The Supreme Court has set aside an order of the Calcutta High Court appointing an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, holding that a notice seeking commencement of arbitration issued on 02 June 2022 could not revive a dispute relating to work that was completed as early as 30 July 2000. In its order dated 09 April 2026 in Civil Appeal No. 4320 of 2026 titled State of West Bengal and others versus M/S B.B.M. Enterprises, a bench comprising Justice Sanjay Kumar and Justice K. Vinod Chandran observed that arbitration, though an alternate dispute resolution mechanism that deserves to be encouraged, cannot deviate from the fundamental principle that law favours the diligent and not the indolent. The Court noted that the work under the contract stood completed on 30 July 2000 and after a communication dated 04 January 2001 recording part payment, the contractor took no steps whatsoever for the next 21 years before issuing the arbitration notice. The Supreme Court held that the claim was ex-facie time-barred and there was no justification to sustain the High Court’s order referring the dispute to arbitration.
The High Court, while dealing with the Section 11 application, had found an ambiguity in Clause 7 of the agreement which required the contractor to submit the final bill within one month from the date fixed for completion of work, failing which the Engineer-in-Charge was competent to issue a certificate of measurement and the total amount payable. Since no such final certificate had been issued and the 04 January 2001 communication spoke only of part payment, the High Court took the view that the dispute was not beyond the scope of Section 11 and the objection as to limitation stood effaced because the final measurement and the total amount payable had not been determined by the Engineer-in-Charge. The Supreme Court rejected this reasoning outright. It held that if there was any failure on the part of the Engineer-in-Charge to determine the final amount, it was for the contractor to have initiated arbitration proceedings then and there. The contractor neither raised a final bill nor issued any notice invoking arbitration nor made any request for determination of the total amount payable. The mere passage of 21 years after the last communication could not keep the claim alive.
The Supreme Court examined the question of limitation in detail. It clarified that Section 43 of the Arbitration and Conciliation Act, 1996 applies the Limitation Act, 1963 to arbitration proceedings in the same manner as it applies to proceedings in court. For recovery of money, the period of limitation is three years under Article 18 of the Limitation Act, 1963. The date of commencement of arbitration proceedings is the date on which a request for initiation of arbitration is received by the respondent under Section 21 read with Section 43(2) of the Act.
The Court referred to its earlier decision in Vishram Varu and Company versus Union of India where a similar claim that arose in 1985-86 and was sought to be agitated after 32 years by a notice issued in 2018 was held to be hopelessly barred. The bench also relied upon Arif Azim Company Limited versus Aptech Limited wherein it was categorically held that the Limitation Act applies to arbitration proceedings in general and Article 137 applies to a petition under Section 11(6) in particular. In Arif Azim the Court had emphasised that although limitation is an admissibility issue, it is the duty of the courts to prima facie examine and reject non-arbitrable or dead claims so as to protect the other party from being drawn into a time-consuming and costly arbitration process. The Supreme Court further noted the distinction drawn in Aslam Ismail Khan Deshmukh versus ASAP Fluids Private Limited that while intricate evidentiary questions on limitation should ordinarily be left to the arbitrator, ex-facie hopelessly time-barred claims can be rejected at the referral stage itself. In the present case, the Court found that no intricate evidentiary inquiry was required at all. After the communication of 04 January 2001, the contractor had simply slept over the claim for 21 years, rendering it an ex-facie dead claim.
The Supreme Court therefore held that there was absolutely no reason to sustain the order initiating arbitration. It set aside the impugned order of the High Court and allowed the appeal filed by the State of West Bengal. All pending applications, if any, were disposed of accordingly. The judgment is reported as 2026 INSC 358.
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