The appellant’s own default in sleeping over his right for 14 years will not constitute a case of ‘undue hardship’ justifying extension of time for condonation of delay: SC

A bench of Justices N.V. Ramana, Mohan M. Shantanagoudar, Ajay Rastogi of the Supreme Court held that it does not lie to the applicant to plead that he waited for an unreasonably long period to refer the dispute to arbitration merely on account of the respondent’s failure to settle their claim and because there were writing representations and reminders to the respondent in the meanwhile.

The High Court of Rajasthan at Jaipur Bench dismissed three arbitration applications filed by the appellant under Section 11(6) of the Arbitration and Conciliation Act, 1996 (1996 Act) seeking appointment of an arbitrator for adjudication of the disputes between the appellant and the respondent.

The respondent had floated tenders for execution of work on a water treatment plant. Three work orders dated 7th October 1979, 4th April 1980 and 3rd May 1985 were assigned in favour of the appellant. The three Notice Inviting Tender (NIT) documents in respect of these work orders constituted the terms and conditions of the three separate contracts between the parties. The case of the appellant is that the respondent failed to make the payments due to them under the three contracts.

The appellant was involved in discussions with the respondents in respect of the outstanding payments till 1997, and when the respondent kept delaying, the appellant approached the Settlement Committee constituted by the respondent Board for release of the outstanding payment in the same year. The appellant contended that they were required to have pursued the matter with the Settlement Committee prior to initiating arbitration. However the Settlement Committee also failed to respond to their representations.

Both the parties exchanged letters in 1999 when the respondent replied to the appellant partly allowing one claim to the extent of Rs. 1,34,359.12 and requesting details of bills/invoices of certain other claims for verification. Later in 2002, the appellant sent a final communication to the respondent requesting payment of all the outstanding amounts. In October 2002, the appellant sent a final communication to the respondent requesting payment of all the outstanding amounts. On still not having received the payment, the appellant sent a communication dated 22nd November 2002 to the respondent requesting appointment of an arbitrator for adjudication of disputes relating to payment, as provided under the arbitration clause.

However the respondent did not appoint an arbitrator within the period of 30 days as stipulated under the agreement between the parties. Hence the appellant filed Arbitration Applications for appointment of an arbitrator. The respondent contended that as per the appellant’s own admission, the final bills for the work orders were raised in 1983. Hence since the request for arbitration was invoked only in 2002, the appellant’s claim was barred by limitation.

The High Court found that the appellant had raised the final bill on 8th February 1983, but had not stated any explanation for why it failed to take any steps for immediately referring the dispute in 1983 to the Chairman, Rajasthan State Electricity Board, as provided under the arbitration clause, but instead requested appointment of arbitrator as late as in 2002.

The High Court in the impugned judgement held that the appellant had failed to make out any case of hardship or injustice justifying condonation of delay in filing the applications under Section 43(3) of the 1996 Act, and the Arbitration Applications were hopelessly barred by limitation.

On appeal, the issue which arose for the Supreme Court’s consideration was whether the Arbitration Applications, on the facts of this case, are barred by limitation.

The Supreme Court of India ruled that the appellant’s own default in sleeping over his right for 14 years will not constitute a case of ‘undue hardship’ justifying extension of time under Section 43(3) of the 1996 Act or show ‘sufficient cause’ for condonation of delay under Section 5 of the Limitation Act. The appellant should have approached the Court for appointment of an arbitrator under Section 8(2) of the Arbitration Act, 1940 (1940 Act) within the appropriate limitation period.

The Court ruled that the date of commencement of arbitration proceedings for the purpose of deciding which Act applies, upon a conjoint reading of Sections 21 and Section 85(2)(a) of the 1996 Act, shall be regarded as the date on which notice was served to the other party requesting appointment of an arbitrator. Though strictly speaking the 1996 Act came into force from 22nd August 1996, for all practical purposes it is deemed to have been effective from 25th January 1996, which is when the Arbitration and Conciliation Ordinance, 1996 came into force. In the present case, since notice was served to the respondent in 2002, the provisions of the 1996 Act will be deemed to apply to the present Arbitration Applications filed by the appellant.

The Apex court gave a precedent of Panchu Gopal Bose v. Board of Trustees for Port of Calcutta, where it was held that the claim is “hopelessly barred” by limitation as the petitioner by his own conduct had slept over his right for more than 10 years.

The Court further held that mere correspondence of the appellant by way of writing letters/reminders to the respondent subsequent to the aforesaid date would not extend the time of limitation. Hence the maximum period during which this Court could have allowed the appellant’s application for appointment of an arbitrator is 3 years from the date on which cause of action arose i.e. 8th February 1986.

Since the appellant served notice for appointment of arbitrator in 2002, and requested the appointment of an arbitrator before a Court only by the end of 2003, his claim is clearly barred by limitation. The Supreme Court agreed with the High Court’s observation that the entire dispute seems concocted so as to pursue a monetary claim against the respondents, taking advantage of the provisions of the 1996 Act.

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