Case Title: Zillon Infraprojects Pvt. Ltd. v. BHEL, AP 312 of 2021, Date: 29.03.2023

👉 The high court of Calcutta has held that the period of limitation will only begin to run when the talks of amicable settlement between the parties fail.

Facts:

👉 The parties entered into a contract dated 28.10.2010 by which the petitioner was awarded the work by the respondent. The work was to be completed within a stipulated time. Clause 2.2. of the contract stipulated the procedure for the appointment of the arbitrator. It conferred the respondent with the right to unilaterally appoint the arbitrator.

👉 There was a delay in the completion of the project work, and it was put on hold. There were also concerns regarding the delay and withholding of payments by the respondent. Accordingly, the petitioner requested for payments of long-standing dues against the bills raised.

👉 However, the respondent vide email dated January 18, 2013 put the project on ‘Hold’ and further informed the petitioner that the contractual period of completion of project cannot be extended. It also asked the petitioner to submit final bills.

👉 During the period from 2014-2017, the parties exchanged several communications reiterating their claims and contentions. On 22.03.2017, the petitioner finally issued a legal notice upon the respondent for the release of the due payment. In response to the said notice, the respondent retuned the PBGs to the petitioner and by two subsequent letters called a meeting between the parties to sort out the issues.

👉 Even after the invocation of the arbitration notice, the respondent called for another meeting to resolve the matter subject to the petitioner withdrawing the notice of arbitration. It requested the petitioner to submit its claims along with the relevant documents backing its claims. However, after patiently participating in the negotiation talks and waiting for a considerable time period, the petitioner filed the petition under Section 11 for the appointment of the arbitrator.

Courts Sequitur:

👉 At the outset, the Court invalidated the procedure for the appointment of the arbitrator stipulated under Clause 2.2 of the contract.

👉 The Court observed that the cause of action first arose in the year 2013 when the project was put on hold. A fresh cause of action arose in favour of the petitioner when it was informed of the short closure of the contract. The Court held that the cause of action froze as the parties were attempting to amicably settle the dispute.

👉 Lastly, the Court reiterates that the scope of examination under Section 11 of the Act is narrow and the Court can only refuse arbitration in cases of deadwood or where the claims are ex-facie barred by limitation.