LexM/S ARIF AZIM CO. LTD. versus M/S APTECH LTD.
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* Author [2024] 3 S.C.R. 73 : 2024 INSC 155 M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd. (Arbitration Petition No. 29 of 2023) 01 March 2024 [Dr. Dhananjaya Y. Chandrachud, CJI, J.B. Pardiwala* and Manoj Misra, JJ.] Issue for Consideration Whether the Limitation Act, 1963 is applicable to an application for appointment of arbitrator u/s.11(6), Arbitration and Conciliation Act, 1996; if yes, whether the present petition is barred by limitation; when does the right to apply u/s.11(6) accrues; whether the court may refuse to make a reference u/s.11 of the Arbitration and Conciliation Act, 1996 where the claims are ex-facie and hopelessly time-barred. Headnotes Arbitration and Conciliation Act, 1996 – s.11(6) – Limitation Act, 1963 – Article 137 – Applicability – Three franchise agreements entered into between parties in 2013 – As per the agreements, the petitioner-a company based in Afghanistan, as the franchisee, was granted a non-exclusive license, by the respondent to establish and operate businesses under three trade names – Proposals were invited by the Indian Council for Cultural Relations (ICCR), for the execution of a short-term course – Proposal of the respondent accepted – Course executed by the petitioner at its centre in Kabul from February to April, 2017 – Disputes arose between the parties in relation to the renewal and payment of royalties for all the three franchise agreements – Respondent issued recovery notice for non-payment of royalty/renewal fees in 2018 – Petitioner informed the respondent of its decision to not renew two franchise agreements – In 2021, after a gap of around three years, the petitioner again took up the issue of non-payment of dues for the ICCR project with the respondent – Petitioner invoked a pre-institution mediation in 2022 however, upon failure thereof, it sent notice for invocation of arbitration to the respondent – Respondent replied denying the claims 74 [2024] 3 S.C.R. Digital Supreme Court Reports stating that notwithstanding the merits, the claims were barred by limitation – Petitioner filed petition u/s.11(6) filed for the appointment of an arbitrator: Held: 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 u/s.11(6) in particular – As is evident from Article 137, the limitation period for making an application u/s.11(6) is three years from the date when the right to apply accrues – 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 request for appointment of an arbitrator was first made by the petitioner vide notice dtd. 24.11.2022 and a time of one month from the date of receipt of notice was given to the respondent to comply with the said notice – Notice was delivered to the respondent on 29.11.2022 – Hence, the said period of one month from the date of receipt came to an end on 28.12.2022 – Thus, it is only from this day that the clock of limitation for filing the present petition would start to tick – The present petition was filed by the petitioner on 19.04.2023, well within the time period of 3 years provided by Article 137 – Thus, the present petition u/s.11(6) cannot be said to be barred by limitation – Further, the notice invoking arbitration was received by the respondent on 29.11.2022, which is within the three-year period from the date on which the cause of action for the claim had arisen – Thus, it cannot be said that the claims sought to be raised by the petitioner are ex-facie time-barred or dead claims on the date of the commencement of arbitration – Petition allowed, sole arbitrator appointed.[Paras 50-52, 62, 88, 92] Arbitration and Conciliation Act, 1996 – s.11(6) – Petition under, issue of limitation – Courts to satisfy themselves on two aspects by employing a two-pronged test: Held: While considering the issue of limitation in relation to a petition u/s.11(6), the courts should satisfy themselves on two aspects by employing a two-pronged test – first, whether the petition u/s.11(6) is barred by limitation; and secondly, whether the claims sought to be arbitrat
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