The limitation period is a significant basis for all the civil proceedings initiated between the parties. The civil right for a claim comes to an end if it is barred due to passage of time. Therefore, the discussion regarding the limitation period has been pervasive in the contemporary legal world. In the context of arbitration, it is important to understand that the limitation period for filing an application for appointment of arbitrator under Sec 11 of the Arbitration & Conciliation Act, 1996 (the Act) and limitation period for referring a dispute under Sec 8 of the Act are different1 .
APPLICATION OF LIMITATION ACT, 1963, & ARBITRATION & CONCILIATION ACT 1996
Section 43 of the Act mandates the application of Limitation Act, 1963, to arbitration proceedings. Further, Section 43(2) of the Act also provides that the limitation period is deemed to commence on the date on which reference is made under Section 21 of the Act. Thus, to ascertain the Limitation Period, it will be imperative to take a cue from section 21 of the Act, which provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date when a request for the dispute to be referred for arbitration is received by the respondent.
DETERMINATION OF LIMITATION PERIOD FOR MAKING A CLAIM
It is a settled position of law that to determine whether a civil suit is within the period of limitation or not, a reference must be made to the date of the institution of the suit. However, with respect to arbitration, the Limitation Act does not specify as to when the arbitration proceedings are deemed to be initiated. This lacuna of law is filled by the co-joint reading of section 43(2) and Section 21 of the Act which states that the limitation period in respect of the arbitration proceedings is deemed to have commenced from the date on which the request to refer the matter to arbitration is received by the other party. While dealing with computation of Limitation Period one has to always take into account the practicalities of law as it is always open for a party to raise a claim even without a notice seeking reference. This issue was dealt by the Supreme Court in the matter of State of Goa vs. Praveen Enterprises 2 , and the following observations were made:
"There can be claims by a claimant even without a notice seeking reference. Let us take an example where a notice is issued by a claimant raising disputes regarding claims 'A' and 'B' and seeking reference thereof to arbitration. On appointment of arbitrator, the claimant files a claim statement with regard to the said claims 'A' and 'B', Subsequently, if the claimant amends the claim statement by adding claim 'C' [which is permitted under Section 23(3) of the Act] the additional claim 'C' would not be preceded by a notice seeking arbitration. The date of amendment by which the claim 'C' was introduced, will become the relevant date for determining the limitation in regard to the said claim 'C', whereas the date on which notice seeking arbitration was served on the other party, will be the relevant date for deciding the limitation in regard to Claims 'A' and 'B'. "
The position is crystal clear with respect to relevant date for determining the limitation period for the filing of an additional claim during the arbitration proceedings.
DETERMINATION OF LIMITATION PERIOD FOR MAKING A COUNTER CLAIM
Since by the virtue of Section 43 of the Act, the Limitation Act is applicable to the Arbitration Proceedings. Therefore, as per Section 3(2) of the Limitation Act, 1963, the date on which the counter claim is made before the arbitrator shall be the date for the "institution" of the Counter Claims. Taking note of the aforesaid position, it is quite apparent that Section 21 has no applicability in determining the limitation period of counter claims.
An exception to this rule was made in the case of State of Goa vs. Praveen Enterprises3 where it was laid down that when the party against whom a claim is made, also makes a claim against the claimant and seeks arbitration by serving notice of arbitration instead of filing of a separate application under Section 11 of the Act, the limitation for such counter claim should be computed as on the date on which the notice of such claim was served on the claimant and not on the date of filing of counter claim.
This position has also been affirmed by the Bombay High Court in case of Rolta India vs Voltas Limited4 that "...if no notice under section 21 is given by the party who had made counter claim, limitation in respect of the counter claim would stop only when the same is lodged before the arbitral tribunal. It is held that the separate notice in respect of the counter claim under section 21 is required to be issued otherwise arbitration proceedings does not commence in respect of the counter claim when other party gives notice under section 21 in respect of its claim...."
This Judgment has provided caveat to respondents that just because arbitration has commenced, it will not necessarily entail the conclusion that all the counter claims are within the period of limitation as limitation period will be computed from the date when the counter claim is made before the arbitrator. However, there is one exception where the computation of period of limitation will differ- when the party against whom a claim has been made chooses to make a claim against the claimant, but instead of filing a separate application under Section 11 after notice seeking arbitration is served upon the other party, it resorts to filing a counter-claim. In such a scenario, the limitation period will be computed from the date when the notice seeking arbitration is received by the other party. Respondents must exercise caution towards the limitation period while raising a counter claim. Usually, a party may choose not to raise a claim against the other party due to different reasons such as not to stifle the commercial relationship, size of the claim, ongoing efforts to mutually sort out the differences but all these factors take a back seat when the party is not reciprocated with similar efforts. Consequently, they might choose to make a counter claim at a later stage. In such a scenario, the aforesaid principle of law will be the torch bearer and guiding light so that claims are not raised after the expiry of the limitation period.
1 Inder Singh Rekhi. V. Delhi Development Authority MANU/SC/0271/1988
2 State of Goa Vs. Praveen Enterprises MANU/SC/0812/2011
3 State of Goa Vs. Praveen Enterprises MANU/SC/0812/2011
4 Rolta India Limited vs. Volta Limited MANU/MH/1749/2012
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