The question of whether Section 8 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) on which limitation period can be applied is still a debatable topic. The statute of limitations is enforceable over courts but not in the matters of arbitration is debated. In this article, the limitation period under Section 8 of the arbitration act is discussed.
The Delhi High Court in SSIPL Lifestyle Private Limited vs. Vama Apparels (India) Private Limited C.S. COMM. 735/2018., has conclusively clarified the 2015 Amendment in the context of filing a Section 8 application for referring the dispute to an arbitration, instead of being adjudicated by a Civil Court.
This peculiar question of whether the limitation period will be applicable over section 8 was first discussed by the Supreme Court in the case of Booz Allen and Hamilton Inc. vs. SBI Home Finance Ltd. & Ors. (2011) 5 SCC 532. In this case, the court put an end to the endless debate and concluded that the limitation period will not be applicable in the case of section 8 of the Arbitration Act. This decision came before the celebrated Arbitration and Conciliation (Amendment) Act 2015. (“2015 Amendment”)
Amendment in Section 8
After the 2015 Amendment , the sub-section(1) of section 8 of the Act read as follows:
“If an action relating to the subject matter of an arbitration agreement has been brought before the judicial authority by a party not later than the date of submitting his first statement on the substance of the dispute, then the judicial authority shall refer the parties to arbitration provided a valid arbitration agreement exists between the parties.”
The subsection included the expression “the date of” to section 8(1) post amendment as opposed to “not later than when submitting his first statement on the substance of the dispute” in the unamended Section 8.
With the addition of these words, one can presume that the date on which written statement is filed can be presumed for the limitation period.
Brief Facts of SSIPL Lifestyle-
SSIPL Lifestyle Private Limited entered into a contract with Vama Apparels (India) Private Limited on 22nd April 2016. A dispute arose between the two companies after some time. SSIPL filed two suits against the Vama Apparels to recover certain amounts from Vama Apparels on 17th February 2018. Summons by the court was issued on 15th March 2018. On 16th May, the court allowed Vama Apparels to file a written statement. Vama Apparels was unable to file a written statement as insolvency procedures against them were initiated on 17th May 2018 by the National Company Law Tribunal. Vama Apparels filed an application under section 8 of the Arbitration Act in respect of the two suits to refer it to an arbitrator as the arbitration clause was present in their initial agreement.
SSIPL objected to the application submitted by Vama Apparels on 11th February. They claimed that the limitation period has expired and now they cannot file an application under section 8 of the Arbitration Act. The Court, therefore, dismissed Vama Apparel’s application under section 8 of the Act and stated that:
“The Defendant (Vama Apparels) cannot defeat the intention behind the amendments in the Civil Procedure Code and the Arbitration Act, by choosing to file a Section 8 application at its own sweet will.”
Issue before the Delhi High Court:
The Delhi High Court, in the case of SSIPL Lifestyle dealt with the problem of existence of limitation period while filing an application under section 8 of the Arbitration Act and also whether the limitation period is given under the Code of Civil Procedure 1908 (“CPC”) and also the Commercial Courts Act 2015 can be applied to Section 8 of the Act.
Decision of the Delhi High Court:
The Delhi High Court specifically stated that the word “date” added in subsection 8(1) of the Act is a precise date and there is no space for ambiguity. That date is a specific date and not a “prior” period before the filing of the written statement. The Court said: “The entire intention is that those parties who wish to proceed for arbitration ought to do so with alacrity and speed and not merely procrastinate.”
The Court further added that-
“The amendment is a conscious step towards prescribing a limitation period for filing the Section 8 application. The mention of the word “date” in the amended provision means that it is a precise date and usually incapable of ambiguity. The same is a crystallized date and not a ‘period’ before the filing of the first statement on the substance of the dispute.
Section 8 of the Arbitration Act is peremptory where the judicial authority is required to take action as soon as possible to refer the parties to an arbitrator if a valid arbitration clause exists among the parties. The section in no way is “Discretionary”.”
With this decision, the Delhi High Court went against the decision of the Supreme Court in the case of Booze Allen and held that an application under section 8 of the Arbitration Act is ruled by the law of limitation and the period of limitation prescribed under the Civil Procedure Code and the Commercial Court Act, 2015 would also be applicable to section 8 of the Arbitration Act. The Court brought out the legislative intent behind the 2015 Amendment and how it was not in accordance with past judgments.
The decision by the Delhi High Court will be praised by people who do not prefer arbitration but still under compulsion even after the expiry of the limitation period was subjected to arbitration. This will help in speeding up the process of arbitration for parties who are willing for arbitration as they have to file the application within the limitation period without delay.
So, before bringing any suit before the court, the party applying for arbitration must submit the written application according to section 8 of the Arbitration Act before the expiry of the limitation period. The limitation period determined by the court i.e. no later than after the submission of the written statement.
There seems to be a difference in opinion between the Delhi High Court and the Supreme Court in their respective cases i.e. the SSIPL and the Booze Allen. The legislative silence on the applicability of the limitation period because of the 2015 Amendment gives the general laws an upper hand i.e. the CPC and the Commercial Courts Act. The subject is still not completely resolved and it will have wide implications and it seems that the final decision rests upon the Apex Court to decide the given issue.