Time Limit for Arbitration Claims in India: When Is It Too Late to Start?

Businesses often put off arbitration while they try to negotiate, wait for a project to finish, or hope the other side will pay. Then, years later, they discover the claim may be time-barred. The Limitation Act applies to arbitration just as it applies to court cases, and for most commercial claims the period is three years. The tribunal can and will reject claims filed too late, and courts can refuse to appoint an arbitrator if the claims are plainly dead.

This guide is for anyone wondering whether it is too late to start an arbitration, or facing a claim they think is stale. In short: Section 43 of the Arbitration Act applies the Limitation Act to arbitrations; for most money and contract claims, the period is three years from when the money fell due or the breach occurred; an arbitration commences on the date the respondent receives the notice invoking arbitration under Section 21, which is the date that stops the clock; a separate three-year period applies to a Section 11 application to court, running from the failure to appoint after the notice (Arif Azim Co v Aptech, 2024); and a written acknowledgment of the debt or a part payment before the period expires gives a fresh period.

The safest course is simple: send the Section 21 notice well within three years of the claim arising.

The short answer

For most arbitration claims about money or contracts, you have three years from the date the claim arose to commence arbitration, and the arbitration commences when the other side receives your written notice invoking the arbitration clause. If the other side does not cooperate in appointing an arbitrator, you then have three years from that failure to apply to the court under Section 11, but the court can refuse if your underlying claims were already time-barred when you sent the notice. A written acknowledgment of the debt signed by the other side, or a part payment, made before the three years run out, starts a fresh three-year period. Negotiations alone do not stop time.

Common periods at a glance

When does the clock stop?

Section 21 of the Arbitration Act says that, unless the parties agree otherwise, arbitral proceedings in respect of a dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Section 43(2) of the Act then treats the arbitration as commenced on that date for limitation purposes. So the relevant question is whether the respondent received a proper notice invoking arbitration before the limitation period expired, not when the arbitrator was appointed or when the statement of claim was filed.

The notice should identify the dispute and the claims, refer to the arbitration clause, and ask for the dispute to be referred to arbitration, usually proposing or nominating an arbitrator. A legal notice demanding payment, without invoking arbitration, does not commence arbitration. Send the notice by a method that gives proof of receipt, such as registered post with acknowledgment, courier with delivery proof, and email to known addresses.

Situations we see often

Section 11 applications and dead claims

When the other side does not appoint an arbitrator or agree on one, a party goes to court under Section 11. In Arif Azim Co Ltd v Aptech Ltd (2024), the Supreme Court held that the three-year residual period under Article 137 of the Limitation Act applies to Section 11 applications, running from the date the right to apply arises: when the respondent fails or refuses to appoint after receiving a valid notice. The Court also suggested that Parliament consider a shorter period.

The Court made a second point: at the Section 11 stage, the court may decline to appoint if the claims are plainly time-barred, though ordinarily limitation of the claims is for the tribunal. This builds on BSNL v Nortel Networks (2021), where the Court held that a Section 11 application may be refused in the rare case where the claims are obviously barred on the face of the record, which the Court called "deadwood". So there are two separate questions: was the notice sent within limitation for the claims, and was the Section 11 application filed within three years of the failure to appoint?

How to check whether your claim is in time

Acknowledgments and part payments

Section 18 of the Limitation Act provides that where, before the limitation period expires, the party against whom a right is claimed acknowledges liability in writing, signed by it or its authorised agent, a fresh period of limitation starts from the date of signing. The acknowledgment need not state the exact amount or promise to pay; it must show that the party admits a subsisting liability. Balance confirmation letters, signed ledger statements, and emails from authorised officers admitting dues have all been treated as acknowledgments in suitable cases.

Section 19 provides that where a payment on account of a debt is made before the period expires, by the debtor or its authorised agent, a fresh period starts from the date of payment, but the fact of payment must appear in the handwriting of, or in a writing signed by, the person making the payment. Bank transfers with narrations, payment advice letters and signed receipts can serve this purpose. An acknowledgment or payment made after the period has expired does not revive a dead claim under these sections, though a written promise to pay a time-barred debt may be enforceable as a fresh contract under Section 25(3) of the Contract Act.

Negotiations and the breaking point

Many parties believe that while they are negotiating, time does not run. That is generally wrong. In Geo Miller & Co v Chairman, Rajasthan Vidyut Utpadan Nigam (2019), the Supreme Court held that in rare cases, where the parties were engaged in genuine negotiations in good faith towards settlement, the period of negotiations may be excluded, and the cause of action may be treated as arising at the "breaking point", when one party abandons efforts at settlement. But the Court stressed that this must be shown from the record, and that a party cannot extend limitation indefinitely by sending reminders.

In practice, tribunals and courts are cautious. Repeated letters demanding payment do not delay the start of limitation. A settlement meeting does not stop the clock. Unless there is a written acknowledgment, the safe course is to assume time is running from the original due date, and to send a Section 21 notice while negotiations continue if the deadline is approaching. Negotiations can continue after the notice; nothing stops the parties from settling once arbitration has begun.

Works contracts and final bills

For construction and works contracts, the start date is often harder to fix. Where the contract provides for running bills and a final bill, courts have often treated the cause of action for the final dues as arising when the final bill is submitted and payment becomes due under the contract, or when the employer finally rejects the claim. Claims for retention money may arise when the defect liability period ends and the money becomes due for release. Claims for damages for delay may arise at completion, or when the employer refuses to pay the extra costs.

These questions depend on the contract's terms and the correspondence. Contractors should not assume that time runs only from the end of the project. Where a specific payment fell due and was refused years earlier, time may have started then. The safest course is to raise disputes and send a notice invoking arbitration within three years of each disputed claim arising.

Section 43(3) and extension by the court

Many contracts require claims to be referred to arbitration within a short period, for example 90 days after the final bill or after a decision of the engineer, failing which the claim is barred. Section 43(3) of the Arbitration Act allows the court, where such a clause exists and undue hardship would otherwise be caused, to extend the time on such terms as justice requires, even after the contractual period has expired.

Since the 1997 amendment to Section 28 of the Contract Act, clauses that extinguish rights after a period shorter than the statutory limitation, or that limit the time to enforce rights, are generally void to that extent, though there are exceptions for bank guarantees and some insurance contracts. Parties facing a short contractual time limit should take advice: such clauses may be unenforceable, but this depends on their wording and the date of the contract.

Limitation after an award is set aside

If an award is set aside by the court, Section 43(4) of the Arbitration Act provides that the period between the commencement of the arbitration and the date of the court's order is excluded in computing the limitation period for starting fresh proceedings, whether arbitration or a suit, on the same dispute. This protects a claimant whose award is set aside after many years from being told that the claim is now time-barred. The fresh proceedings must still be started within the remaining limitation period after the exclusion.

The Covid exclusion

By its order in In re Cognizance for Extension of Limitation (2022), the Supreme Court excluded the period from 15 March 2020 to 28 February 2022 for computing limitation in all judicial and quasi-judicial proceedings, and provided that where limitation would have expired during that period, parties had 90 days from 1 March 2022, or a longer remaining period, to file. This order has been applied to arbitration proceedings and to Section 11 applications. For claims that arose in 2019 to 2022, the exclusion can make the difference between a timely and a time-barred notice, and the calculation should be done carefully.

Limitation for counter-claims

A respondent's counter-claim has its own limitation. Under Section 43 read with the Limitation Act, a counter-claim is treated like a separate claim, and time is generally computed up to the date the counter-claim is raised. Where the respondent had itself invoked arbitration for the counter-claim by a notice, or had included the counter-claim in its reply to the claimant's Section 21 notice, it may argue that arbitration of the counter-claim commenced on that date. Respondents with claims of their own should raise them in writing early, preferably in the reply to the notice, rather than waiting for the statement of defence.

Mistakes to avoid

Treating a demand notice as if it commenced arbitration. Waiting for the contract to end before raising disputes over payments refused years earlier. Relying on negotiations or meetings to stop time. Assuming an email from a junior employee counts as an acknowledgment under Section 18, when it must be signed by the party or its authorised agent. Missing the Section 11 deadline after sending a timely notice. And forgetting that each invoice may have its own due date, so that older invoices may be barred even if newer ones are not.

Defending a stale claim

A respondent facing an old claim should raise limitation in its reply to the Section 21 notice, in any Section 11 proceedings if the claims are obviously barred, and as a preliminary issue before the tribunal. Ask the tribunal to decide limitation first if it can be decided on documents, which may save the cost of a full hearing. Check the claimant's evidence of acknowledgments carefully: who signed, whether before expiry, and whether it admits a subsisting liability. See reply to arbitration notice and jurisdiction objection under Section 16.

Use our limitation calculator

Our limitation calculator gives quick dates for common deadlines, such as the Section 34 challenge period, appeals and SARFAESI steps. For claims, a three-year period from the due date is the starting point, adjusted for acknowledgments, part payments and the Covid exclusion. For anything close to the deadline, take advice and send the notice at once.