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It is only in cases where there is no vestige of doubt that the claims are barred by limitation that the Court would decline the request for appointment of an Arbitrator. It is now well settled that unless the Court finds that ex-facie the dispute is barred by limitation and there is no issue to be adjudicated, the Courts would relegate the parties to the remedy of their choice i.e. arbitration and the same was upheld by High Court of Delhi through the learned bench led by Justice Vibhu Bakhru in the case of GAIL (INDIA) LIMITED vs. M/S RATHI STEEL AND POWER LTD [ARB.P. 597/2021] on 16.02.2022.

The facts of the case are that the petitioner filed the present petition praying that an Arbitrator should be appointed to adjudicate the disputes that have arisen between the parties in connection with the Gas Supply Contract (GSA). The GSA includes an Arbitration Clause. It is the petitioner’s case that the respondent had not lifted the minimum quantity of Regasified LNG (Gas) as agreed. Therefore, is liable to pay the amount for the said quantity under Clause 14.1 of the GSA, which provides for ‘Pay For If Not Taken’ obligations.

The respondent had not paid the said invoices, as according to the respondent, it was not liable to do so. In view of the above, the petitioner had also suspended the supply of gas from the year 2015 onwards. Since the respondent had failed to pay the amounts as claimed by the petitioner, the petitioner issued a notice invoking the Arbitration Agreement, claiming certain amounts, which according to the petitioner, were due under ‘Pay For If Not Taken’ obligations of agreement.

The respondent’s counsel submitted that an agreement does exist between the parties for reference of the disputes to arbitration, however, the claims made by the petitioner are ex-facie barred by limitation.

The petitioner’s counsel contended that the liability of the respondent to pay under the GSA ‘Pay For If Not Taken’ obligations continued even after the supply of Gas was suspended. He stated that notwithstanding that the invoices raised in respect of the period three years prior to the date of notice of invocation of arbitration are considered as barred by limitation, nonetheless, petitioner is entitled to recover the amounts for the period of three years prior to the notice invoking arbitration.

In view of the above, the Court considered it apposite to allow the present petition. Even though the parties to arbitration in respect of the disputes were barred by limitation. The Court observed that, “it is only in cases where there is no vestige of doubt that the claims are barred by limitation that the Court would decline the request for appointment of an Arbitrator. It is now well settled that unless the Court finds that ex-facie the dispute is barred by limitation and there is no issue to be adjudicated, the Courts would relegate the parties to the remedy of their choice – arbitration.”

Click here to read the Judgment

Judgment reviewed by – Shristi Suman