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Time is of the Essence! Limitation in Arbitration
One of the important aspects of arbitration is the limitation period, which is the time frame within which parties can initiate arbitration or challenge an arbitral award. The limitation period for arbitration in India is determined by the interplay of the Arbitration Act and the Limitation Act, 1963 (the Limitation Act), which applies to civil suits and proceedings.
The limitation period for initiating arbitration
The limitation period for initiating arbitration depends on the nature of the dispute and the cause of action that gives rise to the claim. The cause of action is the bundle of facts that constitute the infringement of a right or an obligation. The Limitation Act prescribes different limitation periods for different types of claims, ranging from one year to thirty years. For instance, the limitation period for a claim arising from a breach of contract is three years from the date when the contract is breached or when the claimant becomes aware of the breach.
The limitation period for initiating arbitration is calculated from the date when the cause of action accrues unless there is an express or implied agreement between the parties to extend or reduce it. The parties can also waive or abandon their right to invoke the limitation period by mutual consent or conduct. However, such waiver or abandonment must be unequivocal, and cannot be inferred from mere silence or inaction.
The limitation period for initiating arbitration is not affected by any notice or demand sent by one party to another unless such notice or demand amounts to an acknowledgement of liability or a promise to pay by the other party. Such acknowledgement or promise must be in writing and signed by the party or its authorized agent and must be made before the expiry of the limitation period.
The limitation period for initiating arbitration may also be extended by certain events or circumstances that prevent or interrupt the running of time, such as fraud, mistake, disability, acknowledgement, payment, injunction, force majeure, etc. These events or circumstances are governed by various sections of the Limitation Act, such as Sections 6, 12, 14, 15, 18, 19 and 20.
The initiation of arbitration is usually done by sending a notice of arbitration to the other party, invoking the arbitration clause in the contract or agreement. The notice of arbitration must contain certain information, such as the names and addresses of the parties, a brief description of the dispute, the relief sought, and the arbitrators' proposed number and appointment method. The notice of arbitration must also comply with any specific requirements stipulated in the arbitration clause or agreement.
If the parties fail to agree on the number and appointment method of arbitrators within thirty days from the receipt of the notice of arbitration, either party can approach the court for the appointment of arbitrators under Section 11 of the Arbitration Act. The limitation period for applying Section 11 is three years from the date when either party refuses to appoint an arbitrator or fails to respond to the notice of arbitration within thirty days.
Limitation period for challenging arbitral awards
The limitation period for challenging arbitral awards is governed by Section 34 of the Arbitration Act, which provides that an aggrieved party can apply to set aside an arbitral award before the court within three months from the date of receipt of the award. The court may extend this period by another thirty days if satisfied that there was sufficient cause for delay. However, this extension is not automatic and discretionary, and no further extension is permissible beyond this limit.
The grounds for setting aside an arbitral award under Section 34 are limited and relate to issues such as the incapacity of parties, the invalidity of the arbitration agreement, lack of proper notice or opportunity to present a case, excess of jurisdiction, violation of public policy, etc. The court cannot review the merits or facts of the dispute while deciding an application under Section 34.
The date of receipt of the award is crucial for calculating the limitation period under Section 34. The receipt of the award means valid delivery of the award per Section 31(5) of the Arbitration Act, which requires that a signed copy of the award be delivered to each party personally or by registered post or courier service.
The receipt also depends on whether the award is a domestic award or a foreign award. A domestic award is an award made in India under Part I Of the Arbitration Act. In contrast, a foreign award is an award made outside India under Part II of the Arbitration Act, which gives effect to the New York Convention and the Geneva Convention on the recognition and enforcement of foreign arbitral awards. A domestic award is deemed to be received on the date of its delivery, while a foreign award is deemed to be received on the date of its filing before the court under Section 47 of the Arbitration Act.
The limitation period for challenging arbitral awards is not affected by any application for correction, interpretation or additional award under Section 33 of the Arbitration Act unless such application results in a change or modification of the original award. In such cases, the limitation period will run from the date of receipt of the amended or modified award.
The limitation period for challenging arbitral awards may also be extended by certain events or circumstances that prevent or interrupt the running of time, such as fraud, mistake, disability, acknowledgement, payment, injunction, force majeure, etc. These events or circumstances are governed by various sections of the Limitation Act, such as Sections 6, 12, 14, 15, 18, 19 and 20.
Conclusion
The limitation period for arbitration in India is determined by the interplay of the Arbitration Act and the Limitation Act, which apply to arbitrations as they apply to proceedings in court. The limitation period for initiating arbitration depends on the nature of the dispute and the cause of action that gives rise to the claim. The limitation period for challenging arbitral awards is fixed at three months from the date of receipt of the award, which can be extended by another thirty days by the court for sufficient cause. The parties can also agree to extend or reduce the limitation period by mutual consent or conduct. The limitation period may also be extended by certain events or circumstances that prevent or interrupt the running of time. The parties should be aware of the limitation period for arbitration and act diligently and promptly to avoid any adverse consequences.
References
: Applicability of the Law of Limitation to Arbitration Proceedings | SCC Blog https://www.scconline.com/blog/post/2021/01/16/applicability-of-the-law-of-limitation-to-arbitration-proceedings/
: Limitation Periods in Arbitration With Applicability of Limitation Act, 1963 https://taxguru.in/corporate-law/limitation-periods-arbitration-applicability-limitation-act-1963.html
: What is the time limit for Arbitration | IDRC https://theidrc.com/content/adr-faqs/what-is-the-time-limit-for-arbitration
: Supreme Court prescribes limit for applying for appointment of arbitrator - Lexology https://www.lexology.com/Commentary/litigation/india/clasis-law/supreme-court-prescribes-limit-for-filing-application-for-appointment-of-arbitrator
: Limitation Period under Arbitration and Negotiable Instrument Act extended: SC https://ssrana.in/articles/limitation-period-arbitration-negotiable-instruments-act-extended-sc/
- The Limitation Act, 1963 applies to arbitrations as it applies to proceedings in court, as per Section 43 (1) of the Arbitration and Conciliation Act, 1996 .
- Application for award setting aside: 3 months from award receipt, extendable by 30 days .
- Claim in arbitration: depends on contract and cause of action, usually 3 years.
