Limitation Period For Appointment Of A Substitute Arbitrator Is 3 Years From The Date When The Right To Apply For Fresh Appointment Accrues: Delhi High Court

The bench of Justice Pratibha M. Singh held that since the act does not provide for any explicit period for the appointment of a substitute arbitrator, the limitation shall be governed by the residual provision found in Article 137 of the Limitation Act which provides a period of 3 years as the limitation period from the date when the right to apply accrues.

The Court also held that when the initial arbitrator was appointed under Section 11(6) of the Act, axiomatically the appointment of the substitute arbitrator shall also be undertaken in terms of Section 11(6) of the Act.

Facts

The parties were together in a business called 'Lahore Timber House'. On 04.07.2010, the parties entered into an agreement to sell which pertained to a plot of land and the rights and interests in the business. Clause 12 of the agreement provided for resolution of dispute through arbitration.

A dispute arose between the parties and the petitioners filed an application under Section 11(6) of the A&C Act. Before the Court, the parties expressed their interest in mutual settlement, accordingly, the Court, while appointing the arbitrator, also sent the parties for mediation. The Court ordered that if the parties fail to arrive at a mutual settlement, the arbitrator shall commence, and the arbitration would enter reference.

However, before the arbitrator could formally begin with the arbitral proceedings, he passed away due to Covid-19 on 03.03.2022. Moreover, the original respondent also died due to the virus on 20.07.2021.

Accordingly, the Petitioner filed applications under Section 11, 14 & 15 of the A&C Act, seeking appointment of a substitute arbitrator. It also filed an application under Section 9 of the Act seeking injunction against creation of any third-party interest in the property.

Contention of the Parties

• The arbitration proceedings have been abated as the arbitrator had entered reference in June 2021, however, it had not taken any action till his death in March 2022. Moreover, the petitioners also did not take any action to commence or proceed with the arbitral proceedings till the filing of these petitions.
• Arbitrator cannot be substituted under Section 11 of the A&C Act.

Analysis by the Court

The Court observed that there were few SMS that were exchanged between the parties and the arbitrator, however, such informal communication would not mean that the arbitrator had entered reference as no written order was passed by the arbitrator.

The Court also observed that in terms of the order passed by the Supreme Court in, the period till 30th May, 2022 would not be counted for the purpose of calculating limitation, therefore, it cannot be said that the arbitration has been abated due to non-action.

Next, the Court decided on the limitation period for the appointment of the substitute arbitrator. It held that the limitation period for the appointment of the substitute arbitrator is 3 years from the date when the right to apply for such appointment accrues.

The Court held that since the act does not provide for any explicit period for the appointment of a substitute arbitrator, the limitation shall be governed by the residual provision found in Article 137 of the Limitation Act which provides a period of 3 years as the limitation period from the date when the right to apply accrues.

The Court held that it is the death of the arbitrator that would constitute an event triggering the start of limitation period. It held that the petitioners have moved the application for the substitution of the arbitrator within the permissible time period.

The Court also held that when the initial arbitrator was appointed under Section 11(6) of the Act, axiomatically the appointment of the substitute arbitrator shall also be undertaken in terms of Section 11(6) of the Act.

Accordingly, the Court allowed the petition and appointed Justice R.S. Endlaw (Retd.) as the substitute arbitrator.

Case Title: Jatinder Kaur & Ors v. Late Jagjit Singh & Ors, ARB.P. 1167 of 2022

Citation: 2024 LiveLaw (Del) 72

Date: 05.01.2024

Counsel for the Petitioners: Mr. Arjun Malik and Ms. Aarohi Malik

Counsel for the Respondent: Mr. Bhagat Singh

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