Mere Negotiations Will Not Postpone The Cause Of Action For Appointment Of An Arbitrator: Telangana High Court

The High Court of Telangana has held that mere negotiations between the parties related to the dispute would not delay the cause of action for the purpose of limitation for the appointment of the arbitrator.

The bench of Justice C.V. Bhaskar Reddy dismissed an application for the appointment of an arbitrator wherein the cause of action accrued more than 7 years before the date of the application.

Facts

The parties entered into two development agreements dated 07.12.2012. In terms of the agreement, the respondent was to build apartments on the property owned by the petitioners. Clause 16 of the agreement provided for resolution of the dispute through arbitration.

The entire construction work was to be completed within a period of 18 months, including 6 months of grace period. The possession of the flats was handed over to the petitioners in the year 2014-15 after a delay of few months.

As per the case of the petitioner, there were certain deficiencies in the work carried out by the respondent, including a delay of 12 months in the completion of the project work and the failure of the respondents to obtain and provide the occupancy certificates. These deficiencies were pointed out to the respondent from time to time, however, the petitioners finally issued a notice of arbitration and invoked the arbitration clause in the agreement vide a letter dated 19.05.2022. Upon the failure of the parties to mutually appoint the arbitrator, the petitioner approached the Court under Section 11 of the A&C Act.

Preliminary Objection

The respondent raised a preliminary objection to the maintainability of the petition on the following grounds:

• That the claims of the petitioner are time barred. Moreover, the invocation of the arbitration is also time barred as the application as been moved after the expiry of the 3 years time period provided under Article 137 of the Limitation Act.
• That the possession of the project sites was handed over to the petitioners in the year 2014-15 and the arbitration was invoked after a period of more than 7 years.
• The claims are time barred and have become stale as the petitioners was sleeping over their rights for more than 7 years.

Analysis by the Court

The Court observed that the construction was complete and the possession was given to the petitioners in the year 2014-15. However, despite their grievance with the quality of the amenities provided, the petitioners, except stating that they have repeatedly requested the respondents to make good the loss and pointing out the deficiencies in the construction, have not raised any dispute to resolve the disputes by the arbitrator for a long period of more than 7 years.

The Court held that the period for invoking arbitration is governed by Article 137 of the Limitation Act which provides for a period of 3 years as the period of limitation from the date when the right to apply accrues. It held that the right on the petitioners accrued in the year 2014-15 when they were handed over the possession and were not satisfied with the amenities provided by the respondents.

It held that merely because the petitioners repeatedly requested the respondents to make good of the deficiencies, it would not postpone or delay the cause of action. It held that mere negotiations between the parties related to the dispute would not delay the cause of action for the purpose of limitation for the appointment of the arbitrator.

The Court held that the claims of the petitioners are ex-facie time barred as the cause of action arose more than 7 years ago and the petitioners did not take any steps for the appointment of the arbitrator in that period.

Accordingly, the Court dismissed the petition as time barred.

Case Title: Atheli Mallikarjun v. S.S.B. Constructions, Arbitration Application No. 169 of 2022

Date: 08.08.2024

Counsel for the Petitioners: Mr. Prabhakar Sripada, Senior Advocate

Counsel for the Respondents: Mr. Vijay B. Paropakari, Advocate.

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