Brief Facts

The Petitioner in the matter relied on an arbitration clause as contained in the Supplementary Deed of Partnership dated 9 July 2012. Since certain disputes had arisen between the parties on 29 September 2014, the Petitioner had filed a petition being OMP No. 1198 of 2014 under Section 9 ("Section 9 Petition") of the Arbitration and Conciliation Act, 1996 ("Act"). Thereafter, the Petitioner also issued a notice dated 14 November 2014 ("First Notice") invoking the arbitration clause. Mukesh Panika ("Respondent") responded to the First Notice by a letter dated 22 December 2014 ("Reply to First Notice").

The Petitioner claimed that the said response was handed over in Court on 5 February 2015. On the said date, this Court disposed of the Section 9 Petition. On 10 October 2017, the Petitioner sent another notice invoking the arbitration clause under the subject agreement ("Second Notice"). The respondents sent a reply to the aforesaid notice on 6 November 2017, wherein it was asserted that the respondents had never executed the documents referred to by the Petitioner, including the subject agreement.

On 4 January 2018, the Petitioner filed another petition under Section 9 of the Act. Thereafter, the Petitioner filed the petition dated 12 February 2018 under Section 11 of the Act, praying for appointment of arbitrator ("Section 11 Petition").

Issue

Whether the Section 11 Petition dated 12 February 2018, which is admittedly beyond the period of three years from the First Notice, is barred by limitation?

Judgment

The Court noted the dates of First Notice, Reply to First Notice, as well as Petitioner' claim that the Reply to First Notice was received by it in Court for the first time on 5 February 2015, on which date, the Court disposed of the Section 9 Petition.

The Court observed that the right to sue had arisen in favour of the Petitioner earlier in 2014 and, in any event, with the Petitioner invoking the arbitration clause by the First Notice. However, the Petitioner did not take any steps for constitution of the arbitral tribunal. The Petitioner made a similar allegation in the Second Notice to the effect that Respondent is attempting to dilute the assets of the subject firm being the immovable properties in question.

The Petitioner argued that since it had received the Reply to First Notice on 5 February 2015, the cause of action had arisen on the said date. Since the Petitioner had issued the Second Notice on 10 October 2017, i.e., within a period of three years from that date, therefore, Section 11 Petition was not barred by limitation.

The Court then noted that Section 43(1) of the Act mandates that the Limitation Act, 1963 ("Limitation Act") would apply to arbitration as it applies to the proceedings in Court.

The Court then referred to the observations in Prasar Bharti v. Maa Communication[1], wherein it was held that:

"6. The position under the 1996 Act in Section 11 is akin to that under Section 8 and not to that under Section 20 of the 1940 Act. In fact, the procedure as prescribed under Section 20 of the 1940 Act has been totally done away with in the 1996 Act. Under the 1996 Act, a party to an arbitration agreement cannot straightaway approach the court for appointment of the arbitrator, as a party to an arbitration agreement was entitled to under Section 20 of the old Act. Under Section 11 of the new Act, even if there is no named arbitrator, the party is not entitled to approach the court straightaway and is required to first issue notice to the other party proposing the names of the arbitrators and is to approach the court only upon the failure of consensus within 30 days of such notice. The procedure prescribed in Section 11 is mandatory. Thus, the question of a party preferring an application under Section 11(4) or under Section 11(6) to the Chief Justice or his designate does not arise unless the procedure of giving a notice is followed and without such procedure being followed and failure thereof, there would be no cause of action for the petition under Section 11(4) or 11(6) of the Act. Thus, the limitation for filing an application under Section 11(4) or 11(6) of the Act cannot but accrue only upon the failure of the procedure prescribed and can possibly have nothing to do with the limitation for preferring the claim. The Supreme Court in J.C. Budhraja v. Chairman, Orissa Mining Corporation Ltd. (2008) 2 SCC 444, relied by the counsel for the Petitioner, has clearly held that the period of limitation for filing a petition under Section 8(2) of the 1940 Act seeking appointment of an arbitrator cannot be confused with the period of limitation for making the claim."

Prasar Bharti (supra) had consequently held that the limitation for filing an application under Section 11(4) would commence running only from the expiry of 30 days from the receipt of request mentioned in Section 11(4)(a) or (b) and the limitation for an application under Section 11(6) would commence running from the happening of contingencies mentioned in sub-clause (a) or (b) or (c) thereof.

In light of the above, the Court noted that the Petitioner had raised a dispute and had accordingly, invoked the arbitration clause and the respondents had denied the existence of arbitration agreement between the parties. The Court observed that disputes between parties were therefore crystallized at the stage of Reply to First Notice. It was open for the Petitioner to file an application for appointment of an arbitrator at that stage. However, the Section 11 Petition has been filed more than three years after this Court had disposed of the Section 9 Petition. In view of the above, the Court held that the Section 11 Petition was barred under the provisions of Limitation Act[2] as it was required to be filed within a period of 3 years from the expiry of 30 days of First Notice.

Analysis

The Court has reiterated the limitation period for filing an application for appointment of an arbitrator. Further, more notably, the Court rejected the Petitioner's contention that the Reply to First Notice gave a fresh cause of action to issue a fresh notice invoking the arbitration, and held that there was no requirement for the Petitioner to issue a fresh notice of arbitration for resolution of the said disputes. The effect of the judgment is that a party cannot seek to extend its limitation period for the purpose of Section 11 by issuing a second/fresh notice invoking arbitration agitating the very same claims.

It is pertinent to note that Prasar Bharti (supra) had held that limitation for filing an application under Section 11(14) or 11(16) of the Act cannot but accrue only upon failure of the procedure envisaged therein respectively and can possibly have nothing to do with the limitation for preferring the claim. Notably, Prasar Bharti also clarified that even if a petition under Section 11 is found to be in time, it may still be dismissed if claims sought to be resuscitated are still found to be long dead ones.

*Authored by Surjendu Sankar Das, Partner and Avlokita Rajvi, Associate; Golden Chariot Recreations Pvt. Ltd. v. Mukesh Panika & Anr., Arb. P. No. 143 of 2018 and I.A. No. 3336-3337 of 2018, Delhi High Court, SCC OnLine Del 10050, judgment dated 23 July 2018.
Quorum: Vibhu Bakhru J.

[1] 2010 (115) DRJ 438 (DB).

[2] Article 137 of Schedule to the Limitation Act.

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