The question whether the period of invoking the arbitration could be restricted to a period less than as provided under the Limitation Act, 1963 is no longer res integra. {Para 6}
7. In Grasim Industries Limited v. State of Kerala : (2018) 14 SCC 265, the Supreme Court considered an appeal from an order where the appellant was non suited on the ground that the demand for the appointment of an arbitral tribunal was not made within the time as stipulated in the arbitration agreement. The Supreme Court found that the relevant clause did not stipulate any time and further held as under:
“11. Section 28(b) [of the Contract act, 1872] unequivocally provides that an agreement which extinguishes the right of a party on expiry of the a specified period, would be void. Therefore, even if a restricted period for raising an arbitral dispute has actually been provided for (as was determined in the impugned order), the same would be treated as void”
8. A Coordinate Bench of this Court in the case of National Highways Authority India v. Mecon - Gea Energy Systems India Ltd. JV:, (2013) 199 DLT 397, held as under:
“41. A perusal of the amended Section 28 of the Contract Act, 1957 extracted above would show that both kinds of agreements i.e. agreements which restrict the period of limitation within which claims could be referred, as also agreements which extinguish the right of a party to prefer a claim or discharges any party from any liability under a contract on expiry of a specified period, are void to that extent.
42. Before the amendment of Section 28 in 1997, the agreements reducing the period of limitation were distinguished from those which did not limit the time within which a party might enforce his rights, but which provided for a release or forfeiture of rights, if no suit was brought within the period stipulated in the agreement; and the latter class of agreements, being outside the scope of the section, were held to be binding between the parties. Thus, in National Insurance Co. Ltd. v. Sujir Ganesh Nayak & Co. ((1997) 4 SCC 366 : AIR 1997 SC 2049), the Supreme Court drew a clear distinction between an agreement which curtails the period of limitation and an agreement which provides for forfeiture or waiver of the right itself, if no action is commenced within the period stipulated by the agreement. The first was held to be void as offending Section 28 but, the later was held not falling within the mischief of Section 28. Thus, it was held that curtailment of the period of limitation was not permissible in view of Section 28 but extinction of the right itself, unless exercised within the specified time, was permissible and can be enforced.
43. After the 1997 amendment to Section 28 of the Indian Contract Act, 1872, not only the curtailment of the period of limitation is void, but also the extinction of right, if sought to be brought by the agreement within a specific period, which period is less than the period of limitation prescribed for the suit under the Contract in question, is also rendered void. In other words, after the amendment to Section 28 of the Indian Contract Act, 1872 by Act 1 of 1997, the distinction between curtailing of the period of limitation and extinction of the right itself, after the specified period, no longer exists.”
9. The contention that the claims are barred by limitation as three years have elapsed from 30.08.2016 - the date when the Final Bill was prepared - is also unmerited. The time for reckoning whether a claim is barred by limitation would run from the date of cause of action and end on the party invoking the agreement to refer the disputes to arbitration. In terms of Section 21 of the A&C Act, the Arbitral Proceedings would commence on receipt of notice under Section 21 of the A&C Act. Plainly, the petitioner has invoked the Arbitration Agreement within the said period of three years. The period for determining whether the present petition is within limitation is required to be reckoned from the date when the notice invoking the arbitration was issued. It cannot be disputed that this petition is also within the period of limitation. This question is no longer res integra and is squarely covered by the decision of the Supreme Court in Bharat Sanchar Nigam Limited v. Nortel Networks India Private Limited : (2021) 5 SCC 738.
In the High Court of Delhi at New Delhi
(Before Vibhu Bakhru, J.)
Sagar Constructions Through Subash Chand Saini Vs Govt. of NCT of Delhi
Arb.P. 851/2021
Decided on October 6, 2021
Citation: 2021 SCC OnLine Del 4647
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