In the event of a contract breach, the correspondence letters between the parties does not extend the limitation period for the appointment of the arbitrator. A bench constituting of R.F. Nariman J. and B.R. Gavai J. delivered the judgement in Secunderabad Cantonment Board Vs. M/s. B. Ramachandraiah & Sons [Civil Appeal Nos. 900-902 of 2021]. The case involved an unusual hiatus in the appointment of arbitrator, the communication of which was carried on through correspondences through series of years under the presumption of extension of limitation period.
The Appellant argued that the Respondent had failed to complete the work within the stipulated period, but vide its meeting dated 05.10.2002, it resolved to grant an extension of time up to 31.12.2002 on an undertaking from the Respondent that the Appellant would be at liberty to impose penalty as provided in the contracts and as decided by the Appellant in case balance works were not completed by 31.12.2002. Both parties exchanged correspondences irregularly and after a three-year long hiatus after last communication dated 10.11.2010, the Respondent filed applications under Section 11 of the Arbitration Act on 06.11.2013. The learned Single Judge of the High Court for the State of Telangana held that the Section 11 applications were within time as they were filed within three years.
It was contended that the request made for the appointment of an arbitrator was received by the President of the Secunderabad Cantonment Board was 23.01.2007, which is the date on which the limitation period starts running under Article 137 of the Limitation Act, 1963 insofar as an application under Section 11(6) of the Arbitration Act is concerned. The Court referred to the judgement of Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd [(2020) 14 SCC 643] wherein it observed that mere correspondence of the appellant by way of writing letters/reminders to the respondent subsequent to this date would not extend the time of limitation.
The Court opined that, “Obviously, once time has started running, any final rejection by the Appellant by its letter dated 10.11.2010 would not give any fresh start to a limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act.”
Hence, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 06.11.2013, they were within the limitation period of three years starting from 10.11.2020. On this count, the applications under Section 11 of the Arbitration Act, themselves being hopelessly time barred, no arbitrator could have been appointed by the High Court.
The Court stated in its judgement that, “It is undisputed that final payments were received latest by the end of March 2003 by the Respondent. That apart, even assuming that a demand could have been made on account of price variation, such demand was made on 08.09.2003. Repeated letters were written thereafter by the Respondent, culminating in a legal notice dated 30.01.2010. Vide the reply notice dated 16.02.2010, it was made clear that such demands had been rejected. Even taking 16.02.2010 as the starting point for limitation on merits, a period of three years having elapsed by February 2013, the claim made on merits is also hopelessly time barred.”