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Arbitration awarded on a time barred debt, if challengeable?
12-Sep-2023 (In Arbitration Law)
One of my clients (from Delhi) entered into a loan agreement with some financial institution.
The loan was not re-paid by my client.
After more than 10 years passed, the finance company referred matter as dispute to sole arbitrator in Mumbai.
Notice was received by my client by post and on receipt of second notice my client replied in writing (through speed post) that subject debt is barred by limitation (Time-barred).
The sole arbitrator completely ignored the letter sent by my client and passed order without any reference to my client’s letter. Also sole arbitrator did not mention the issue stated in the letter regarding the limitation by time.
What action shall be taken by my client?
Limitation Act does apply to filing of statements of claim in arbitrations.
The residuary provision in Limitation Act allows 3 years limitation period. This is application to the arbitral proceedings.
But as per the law laid down by the Supreme Court in various judgments the 3 years period is counted from the date of service of Demand Notice. From that date within 3 year if the Statement of Claim is not filed within 3 years that's when the debt is regarded as being time barred for the purpose of arbitration proceedings.
You client may possibly seek to challenge the award.
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Adv. Mrinalika Devarapalli
Mumbai | 25+ Answers
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please carefully refer to the terms of the loan agreement which may have a clause for limitation, which may work slightly in your favour. The sole arbitrator was appointed on the basis of the same loan agreement. please clarify what order is passed by the arbitrator as if it's merely an order then in that case you can file a counter claim and an application for rejection of the claim
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Adv. Garima Anil Mehrotra
Mumbai | 700+ Answers
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