Counter-claim for liquidated damages filed beyond three years from contract termination is barred by limitation.

The Respondent entered into a contract with the Appellant for the supply of LPG cylinders from June 7, 2004, to June 6, 2005

The Respondent claimed unpaid dues of Rs. 5,48,478, while the Appellant sought to recover approximately Rs. 52,00,000 as liquidated damages for alleged short supply during the contract period

An Arbitrator allowed the Appellant’s counter-claim, computing the limitation period from February 14, 2006 (the date of the last correspondence), rather than the contract’s end date

The Respondent challenged this under Section 34 of the Arbitration Act, and the learned Single Judge set aside the award, holding the counter-claim barred by limitation

The Appellant subsequently filed this appeal under Section 37

1. Whether the limitation period for filing a counter-claim for liquidated damages commences from the date of the breach/expiry of the contract or from the date of the last correspondence between the parties

2. Whether the High Court can re-appreciate facts and evidence while exercising jurisdiction under Section 34 or Section 37 of the Arbitration Act, 1996

The court applied the Limitation Act, 1963, specifically the principle that a claim for liquidated damages must be initiated within three years from the date the cause of action accrues

It also interpreted the scope of judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which prohibits the re-appreciation of evidence or facts by the court

The Court rejected the Appellant’s contention that the cause of action arose on February 14, 2006, via correspondence

It reasoned that the alleged liability for liquidated damages for short supply necessarily arose during the subsistence of the contract, which concluded on June 6, 2005

Consequently, the three-year limitation period expired on June 5, 2008. Since the counter-claim was filed on September 8, 2008, it was demonstrably time-barred

The Court further noted that the Arbitrator’s calculation showed a "complete non-application of mind to the relevant law"

Finally, the Court emphasized that under Sections 34 and 37, it is not permissible to engage in a merits-based re-evaluation of the evidence already considered by the lower forum

The Court upheld the Single Judge's order setting aside the Arbitral Award, holding that the impugned order suffered from no error in law or facts. The Appeal was dismissed for lack of merit