The question that arose in this case was as to whether a notice seeking commencement of arbitration, issued on 02.06.2022, could set in motion the process of resolution of a dispute regarding a work completed as early as on 30.07.2000.

A 2-Judges Bench of the Supreme Court held –

“6. Arbitration though is an alternate dispute resolution system, which has to be encouraged, it cannot deviate from the fundamental principle that law favours the diligent and not the indolent. Section 42 of the Arbitration and Conciliation Act, 1996 applies the Limitation Act, 1963 to arbitrations as it is applied to proceedings in Court. Hence, for recovery of amounts, as in this case, the limitation is three years as provided in Article 18 of the Limitation Act, 1963. The commencement of arbitration proceedings as per sub-section (2) of Section 43 being the date referred in Section 21, which is the date on which a request for initiation of arbitration is received by the respondent, the claim itself was hopelessly time barred, the notice having been issued after 21 years.”

It was observed that despite the work having concluded on 30^th July 2000, the petitioner did not attempt to raise a bill or initiate the arbitration proceedings till 2022, when a notice requiring commencement of arbitration proceedings was first issued. The Bench held that the high court erred in holding that limitation was extended due to failure on the part of the Engineer-in-Charge to determine the final amount payable. It was held that if there was such failure, it was for the contractor to have initiated arbitration then and there. Neither was notice issued for arbitration nor was a final bill raised or a request made to determine the total amount payable.

The appeal was allowed and order initiating arbitration was set aside.