M/S B AND T AG versus MINISTRY OF DEFENCE

Citation: [2023] 7 S.C.R. 599 · Decided: 18-05-2023 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Rejected

Cited by 3 judgment(s) · cites 8 · see the full citation network in Lexace

Judgment (excerpt)

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   [2023] 7 S.C.R. 599
M/S B AND T AG
v.
MINISTRY OF DEFENCE
(Arbitration Petition (Civil) No. 13 of 2023)
MAY 18, 2023
[DR. DHANANJAYA Y CHANDRACHUD, CJI AND
J. B. PARDIWALA, J.]
Arbitration and Conciliation Act, 1996 – s.11– Limitation
period – Cause of action – When accrues – “Breaking Point”–
Negotiations, if postpone the cause of action – Held: No – Cause
of action becomes important for calculating the limitation period
for bringing an action – Period of limitation for commencing an
arbitration runs from the date on which the “cause of arbitration”
accrued i.e., from the date when the claimant first acquired either a
right of action or a right to require arbitration – An application u/
s.11 is governed by Article 137 of the Schedule to the 1963 Act and
must be made within 3 years from the date when the right to apply
first accrues – There is no right to apply until there is a clear and
unequivocal denial of that right by the respondent – Claim for
arbitration must be raised as soon as the cause for arbitration arises
– Whether any particular facts constitute a cause of action has to
be determined with reference to the facts of each case and the
substance rather than the form of the action – If an infringement of
a right happens at a particular time, the whole cause of action will
be said to have arisen then and there – In such a case, it is not open
to a party to sit tight and not file an application for settlement of
dispute of his right and allow it to be extinguished by lapse of time
– Mere negotiations will not postpone the cause of action for the
purpose of limitation – What is important for the Court is to find out
what was the “Breaking Point”, a question of fact, at which any
reasonable party would have abandoned efforts at arriving at a
settlement and contemplated referral of the dispute for arbitration–
Entire history of the negotiation between the parties must be pleaded
and placed on record for the Court to find out the “Breaking Point”
– Bilateral discussions for an indefinite period of time would not
save the situation so far as the accrual of cause of action and the
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SUPREME COURT REPORTS
[2023] 7 S.C.R.
right to apply for appointment of arbitrator is concerned – Limitation
Act, 1963 – Article 137.
Arbitration and Conciliation Act, 1996 – s.11(6), 43 – Contract
entered between parties in 2012 – Dispute in relation to the alleged
wrongful imposition of Liquidated Damages and wrongful
encashment of the bank guarantee by the respondent-Ministry of
Defence in2016 – Petitioner issued notice invoking arbitration only
in 2021 – According to the petitioner the parties were trying to
amicably resolve the disputes by way of ‘bilateral discussions’ as
per the Contract – Present petition filed by the petitioner u/s.11(6),
claiming to be within the period of limitation, for appointment of
arbitrator – Time-barred claims/claims barred by limitation, if can
be said to be live claims which can be referred to arbitration –
Held: Disputes between the parties had cropped up way back in
the year 2014 itself – When the bank guarantee came to be encashed
in 2016 and the requisite amount stood transferred to the
Government account, that was the end of the matter – This “Breaking
Point” is the date at which the cause of action arose for the purpose
of limitation – Petitioner not justified in saying that it continued to
negotiate till 2019 – Statutory time period of three years prescribed
for the enforcement of a claim cannot be defeated on the ground
that the parties were negotiating – Present case is one of a hopelessly
barred claim, as the petitioner slept over its right for more than five
years – Petition rejected – Limitation Act, 1963 – Article 137.
Words and Phrases– “cause of action”; “right to apply” –
Meaning of – Discussed.
Rejecting the petition, the Court
HELD: 1.1 Ordinarily on the completion of the work, the
right to receive the payment begins. A dispute arises when there
is a claim on one side and its denial/repudiation by the other. A
person cannot postpone the accrual of cause of action by
repeatedly writing letters or sending reminders.‘Bilateral
discussions’ for an indefinite period of time would not save the
situation so far as the accrual of cause of action and the right to
apply for appointment of arbitrator is concerned. What is important
for the Court is to find out what was the “Breaking Point” at
which any reasonable party would have abandoned efforts a

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