Delhi High Court


Delhi High Court: In a case filed by Extramarks Education India Private Limited (petitioner) seeking appointment of an arbitrator to adjudicate upon the disputes that are stated to have arisen with the Sri Ram School (respondent) from Agreement dated 02-05-2014 related to the sale, implementation and installation by the petitioner of certain hardware and multi-media system accessories along with software for the purpose of setting-up 24 Smart Learn Classes at several schools run by the respondents, Anup Jairam Bhambhani, J., held that the petitioner’s claim against the respondent is ex-facie time barred while observing that once it is found that the claim is time barred by Limitation Act, 1963, arbitration cannot be invoked even by consent of parties.

Counsel for respondent submitted that by legal notice dated 04.01.2017, the petitioner terminated agreement dated 02.05.2014 (in addition to Agreements dated 01.05.2015 and 01.06.2015) with the respondents. Reminder notices were also sent dated 24.03.2017 and 22.08.2017 to the respondents. However, the present petition was filed only on 19/21-01-2022, which was well beyond the 03-year limitation provided for the petitioner to seek recovery of monetary dues.

Counsel for the petitioner submitted that the 03-year limitation period prescribed in Limitation Act, 1963 is applicable in the present set of facts as the petitioner’s money claims against the respondents are founded inter-alia on the recovery of hardware from the respondents, and thus, the claims sought to be referred are within limitation.

Reliance was placed on BSNL v. Nortel Networks India Pvt. Ltd., (2021) 5 SCC 738 wherein it was observed that “the period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters, or mere settlement discussions, where a final bill is rejected by making deductions or otherwise.”

There must be a clear notice invoking arbitration setting out the “particular dispute” including claims/amounts which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail.”

Placing further reliance on N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123, the Court observed that based on the conspectus it is clear that the petitioner’s claim against the respondents as raised in the invocation notice dated 28-07-2021 is only one: viz. for payment of arrears of license fee/other dues which is founded upon the termination of the contract by the petitioner vide notice dated 04-01-2017. It, however, does not contain any reference to any claim for recovery of hardware, supposedly lying with the respondents up to the year 2019.

Thus, it is clear that the petitioner’s cause of action first arose when the respondents failed to pay the monies due under the contract in addition to damages and the argument that the petitioner was also entitled to get back the hardware and other equipment lying with the respondents does not stand.

The Court remarked that “limitation bars a legal remedy and not a legal right, the legal policy being to ensure that legal remedies are not available endlessly but only up-to a certain point in time.

The Court concluded that an invocation notice must set out clearly the claims that a party wants referred to arbitration; and in the present case, no claim for recovery of hardware was at all contained in the invocation notice dated 28-07-2021. Thus, having terminated the contract with the respondents vide notice dated 04-01-2017, and the respondents having failed to pay the amounts claimed to be due, the petitioner ought to have issued the notice invoking arbitration within 03 years of that date, viz. by or before 03-01-2020, however, the notice was issued on 28-07-2021, which was evidently beyond the limitation prescribed in law.

[Extramarks Education India Private Limited v. Sri Ram School, 2022 SCC OnLine Del 3123, decided on 23-09-2022]

Advocates who appeared in this case:

Mr. Zeeshan Hashmi with Ms. A. Chaudhary, Mr. Ankit Parashar, Advocates, for the Petitioner;

Mr. Siddharth Batra with Mr. Chinmay Dubey, Ms.Shivani Chawla and Ms. Archna Yadav, Advocates, for the Respondent.

*Arunima Bose, Editorial Assistant has put this report together.

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