The Meghalaya High Court has ruled that in a case where the issue of whether the claim raised by a party is barred by limitation or not calls for an inquiry, the Chief Justice or his designate should allow the objection to be decided by the arbitral tribunal in accordance with law.
The Single Bench of Chief Justice Sanjib Banerjee held that though in an open and shut case where it is apparent that the claim can no longer be pursued, or where the request for setting up an arbitral tribunal is hopelessly barred by limitation, the Court may dismiss the petition for reference to arbitration; however, when an arguable case is made out and the issue of limitation calls for an enquiry, the Court should yield to the authority of the arbitral tribunal.
The petitioner M/s Maya Construction filed a petition under Section 11 (5) of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Meghalaya High Court for setting up an arbitral tribunal to adjudicate the disputes between the petitioner and the respondent Air Force authorities under a construction contract.
The respondent Air Force authorities submitted before the High Court that the claims raised by the petitioner were ex facie barred by limitation. The respondent averred that by the time the demand for setting up an arbitral tribunal was made by the petitioner, the claims raised by the petitioner were no longer live since a period of three years had elapsed since the completion of work and the receipt of payment by the petitioner.
The petitioner M/s Maya Construction contended that as per the general conditions governing the contract entered into between the parties, an attempt at reconciliation was required to be made before resorting to arbitration. Thus, the petitioner averred that it made a request for conciliation, which was spurned by the respondents.
The petitioner added that it made a demand for setting up an arbitral tribunal over two years after the refusal by the respondents to enter into conciliation proceedings.
The Court observed that in view of Section 5 of the A&C Act, the arbitral tribunal has all the authority and the Court has a limited scope for intervention. The Court noted that an objection to the authority of the arbitral tribunal can be adjudicated upon by the tribunal itself under Section 16 of the A&C Act. The Court added that even when the said objection is overruled, the objector has to wait for the conclusion of the arbitral proceedings on merits, and only then can the challenge founded on the jurisdictional objection may be renewed if the award is otherwise challenged under Section 34 of the A&C Act.
The Court ruled that when a request is received under Section 11 of the A&C Act, the Chief Justice or his designate has to assess whether there is a live claim to be carried to an arbitral reference. The Court added that there are two aspects to limitation in arbitration matters; the first being whether the cause can be pursued, and the second is whether the arbitration may be sought.
The Court held that in an open and shut case where it is apparent that the claim can no longer be pursued, or in cases where the request for setting up an arbitral tribunal is hopelessly barred by limitation, the Chief Justice or his designate may dismiss the petition for reference of a matter to arbitration. However, the Court ruled that in a case where the issue of whether the claim raised by a party is barred by limitation or not calls for an inquiry, the Chief Justice or his designate should yield to the authority of the arbitral tribunal and should allow the objection to be decided by the arbitral tribunal in accordance with law.
The Court observed that it was evident that the petitioner had made a request for setting up an arbitral tribunal beyond the limitation period of three years from the date when the last payment was received by it. However, the Court noted that a request for reconciliation was made by the petitioner within three years of the receipt of the last payment. Hence, the Court ruled that since an arguable case had been made out by the petitioner that a request for the constitution of the arbitral tribunal was made by it at a time when the claim of the petitioner was alive and that the clock of limitation in terms of Section 21 of the A&C Act had stopped at such a stage, therefore, the objection should be left for the arbitral tribunal to decide.
The Court thus allowed the petition, appointed a Sole Arbitrator and referred the parties to arbitration.
Case Title: M/s Maya Construction versus Union of India & Ors.
Dated: 02.05.2022 (Meghalaya High Court)
Citation: 2022 LiveLaw (Meg) 24
Counsel for the Petitioner: Mr. ES Saikia, with Mr. U Das
Counsel for the Respondents: Dr. N Mozika, ASG ; Ms. S. Rumthao