No arbitration for time-barred issues

High Court Refuses Arbitration Application in Shiram EPC Ltd

The Bombay High Court, in Shriram EPC Ltd and Anor v Gaja Trustee Co Pvt Ltd, held that it would not be right for the court to foist unwarranted arbitration on the parties when clearly on the facts the cause was a dead letter. In such a case, the application seeking appointment of an arbitrator would be refused.

An application was made to the Bombay High Court in 2020 under section 11(6) of the Arbitration and Conciliation Act, 1996, for the appointment of an arbitrator to adjudicate disputes between the parties. Such disputes had arisen over a share subscription and shareholders agreement dated 31 May 2010.

The applicants’ case was that the respondent had breached the agreement because of transactions into which it had entered. The applicants were aware in 2015 of documents supporting the transactions and issued an arbitration invocation notice on 1 July 2019.

The respondent opposed the application on the basis that the application did not concern live issues and espoused a cause of action available to the applicants in 2015. The invocation of arbitration in 2019 was more than three years after the cause of action accrued, and the cause of action being pursued by the applicants was therefore time-barred.

The court agreed with the submission of the respondent that the proceedings concerned issues that were not live. The entire cause of action was founded on a document dated 28 September 2015, which was within the knowledge of the applicants that same year.

In deciding the matter, the high court relied on the ruling of the Supreme Court in Bharat Sanchar Nigam Ltd and Anor v Nortel Networks India Pvt Ltd. The Supreme Court held that it would not be appropriate for the court to order the parties to take part in unwarranted arbitration, when clearly on the facts a cause does not deal with live issues. The high court also relied on the judgment of the Supreme Court in Vidya Drolia and Others v Durga Trading Corporation. That case held that at the referral stage the court can refuse to interfere only when it is manifest that the claims are on the facts time-barred, dead or not the subject of dispute.

The high court therefore refused the application for arbitration, holding that the claim being advanced by the applicants was time-barred and therefore caught by limitation.