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Clause Restricting Right To Invoke Arbitration To Only 6 Months Invalid; Cannot Restrict To Period Lesser Than Provided Under Limitation Act: Delhi HC Reiterates
Ausaf Ayyub
19 Aug 2023 12:00 PM GMT
The High Court of Delhi has reiterated that an arbitration clause that restricts the right of a party to a mere of 6 months is invalid. The bench of Justice Yogesh Khanna held that the right to invoke arbitration cannot be restricted to a period lesser than that provided under the Limitation Act, 1963. The Court was hearing an application under Section 11(6) filed by G.S. Express Pvt...
The High Court of Delhi has reiterated that an arbitration clause that restricts the right of a party to a mere of 6 months is invalid. The bench of Justice Yogesh Khanna held that the right to invoke arbitration cannot be restricted to a period lesser than that provided under the Limitation Act, 1963.
The Court was hearing an application under Section 11(6) filed by G.S. Express Pvt Ltd (Petitioner) seeking appointment of a sole arbitrator to adjudicate the dispute that has arisen between the parties.
The respondent raised an objection regarding the petition being time barred. It placed reliance on Clause 7.3.1. of the agreement which provided that the arbitration must be invoked within 180 days from the date of completion of work or termination of the agreement. It contended that the respondent having failed to invoke arbitration within 180 days cannot maintain an application afterwards.
The Court rejected the contention that if there is any condition in the arbitration agreement which makes certain disputes unarbitral or which restricts the arbitration to a particular amount of dispute; these terms need to be adhered to by the parties by observing that any condition that restrict the right of a party to a legal remedy would be in teeth of Section 28 of the Indian Contract Act.
The Court referred to the judgment of the division bench in Municipal Corporation of Delhi v. Natraj Construction Company, FAO 432/2010 wherein the Court was examining similar stipulation in the contract restricting the right to invoke arbitration to a lesser period. The Court held that such a stipulation would violate Section 28 of the Indian Contract Act.
The Court further referred to Pandit Construction Company v. Delhi Development Authority, 2007 SCC OnLine Del 993, Grasim Industries Limited vs. State of Kerala (2018) 14 SCC 265 and Sagar Construction through Subhash Chand Saini vs. Govt. of NCT of Delhi 2021 SCC OnLine Delhi 4648 wherein the Courts declared such a contractual clause to be illegal and without any legal force.
Accordingly, the Court allowed the petition and appointed Justice (Retd.) Mukta Gupta as the sole arbitrator.
Case Title: M/s G.S. Express Pvt Ltd v. NTPC Ltd
Citation: 2023 LiveLaw (Del) 712
Counsel for the Petitioner: Mr. Karan Luthra and Mr. Pratham Mehrotra
Counsel for the Respondent: Mr. Gopal Jain, Sr. Adv with Mr. Vikram Singh Baid, Mr. Adarsh Tripathi and Mr. Ajitesh Garg.
