An arbitral award granting time-barred claims may be set aside as contrary to public policy.

The appellant was awarded a contract in 1988 to execute balance work at Wangat Weir.

The contract was terminated in 1998, after which the appellant claimed, among other amounts, payment for restoration work and flood damages, the final bill, and refund of security and earnest money deposits.

A sole arbitrator awarded several sums, including those claims; an interim award for escalation charges had separately attained finality.

On the respondents’ application under Section 34 of the Arbitration and Conciliation Act, the Single Judge set aside the final award, except for the arbitrator’s fee, holding the claims time-barred, while preserving the appellant’s entitlement under the interim award.

The appellant challenged that decision under Section 37.

He argued, among other things, that a 2000 departmental communication deferred payment pending civil litigation, and that the dismissal of that litigation and preparation of a final bill in 2011 gave rise to a fresh cause of action.

Whether the claims set aside by the Single Judge were barred by limitation, including whether the 2000 communication deferred accrual of the cause of action until the civil suit ended in 2011.

Whether preparation of the final bill in 2011 amounted to an acknowledgment of liability that began a fresh limitation period.

Whether the respondents waived their limitation objection by not raising it in the Section 11 proceedings or before the arbitrator, or by failing to invoke Section 16 of the Act.

Section 43 of the Arbitration and Conciliation Act, 1997 applies the Limitation Act to arbitration proceedings; entertaining a time-barred claim may render an award vulnerable to challenge under Section 34(2)(b)(ii) as contrary to public policy.

Under Section 19 of the J&K Limitation Act, Samvat 1995, a fresh limitation period runs from a written acknowledgment of liability only if the acknowledgment is made before expiry of the prescribed period.

In Bharat Sanchar Nigam Ltd. v. Nortel Networks India Pvt. Ltd., (2021) 5 SCC 738, the Supreme Court distinguished a limitation objection, which concerns the admissibility or maintainability of a claim, from an objection to the arbitral tribunal’s jurisdiction; limitation is for the tribunal to decide, and failure to raise it under Section 16 does not, by itself, amount to waiver.

The Court also considered M/s B&T AG v. Ministry of Defence, (2023) 7 SCR 599, and M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd., 2024 INSC 155, in upholding the Single Judge’s approach.

The Court read the 12 September 2000 communication as rejecting the claims for restoration work and diversion bunds, while stating only that the final bill and certain outstanding amounts would be considered after the civil proceedings. It therefore did not defer the entire set of claims.

Further, the appellant had obtained clarification in 2005 that no court order restrained payment, yet did not invoke arbitration until 2013; even on the appellant’s account, the claims were then out of time.

The 2011 bill did not revive the claims: its preparation, without approval by the competent authority, was not an acknowledgment of liability, and in any event occurred after the claims had become time-barred.

Applying BSNL v. Nortel, the Court rejected the waiver arguments: the limitation objection was not a jurisdictional challenge requiring invocation of Section 16, and the respondents’ participation did not waive it.

It dismissed the appeal without costs, leaving undisturbed the appellant’s entitlement to Rs. 21,43,536 under the finalised interim award and the arbitrator’s fee as preserved by the Single Judge.