Limitation for counter claim in Arbitration proceedings

Date of commencement of arbitration:

Section 3 of Limitation Act, 1963 specifies the date of institution for suit, but does not specify the date of `institution’ for arbitration proceedings. Section 21 of the Act supplies the omission. But for section 21, there would be considerable confusion as to what would be the date of `institution’ in regard to the arbitration proceedings. ….. In view of section 21 of the Act providing that the arbitration proceedings shall be deemed to commence on the date on which “the request for that dispute to be referred to arbitration is received by the respondent” the said confusion is cleared. Therefore the purpose of section 21 of the Act is to determine the date of commencement of the arbitration proceedings, relevant mainly for deciding whether the claims of the claimant are barred by limitation or not.

Counter-claim:

As far as counter claims are concerned, there is no room for ambiguity in regard to the relevant date for determining the limitation. Section 3(2)(b) of Limitation Act, 1963 provides that in regard to a counter claim in suits, the date on which the counter claim is made in court shall be deemed to be the date of institution of the counter claim. As Limitation Act, 1963 is made applicable to arbitrations, in the case of a counter claim by a respondent in an arbitral proceedings, the date on which the counter claim is made before the arbitrator will be the date of “institution” in so far as counter claim is concerned. There is, therefore, no need to provide a date of `commencement’ as in the case of claims of a claimant. Section 21 of the Act is therefore not relevant for counter claims. There is however one exception. Where the respondent against whom a claim is made, had also made a claim against the claimant and sought arbitration by serving a notice to the claimant but subsequently raises that claim as a counter claim in the arbitration proceedings initiated by the claimant, instead of filing a separate application under section 11 of the Act, the limitation for such counter claim should be computed, as on the date of service of notice of such claim on the claimant and not on the date of filing of the counter claim.

Appointment of arbitrator if reference of dispute?

Section 11 of the Act requires the Chief Justice or his designate only to appoint the arbitrator/s. It does not require the Chief Justice or his designate to identify the disputes or refer them to the Arbitral Tribunal for adjudication. Where the appointment procedure in an arbitration agreement requires disputes to be formulated and specifically referred to the arbitrator and confers jurisdiction upon the arbitrator to decide only such referred disputes, when an application is filed under section 11(6) of the Act, alleging that such procedure is not followed, the Chief Justice or his designate will take necessary measures under section 11(6) of the Act to ensure compliance by the parties with such procedure. Where the arbitration agreement requires the disputes to be formulated and referred to arbitration by an appointing authority, and the appointing authority fails to do so, the Chief Justice or his designate will direct the appointing authority to formulate the disputes for reference as required by the arbitration agreement. The assumption by the courts below that a reference of specific disputes to the Arbitrator by the Chief Justice or his designate is necessary while making appointment of arbitrator under section 11 of the Act, is without any basis. Equally baseless is the assumption that where one party filed an application under section 11 and gets an arbitrator appointed the arbitrator can decide only the disputes raised by the applicant under section 11 of the Act and not the counter claims of the respondent.

Section 23 of the Act enables the claimant to file a statement of claim stating the facts supporting his claim, the points at issue and the relief or remedy sought by him and enables the respondent to state his defence in respect of those claims. Section 2(9) provides that if any provision [other than section 25 (a) or section 32(2)(a)], refers to a “claim”, it shall apply to a “counter claim” and where it refers to a “defence”, it shall also apply to a defence to that counter claim. This would mean that a respondent can file a counter claim giving the facts supporting the counter claim, the points at issue and the relief or remedy sought in that behalf and the claimant (who is the respondent in the counter claim) will be entitled to file his defence to such counter claim. Once the claims and counter claims are before the arbitrator, the arbitrator will decide whether they fall within the scope of the arbitration agreement and whether he has jurisdiction to adjudicate on those disputes (whether they are claims or the counter claims) and if the answer is in the affirmative, proceed to adjudicate upon the same.

[Source: State of Goa vs. Pravin Enterprises, 2012 (12) SCC 581 followed in Voltas India Ltd. vs. Rolta India Ltd. (SC on 14 Feb. 2014)]

Click here to read more about Law of Limitation in India.

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