withdrew his claims pending before the arbitrator, when he had already withdrawn his petition challenging the mandate of the learned arbitrator. Once the petitioner withdrew his claims pending before the learned arbitrator by way of a letter dated January 14, 2008 , fresh petition for appointment of an arbitrator pursuant to notice dated July 26, 2019 , for adjudication of the same claims that were withdrawn in the year 2008, was clearly barred by limitation. 

The fact that work was completed under the contract in the year 2005 and completion certificate dated March 1, 2005 was issued, was not in dispute. Further, disputes regarding amounts payable to the petitioner arose in the year 2005 when petitioner invoked the arbitration clause. 

The present petition for appointment of an arbitrator for adjudication of disputes between the parties was clearly barred by limitation. Further, the claims as raised in the present case pertain to the period before the year 2005. Thus, the claims themselves had also become time barred, the Court held.The Petition was accordingly dismissed by the Bench.