The Bombay High Court has strongly said that after signing a ‘No Claim Certificate’ and accepting full-and-final payment, a party cannot keep claims alive indefinitely through demand letters, criminal proceedings, or forum-shopping. The Court said that unilateral demands and criminal proceedings did not extend limitation, and the liberty to approach the competent court could not revive claims already barred when arbitration was invoked.
The Court clarified that a Section 11 court may decline reference where claims are demonstrably time-barred on uncontested facts, without requiring a substantial evidentiary inquiry. Since the applicant accepted the final bill and executed an unconditional No Claim Certificate on 20 April 2013, the Court treated that settlement as the point when the claim arose and held that the arbitration invocation on 4 November 2019 fell outside the applicable three-year limitation period.
Since the applicant’s correspondence did not constitute an acknowledgment of liability by the respondent, and no contemporaneous document showed acknowledgment after settlement, and the applicant’s objections had been rejected on 21 October 2013, the Court held that the applicant’s police complaints and criminal proceedings did not keep its contractual claims alive for invoking arbitration. The Court also rejected reliance on Section 14 of the Limitation Act, holding that liberty to approach the competent court did not revive an already time-barred claim.
Briefly, M/s. S. D. Bhatt sought appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, for disputes arising from a work order issued by Hindustan Construction Company Ltd. for civil and architectural works at a hydroelectric project in Kargil. Clause 32 of the work order contained the arbitration agreement.
The applicant claimed that amounts remained unpaid despite its signing the final bill and a No Claim Certificate on 20 April 2013. It relied on subsequent correspondence and criminal complaints, and invoked arbitration on 4 November 2019. After the Jammu and Kashmir and Ladakh High Court dismissed its earlier petition for lack of territorial jurisdiction, with liberty to approach the competent court, it moved the Bombay High Court.
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A Single Judge Bench of Justice Gautam A. Ankhad noted that the arbitration agreement was undisputed, but examined whether the claims were clearly barred by limitation. The applicant had accepted the final bill, executed an unconditional No Claim Certificate and undertaken not to raise objections concerning the work; payments were released by 23/24 April 2013. Its later demands did not amount to an acknowledgment of liability by the respondent, and its challenge to the settlement had been rejected on 21 October 2013.
The Court found that neither the subsequent correspondence nor the criminal proceedings kept the contractual claims alive. It also held that the liberty granted by the Jammu and Kashmir High Court did not revive an already time-barred claim.
The Court held that, although limitation ordinarily falls within the arbitral tribunal’s domain, a court deciding a Section 11 application may refuse reference where the claim is demonstrably time-barred on uncontested facts and no substantial evidentiary inquiry is required. Applying that limited scrutiny, it found that the applicant’s claim arose upon the full and final settlement on 20 April 2013 and was subject to a three-year limitation period.
