2023 (1) TMI 1259 - HC - Indian Laws

Court dismisses time-barred petition, rejects unilateral arbitrator appointment, emphasizes limitation periods.

The court dismissed the petitioner's application, ruling that the claims were time-barred and there was no valid arbitration agreement. Emphasizing ... Prayer for appointment of a sole arbitrator to adjudicate the disputes which have arisen between the parties - Section 11 of the Arbitration & Conciliation Act, 1996 - HELD HAT:- It is not a universal principle that every case calls for the appointment of an arbitrator and that any and all disputes should be decided by the arbitrator. The courts act as a doorkeeper where entry is permitted for all the disputes but the doorkeeper can restrict the entry if certain specific criteria as laid down in the aforementioned judgments are not met. Reliance can be placed upon the decision of the Supreme Court in DLF Home Developers Limited -v- Rajapura Homes Pvt. Ltd. & Anr. [2021 (9) TMI 1053 - SUPREME COURT] wherein it was clarified that this Court or a High Court, as the case may be, are not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator. On the contrary, the Court(s) are obliged to apply their mind to the core preliminary issues, albeit, within the framework of Section 11(6-A) of the Act. Such a review, as already clarified by this Court, is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement.” Reference can also be made to the apex court’s decision in BHARAT SANCHAR NIGAM LTD. & ANR. VERSUS M/S NORTEL NETWORKS INDIA PVT. LTD. [2021 (3) TMI 447 - SUPREME COURT] wherein the court held that adjudication of the limitation issue at the referral stage does not tantamount to stepping into the arbitrator’s jurisdictional territory. Whether the claims here are exfacie time barred and therefore, falls under the restrictive category of deadwood? - HELD THAT:- To determine the starting point of cause of action and ascertain the expiry of the limitation period, this Court finds it pertinent to refer back to the judgment of the Supreme Court in BHARAT SANCHAR NIGAM LTD. & ANR. VERSUS M/S NORTEL NETWORKS INDIA PVT. LTD. [2021 (3) TMI 447 - SUPREME COURT] wherein it made explicitly clear that a notice invoking arbitration must be sent by the claimant party within three years from the date on which the escalation claim is rejected. It is now well settled that the claims in the present petition are exfacie time barred. However, as a last ditch effort Mr. Mitra contended that since the respondent in its letter dated April 10, 2021 had themselves appointed the arbitrator, the question regarding the existence of any dispute does not arise anymore. In my view, limitation is not something to be decided by the consent between the parties, but it is something which is statutorily mandated and judicially enforced. If there is a boundary drawn by the legislature and enforced by the judiciary, parties cannot act outside of it on the grounds that their consent should be the primary consideration in such cases. While this Court accepts that appointment of arbitrator by the respondent is impermissible but that would not permit the parties to venture beyond the boundaries of limitation. Thus, it is patently clear that the claim giving rise to the present dispute is ex-facie time barred and falls within the limited category of deadwood. Resultingly, the reference to arbitration is hereby declined - application dismissed. Issues Involved:1. Challenge to the appointment procedure of the sole arbitrator.2. Limitation period for invoking arbitration.3. Alleged duress in accepting the final bill.4. Validity of subsequent claims and letters regarding price escalation.Detailed Analysis:1. Challenge to the Appointment Procedure of the Sole Arbitrator:The petitioner challenged the appointment procedure of the sole arbitrator as per clause 25 of the contract, arguing it was invalid under the Arbitration & Conciliation Act, 1996. The court referenced the Supreme Court's rulings in Perkins Eastman Architects DPC & Another -v- HSCC (India) Ltd. and TRF Ltd. -v- Energo Engineering Projects Ltd., which established that unilateral appointment of an arbitrator by an interested party is impermissible. The court agreed with the petitioner, stating that the appointment procedure violated principles of natural justice and independence of the arbitration process.2. Limitation Period for Invoking Arbitration:The court examined whether the claims were time-barred. The petitioner argued that the limitation period should start from September 12, 2017, when the respondent first disputed the price escalation claim. The respondent contended that the limitation began on March 11, 2016, when the final bill was issued. The court held that the cause of action arose on March 11, 2016, and the limitation period started from that date. The court referenced the Supreme Court's decision in BSNL -v- Nortel Networks India Pvt. Ltd., which mandates that a notice invoking arbitration must be sent within three years from the rejection of the final bill. The court concluded that the petitioner's notice dated March 8, 2021, was time-barred.3. Alleged Duress in Accepting the Final Bill:The petitioner claimed that the acceptance of the final bill was under duress. The court found no evidence supporting this claim. The court noted that the petitioner's letters accepting the final bill did not mention any coercion or duress. The court emphasized that compelling financial circumstances do not constitute duress from the respondent's side. The court dismissed the petitioner's argument, stating that the acceptance of the final bill was voluntary and binding.4. Validity of Subsequent Claims and Letters Regarding Price Escalation:The petitioner argued that subsequent letters and claims regarding price escalation should extend the limitation period. The court rejected this argument, stating that mere exchange of letters or settlement discussions do not extend the limitation period. The court referenced the Supreme Court's decision in Geo Miller & Company Private Ltd. -v- Rajasthan Vidyut Utpadan Nigam Ltd., which held that the limitation period does not get extended by mere correspondence. The court concluded that the petitioner's claims were ex-facie time-barred and fell within the category of deadwood.Conclusion:The court dismissed the petitioner's application, holding that the claims were time-barred and there was no valid arbitration agreement. The court emphasized the importance of adhering to limitation periods to ensure efficiency in the arbitration process. The court also reiterated the principle that unilateral appointment of an arbitrator by an interested party is impermissible. The court declined to refer the matter to arbitration and dismissed the application with no order as to costs.