Period of Limitation Will Only Begin To Run When The talks of Amicable Settlement Between The Parties Fail: Calcutta HC
Recently, the single judge bench of Justice Shekhar B.Saraf of the Calcutta High Court in a judgment dated, March 29th 2023, in the case of M/S. ZILLON INFRAPROJECTS PVT. LTD. VS BHARAT HEAVY ELECTRICALS LIMITED held that the period of limitation for referring a dispute to arbitration would be calculated from the date of the breaking point i.e., the date of failure of settlement talks, when the parties were trying to amicably settle the dispute.
Facts of the Case:
The parties signed a contract on October 28, 2010, under which the respondent awarded the work to the petitioner. The task had to be completed within a certain amount of time. The project work was put on hold due to a delay in completion. However, in an email dated January 18, 2013, the respondent placed the project on ‘Hold’ and informed the petitioner that the contractual period of completion of the project could not be extended. It also asked the petitioner to submit final bills. After much back and forth between the parties, the petitioner finally served the respondent with a legal notice demanding the release of the overdue payment. On failure of the talks of settlements between the parties, the petitioner issued the notice of arbitration.
Judgment:
The Court invalidated the procedure for appointing the arbitrator outlined in the contract’s Clause 2.2. The Court in view of the previous judgements of Hon’ble Supreme Court held that, a party cannot unilaterally appoint the arbitrator, thus, the procedure contemplated in the clause in not valid in law and the Court will have the power to appoint a sole independent arbitrator to decide the dispute between the parties. It was further observed that the period of limitation for referring a dispute to arbitration would begin from the date of failure of settlement. The moratorium period would be excluded from the computation of limitation in proceedings at the hands of the corporate debtor. It also ruled that the respondent’s claim that the arbitration was called too soon did not help its case. Finally, the Court emphasises that the scope of examination under Section 11 of the Act is limited, and the Court can only refuse arbitration in cases of deadwood or claims that are ex-facie barred by limitation. As a result, the Court granted the petition and appointed Justice Sahidullah Munshi, a former Calcutta High Court judge, as the sole arbitrator.
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JUDGMENT REVIEWED BY DIVYA SHREE GN