Background Matrix 

In the case of B & T AG v. Ministry of Defence A company based in Switzerland that manufactures weapons, among other things, filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, asking for the appointment of an arbitrator to settle disagreements and claims relating to a contract that was signed on March 27, 2012, with the government of India’s Ministry of Defence.

Issue

Is it true that claims have expired but are still allegedly “live” and subject to arbitration?

Analysis of Court order 

The plea was denied, and the Supreme Court Division Bench composed of Chief Justice Dr. DY Chandrachud and Justice J.B. Pardiwala ruled that the claim in the case was prohibited since the petitioner had, through its actions, slept on its right for more than five years. The bench ruled that each case’s circumstances and the substance rather than the form of the action must be considered when determining whether any specific facts create a cause of action. The entire cause of action will be deemed to have arisen then and if a right is violated at a certain period.

The Court noted that Section 11 of the Act of 1996, which governs the appointment of arbitrators, and stated that there is no deadline for applying for an arbitrator’s appointment under Section 11(6) of the Act of 1996. Additionally, it was mentioned that Section 43 of the Act of 1996 stipulates that the Limitation Act of 1963 will apply to arbitrations in the same way that it does to court proceedings. The Court ruled that Article 137 of the Schedule to the Act 1963 would apply since a petition under Section 11(6) of the Act 1996 requesting the establishment of an arbitral tribunal must be filed before the High Court or the Supreme Court. In addition, the Court stated that based on a simple interpretation of the aforementioned Article, the statute of limitations in situations covered by Article 137 is three years and that the term will start to run once the right to apply has accrued.

The Bench also added that while determining the statute of limitations for filing a claim, the cause of action becomes crucial. A party must recognise when a cause of action manifests. Because they are unsure of when the cause of action started, a party who simply delays sending a notice seeking reference under the Act of 1996 may cause the claim to expire before they even realise it. In light of the petitioner’s conduct—sleeping over its right for more than five years—the Court determined that, while denying the petition, the matter at hand is unquestionably one of a hopelessly barred claim.