2021 (3) TMI 612 - SC - Indian Laws

Supreme Court rules time-barred claims under Arbitration Act, overturning High Court judgment

The Supreme Court ruled that applications under Section 11 of the Arbitration Act were time-barred as per the Limitation Act, with the limitation period ... Period of limitation for appointment of Arbitrator - Seeking reimbursement on account of price variation - HELD THAT:- So far as the applicability of Article 137 of the Limitation Act to the applications under Section 11 of the Arbitration Act is concerned, it is clear that the demand for arbitration in the present case was made by the letter dated 07.11.2006. This demand was reiterated by a letter dated 13.01.2007, which letter itself informed the Appellant that appointment of an arbitrator would have to be made within 30 days. At the very latest, therefore, on the facts of this case, time began to run on and from 12.02.2007. The Appellant’s laconic letter dated 23.01.2007, which stated that the matter was under consideration, was within the 30-day period. On and from 12.02.2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the Respondent and time began running from that day. Obviously, once time has started running, any final rejection by the Appellant by its letter dated 10.11.2010 would not give any fresh start to a limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 06.11.2013, they were within the limitation period of three years starting from 10.11.2020. On this count, the applications under Section 11 of the Arbitration Act, themselves being hopelessly time barred, no arbitrator could have been appointed by the High Court - Even otherwise, the claim made by the Respondent was also ex facie time barred. It is undisputed that final payments were received latest by the end of March 2003 by the Respondent. Even taking 16.02.2010 as the starting point for limitation on merits, a period of three years having elapsed by February 2013, the claim made on merits is also hopelessly time barred - Appeal allowed. Issues Involved:1. Applicability of the Limitation Act to applications under Section 11 of the Arbitration and Conciliation Act, 1996.2. Determination of the starting point for the limitation period for filing an application under Section 11.3. Whether the claims made by the Respondent were time-barred.4. Whether the High Court erred in allowing the Section 11 applications and appointing an arbitrator.Detailed Analysis:1. Applicability of the Limitation Act to Applications under Section 11 of the Arbitration and Conciliation Act, 1996:The Supreme Court emphasized the applicability of Article 137 of the Limitation Act, 1963, to applications under Section 11 of the Arbitration Act, 1996. It referred to the case of Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd., which clarified that the limitation period begins when the claimant first acquires a right to require arbitration. The Court also cited Bharat Sanchar Nigam Ltd. v. M/s Nortel Networks India Pvt. Ltd., which confirmed that the limitation for filing an application under Section 11 arises upon the failure to appoint an arbitrator within 30 days from the notice invoking arbitration.2. Determination of the Starting Point for the Limitation Period for Filing an Application under Section 11:The Court held that the limitation period began on 12.02.2007, 30 days after the Respondent's letter dated 13.01.2007 requesting the appointment of an arbitrator. The Respondent's subsequent letters did not extend the limitation period, as per Section 9 of the Limitation Act, which states that once time begins to run, it cannot be extended by subsequent actions. Therefore, the applications filed on 06.11.2013 were time-barred.3. Whether the Claims Made by the Respondent Were Time-Barred:The Court found that the Respondent's claims were ex facie time-barred. The final payments were received by the end of March 2003, and the demand for price variation was first made on 08.09.2003. Even if the limitation period started from the Respondent's legal notice dated 30.01.2010, the claims were time-barred by February 2013, as the three-year limitation period had elapsed.4. Whether the High Court Erred in Allowing the Section 11 Applications and Appointing an Arbitrator:The Supreme Court concluded that the High Court erred in allowing the Section 11 applications and appointing an arbitrator. The applications were filed beyond the limitation period, and the claims were time-barred. The Court highlighted that under Section 11(6A) of the Arbitration Act, the Court's role is limited to examining the existence of an arbitration agreement, and it should refer the matter to arbitration unless it is manifestly clear that the claims are ex facie time-barred or there is no subsisting dispute.Conclusion:The appeals were allowed, and the impugned judgment of the High Court dated 20.08.2019 was set aside. The Supreme Court held that the applications under Section 11 of the Arbitration Act were hopelessly time-barred, and no arbitrator could have been appointed by the High Court.