The Supreme Court in an Application under Section 11(6) of the Arbitration and Conciliation Act, 1996 filed by an Afghan Company praying for the Appointment of an Arbitrator for the adjudication of disputes and claims arising from the Contract dated 21.03.2013 entered into between the petitioner and the respondent dealt an Important Issue as to Whether the Limitation Act, 1963 is applicable to an application for appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996?
The court observed that the plain reading of Section 11(6) of the Act, 1996, which provides for the appointment of Arbitrators, indicates that no time-limit has been prescribed for filing an application under the said section. However, Section 43 of the Act, 1996 provides that the Limitation Act, 1963 would apply to Arbitrations as it applies to proceedings in court.
The Court further observed that since none of the Articles in the Schedule to the Limitation Act, 1963 provide a time period for filing an application under Section 11(6) of the Act, 1996, it would be covered by Article 137 of the Limitation Act, 1963 which is the residual provision and provides Three years’ period of limitation from the time the right to apply accrues to the party.
While placing reliance on a Judgment of Seven-Judge Bench in SBP & Co. v. Patel Engineering Ltd. and Another reported in (2005) 8 SCC 618 and a judgment of three-Judge Bench in Geo Miller and Company Private Limited v. Chairman, Rajasthan Vidyut Utpadan Nigam Limited reported in (2020) 14 SCC 643 the Court held that there is no doubt as to the applicability of the Limitation Act, 1963 to arbitration proceedings in general and that of Article 137 of the Limitation Act, 1963 to a petition under Section 11(6) of the Act, 1996 in particular.
The court held that the limitation period for making an application under Section 11(6) of the Act, 1996 is three years from the date when the right to apply accrues
The Court further while answering the question as to When does the right to apply under Section 11(6) accrue held that 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 part of the other party to make an appointment as per the appointment procedure agreed upon between the parties.
The Court further observed that the applicability of Section 137 to applications under Section 11(6) of the Act, 1996 is a result of legislative vacuum as there is no statutory prescription regarding the time limit. The Court further reiterated that the period of three years is an unduly long period for filing an application under Section 11 of the Act, 1996 and goes against the very spirit of the Act, 1996 which provides for expeditious resolution of commercial disputes within a time-bound manner.
Given the fact the there is a need that arbitration proceedings are conducted and concluded expeditiously, the court urged upon the Parliament to consider bringing an amendment to the Act, 1996 prescribing a specific period of limitation within which a party may move the court for making an application for appointment of arbitrators under Section 11 of the Act, 1996.
