In a significant legal development, the Delhi High Court has delivered a judgement on an arbitration dispute between two companies. The case delved into the time limit for filing arbitration petitions, shedding light on the intricacies of the Arbitration and Conciliation Act, 1996. The ruling provides valuable insights for companies navigating arbitration proceedings. #Arbitration #Legal #DelhiHighCourt #DisputeResolution
Facts
- The petitioner filed two Petitions under Section 9 of the Act, 1996 for interim relief in respect of ABG and the CPBG before the Saket District Court, Delhi which were registered vide OMP(I)(COMM) Nos. 1168-1169/2021.
- The present Petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 has been filed on behalf of the petitioner, seeking appointment of a Sole Arbitrator for adjudication of the disputes between the parties.
- The Petitioner-Company incorporated under the Companies Act, 1956 is engaged in the business of production and supply of high-end pre-engineered and structural steel.
Arguments
- Learned counsel for the respondent argues that petitioner is agitating dead claims
- Dispute arose in 2020, first notice of arbitration sent on 17.09.2021, petition filed on 17.09.2024
- Respondent claims petitioner’s claims are time-barred
- Two statutory notices issued by petitioner under Section 21 of the Act
- Reply dated 15.10.2021 denied liability to pay any amount
- Rejoinder dated 08.11.2021 submitted
- Two petitions under Section 9 for interim relief filed and disposed of
- Parties attempted amicable resolution between 2022-2023 without final settlement
Analysis
- Negotiations and settlement talks continued during the period of 2022-2023 as per both parties’ submissions.
- Disputes arose on 26.03.2021 during the COVID period.
- The applicability of Article 137 to applications under Section 11(6) of the Act due to a legislative vacuum is noted, with no statutory prescription of a time limit.
- A three-year limitation period is deemed unduly long and against the Act’s spirit of expeditious dispute resolution.
- Considering the exclusion of the years 2022-2023, the petition filed on 13.05.2024 falls within the limitation period.
- The present petition under Section 11(5) of the Act was filed only after negotiation talks failed.
- It is suggested that Parliament should amend the Act, 1996, to prescribe a specific period for filing petitions under Section 11(6) after the Notice of invocation under Section 21.
- In Milkfood Ltd. vs GMC Ice Cream (P) Ltd., (2004) 7 SCC 288, it was noted that Arbitration proceedings commence when one party serves a Notice requiring appointment of an Arbitrator on the other party.
- Bharat Sanchar Nigam Limited vs Nortel Networks India Private Limited, (2021) 5 SCC 738, emphasized that a clear Notice invoking Arbitration setting out disputes must be issued within three years of cause of action.
- Arif Azim Co. Ltd. vs Aptech Ltd., 2024 SCC OnLine SC 215, concluded that three years are available for filing Section 11 application after the Notice of invocation under Section 21.
- Section 21 of the Act specifies the commencement of arbitral proceedings through the service of Notice or the issuance of a request for the appointment of an Arbitrator.
- The initiation of arbitral proceedings is deemed to have commenced indisputably through the actions mentioned in the Arbitration Agreement.
- The service of Notice or the request for the appointment of an Arbitrator as per the Arbitration Agreement is crucial in determining the commencement of arbitral proceedings.
- The cause of action for the arbitration case arose in March 2021.
- The petition for arbitration was filed on 13.05.2024, which is beyond the time limit, making the claims time-barred.
- Despite the objections raised, it was clarified that the discussion was solely for the determination of adjudication of Section 11 of the Act.
- The Notice of Invocation under Section 21 of the Act must be filed within three years of the cause of action, which was done in this case.
Decision
- The petition is allowed and Justice Rajiv Sahai Endlaw (Retd.) is appointed as the sole Arbitrator.
- The parties can raise objections before the Arbitrator.
- The appointment of the Arbitrator will follow the rules of DIAC including fees and disclosures.
- The Arbitrator must make necessary disclosures as per the Arbitration and Conciliation Act, 1996.
- The petition is allowed and disposed of accordingly.
- The Notice of invocation was filed within the required time limit.
- The fees of the Arbitrator will be fixed as per the Act or with consent of parties.
- Parties must contact the Arbitrator within one week.
Case Title: ZAMIL STEEL BUILDINGS INDIA PVT. LTD. Vs. CINDA ENGINEERING & CONSTRUCTION PRIVATE LIMITED (2024:DHC:4128)
Case Number: ARB.P.-628/2024
