Court’s Decision:
The Delhi High Court appointed a sole arbitrator to adjudicate the disputes between the petitioner and respondent arising from a contract for the design and installation of a fire-fighting system. The court dismissed the respondent’s argument that the petitioner’s claim was barred by limitation, noting that the limitation argument could still be raised before the arbitrator.
Facts:
The case stems from a work order dated September 3, 2014, for the design, manufacture, supply, installation, testing, and commissioning of a fire-fighting system. The project was substantially completed by 2018, but the respondent allegedly delayed payments without justification. Despite the petitioner’s completion of most of the work and requests for payment, the respondent ultimately terminated the contract on June 17, 2019.
Following this, the petitioner initiated pre-litigation mediation under Section 12(A) of the Commercial Court Act, resulting in a Non-Starter Report. The petitioner subsequently filed a suit for recovery of outstanding payments, which was referred to arbitration based on the contract’s arbitration clause.
Issues:
- Whether the petitioner’s claim was barred by limitation, preventing the matter from being referred to arbitration.
- Whether an arbitrator should be appointed to adjudicate the contractual disputes.
Petitioner’s Arguments:
The petitioner argued for the appointment of an independent arbitrator, as per the arbitration clause in the contract, to resolve the disputes. It was contended that the claims were not time-barred since the petitioner had taken steps within the legal timeframe, including filing for pre-litigation mediation and a subsequent recovery suit.
Respondent’s Arguments:
The respondent argued that the petitioner’s claims were barred by limitation and, therefore, arbitration would serve no useful purpose. Citing precedents, including Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd. and SBI General Insurance Co. Ltd. vs. Krish Spinning, the respondent asserted that ex facie time-barred claims should not be referred to arbitration.
Analysis of the Law:
The court examined Section 11 of the Arbitration and Conciliation Act, 1996, which allows for the appointment of arbitrators. The court also analyzed Section 14 of the Limitation Act, 1963, noting that time spent in good faith in court proceedings without jurisdiction can be excluded from the limitation period, which could apply to the petitioner’s actions under the Commercial Court Act.
Precedent Analysis:
The court referred to SBI General Insurance Co. Ltd. vs. Krish Spinning, which emphasized the duty of referral courts to prima facie reject non-arbitrable or time-barred claims. However, the court distinguished this case based on the petitioner’s ongoing efforts to seek redress through pre-litigation mediation and subsequent suit filings within the limitation period.
Court’s Reasoning:
The court reasoned that having initiated proceedings under the Commercial Courts Act within the limitation period, the petitioner’s claim could not be considered ex facie time-barred. The court highlighted that while the limitation argument could still be raised before the arbitrator, the current claim merited referral to arbitration.
Conclusion:
The court appointed Mr. Shashank Garg as the sole arbitrator under the Delhi International Arbitration Centre (DIAC), following its rules and regulations. The arbitrator was directed to consider all claims and counter-claims, including the limitation issue, as part of the proceedings.
Implications:
This judgment reinforces that courts may refer disputes to arbitration even when limitation issues are raised, leaving such determinations to the arbitrator. It underscores the application of Section 14 of the Limitation Act, allowing parties to pursue claims through good-faith legal proceedings without impacting the limitation period adversely.
