Application of Limitation Act, 1963, to the Arbitration & Conciliation Act, 1996:
1. Section 43 (1) of the Act, 1996 mandates the application of Act 1963, to the
Arbitration proceedings. Section 43(2) of the Act, 1996 states that arbitration
shall be deemed to have commenced on the date referred to in section 21 of
the Act . Further, section 43(3) of the Act, 1996 states that-
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"Where an arbitration agreement to submit future disputes to arbitration provides that
any claim to which the agreement applies shall be barred unless some step to
commence arbitral proceedings is taken within a time fixed by the agreement, and a
dispute arises to which the agreement applies...."
2. In India, the law of limitation is governed by the limitation Act, of 1963, Section 3 of
the Act3 bars the remedy of filing suits, applications, and appeals after the prescribed
period. Moreover, section 3 of the Act, 1963 bars the remedy of filing suits, appeals,
and applications after a prescribed period. Thus, action cannot be initiated by the
party after the expiration of the prescribed time. Section 11 of the Act, 1996 provides
the procedure to initiate the arbitration. However, it can be divided into two issues
first, an application to the court for the appointment of the arbitrator, and second, an
issue of claim to cause of Action.
3. The Supreme Court in the case of Grasim Industries vs. The State of Kerala
[MANU/SC/0777/2017] has held the Art. 137 of the first schedule of the Act, 1963
would apply to the Arbitration & Conciliation Act, 1996, and any application under
section 11 of the Act, 1996 should be initiated within three years from the date when
the cause of action arose. Article 137 of the Act, 1963 is a residual provision, it
provides a limitation for a period for any application for which no period of limitation is
provided in any of the Articles in the Schedule of the Limitation Act. It provides for a
limitation period of three years from the time the "right to reply" accrues.
Remember:
Now, the question is what is the cause of action under arbitration law? Supreme
Court in the case Major (Retd.) Inder Singh Rekhi vs. Delhi Development
Authority [MANU/SC/0271/1988] held that a dispute can be said to arise when "a
claim is asserted by one party and denied by the other on whatever grounds. Mere
failure or inaction to pay does not lead to the inference of the existence of a dispute.
Dispute entails a positive element and assertion of denying, not merely inaction to
accede to a claim or a request." And, also observed that the parties cannot postpone
the cause of action by writing or sending reminders.
4. In the case of Geo Miller vs. Rajasthan Vidyut Nigam [2019 SCC OnLine SC
1137]the supreme court had to deal with similar issues; what is the time limit of the
application for appointment of an Arbitrator under 11(6) of the Act 1996? And what is
the cause of action to determine the beginning of the time limit under the Act, of
1963? Concerning the former issue, the court held that the application of the Art. 137
of the Act, 1963, i.e., the outer time limit period for the reference of the dispute to the
arbitration or the appointment of the arbitrator under section 11 of the Act, 1996 is
three years from the date on which the cause of action or the claim which is to be
arbitrated first arise. Further, the court observed that the mere interaction between
the parties in the form of letters or reminders will not extend the statute of limitations.
5. However, the period of limitation for filing an application seeking the appointment of
an arbitrator is different from the period of limitation applicable to the substantive
claims made in a contract. According to the Art. 55 of the Schedule of the Act, 1963,
the limitation period for claiming breach of contract is three years from the date of
accrual of the cause of action. Moreover, by the virtue of Art. 137 of the First
Schedule of the Limitation Act, 1963, the limitation period for filing an application
under section 11 for appointment of the arbitrator before a court is three years from
the date of refusal to appoint the arbitrator or expiry of 30 days from receipt of notice
invoking arbitration by the other side, whichever is earlier.
6. In the case of BSNL vs. Nortel Networks Pvt. Ltd. [MANU/SC/0171/2021] the
supreme court observed that Art. 137 of the First Schedule of the Limitation Act will
govern the limitation period for filing an application under section 11 of the Act, 1996.
The limitation period will begin from the date when there is a failure to appoint the
arbitrator. Further, the court held that in exceptional cases when the claims are prima
facie time-barred, and it is evident that there is no subsisting dispute, the court may
refuse to appoint an arbitrator. Thus, it was observed that since there is no provision
in the Act, 1996 specifying the period of limitation for filing an application under
Section 11, and however the Act, 1963 does not provide a period for filing an
application for the appointment of an arbitrator under section 11 of the Act, 1996. It
would be covered by Article 137 of the Act, 1963.
7. The Supreme Court has provided a time limit of three years to approach the Court to
initiate the arbitration.
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