Case at a Glance
Two buyers of a commercial unit in a Gurugram project agreed in 2014 to buy it for ₹2.38 crore, with possession due by 31 December 2017 and delay compensation of ₹30 per sq. ft. per month. When they invoked arbitration in June 2026 to claim about ₹1.85 crore, the developer objected that the claims were long dead. The Delhi High Court agreed: limitation ran from the fixed possession date, monthly compensation did not make the breach ‘continuing’, and neither the 2026 notices nor the developer’s refund offer revived the claim. The petition under Section 11(6) of the Arbitration and Conciliation Act was dismissed.
On 7 April 2014 the petitioners signed an Agreement to Sell with the developer for Commercial Unit No. 903 in the ‘Business Square’ project at Village Badshahpur, Gurugram, for a total consideration of ₹2,38,68,000. They had paid ₹4,82,123. Clause 14 fixed possession by 31 December 2017 and provided compensation of ₹30 per sq. ft. per month for delay; Clause 44 contained an arbitration clause, which was not disputed.
The developer was in a separate dispute with the landowners under a 2008 collaboration agreement and had filed a civil suit in 2022. The buyers learnt of it in December 2025, failed in an attempt to be impleaded, and then sent a legal notice on 4 May 2026. The developer replied on 20 May 2026 offering a refund of ₹4,82,123 without admitting liability (it said 37 of 38 similar buyers had accepted refunds). The buyers invoked arbitration on 18 June 2026 and approached the High Court for appointment of an arbitrator.
The Key Question Before the Court
Can a court refuse to refer a dispute to arbitration at the Section 11 stage when the underlying claims are, on admitted dates, ex facie barred by limitation — and does a monthly delay-compensation clause or later correspondence keep such claims alive?
Why the Clock Started in December 2017
The Court separated two questions. The Section 11(6) petition itself, governed by the three-year period under Article 137 of the Limitation Act, was filed in time. But the substantive claims were another matter. Because the Agreement fixed the date for performance, limitation under Article 54 ran from 31 December 2017; relying on Ahmadsahab Abdul Mulla (2) v. Bibijan, (2009) 04 SC CK 0049, the Court said the period “commences from the date so fixed”. Article 55, for breach of contract, likewise ran from the date the contract was broken. The monthly computation in Clause 14 did not convert the breach into a continuing one: the continuing financial consequences “cannot, without more, be treated as successive independent breaches” for extending limitation. Samruddhi Co-operative Housing Society Ltd. v. Mumbai Mahalaxmi Construction (P) Ltd., (2022) 01 SC CK 0021 (a continuing statutory obligation) and Lata Construction v. Dr. Rameshchandra Ramniklal Shah, (1999) 08 SC CK 0115 (a fresh agreement) were distinguished.
Nor could later events help. An acknowledgment under Section 18 of the Limitation Act must be in writing, signed and made before limitation expires; negotiations, the 2026 legal notice or a without-prejudice refund offer do not qualify. The developer’s litigation with the landowners did not suspend time for the buyers’ independent contractual remedies. Following SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 07 SC CK 0049 and M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd., (2024) 03 SC CK 0005, the Court held that the bar was apparent from the admitted chronology without any intricate evidentiary inquiry, so the claims “had become ex facie barred by limitation before commencement of the arbitral proceedings”. Fresh notices, it said, “cannot revive claims which had already become barred by limitation”.
What the Court Actually Held
- The Section 11(6) petition was within the three-year period under Article 137, but the claims sought to be referred were ex facie time-barred.
- Where the agreement fixes a possession date, limitation runs from that date; a monthly delay-compensation formula does not make the breach continuing.
- A refund offer, legal notices and negotiations after the limitation period are not an acknowledgment under Section 18 and do not revive dead claims.
- The developer’s separate suit against the landowners did not suspend limitation; the petition was dismissed with no order as to costs.
Why This Judgment Matters
- It warns property buyers that waiting years after a missed possession date can cost them their contractual remedy altogether.
- It shows that courts at the referral stage can still weed out claims that are obviously time-barred on undisputed dates.
- It clarifies that ‘per-month’ compensation clauses do not reset the limitation clock every month.
What Should Advocates Take Away From the Judgment?
For Property Buyers
- Note the contractual possession date — limitation for claims generally starts from it.
- Do not treat a builder’s correspondence or refund offer as keeping your claim alive; act within three years.
- A builder’s dispute with landowners does not stop time running against you.
For Counsel
- At the Section 11 stage, plead limitation with an admitted chronology to seek dismissal of manifestly dead claims.
- Distinguish continuing statutory obligations (Samruddhi) from a single breach with continuing consequences.
- Check Section 18 requirements strictly: written, signed and before expiry.
Key Takeaways
- Possession date 31.12.2017; arbitration invoked 18.06.2026 — claims held ex facie barred.
- Monthly compensation does not equal successive breaches.
- Refund offers and notices after expiry do not restart limitation.
- Referral courts can reject claims whose time-bar is plain on admitted facts.
Frequently Asked Questions
Does a delay-compensation clause payable per month extend limitation?
No. The Court held that Clause 14’s monthly computation only measured the consequences of a single breach on the fixed possession date; it did not create successive independent breaches.
Can a builder’s refund offer count as acknowledgment of liability?
Not here. Under Section 18 of the Limitation Act an acknowledgment must be written, signed and made before the period expires. The 2026 refund offer came after expiry and without admitting liability.
Can a court refuse arbitration because a claim is time-barred?
Yes, where the bar is ex facie apparent from admitted dates. The Court followed SBI General Insurance Co. Ltd. v. Krish Spinning and M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd. to dismiss the Section 11(6) petition.
Conclusion
The judgment is a sharp reminder that an arbitration clause does not suspend limitation. For buyers who were promised possession in 2017, the window to claim delay compensation under the agreement closed long before 2026.
Practical takeaway: Buyers should calendar three years from the contractual possession date and initiate proceedings within it; later notices or builder offers will not save a lapsed claim.
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