In a commercial dispute, mere failure to pay may not give rise to a cause of action | The cause of action for reference to arbitration arises upon failure to respond asserted claim of a party | Mere negotiations will not postpone the cause of action for the purpose of limitation – Triveni Constructions Vs. Military Engineer Services – Telangana High Court
January 17, 2024
In this important judgment, Hon’ble Telangana High Court has held that: (i) It is settled law that in a commercial dispute, mere failure to pay may not give rise to a cause of action. Once the applicant has asserted his claim and the respondent fails to respond to such claim, such failure will be treated as a denial of the applicant’s claim giving rise to a dispute, and thus it is the cause of action for reference to arbitration. (ii) Mere negotiations will not postpone the cause of action for the purpose of limitation. (iii) The limitation period of three years for filing such application would commence from the date when the cause of action arose. Since there is no provision in the Arbitration and Conciliation Act, 1996 specifying the period of limitation for filing an application under Section 11, one would have to take recourse to the Limitation Act, 1963. (iv) Since none of the Articles in Schedule to the Limitation Act, 1963 provide a time period for filing an application for appointment of arbitrator under Section 11, it would be covered by the residual provision under Article 137 of the Limitation Act which provides that the period of limitation is three years for any other application for which no period of limitation is provided elsewhere in the division. (v) The time limit starts from the period when the right to apply accrues.