In a recent case, Shriram EPC Ltd and Anor v Gaja Trustee Co Pvt Ltd, the Bombay High Court held that it would not be appropriate to foist unwarranted arbitration on the parties when the cause of action is time-barred or dead.
The case involved an application made under section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator to adjudicate disputes over a share subscription and shareholders agreement. The applicants claimed that the respondent had breached the agreement by entering into transactions that violated its terms. The applicants issued an arbitration invocation notice in 2019, which the respondent opposed on the grounds that the claim was time-barred and not a live issue.
The court agreed with the respondent’s argument that the claim was time-barred and that the cause of action had arisen in 2015. The court relied on the ruling of the Supreme Court in Bharat Sanchar Nigam Ltd and Anr v Nortel Networks India Pvt Ltd, which held that the court should not order the parties to take part in unwarranted arbitration when a cause does not deal with live issues.
The court also relied on the judgment of the Supreme Court in Vidya Drolia and Others v Durga Trading Corporation, which held that the court can refuse to interfere at the referral stage only when it is manifest that the claims are on the facts time-barred, dead, or not the subject of dispute.
The high court’s decision in Shriram EPC Ltd and Anr v Gaja Trustee Co Pvt Ltd is significant because it emphasizes the importance of live issues in arbitration.
In conclusion, the decision in Shriram EPC Ltd and Anor v Gaja Trustee Co Pvt Ltd reaffirms the principle that arbitration should only be used to resolve live issues. The court’s ruling also highlights the importance of limitation periods in legal disputes and serves as a reminder to parties to be vigilant about these periods when pursuing legal claims.