Arbitration Act | When Parties Engage In Constant Communication, Unjust To Dismiss Claim Solely On Grounds Of Being Time-Barred: Calcutta High Court
The Calcutta High Court single bench of Justice Moushumi Bhattacharya held that it would be an unnatural construction of Section 11 of the Arbitration and Conciliation Act, 1996 where a party with a bona fide and a genuine claim is left in the lurch on the defence of the claim being barred by limitation. It held that when parties engage in constant communication for the settlement of...
The Calcutta High Court single bench of Justice Moushumi Bhattacharya held that it would be an unnatural construction of Section 11 of the Arbitration and Conciliation Act, 1996 where a party with a bona fide and a genuine claim is left in the lurch on the defence of the claim being barred by limitation. It held that when parties engage in constant communication for the settlement of claims, it would be unjust to dismiss a claim solely on the grounds of being time-barred.
Brief Facts:
The Petitioner approached the Calcutta High Court (“High Court”) for appointment of an Arbitrator under Section 11 of The Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The Respondent raised a preliminary objection, contending that the application pertained to time-barred claims. The Respondent presented two documents, including a balance confirmation dated March 31, 2017, indicating a debt of Rs. 56 lakhs owed by the Respondent to the Petitioner. Furthermore, it argued that the Petitioner invoked the arbitration agreement through a Notice under Section 21 of the Arbitration Act on August 9, 2023, which amounted to a delay of six years from March 31, 2017.
On the other hand, the Petitioner relied on the contents of the invocation notice to assert that the Petitioner made numerous verbal representations and requested to the Respondent for repayment of the balance amount of Rs. 56 lakhs. However, the Respondent allegedly failed to take any steps in response to these representations. Thus, the contention was that despite the delay in invoking the arbitration agreement formally, there were ongoing verbal communications and requests that should be considered in determining the timeliness of the arbitration invocation.
Observations by the High Court:
The question before the High Court was whether the Petitioner's claim for repayment or the Section 21 notice was time-barred.
The High Court noted that besides the preliminary objection raised by the Respondent, no substantive defense to the non-payment was presented. The Respondent's response to the Petitioner's notice of invocation merely contained bare denials and raised a dispute regarding the jurisdiction clause of the arbitration agreement. Notably, the Respondent proceeded to nominate its Arbitrator for resolving disputes arising from the MoU, suggesting an acknowledgment of the ongoing dispute.
While the Respondent counsel relied on the case of Bharat Sanchar Nigam Limited and Anr. vs. Nortel Networks India Private Limited (2021)5 SCC 738 to emphasize the point of limitation, the High Court noted that the Supreme Court in the Nortel case excluded claims only if they were manifestly and ex facie 'time-barred' and 'dead'. The High Court emphasized that Nortel made provisions for cases where there is even a vestige of doubt, allowing the Arbitrator to decide the issue of delay.
Furthermore, the High Court emphasized that the invocation notice clearly outlined the Petitioner's efforts to resolve the dispute through verbal requests and communication with the respondent. The Respondent's repeated assurances to repay the debt and fulfill the terms of the MoU, as recorded in the notice, indicated an ongoing engagement between the parties. Given the existence of a genuine and bona fide claim by the Petitioner and the Respondent's failure to fulfill its obligations, the High Court concluded that it would be unjust to dismiss the claim on grounds of limitation.
Consequently, the High Court ruled in favor of the Petitioner and allowed the application for appointment of an Arbitrator. Ms. Suchismita Chatterjee (Ghosh) was appointed as the Arbitrator.
Case Title: Tree House Education And Accessories Ltd. Versus Holy Trust School
Case Number: AP/24/2024
Advocate for the Petitioner: Mr. Yash Vardhan Deora, Adv.
Advocate for the Respondent: Mr. Sakya Sen, Adv. Mr. Gaurav Purkayastha, Adv. Ms. Sushmita Choudhury, Adv.
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