Contractual 90-day deadline cannot bar arbitration if it leaves a contractor without an effective remedy, Bombay High Court rules

The parties’ construction contract incorporated Clause 6.40 of the tender conditions, which provided for arbitration.

The Respondent said it notified the Applicant on 30 April 2024 that the final account had been settled and payment released; the Applicant’s first arbitration notice was dated 27 February 2025, followed by a more detailed notice invoking Clause 6.40 on 27 June 2025.

The Respondent opposed the Section 11 application, principally arguing that the 90-day period had expired and the claims could no longer be arbitrated.

Whether Clause 6.40.5 barred the Applicant from referring its claims to arbitration after the contractual 90-day period, consistently with Section 28 of the Indian Contract Act, 1872.

Whether the disputes fell within the arbitration agreement and whether the Court could appoint an independent sole arbitrator after the Respondent refused to proceed with the contractual appointment process.

Whether the Respondent’s objections concerning the claims’ merits, final settlement and limitation defeated the Section 11 application.

Section 28 of the Indian Contract Act, 1872, as amended with effect from 8 January 1997, renders void to the relevant extent an agreement that restricts enforcement of contractual rights or extinguishes rights or liability upon expiry of a specified period.

In Grasim Industries Ltd. v. State of Kerala, (2018) 14 SCC 265, the Supreme Court held that a contractual stipulation imposing an invalid time restriction on contractual claims is not binding.

M/s. Sowil Limited v. Deputy Chief Engineer (Construction), Bhusawal, Commercial Arbitration Application No. 688 of 2025 (Bombay High Court, 28 January 2026), recognised that parties may exclude defined categories of claims from arbitration where another remedy, such as a civil suit, remains available.

Under Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760, an interested party cannot have exclusive power to appoint a sole arbitrator.

Clause 6.40.5 referred both to a 90-day demand period and to claims received after a “30 days’ period,” creating an internal inconsistency; in any event, the Court assumed the Applicant received notice on 30 April 2024 and that its first notice was late.

The Court held that enforcing the clause to bar arbitration would, when read with Clause 6.40.15—which made arbitration a condition precedent to contractual action—leave the Applicant without an effective contractual remedy. The time bar therefore could not be enforced to that extent under Section 28.

The Court distinguished Sowil Limited: that case concerned the agreed scope of arbitrable claims and preserved access to a civil court, whereas Clause 6.40.5 imposed a time-based bar on claims otherwise covered by arbitration.

The disputes were within Clause 6.40’s broad scope; contested questions about authorisation of additional work, escalation, delay, settlement and limitation required evidence and were left to the arbitrator.

It allowed the application under Section 11 and appointed Mr. Dormaan Dalal as sole arbitrator. The arbitrator was to decide the parties’ claims and any permissible counterclaims, with all issues on the merits—including ordinary limitation, final settlement, delay and amounts payable—left open.

Arbitration costs and fees were to be borne equally in the first instance, subject to the tribunal’s final award on costs.