Andhra Pradesh High Court: Limitation For Section 11 Arbitration Act Application Begins From Date Of Failure To Comply With Requirements Of Notice
The Andhra Pradesh High Court was deciding an Application filed under Section 11(6) of the A&C Act for the appointment of a Sole Arbitrator.
The Andhra Pradesh High Court reiterated that the limitation period for the appointment of an Arbitrator begins from the date of failure or refusal by the party to comply with the requirements of the notice invoking arbitration.
The Court reiterated thus in an Application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act) for the appointment of a Sole Arbitrator for adjudicating the disputes arising out of and in connection with a Work Contract.
A Single Bench of Chief Justice Dhiraj Singh Thakur referred to the Judgment in the case of Aslam Ismail Khan Deshmukh v. ASAP Fluids (P) Ltd. (2024 INSC 849) in which the Supreme Court held as under:
“In view of the above discussion, we must restrict ourselves to examining whether the Section 11 petitions made before us are within limitation. The petitioner herein issued a notice invoking arbitration on 23 1-2017 and the same was delivered to both the respondents on 24-1 2017. However, the respondents failed to reply to the said notice within a period of 30 days i.e. within 23-2-2017. Therefore, the period of limitation of three years, for the purposes of a Section 11(6) petition, would begin to run from 23-2-2017 i.e. the date of failure or refusal by the other party to comply with the requirements mentioned in the notice invoking arbitration.”
Advocate Udit Seth represented the Applicant while Advocate A. Tulsi Raj Gokul represented the Respondent.
Factual Background
The Applicant was a company engaged in the construction and infrastructure development activities. The Respondent i.e., Andhra Pradesh State Fiber Net Limited, had floated a rate contract tender for inviting eligible service providers for commissioning and maintenance of last mile optical fiber connectivity to Government Offices in the Districts of Anantapur and Kadapa in the Andhra Pradesh State. The Applicant was allotted the work and a contract agreement was signed between the two parties. Various work orders were issued to the Applicant from time to time for a total value of Rs. 12,26,63,520/-.
The Applicant claimed that even when work orders were executed, payment was not made to the tune of Rs. 2,82,60,159/-. Several reminders were also stated to have been sent, which did not elicit any response from the Respondent. It was further stated that instead of making payments, the Respondent terminated the contract. The Applicant also claimed that on several occasions, the representatives of both the parties tried to resolve the issues, however, despite efforts, the amount due to the Applicant was not released which finally led it to invoke the Arbitration Clause.
Reasoning
The High Court after hearing the arguments from both sides, observed, “The objection raised by learned counsel for the respondent that the present Arbitration Application is time barred is without any basis.”
The Court also referred to the Judgment in the case of Arif Azim Co. Ltd. v. Aptech Ltd. (2024 INSC 155) in which the Supreme Court held as under –
“It has been held in a catena of decisions of this Court that the limitation period for making an application seeking appointment of arbitrator must not be conflated or confused with the limitation period for raising the substantive claims which are sought to be referred to an Arbitral Tribunal. The limitation period for filing an application seeking appointment of arbitrator commences only after a valid notice invoking arbitration has been issued by one of the parties to the other party and there has been either a failure or refusal on the part of the other party to make an appointment as per the appointment procedure agreed upon between the parties.”
The Court noted that the notice invoking arbitration clause was issued by the Applicant only on October 17, 2022 and assuming that three years were to be calculated from the said date itself, the Petition which is filed on August 31, 2023, would squarely be within the period of prescribed three years in terms of Article 137 of the Limitation Act, 1963.
“The argument that the present application is barred by limitation is, therefore, without any basis and is accordingly rejected. … Considering the fact that the respondent did not appoint the arbitrator within the time specified in the notice invoking the arbitration clause, the respondent must be deemed to have lost that right”, it said.
The Court concluded that there would be no legal impediment to appoint an Independent Arbitrator. It, therefore, appointed Justice U. Durga Prasad Rao, former Judge of the Andhra Pradesh High Court, to adjudicate upon the disputes between the parties.
“The question of arbitrability of the claims is left open to be decided by the learned Arbitrator. The parties shall be free to file detailed claims and counter claims, before the learned Arbitrator. The learned Arbitrator shall also be entitled to claim the fee in consultation with the parties, keeping in view the provisions of the Fourth Schedule of the Arbitration and Conciliation Act, 1996”, it ordered.
Accordingly, the High Court allowed the Application.
Cause Title- Alliance Enterprises v. Andhra Pradesh State Fiber Net Limited (APSFL) (Case Number: Arbitration Application No: 48 of 2023)
Appearance:
Applicant: Advocates Udit Seth and Kotharu Vijayeswari.
Respondent: Advocate A. Tulsi Raj Gokul
