Time Spent In Earlier Arbitration Must Be Excluded From Limitation After Award Set Aside: Bombay High Court

The Bombay High Court recently reiterated that when an arbitral award is set aside, the period between the commencement of the earlier arbitration and the date of the court's order is required to be excluded while computing limitation for initiating fresh arbitral proceedings.

A single bench of Justice Sandeep V. Marne applied Section 43(4) of the Arbitration and Conciliation Act and relied on Supreme Court rulings in Arif Azim Co. Ltd v Aptech Ltd and SBI General Insurance Company Ltd v Krish Spinning while examining the scope of limitation at the stage of deciding an application for appointment of an arbitrator under Section 11.

“Thus, when Arbitral Award is set aside by the Court either under Section 34 or under Section 37 of the Arbitration Act, the period between commencement of arbitration and date of order of the Court is required to be excluded for the purpose of computation of limitation for commencement of fresh arbitral proceedings with respect to the dispute so submitted,” the court observed.

The ruling came while deciding a commercial arbitration application filed by Edelweiss Financial Services Ltd seeking appointment of an arbitrator to commence fresh arbitral proceedings against Percept Finserve Pvt Ltd and Percept Ltd.

The dispute arose from a Share Purchase Agreement dated 8 December 2007 under which Edelweiss purchased 2,28,374 equity shares of the company for Rs. 2 crores subject to certain restructuring conditions to be fulfilled by Percept Finserve Pvt Ltd and Percept Ltd. After the companies allegedly failed to comply, Edelweiss invoked arbitration on 6 May 2009.

A sole arbitrator was appointed by the High Court on August 13, 2009, and an arbitral award dated 6 June 2013 rejected Edelweiss's claims after holding certain clauses of the agreement to be illegal and unenforceable.

The award was set aside by the High Court in March 2019 after it overturned the tribunal's finding on the validity of those clauses. The appeal filed by Percept Finserve Pvt Ltd and Percept Ltd was dismissed on February 2, 2023, and the Supreme Court declined to interfere in April 2023.

Edelweiss thereafter issued a fresh notice invoking arbitration on November 25, 2025 and approached the High Court under Section 11 for appointment of an arbitrator.

Percept Finserve Pvt Ltd opposed the application, contending that it was barred by limitation. Rejecting the objection, the court held that under Section 43(4) the period between the commencement of the earlier arbitration and the order setting aside the award must be excluded while computing limitation for commencement of fresh arbitral proceedings, and further held that the application under Section 11 had been filed within the period of limitation prescribed under Article 137 of the Limitation Act.

Holding that the existence of the arbitration agreement was undisputed and that the issue of limitation in respect of the claims would be decided by the arbitral tribunal, the court appointed former Madras High Court Chief Justice S.V. Gangapurwala as the sole arbitrator to adjudicate the dispute.