Applicability of Limitation Act, 1963 on Arbitration Proceedings

INTRODUCTION: Section 43 of the Arbitration and Conciliation Act, 1996 (hereinafter

referred to as Act, 1996) talks about the applicability of the Limitation on arbitration
proceedings. Section 43(1) says that the limitation period shall be applicable to arbitration
proceedings as it applies to Court proceedings.

Section 43(2) says for purpose of limitation the arbitration is deemed to have commenced
from that day as referred to in the Section 21 of the Act, 1996 (that is the day on which the
reference of the dispute to arbitration is received by the Respondents).

Section 43(3) says that in case, where an arbitration agreement provides that any claim to
which the agreement applies shall be barred unless some steps are taken to initiate arbitration
proceedings within the fixed time period as provided by the agreement, the Court may, even
after expiration of time period, extend the term to such proper period as may be justified in
the particular case.

Section 43(4) says that in case were the Court has ordered for the setting aside of an Arbitral
award then the period between the commencement of the Arbitration and the date of order of
the Court shall be excluded for the purpose computing limitation period for commencement
of proceedings with respect to the dispute so submitted.

APPLICABILITY OF LIMITATIONS ACT, 1963: The limitations Act, 1963(hereinafter

referred to as Act, 1963) is the general Law with regards to Limitation in India. Further on
Section 29 (2) of the Act, 1963 states that the period of limitation shall apply for computation
of time period prescribed by special law only till the extent it is not excluded expressly.

Section 3 of the Act, 1963 enjoins the Court to consider the question of Limitation whether it
is pleaded or not.1 Thus if an arbitration application is barred by limitation such application
can be rejected by the Court. The law of limitation is however only applicable to the
provisions of Part I of the Act, 1996 and not with respect to Part II which deals with Foreign
Awards.

Thus by virtue of Section 29(2) of the Act, 1963 when the various provisions of Act, 1996
has already prescribed the respective time limit, then the time period prescribed under the

1
State of Orissa V. Damodar Das, AIR SC 942, 1996
Act, 1996 will become applicable instead of time period as mentioned under the Limitations
Act, 1963.

For example, Section 34 (3) of the Act, 1996 talks about the period of limitation for moving
an application to set aside an arbitral award (I.e. 3 months from the date of receipt of the
arbitral award by the applicant). Proviso to Section 34 (3) provides the Court with the power
to extend the period mentioned under Section 34 (3) for another 30 days if the Court is
satisfied that there was sufficient cause that prevented the applicant from filling within the
prescribed time period. Thus in this case the period of limitation applicable would be the one
which has been mentioned under Section 34(3) and not the one mentioned under Limitation
Act, 1963.

However, the Act, 1996 is silent about the period of limitation in case where any party had
bonafidely started and continued prosecution for its remedy before a forum which did not
have jurisdiction in the first place. The Act, 1996 doesn’t mention whether such period of
time spent in the prosecution before the inappropriate forum would be excluded or not.

Further on it is the arbitrator who decides whether a particular claim is within the time limit
or not 2 and that the arbitrator is bound to apply Limitations Act, 19633.

CONCLUSION: Thus, by virtue of Section 43 the limitation period of 3 years (which is the
period of limitation prescribed for raising claims arising out of contract as provided by the
limitations Act) would be applicable for to arbitration proceedings as it applies to a civil suits
in Court. However, when various provisions of the Arbitration and Conciliation Act, 1996
already provide for a particular limitation period, the limitation period mentioned under the
Limitations Act, 1963 will stand excluded because of Section 29(2) of the Limitations Act,
1963.

2
Fertillizer Corporation of India V. Ravi Kumar Ohri, AIR 1979 Ori 19
3
Wazirchand Mahajna V. Union of India, 1967 AIR 990