What is breaking point/ date to determine period of limitation in arbitration claim

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                                          Shubham Budhiraja[1]


[1] Advocate, Delhi High Court, LLB, ACS, BCOM(H), Budhirajalawchambers@gmail.com ,+91-9654055315

Mr. A and Mr. B entered into a work contract to complete the work within the prescribed timeline. Mr. A made the part payment and retained 30% on account of anticipated liability. On final completion of work in 2011, Mr. A issued the balance payment after deducting 30% and asked Mr. B to justify the delay to get a waiver. Mr. B justified the same and issued the legal notice for recovery of Rs. 37L withheld by Mr. A in 2015. Mr. A in reply (for first time) contended that the aforesaid withheld was on account of penalty clause. Mr. B invoked the arbitration. Mr. A took the plea of limitation that claim is time barred. The Ld.  arbitrator dismissed the Section 16 application and held that the claim is not time barred. The Hon’ble High Court held that if the extension of time was permitted by Mr. A, the same would have bearing on the levy of liquidated damages. The correspondence does indicate that Mr. A had sought for details for examining whether the extension of time was justified. Though mere correspondence by a party by writing letters and reminders does not extend the period of limitation. It is, thus, necessary for the parties to invoke arbitration within a period of three years from the date when the cause of action arises. However, if the parties are in bona fide negotiations to resolve the disputes, the date on which the ‘breaking point’ is reached would be the date on which the cause of action arises. The question as to when did the ‘breaking point’ arise is a question of fact. The Arbitral Tribunal had examined this question and found that the notice invoking arbitration was issued in 2015, which is within a period of three years of Mr. A’s communication seeking documents in connection with the extension of time. 


2022/DHC/005312, Delhi High Court, Judgment dated 05/12/2022



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