Limitation period for commencement of arbitration runs from the date cause of action would have accrued

Serve And Volley Outdoor Advertising Pvt. Ltd Vs Bruhat Bengaluru Mahanagara Palike (Karnataka High Court)

Conclusion: Just as in the case of civil actions the claim was not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim was not to be put forward after the expiration of the specified number of years from the date when the claim accrued. The period of limitation for making claims by BBMP by way of a suit or arbitration was six years from the date when the cause of action arose. Therefore, the trial Court was justified in confirming the reasoning of Arbitrator vis-à-vis the question regarding the period of limitation for the commencement of arbitration by holding that the claim was not time barred.

Held: Assessee-company being in the business of outdoor advertisement, responded to a tender, inviting potential bidders to develop and maintain the road medians and also to earn revenue from the same. Assessee was permitted and licenced to beautify the road medians at the specified locations under the agreement and was allowed to install translite boxes in the road medians for displaying commercial advertisements of its clients. It undertook to pay advertisement tax, cess and other statutory dues to Bruhat Bengaluru Mahanagara Palike, which was a Municipal Corporation for the City of Bengaluru (“BBMP”) at the rates prescribed from time to time. There were various terms and conditions under the agreement with regard to payment of licence fee, advertisement tax, service tax, etc. Thereafter, notice was issued stating that assessee’s denial of its liability on the demand notices had given rise to a dispute. CMP.No.44/2012 was filed before this Court seeking appointment of a sole Arbitrator. On his appointment, the claim statement was filed and assessee filed its defence statement, inter alia, contending that the claim was time barred. However, Arbitrator held that the claim was not time barred having regard to Section 474 of the KMC Act read with Sections 21 and 43 of the Arbitration Act, 1996. Similarly, the trial Court dismissed the suit /application filed under Section 34 of the Arbitration Act, 1996 by holding that the claim was not time barred. It was held that in Panchu Gopal Bose vs. Board of Trustees for Port of Calcutta [(1993) 4 SCC 338] (Panchu Gopal Bose) that the period of limitation for the commencement of arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued. Just as in the case of civil actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued.” It was clear that the period of limitation, whether for a suit or an arbitration was the same under Section 474 of the KMC Act even though the word “arbitration” was not found in the said provision. Hence, the expression “suit” in Section 474 of the KMC Act would take within its scope and ambit the expression “arbitration” also. This is because arbitration is an alternative dispute resolution mechanism to a suit. In the circumstances, the period of limitation for making claims by BBMP by way of a suit or arbitration is six years from the date when the cause of action arose. Therefore, the trial Court was justified in confirming the reasoning of Arbitrator vis-à-vis the question regarding the period of limitation for the commencement of arbitration in the instant case and by holding that the claim was not time barred.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

The appellant herein was the plaintiff in A.S.No.25/2014. The said suit was filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act, 1996” for the sake of brevity), seeking setting aside of the arbitral award dated 26/12/2013, passed by sole Arbitrator/respondent No.2 herein. By the impugned judgment and decree dated 10/06/2020, passed by the VI Additional City Civil and Sessions Judge at Bengaluru City, the suit for setting aside the award dated 26/12/2013 was dismissed. Hence, this appeal.

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