The Calcutta High Court has clarified that when a claim is clearly time-barred and does not require further trial to determine its validity, the referral court has the authority to reject arbitration under Section 11 of the Arbitration and Conciliation Act, 1996. Justice Shampa Sarkar made this observation while ruling on an application seeking the appointment of an arbitrator.
Case Background
The dispute arose from a notarized sale agreement dated June 12, 2015. Under this agreement, the petitioner had agreed to purchase a piece of land from the respondent for a sum of Rs. 16 lakhs. The vendor accepted the offer and agreed to transfer the land after its development.
The agreement contained several terms and conditions, including Clause 14, which provided for the resolution of disputes through arbitration. It stipulated that all conflicts between the parties should first be settled amicably, and if that failed, arbitration would be the next course of action as per the Arbitration Act.
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Despite an attempt at an amicable resolution, the matter remained unresolved. Subsequently, the petitioner invoked arbitration through a letter dated December 24, 2024, alleging that although Rs. 16 lakhs had been paid, the respondent failed to fulfill the contractual obligations.
Upon reviewing the case, the court noted that the petitioner was seeking specific performance of the contract signed on June 12, 2015. However, no evidence was presented to establish that Rs. 16 lakhs had been paid or that the respondent had acknowledged any liability.
A critical point of consideration was the limitation period for invoking arbitration. As per the law, arbitration must be initiated within three years from the accrual of the cause of action. The Supreme Court, in the case of Bharat Sanchar Nigam Limited & Another vs. Nortel Networks India Private Limited (2021), ruled that:
"Although the arbitration petition may not be barred by limitation, if the underlying claims arose much earlier, they would be deemed time-barred when arbitration is invoked."
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The Supreme Court further clarified that exchanging letters does not extend the limitation period. A formal notice invoking arbitration, specifying the particular disputes and claims, must be received by the opposing party within three years from the rejection of the final bill. Otherwise, the claim would be time-barred as per Section 21 of the Arbitration Act.
Applying this precedent, the Calcutta High Court observed that in the present case, arbitration was invoked on December 24, 2024, nearly nine years after the contract was signed. Given this substantial delay, the court ruled that the claim was ex-facie time-barred. While a referral court under Section 11 of the Arbitration Act is not required to conduct a mini-trial to assess limitation issues, it should exercise discretion and refrain from referring disputes that are evidently beyond the prescribed limitation period.
Since the limitation issue was apparent from the records and did not involve a complex question of law or fact, the court dismissed the arbitration application.
Based on the above observations, the Calcutta High Court ruled that the petitioner’s request for arbitration could not be entertained, as the claim was time-barred.
Case Details:
- Case Title: Sri Swapan Paul vs. M/s. Paul Construction
- Case Number: AP No. 28 of 2025
- Order Date: March 27, 2025
- Judges: Justice Shampa Sarkar
- Legal Representatives:
- For Petitioner: Mr. Partha Chakraborty, Adv. & Mr. Rishabh Dutta Paul, Adv.
