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REPLY TO NOTICE OF ARBITRATION WILL NOT SAVE THE LIMITATION PERIOD OF COUNTER CLAIM – ODISHA HIGH COURT.

The Odisha High Court passed an Order on 28.07.2022. Birla Institute of Management v. Fiberfill Interiors & Constructions, (ARBA. No. 26 of 2022).The Orissa High Court has held that a mere reply to the notice of arbitration would not save the period of limitation for filing the counter-claim(s).The Court held that the date on which the counterclaim is filed before the arbitrator would be the relevant date for determining the date of stopping of the period of limitation unless the respondent had issued a separate notice of arbitration raising the counter-claims, then the limitation would be computed as on the date of that notice. The order was passed by JUSTICE ARINDAM SINHA.

FACTS OF THE CASE

The parties entered into an agreement dated 08.06.2012. The work could not be completed within the stipulated time period, therefore, the agreement was terminated on 12.06.2014 and the respondent vacated the site on 30th July, 2014.Thereafter, on 17.09.2016, the petitioner sent an email to the respondent whereby both parties agreed to appoint an arbitrator for determining the amount due to the respondent.Then on 25.03.2017, the petitioner issued the notice invoking arbitration and vide reply dated 07.04.2017, the respondent denied its liability to pay and stated that an amount of Rs. 6 Cr is due to it from the petitioner. However, it agreed that the parties have an arbitration agreement, therefore, an arbitrator was appointed.Along with its statement of defence, the respondent filed its counter-claims on 18.09.2018. The arbitrator allowed the counter-claims of the respondent and awarded a sum of Rs. 5,21,60,618. Aggrieved by the award, the petitioner challenged the award.

JUDGEMENT

The Court rejected the argument of the respondent that its case falls within the exception carved out in the judgment of Praveen Enterprises (supra) as the SC had merely held that if the respondent has any counter-claim against the petitioner and it had by a separate notice of arbitration intimated the petitioner of its claims, then the date of such notice would be relevant for the purpose of determining limitation.The Court held that the respondent did not fulfil the twin conditions laid down in Praveen Enterprises (supra) as it neither intimated the petitioner of the particulars of its claims nor did it issue any notice of arbitration that would have stopped the period of limitation. It held that respondent’s letter dated 07.04.2017 was a mere reply to the arbitration notice issued by the petitioner on 25.03.2017, therefore, it cannot save the limitation period.The Court further held that the date of settlement of final bill is inconsequential when the agreement was terminated and the respondent vacated the work site in 2014 only. It further held that email dated 17.09.2016 cannot amount to Acknowledgement of debt as the petitioner had merely agreed to the appointment of arbitrator without admitting any liability to pay.Consequently, the held that the counter claims preferred by the respondent on 18.08.2018 were barred by limitation.Accordingly, the Court set aside the arbitral award to the extent it allowed the Respondent’s counter claims.

JUDGEMENT REVIEWED BY KUNMUN DAS

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