India – A Party Cannot Restrict The Right Of The Other Party To Invoke Arbitration To A Lesser Period Than Provided Under The Arbitration Act.

Order dated: 06 October 2021

Summary:

Sagar Constructions had been awarded construction work and after failure on part of the government of Delhi to release the payments as per the agreed terms of the contract, it invoked the arbitration clause. However, Sagar Constructions’ request to appoint an Arbitrator for adjudication of the disputes was denied on the ground that it had not invoked the Dispute Resolution Clause within a period of 120 (one hundred and twenty) days from the date of preparation of the Final Bill, as mandated under the arbitration clause.

Sagar Constructions filed a petition before the Delhi HC under the Arbitration Act praying for appointment of arbitrator. The HC held that a party cannot restrict the right of the other party to invoke arbitration to a lesser period than provided under the Arbitration Act. It held that the right of the party to invoke arbitration would be three years from the date when cause of action arises and the parties cannot circumscribe it to a lesser period through an agreement. An agreement that restricts the period of limitation would be void under the Indian Contract Act, 1872. Accordingly, the HC appointed a sole arbitrator.