Arbitral neutrality and limitation bar: unilateral sole-arbitrator appointment was invalid, and time-barred claims were not referred to arbitration.

A contractual clause allowing one party to unilaterally appoint the sole arbitrator was found inconsistent with arbitral neutrality, because an interested party cannot appoint its own decision-maker and the tribunal must satisfy nemo judex in causa sua; the appointment mechanism was therefore invalid. On limitation, the Court held that in a Section 11 referral it may conduct a limited prima facie review and refuse reference where the claims are manifestly time-barred or deadwood. The claims arose when the final bill was issued, later correspondence did not revive limitation, and no sufficient material showed duress or coercion to displace final settlement, so reference to arbitration was declined.

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Issues: (i) Whether the contractual clause empowering one party to appoint the sole arbitrator was hit by the principle against unilateral appointment of an interested arbitrator; (ii) whether the dispute and claims were ex facie time-barred and incapable of reference under Section 11 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the contractual clause empowering one party to appoint the sole arbitrator was hit by the principle against unilateral appointment of an interested arbitrator.

Analysis: The Court applied the rule that an interested party cannot unilaterally appoint the arbitrator, since neutrality and independence of the arbitral tribunal are essential and the appointment must satisfy the principle of nemo judex in causa sua. The contractual mechanism authorising one side to nominate the sole arbitrator was therefore inconsistent with the settled law on arbitral neutrality.

Conclusion: The appointment procedure under the contract was held unsustainable and invalid.

Issue (ii): Whether the dispute and claims were ex facie time-barred and incapable of reference under Section 11 of the Arbitration and Conciliation Act, 1996.

Analysis: The Court held that, at the referral stage, it may undertake a limited prima facie review and refuse reference where the claim is manifestly time-barred or falls within the category of deadwood. Applying the limitation principles, the Court found that the cause of action arose when the final bill was issued and the escalation claim was not included, and that the later correspondence did not revive limitation. The Court also held that mere exchange of letters, settlement discussions, or an alleged withdrawal of acceptance did not extend or restart limitation, and no material established duress or coercion sufficient to displace the final settlement.

Conclusion: The claims were held to be ex facie time-barred and not referable to arbitration.

Final Conclusion: The Court declined reference to arbitration and dismissed the petition, holding that the dispute was barred by limitation and fell within the category of deadwood notwithstanding the invalidity of the unilateral appointment mechanism.

Ratio Decidendi: In a Section 11 proceeding, the Court may refuse reference on a limited prima facie review where the arbitration claim is manifestly time-barred, and a contractual clause permitting unilateral appointment by an interested party is invalid for want of neutrality.

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