Time Spent On Application Under Section 8 Of A&C Act, Not Excludable For Computation Of Limitation For Counter Claim: Delhi High Court

The Delhi High Court has ruled that in a suit filed by a party, the time spent by the opposite party in pursuing its application under Section 8 of the Arbitration and Conciliation Act, 1996 (A&C Act), cannot be excluded for the purpose of computation of the limitation period for filing the counter-claims by the opposite party before the Arbitral Tribunal. The bench of Justices Vibhu Bakhru and Amit Mahajan held that the benefit of Section 14 (1) of the Limitation Act, 1963 is available only to the plaintiff who has been prosecuting civil proceedings against the defendant, and not to the defendant who is resisting a claim. The Court added that filing of an application under Section 8 of the A&C Act cannot be construed as a party pursuing his claim before a Court so as to avail the benefit of Section 14(1) of the Limitation Act. The appellant- Web Overseas Ltd., and the respondent- Universal Industrial Plants Manufacturing Company Pvt. Ltd., entered into an Agreement, which was subsequently terminated by the appellant. The appellant filed a suit for recovery against the respondent before the District Court, averring that the respondent had failed to refund the advances paid under the said agreement executed between the parties. In the suit filed by the appellant, the respondent filed an application under Section 8 of the A&C Act, seeking reference of the dispute to arbitration. After the said application was allowed by the District Court, the appellant filed an application under Section 11 of the A&C Act before the Delhi High Court, seeking appointment of an arbitrator. Thereafter, the parties were referred to arbitration. During the arbitral proceedings, the appellant/claimant filed an application before the Arbitral Tribunal contending that the counter-claims filed by the respondent before the Arbitral Tribunal were barred by limitation. The Arbitral Tribunal ruled that the period of limitation for filing the counter-claims was three years from the date when the Agreement was terminated by the appellant. Further, it noted that the counter-claims must be considered as instituted on the date when they are filed before the Tribunal. The Tribunal held that since the counter-claims were filed by the respondent more than three years after the agreement was terminated by the appellant, the counter-claim was prima facie barred by time. However, the Tribunal opined that by virtue of Section 14 of the Limitation Act, 1963, the period spent by the respondent in pursuing its application under Section 8 of the A&C Act was required to be excluded. Thus, it concluded that the counter-claim was filed by the respondent within the period of limitation. Therefore, the Arbitral Tribunal passed an interim award rejecting the application filed by the appellant seeking dismissal of the counter-claims. The appellant challenged the said interim award by filing an application under Section 34 of the A&C Act before the Commercial Court, who dismissed the application. Against this, the appellant filed an appeal under Section 37(1)(c) of the A&C Act before the Delhi High Court. Section 14(1) of the Limitation Act, 1963 provides for exclusion of the time spent by the plaintiff in prosecuting another civil proceeding against the defendant in a court which is unable to entertain it due to defect of jurisdiction or other cause of a like nature, for computation of the limitation period for filing a suit. Section 14(2) of the Limitation Act, provides for exclusion of the time spent by an applicant in prosecuting another civil proceeding against the same party for the same relief, in a court which is unable to entertain it due to defect of jurisdiction or other cause of a like nature While holding that the counter-claim is in the nature of an original action and that it is not an application as contemplated under Section 14(2) of the Limitation Act, the High Court ruled that the benefit of Section 14(2) of the Limitation Act was not available to the respondent. Referring to Section 14 (1) of the Limitation Act, the Court observed that the benefit of the said provision is available only to the plaintiff who has been prosecuting civil proceedings against the defendant, and not to the defendant. It added that the provisions of Section 14(1) are not available to a defendant who is resisting a claim. The bench ruled that though a counter-claim is like a suit and thus, a defendant may be construed as a plaintiff in the context of a counter-claim. However, it added that in order to claim the benefit of Section 14(1), the party must be diligently pursuing its claim in the court, which cannot entertain the proceedings for want of jurisdiction, and not for want of an effective claim. The Court held that the filing of an application under Section 8 of the A&C Act cannot be construed as a party pursuing his claim before a Court so as to avail the benefit...

Time Spent On Application Under Section 8 Of A&C Act, Not Excludable For Computation Of Limitation For Counter Claim: Delhi High Court

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Time Spent On Application Under Section 8 Of A&C Act, Not Excludable For Computation Of Limitation For Counter Claim: Delhi High Court

Parina Katyal

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Parina Katyal

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