Period Of Limitation Begins To Run On The Date Of Payment Of Final Bill For Claims Rejected: Calcutta HC

The Calcutta High Court has held that the period of limitation would begin to run from the date of final payment for the claims that are rejected under it. The Court held that once a claim that was existing at the time of preparation of the final bill is rejected in the final payment, the limitation period commences which cannot be stopped by issuing unilateral letters by a party. The bench of Justice Shekhar B. Saraf held that at the stage of appointment of arbitrator the Courts do not perform a meagre cosmetic exercise and simply refer every dispute to arbitration but are expected to apply judicial minds to determine the aspects of arbitrability of the dispute. It further observed that had the exercise been to merely examine the existence of an arbitration agreement, this could have been delegated to an AI-empowered computer system. The Court further held that Section 11(6A) does not prevent the Courts to examine the issue of limitation of substantive claims when the claims are ex-facie barred by limitation and the case is of a clear deadwood. The Court further held that period of limitation once expired would not stand extended by the conduct of the parties. Facts The parties entered into a contract in the year 2008-09 wherein the petitioner was to carry out certain construction and basic utility works for the respondent. Initially the agreement was required to be completed by August 2009, however, on account of certain delays and increase in the scope of deadline was extended time and again till 31.08.2014, the date on which the work was completed. The respondent furnished the final bill on 11.03.2016 and the petitioner accepted it as full and final settlement of all its claims vide a letter dated 15.03.2016. By another letter dated 17.03.2016, the petitioner reiterated its acceptance of the final amount but this time a request for price escalation was made. Thereafter, by a letter dated 16.05.2016, the petitioner contended that its claim for price escalation has not been settled yet and sought permission for arbitration. It sent a reminded letter dated 25.08.2017 to which respondent replied vide its letter dated 12.09.2017 and denied any liability to pay escalation claims on the ground that the payment made on 15.03.2016 was excepted as full and final settlement of its claim, thus, no claim survives. In response to the letter dated 12.09.2017, the petitioner sent another letter whereby it, for the first time, contended sending approval for final bill as full and final settlement under coercion. Thereafter, certain other letters were exchanged between the parties. The formal notice of arbitration was issued on 08.03.2021 Finally, the petitioner approached the Court for the appointment of arbitrator on the ground that appointment procedure under the agreement provides for unilateral appointment of the sole arbitrator. Contention of the Parties The petitioner sought the appointment on the following grounds: Appointment procedure under the agreement is not valid in law, thus, the Court can appoint the arbitrator. The existence of the arbitration agreement is not disputed, thus, the requirement of Section 11 that only pertains to the existence of arbitration agreement is satisfied. The Court cannot examine the aspect of limitation of the substantive claims while exercising powers under Section 11 of the Act as in view of Section 11(6A) such an exercise is impermissible. Moreover, limitation being a mixed question of law and fact should be decided by the arbitrator only.The petitioner was assured by the respondent regarding the consideration of its claim for escalation costs and the acceptance letter dated 15.03.2016 was given under coercion, thus, the same cannot amount to waiver of its right to claim price escalation. The notice of arbitration was issued within the three years limitation period that commenced only after the respondent denied its liability to pay vide letter dated 12.09.2017. Prior to this the parties were negotiating or having mutual discussions and this letter would amount to the ‘breaking point’ as enunciated under Geo Miller Case. The respondent had acquiesced its right to object on limitation as it had nominated its arbitrator. Moreover, a high powered committee was constituted to consider the escalation claim of the petitioner. The respondent objected to the maintainability of the petition on the following grounds: The petition is barred by limitation as the cause for action for any claim arose on the date of payment of final bill.The claims of the petitioner were discharged by accord and satisfaction and it had issued a no-claim certificate in favour of respondent. The objection regarding the coercion is an afterthought made to wriggle out of the settlement reached between the parties. A mere request, after the settlement, cannot amount to a claim...

Period Of Limitation Begins To Run On The Date Of Payment Of Final Bill For Claims Rejected: Calcutta HC

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