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Arbitral Award – Claim barred by limitation – Sec.14(1) of the Limitation Act  Exclusion of period of earlier proceedings – Patent illegality & Violation of Public Policy- Interference under Section 34 of AA –

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On 29.11.2011, there was an agreement for purchase of salvage material from project site for Rs.1,95,00,000/- and it was valid upto December,2014.   Security deposit of Rs.51,38,000/- was paid to the Respondent to be adjusted against the delivery of salvage material to the petitioner.

However, the Respondent failed to supply any salvage material to the Petitioner.   On 1.1.2016, the Petitioner gave legal notice for refund of security deposit.  The Respondent refused to give security deposit.  

By the order dated 14.6.2016, the High Court accepted the winding up Company Petition No.269 of 2016 issued notice to the Respondent. However, this was allowed to be withdrawn with liberty.

Thereafter, the Petition filed Commercial Summary Suit No.721 of 2018. By consent of the parties and by the order dated 3.10.2018, the High Court referred the dispute to the Sole Arbitrator.

The period from 1.1.2015 to 21.6.2018 (two years and three days) in prosecuting winding up petition has to be excluded.

The Arbitral Award was passed on 6.6.2022.  The Arbitrator, however, gave finding on issue no.4 that the claim was barred by limitation and rejected the claim solely on the ground of limitation.

HELD that the issue of limitation involves a pure question of law. The Limitation Act is based on the public policy.  The incorrect invocation of law of limitation makes the Award vulnerable as contrary to public policy of India and thus, violative of Section 34(2)(b)(ii) read with clause (ii)  of Explanation 1 thereof of the Arbitration Act.  The condition No.3 for availing the benefit under Section 14(1) of the Limitation Act that the previous proceeding should relate to the same matter in issue is satisfied in this case. The finding of the Arbitrator has erroneously involved the law of limitation by holding that the exclusion of limitation under Section 14(1) of the Limitation Act cannot be applied, such a finding amount to a patent illegality on the face of the Award.

Judgment dated 7.2.2024 in Commercial Arbitration Petition No.305 of 2023 of Rajuram Sawaji Purohit Vs. The Shandar Interior Private Ltd

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