Limitation Periods in Arbitration With Applicability of Limitation Act, 1963

Period of Limitation Under Arbitration and Conciliation Act,1996 With Applicability of Limitation Act, 1963

Introduction

The Arbitration and Conciliation Act, of 1996, and the Limitation Act are essential to submit appeals and contest arbitral rulings. Section 43(1) of the Arbitration and Conciliation Act, 1996[i] connects the Limitation Act, 1963, to the Act, saying that it “shall apply to arbitrations as it applies to proceedings in court.”

According to Section 37 of the Arbitration and Conciliation Act, 1996[ii], an appeal from a lower court to a higher court may be filed within 90 days, and an appeal within a higher court may be filed within 30 days.

The period of limitation is three months from the date of receipt of the award in the context of Section 34 of the Arbitration and Conciliation Act, 1996, which addresses contesting arbitral awards. If the petitioner can provide adequate justification for the delay in submitting the petition under Section 34[iii], this time limit may be extended by 30 days. The Supreme Court has ruled that an extension of the time frame specified in Section 34(3) is not permissible.

The date of receipt of the award is important for calculating the period of limitations. According to the Supreme Court’s ruling, the period of limitations won’t start until an arbitral verdict has been validly delivered following Section 31(5) of the Act.[iv]

Reading Section 3 of the Arbitration Act, which states that a communication is “deemed receipt” on the day it is provided to the parties, further emphasizes the distinction between “delivery” and “receipt”.

It is important to remember that the period of limitations for applying to appoint an arbitrator differs from the period of limitations that apply to the actual claims stated in a contract. In matters involving contract breaches, the period of limitations for filing a claim is three years from the day the cause of action first accrued. Additionally, the time limit for applying Section 11 to a court for the appointment of an arbitrator is three years from the date of the other party’s notice of arbitration requesting arbitration, whichever comes first, or thirty days from the date of the other party’s refusal to appoint the arbitrator.

Commencement Of Cause Of Action to Calculate the Limitation Period

Section 137 of the Limitation Act[v] sets a three-year limitation for the filing of any lawsuit for which no other time restriction is mentioned. This section comes into play since the Arbitration Act doesn’t outline a deadline for starting arbitration procedures. This suggests that arbitration ought to start no later than three years after the claimant’s first claims were denied.

A civil lawsuit’s “cause of action” is the legal justification for filing it against a different party. Russell stated that a straightforward explanation of the difficult task of establishing the specific components of a cause of action: the “cause of arbitration” is the event that triggers the period of limitations for initiating arbitration.[vi] This refers to the moment the claimant becomes entitled to pursue legal action or request arbitration of the contested issue.

Calculating the limitation period—the amount of time within which a lawsuit must be filed—requires knowing what constitutes a cause of action. Parties must understand when a cause of action exists to avoid missing the deadline and having their claims become time-barred.

The “cause of action” in arbitration refers to the “cause of arbitration” to establish the period of limitations for bringing an arbitration provision into effect.[vii] The day the claimant first has the right to demand arbitration for the disputed subject, or the date the “cause of arbitration” emerges is the start of the limitation period.

The Limitation for bringing an arbitration lawsuit essentially begins on the day the cause of action would have accrued in the absence of an arbitration provision. Arbitration claims must be filed within a certain time frame from the day the claim originated, much like civil claims are constrained by a period from the date of the cause of action. The cause of action must, however, be covered by the arbitration provision in the contract.

Period Of Limitation Under Section 8 Of The Arbitration Act

It is not very clear regarding the Limitation Act for applying Section 8 of the Arbitration and Conciliation Act[viii], Furthermore, it is imperative to ascertain if the period of limitations for submitting a written statement, as stipulated by the Commercial Courts legislation, 2015, and the Civil Procedure Code, 1908, would also apply to submitting a Section 8 application under the recently modified legislation.

This matter was recently heard by the Delhi High Court. The High Court concluded that the modified language of Section 8 contains the Limitation Act for filing a written statement under the Commercial Courts Act for commercial cases and under the CPC for non-commercial suits after reviewing the precedents established by the Supreme Court.[ix]

As a result, the Court decided that 90 days for regular civil lawsuits and 120 days for business claims is the maximum period of limitations for submitting a Section 8 application.

The amendment was made in the Arbitration and Conciliation Act to accelerate arbitration procedures by enforcing more stringent timelines. These changes include:

• creating a fast-track process for completing arbitrations in less than six months,
• imposing a 90-day deadline for starting arbitration after requesting interim relief, and
• mandating that arbitral verdicts in non-international commercial arbitrations be made within a year.

The amended language in Section 8, which now states “the date of submitting” rather than “when,” was studied by the Court to reflect the imposition of a limitation period in light of these modifications. The court concluded that the “date of submitting” refers to the due date for submitting the substantive statement, which is comparable to the written statement in a civil matter. Consequently, the deadline for submitting a Section 8 application is essentially the same as the period of limitations for submitting a written statement.

The Court did, however, make it clear that making incidental applications or related appeals does not amount to making a “statement on the substance of the dispute” and is not subject to the same period of limitations.

Limitation Under Section 11 Of The Arbitration Act

In the matter of Golden Chariot Recreations Pvt. Ltd. v. Mukesh Panika[x], the Delhi High Court has decided that the three-year period of limitations applies to applying for the appointment of an arbitrator under Section 11 of the Arbitration Act. Even if the party applying sends out a new notice, this period cannot be prolonged. Citing the Division Bench ruling in Prasar Bharti v. Maa Communication[xi], the High Court noted that before applying Sections 11(4) or 11(6) of the Arbitration Act, notice must be given. The petition lacks a cause of action in the absence of such notification. After 30 days have passed after the request specified in Section 11(4)(a) or (b) was received, the time restriction for applying Section 11(4) starts to run. When the events listed in subclause (a), (b), or (c) of that section occur, the period of limitations for an application under Section 11(6) starts to run.

In a recent ruling in Geo Miller & Co. Pvt. Ltd. vs. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd.[xii], the Supreme Court reaffirmed that Section 137 of the Limitation Act governs the period of limitations under Section 11 of the Arbitration Act. As a result, a party has three years to apply to Section 11.

Section 137 of the First Schedule of the Limitation Act, 1963, which specifies three years, governs the limitation period for applying Section 11 of the Arbitration Act, the Supreme Court ruled in a recent ruling in the case of Bharat Sanchar Nigam Ltd & Anr. Vs. M/s Nortel Networks India Pvt. Ltd.[xiii] The period of limitations begins on the day the arbitrator’s appointment is unsuccessful.

Revising Section 11 of the Arbitration Act to set a deadline for applying this provision, as advised by the prestigious Supreme Court bench, should be taken into consideration by the legislature. This proposal emphasizes how important it is for Indian courts to settle arbitration disputes quickly.

Filing Of Counter Claims Beyond Limitation

In Gopal Bose Vs. Board of Trustees of Port of Kolkata[xiv], the Supreme Court decided that a counterclaim had to be considered a distinct lawsuit and that, as such, the period of limitation for bringing it started on the date the cause of action for bringing the cross-claims arose, following Section 137 of the Limitation Act. This implies that when the cause of action accrues, a counterclaim has to be submitted within three years.

Nonetheless, the Supreme Court has deviated from this norm in specific situations. In State of Goa v. Parveen Enterprises[xv], The Court decided that, instead of necessitating a separate application under Section 11 of the Act, the limitation period should be calculated from the date of service of notification of the counterclaim on the claimant for a respondent facing a claim who has also asserted a counterclaim against the claimant and initiated arbitration by serving notice on the claimant. Such a method makes sure that the counterclaim’s real initiation—rather than just the formality of submitting a new application—determines the limitation period.

This exception pertains to parties who, before the arbitrator’s appointment, have given notice requesting arbitration in connection with their outstanding disputes. Nevertheless, if the notification is unclear, the period of limitations cannot be extended. This was further confirmed in Voltas Limited vs. Roltas India Limited[xvi], where the two prerequisites established by the Supreme Court must be fulfilled:

• A claim against the claimant must have been brought by the party.
• The claimant must have received a notification from the party requesting arbitration.

Extending Time Under Section 43(3) & 43(4) Of The Limitation Act, 1963

According to Section 43(3) of the Arbitration Act, claims resulting from an arbitration agreement have a deadline for filing. A claim becomes time-barred if it is not submitted within this period unless the claimant can show that they were prevented from submitting on time by sufficient reason or an extraordinary hardship. The claimant may request an extension of time to submit the claim in such circumstances. Nonetheless, the arbitrator has complete discretion over whether to grant a time extension, and they may do so for whatever amount of time they see right.

This clause is modeled after Section 5 of the Limitation Act, of 1963, which permits a delay to be excused if there is a good reason for the delay in applying or appealing after the deadline. Russell on Arbitration states that a time extension is not given out of the blue and is only approved in cases where it would cause excessive hardship. However, not all adversity qualifies as excessive hardship.[xvii] Reopening a prohibited claim does not transfer hardship that a party has lawfully incurred as a result of their default to the other party.

Exclusion Of Time In Arbitral Proceedings Under Section 43(4) and Section 14 of the Arbitration And Conciliation Act, 1996

The concept of deducting time spent pursuing a legitimate action in a court without jurisdiction is outlined in Section 14 of the Limitation Act. It makes clear that the time a party has been actively pursuing another civil proceeding, whether in a lower court, an appellate court, or a revisional court, will be subtracted from the calculation of the suit or application’s period of limitations if the other proceeding relates to the same disputed matter and was started in good faith in a court that is unable to hear it for lack of jurisdiction or other comparable reasons. The implementation of this clause in arbitration proceedings is not expressly prohibited by the Arbitration Act.

In actuality, the Limitation Act has extensive jurisdiction over arbitration procedures according to Section 43 of the Arbitration Act. Only in cases where the Arbitration Act itself contains a clear time-related clause or agreement does the Limitation Act’s exception apply.

In the Simplex Infrastructure Limited v. Union of India[xviii] judgment, the Supreme Court firmly upheld the notion of strict timeliness. The Court decided that an application to set aside an arbitral decision on the grounds specified in Section 34(2) of the Act must be filed within three months of the arbitral award to be considered for appeal under Section 34(3) of the Arbitration Act and its proviso. If adequate cause is shown, this term may only be extended for an additional thirty days; it cannot be prolonged further.

The application would be 131 days overdue even if the Respondent were to get the benefit of Section 14 of the Limitation Act. This surpasses the stringent timelines outlined in the Arbitration Act’s Section 34(3), in conjunction with its caveat.

The Supreme Court held that the petition to set aside an arbitral award under Section 34 of the Act was filed well beyond the outer limit of ninety days, even if the Respondent benefited from the provisions of Section 14 of the Limitation Act for the time spent pursuing proceedings before the District Judge.

The Respondent’s 514-day delay in applying was not justified by the High Court, the Court stated, considering the period of limitations outlined in Section 34 of the Act. As a result, the decision of the High Court was overturned, and the appeal was granted. Due to a period of limitations, the Respondent’s petition under Section 34 of the Arbitration Act was denied.

Applicability Of Section 17 Of The Limitation Act, 1963 in The Arbitration

In a recent ruling in P. Radha Bai & Ors. Vs. P. Ashok Kumar & Ors.[xix], the Hon’ble Apex Court struck down the following regulations: (i) The limitation period outlined in Section 34 cannot be extended by using the defense of Section 17 of the Limitation Act. If the same is applied, it will be unclear when to apply to have the arbitral decision set aside under Section 36 and it may cause problems when the award is enforced. (ii) The Arbitration Act’s Section 34 takes effect as soon as a party gets the award, and the period of limitations starts to run the moment the party learns of the award.

Since Sections 17(1)(a) and (c) of the Limitation Act deal with scenarios in which the application results from the Respondent’s deception or requests relief from the consequences of an error, it’s possible that they won’t apply when extended to Section 34 of Arbitration Act. A Section 34 application does not ask for compensation for the results of a mistake; rather, it is founded on the arbitral ruling and does not address the Respondent’s deception. Any subsequent impairment under Section 17 or Section 9 of the Limitation Act is immaterial since the period of limitation under Section 34(3) of the Arbitration Act starts as soon as the aggrieved party receives the award.

Applicability Of Limitation Act When Time Limit Is Prescribed Under The Arbitration Act

The Arbitration Act (and its later revisions) is generally subject to the Limitation Act of 1963 under Section 43. On the other hand, if a special period prescribes a certain term of limitation, such period supersedes the requirements of the Limitation Act, according to Section 29(2) of the Limitation Act of 1963.

The time restriction for contesting an arbitral ruling on any of the reasons listed in Section 34 of the Arbitration Act is specified. Furthermore, the same section’s clause (2) allows for a 30-day grace period for delays. The Limitation Act of 1963 has no bearing on the limitation period because it is specified in Section 34.

Comparably, Section 13(1-A) (proviso) of the Commercial Courts Act, 2015 must be taken into account in combination with Section 37 of the Arbitration Act, which handles appeals. This clause gives the District Judge level exercising initial civil jurisdiction or the commercial division of the High Court sixty days to file an appeal against a decision or order.

Examining the provisions of Section 34(3) of the Arbitration Act, which gives the court the authority to consider petitions contesting an arbitral award on several grounds—such as a party’s incapacity, the arbitration agreement’s invalidity, and disputes that do not fall under the terms of the arbitration agreement—will help one understand the extent of this provision. It is specifically stated in Section 34 of the Arbitration Act when a challenge must be filed with a court of competent jurisdiction.

The exact wording of Section 34(3) of the Arbitration Act makes it quite evident that an application to set aside an award cannot be made more than three months from the applicant’s date of receipt of the arbitral verdict. The three-month timeframe begins on the day the arbitral tribunal rules on a request submitted following Section 33 of the Arbitration Act.

The Bombay High Court observed in Anil Kumar Jinabhai V. Pravin Chandra Jinabhai[xx] that the party wishing to set aside an arbitral ruling must first get a signed copy of the award to challenge it. If the party can show good reason for submitting the challenge after the three-month window and offer a compelling justification for the delay in going to court, the Arbitration Act permits an additional thirty days of grace.

It is explicitly stated in the Arbitration Act that the extension cannot be longer than 30 days. In Union of India v. Popular Construction Co.[xxi], the Supreme Court upheld this, ruling that the time limit outlined in Section 34 of the Arbitration Act is unchangeable and cannot be prolonged by the court following Section 5 of the Limitation Act, 1963.

Conclusion

The Arbitration Act specifies timeframes for each step of arbitration, and it is essential to meet these deadlines. There is a deadline for each stage that a party must follow to avoid losing their rights, “the law assists those who are vigilant with their rights, and not those who sleep on them.” “Rules of equity have no application where there are specific statutory provisions specifying the grounds on which alone suspension or stoppage of running of time can arise,” as was excellently noted in Yeshwant Deora v. Walchand.[xxii]

In summary, it is essential to recognize the significance of the Limitation Act in arbitration proceedings. While arbitration proceedings may be more lenient than court proceedings in terms of technicalities, this does not extend to the principles of limitation. When dealing with statutory limitations, it is prudent to proactively pursue legal remedies rather than neglect one’s rights

References

[i] The Arbitration And Conciliation Act, 1996, Act No. 26 Of 1996, S. 43 cl.1, Acts Of Parliament,1996(India)

[ii] The Arbitration And Conciliation Act, 1996, Act No. 26 Of 1996, S.37, Acts Of Parliament,1996(India)

[iii] The Arbitration And Conciliation Act, 1996, Act No. 26 Of 1996, S.34, Acts Of Parliament,1996(India)

[iv] Dakshin Haryana Bijli Vitran Nigam Ltd. V. Navigant Technologies Pvt. Ltd., 2021 Scc Online Sc 157

[v] The Limitation Act, 1963, Act No. 36 Of 1963, S. 137, Acts Of Parliament 1963(India)

[vi] Russell On Arbitration By Anthony Walton (19th Edn.) At Pp. 4-5

[vii] Panchu Gopal Bose V. Board Of Trustees For Port Of Calcutta (1993)4scc338

[viii] The Arbitration And Conciliation Act, 1996, Act No. 26 Of 1996, S.8, Acts Of Parliament,1996(India)

[ix] Ssipl Lifestyle Private Limited And Ors. Vs. Vama Apparels (India) Private Limited And Ors. 2020 (2) Rcr (Civil) 707

[x] Golden Chariot Recreations Pvt. Ltd. V. Mukesh Panika & Anr 2018 Scc Online Del 10050

[xi] Prasar Bharti V. Maa Communication Air 2011 (Delhi) 26

[xii] Geo Miller & Co. Pvt. Ltd. Vs. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd. Air 2019 Sc 4244

[xiii] Bharat Sanchar Nigam Ltd & Anr. Vs. M/S Nortel Networks India Pvt. Ltd  2021 (5) Scc 738

[xiv] Gopal Bose Vs. Board Of Trustees Of Port Of Kolkata (1993) 4 Scc 338

[xv] Goa V. Parveen Enterprises 9 (2012) 12 Scc 581

[xvi] Voltas Limited Vs. Roltas India Limited  (2014)4scc516

[xvii] Russell On Arbitration By Anthony Walton (19th Edn.) At Page 80.

[xviii] Simplex Infrastructure Limited V. Union Of India 2019 2 Scc 455

[xix] P. Radha Bai & Ors. Vs. P. Ashok Kumar & Ors Air 2018 Sc 5013

[xx] Anil Kumar Jinabhai V. Pravin Chandra Jinabhai  2007 (3) Bomcr 664

[xxi] Union Of India V. Popular Construction Co. (2001) 8 Scc 470

[xxii] Yeshwant Deora V. Walchand  Air 1951 Sc 16