Calcutta HC ruled that an escalation claim, barred by limitation, cannot be referred to arbitration under Section 8 of the Arbitration Act.
Time-Barred Claims Cannot Trigger Arbitration: Calcutta HC
The Calcutta High Court has ruled that a claim which is time-barred under the Limitation Act, 1963 cannot be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The case involved a contractor’s escalation claim arising from a delayed infrastructure project.
The court held that limitation is a substantive bar, not merely procedural, and applies equally in arbitration. Where the claim is barred by three years from the accrual date, no valid cause of action survives. The court cited Section 41 of the Limitation Act and recent Supreme Court precedents such as *S.B.P. & Co. v. Patel Engineering* to affirm that courts must independently assess maintainability before referring parties to arbitration.
This decision underscores the necessity for parties and tribunals to evaluate limitation at the referral stage. Practitioners litigating commercial contracts with long gestation periods must ensure timely invocation of claims, even when arbitration clauses exist.