Limitation For Application U/S 11(6) Of Arbitration Act Can't Be Bypassed By Claiming Advocate Was Not Authorised To Issue Notice: Delhi High Court

The Delhi High Court bench of Justice Jyoti Singh has held that the bar of limitation for filing an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) seeking the appointment of an arbitrator, cannot be circumvented merely on the ground that the demand-cum-arbitration invocation notice was issued by the petitioner's counsel without proper authorization. The court held that such a contention, if accepted, would render the limitation period for filing such applications meaningless and defeat the very purpose of prescribing a time frame. Brief Facts: The present dispute arises from a Memorandum of Understanding (MoU) dated 25.11.2013 between the parties for the purchase of two units (2250 sq. ft. each) in the proposed project 'Lifestyle Street K8' in Noida, by K. Rasa International Pvt. Ltd. The MoU also provided that, in consideration of the petitioner's investment, all rights in Unit No. B-04-31, Gurgaon Hills, Gurugram, would be transferred to the petitioner. Pursuant to the MoU, an Agreement to Sell was executed on 13.12.2013, under which the petitioner was to pay Rs.1,56,00,000 by 30.06.2014, with the balance payable directly to the builder. The petitioner made part payments between December 2013 and April 2014. An addendum dated 12.08.2014 extended the payment timeline, with interest at 12% p.a., until 31.12.2014. The petitioner's grievance is that the project was shelved due to land acquisition issues, rendering the MoU void. Consequently, the petitioner sought cancellation of the agreement and refund of the payments. Despite multiple legal notices from May 2015 to April 2024, there was no response from the respondents. On 22.04.2024, the petitioner invoked the arbitration clause in the MoU and, receiving no reply, has approached this Court seeking appointment of the Arbitrator under section 11(6) of the Arbitration Act. Contentions: The Respondent submitted that Petitioner had initially sent a legal notice of demand dated 26.11.2016 to which reply dated 30.12.2016 was sent by the Respondents. Responding to the reply, Petitioner through his counsel sent a rejoinder-cum-notice of invocation dated 12.01.2017 requesting for appointment of an Arbitrator. Taken from this date, this petition filed in 2024, is beyond a period of 3 years and hence barred by limitation. Per contra, the Petitioner submitted that it is true that Petitioner had authorized his lawyer to send a legal notice dated 26.11.2016 to the Respondents but it is equally true that Petitioner was unaware of the reply dated 30.12.2016 allegedly sent by the Respondents to Petitioner's lawyer and learnt of this fact only from the reply filed in this Court. It was further submitted that Petitioner did not give any instruction to the lawyer to follow up the matter and/or to send any communication to the Respondents, much less the stated invocation notice dated 12.01.2017. Lastly, it was submitted that since the invocation notice under Section 21 of the Arbitration Act was sent by the Petitioner only on 04.03.2024, the petition is not barred by limitation. Observations: The court noted that the Supreme Court in Arif Azim Company Limited v. Aptech Limited, 2024 held that a plain reading of Section 11(6) of the Arbitration Act which deals with the appointment of arbitrators, reveals that no specific time-limit is prescribed for filing an application under this provision. However, Section 43 of the Act makes the Limitation Act applicable to arbitration proceedings as it applies to court proceedings. The Apex Court after analysing the provisions of both the acts held that since none of the Articles in the Schedule to the Limitation Act provide a time period for filing an application under Section 11(6) of the Arbitration Act, it would be covered by Article 137 of the Limitation Act which is the residual provision. The Supreme Court further held that the limitation period for filing an application seeking the appointment of an arbitrator must not be conflated with the limitation period for raising the substantive claims intended to be referred to arbitration. The limitation for such an application begins only after a valid notice invoking arbitration has been issued by one party, and the other party has either failed or refused to appoint an arbitrator in accordance with the agreed procedure. The Court noted that this position was reaffirmed by the Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning, 2024. The Court held that the observations in Arif Azim Company Limited (supra)—specifically, that the Limitation Act applies to applications under Section 11(6) and that the referral court must ensure the application is filed within the limitation period prescribed under Article 137 (i.e., three years from the date a valid notice invoking arbitration is issued and there is a failure to...

Limitation For Application U/S 11(6) Of Arbitration Act Can't Be Bypassed By Claiming Advocate Was Not Authorised To Issue Notice: Delhi High Court

Mohd Malik Chauhan

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Limitation For Application U/S 11(6) Of Arbitration Act Can't Be Bypassed By Claiming Advocate Was Not Authorised To Issue Notice: Delhi High Court

Mohd Malik Chauhan

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