Time-Barred Claims Must Not Be Entertained, Doing So Would Perpetuate Injustice Than Serving Justice: Bombay High Court

Brief Facts:

The matter pertained to a dispute stemming from a Memorandum of Understanding (MoU), seeking arbitration between the involved parties. The MoU was established to grant development rights of the relevant property to the Applicant in exchange for a consideration of Rs.7 Crores. Subsequently, a Power of Attorney was executed by the Respondent to empower the Applicant to engage with the tenants regarding the property.

As events unfolded, in 2014, the Applicant requested the execution and registration of the Development Agreement and Power of Attorney by the Respondent. However, before this could be finalized, the Respondent issued a termination notice, citing breaches on the part of the Applicant and allowing a 30-day period for termination of the Agreement.

Responding to the notice, the Applicant expressed its readiness to fulfill its obligations under the MoU. Subsequently, the Respondent filed a rejoinder. Despite discussions about potential arbitrators, the parties failed to refer the dispute to arbitration, leading to Commercial Arbitration Application seeking reference of the disputes arising between the parties in the Bombay High Court.

Observations by the High Court:

The High Court referred to the foundational principles of the Law of Limitation, encapsulated in the Latin maxim "Vigilantibus non dormientibus jura subveniunt," which emphasizes that the law serves those who are vigilant and not those who sleep over their rights. The High Court observed that entertaining long dormant claims would invariably lead to greater injustice rather than serving the cause of justice.

The High Court held that the court's role is to refer disputes to arbitration unless there is unequivocal evidence that the claim is ex facie time-barred or the dispute is non-arbitrable. In the present case, the High Court held that the claims were time-barred for over 5½ years. Despite the invocation of arbitration in 2020, there was no indication of any intervening events that could extend the limitation period under the relevant sections of the Limitation Act. Consequently, the High Court held the present case to be one of "deadwood" or no subsisting dispute.

Furthermore, the High Court emphasized that mere exchanges of letters or settlement discussions do not extend the period of limitation for issuing a notice of arbitration. It is imperative for a clear notice invoking arbitration to be presented within three years from the rejection of a final bill. In this instance, the notice invoking arbitration was issued 5½ years after the rejection of claims, rendering it ex facie time-barred.

Case Title: Mahavir Enterprise vs Chandravati Sunder Salian.

Case Number: COMMERCIAL ARBITRATION APPLICATION NO.15 OF 2023.

Advocate for the Petitioner: Mr.Anoshak Daver a/w Nehaa Shah i/b Dhiren Shah for the Applicant.

Advocate for the Respondent: Mr.Durgaprasad Sabnis a/w Hiten Lala i/b Lex Firmus for the Respondent.

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