Limitation For Appointment Of Arbitrator Commences From Date Of Failure To Comply With Requirements In Notice Invoking Arbitration: AP High Court

Background Facts

Alliance Enterprises (Applicant) entered into a work and contract agreement relating to commissioning and maintenance of last mile optical fiber connectivity in certain government offices with Andhra Pradesh State Fiber Net Limited (Respondent) on 05.08.2016. As per the Applicant, several work orders were executed by it, however, payment was not made to the Applicant to the tune of Rs. 12, 26, 63,520/-. The Respondent terminated the contract vide its order dated 02.01.2019 which was communicated vide communication dated 09.01.2019. Upon failure of the parties to amicably resolve their disputes, the Applicant invoked the arbitration clause of the contract by virtue of its letter dated 17.10.2022.

Contentions

The Counsel for the Applicant submitted that despite service of notice, the Respondent did not appoint a sole arbitrator. It was further submitted that the procedure mentioned in the arbitration clause which authorized the Managing Director of the Respondent to appoint the sole arbitrator was contrary to the ratio of judgments of the Apex Court in the case of Perkins Eastman Architects DPC v HSCC (India) Ltd. and Central Organization for Railway Electrification v. ECI SPIC SMO MCML (JV). The Applicant prayed for the appointment of an independent sole arbitrator by the Court.

The Respondent raised an objection that the application was barred by limitation. It was stated that the cause of action, if at all, accrued to the Applicant in the year 2019, when the contract was terminated whereas the present application had been filed in the year 2023. As per Article 137 of the Limitation Act, 1963, the application has to be filed within three years from the date when the right to apply accrues which in the present case accrued to the Applicant in 2019 and therefore having filed the application beyond the prescribed limit of three years, the present application was time-barred.

Observations

The Court observed that the contention of the Respondent that the application was time-barred was without any basis. The Court referred to the judgment of the Apex Court in Arif Azim Co. Ltd. v. Aptech Ltd. wherein the court had observed that the “limitation period for making an application seeking appointment of arbitrator must not be conflated with the limitation period for raising the substantive claims which are sought to be referred to an arbitral tribunal.”

The Court also relied upon the judgment of the Apex Court in Aslam Ismail Khan Deshmukh v. ASAP Fluids (P) Ltd. wherein the court had observed that the period of limitation of three years, for the purposes of a Section 11(6) application would begin from the date of failure or refusal by the other party to comply with the requirements mentioned in notice invoking arbitration.

Applying the law laid down in these precedents to the facts of the present case, the Court observed that the notice invoking arbitration clause was issued by the Applicant only on 17.10.2022. Assuming that three years were to be calculated from the said date itself, the present application which was filed on 31.08.2023 was well within the period of limitation of three years as prescribed by Article 137 of the Limitation Act, 1963.

Allowing the application, the Court appointed Justice U Durga Prasad Rao, former Judge of the Andhra Pradesh High Court as the sole arbitrator in this matter.

Case Title: Alliance Enterprises v. Andhra Pradesh State Fiber Net Limited (APSFL)

Case Number: Arbitration Application No. 48 of 2023

Appearance: Mr. Udit Seth for the Applicant

Mr. A Tulsi Raj Gokul for the Respondent

Date: 20.02.2025

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