Limitation period to initiate legal action through a judicial forum is a globally recognized concept. Law of Limitation provides for a time restriction for initiating legal action to an aggrieved party seeking to establish a legal right. That means even though you have a right, you cannot approach the court of law to enforce your right, since the cause of action is time barred, as per law. The said Limitation period for different types of legal actions differs from country to country.

The Indian law of Limitation is “The Limitation Act, 1963” (herein after the “Limitation law”). The Limitation law of India provides different limitation periods for different types of suits, appeals, and applications to be filed in the Courts in India. But there is always a doubt in the minds of stake holders, whether the Limitation Act is applicable to all types of legal actions and Arbitrations. In India, Legal actions can be initiated before a court of law or an arbitral tribunal or other quasi-judicial bodies. In the present article, we confine our discussions There are two major types of arbitrations in practice. The first is an arbitration initiated based on the arbitration agreement entered between the parties or an arbitration clause incorporated in the contract between the parties. The 2nd type of arbitrations in practice is an arbitration known as statutory arbitrations. Statutory arbitrations are those where a statute provides for a dispute resolution through arbitration even in the absence of an arbitration clause between the parties. That means, even though parties did not have an arbitration clause in their contract, by statute they are empowered to resolve their disputes by way of arbitration.

The Arbitration law in India is the Arbitration and Conciliation Act, 1996 (herein after “the Act”) that governs all the arbitrations seated in India and the enforcement of Foreign awards in India. The said law is similar to UNCITRAL Model Law on International Arbitration. The above said Arbitration Act has a Section.43 which specifically incorporates the applicability of The Limitation Act, 1963 and hence Limitation Act is applicable to arbitrations seated in India. To determine the limitation of a dispute, the Limitation Act, S.43 and S.21 of the Arbitration and Conciliation Act have to be read together. This is because S.21 defines the commencement of Arbitration proceedings and S.43 provides for the applicability of Limitation Act for arbitration proceedings. The basic law is that from the date of a cause of action arose or a continuing cause of action came to an end, notice of arbitration under S.21 of the Act must be issued within the limitation period provided in the Limitation Act. For example, to claim an unpaid invoice amount through the arbitration process, the above said notice of arbitration must be issued within three years from the date the said invoice became due, if not the said right would become unenforceable by law through a judicial proceeding. But at the same time, S.5 of the Limitation Act is not applicable while filing an application under S.34 since there is an express restriction provided in the Act. The above-said law is applicable to all arbitrations initiated based on an arbitration agreement.

The issue arose, whether the said Limitation Act apply for the statutory arbitrations also or not? As stated above, various statutes provide for dispute resolution by way of arbitration, even though parties did not have an express arbitration clause between them. For Example, Section 7-B of Telegraph Act,1885, Section 52 of Electricity Act, Section 76(2) of Electricity (Supply) Act, Section 18 of The Micro Small Medium Enterprises Development Act,2006 etc., provide for statutory arbitrations. In those arbitrations, the parties shall not initiate arbitrations as provided in S.21 of the Arbitration and Conciliation Act, 1996 and they would initiate the proceedings by approaching a quasi-judicial authority. Later after scrutiny and after following certain procedures, based on requirement, the said authority may refer the matter to arbitration. Hence, the requirements and procedure are totally different from the regular arbitrations.

The Supreme Court of India dealt with the issue of applicability of Limitation Act to the proceedings before the tribunals or quasi-judicial authorities in Tamil Nadu Generation and Distribution Corporation Limited Vs PPN Power Generating Company Private Limited (2014)11SCC 53 and M.P. Steel Corporation Vs Commissioner of Central Excise (2015) 7 SCC 58. In the said cases, the Supreme Court of India held that the Limitation Act is not applicable to quasi-judicial authorities. Most of the statutory arbitrations are references made by the statutory authorities and hence limitation Act does not apply. For example, a proceeding under Section 18 of The Micro Small Medium Enterprises Development Act,2006 is a proceeding before the MSME facilitation council, which is a quasi-judicial authority. The Facilitation council can either act as an Arbitral Tribunal or refer the matter for arbitration, to an arbitral institution. In such a situation S.21 of the Act is not applicable and consequentially Limitation Act is also not applicable. Hence, the law settled is that Limitation Act is not applicable for statutory arbitrations.