Period Of Limitation For The Appointment Of Substitute Arbitrator Begins On The Date Of His Recusal/Removal, Date Of Knowledge Is Irrelevant: Delhi High Court

The bench of Justice Mini Pushkarna held that since Section 15 of the A&C Act does not contain any provision of limitation, therefore, the period of limitation would be 3 years as provided under Article 137 of the Limitation Act, 1963.

The Court held that Article 137 of the Limitation Act is not based on knowledge and the Act clearly provides instances where the knowledge of a party is essential for the purpose of commencement of the limitation period i.e., Articles 4, 54, 56, 57, 59, 61, 68, 71, 92, 92-5, 110 and 123. Thus, the Court held that period of limitation for the purpose of Section 15(2) commences on the date of recusal or removal of arbitrator as provided under Section 15(1) of the Act.

Facts

The parties entered into two share purchase agreements dated 04.11.2006. Thereafter, disputes arose between the parties and the petitioner issued the notice of arbitration dated 27.05.2009 and requested the respondents to nominate its arbitrator.

On the failure of respondent to nominate its arbitrator, the petitioner requested the Court under Section 11 of the A&C Act to appoint respondent's arbitrator. During the proceedings, both the parties agreed on a sole arbitrator being appointed by the Court, accordingly, the Court appointed a retired High Court judge as the sole arbitrator.

After completion of the pleadings, evidence of the parties was concluded on 26.03.2015. The matter was posted for final arguments on 24.08.2015, however, the arbitrator, for personal reasons, recused himself vide an order dated 27.07.2015 and sent it to the parties vide an email on the same day.

The petitioner, on 01.08.2015, filed an application for the appointment of substitute arbitrator under Section 15(2) of the Act. It also, on 22.08.2018, filed an application under Section 5 of the Limitation Act for the condonation of delay of 5 days in filing the petition.

Contention of the Parties

The petitioner sought the appointment of substitute arbitrator and condonation of delay on the following grounds:

• The email of the petitioner's advocate was not functioning, due to technical default, during the time when the email dated 27.07.2015 was sent by the arbitrator and the fact of his recusal only came to the knowledge of the advocate only in the second week of August 2015, therefore, the period of limitation would commence only from the second week of August, thus, the petition is within limitation having been filed on 01.08.2018.
• The file of the present matter got mixed up with other relevant file due to an error, therefore, the delay if any is of 5 days and it should be condoned for the reasons as given above.
• The right to apply for the substitution accrued only after the expiry of 30 days period from the recusal of the arbitrator, therefore, the petition is within limitation.

The respondents objected to the maintainability of the petition on the following grounds:

• The petition is filed beyond the limitation period, moreover, the petitioner's have not provided any reasonable or sufficient reason explaining their delay. The petitioner kept sitting on the fence for three years and let the period of limitation expire.
• All the communication between the parties and the tribunal was by email only, moreover, the email in question was sent to three individuals working in the firm representing the petitioner and not just the advocate appearing for it, therefore, the argument that it was not aware of the recusal is without any substance.
• No specific date or any proof of the malfunctioning of the email of petitioner's advocate is filed with the petition.
• As per Section 15(2), the substitution shall be made in the same manner and according to the same Rules that were applicable to the appointment of an arbitrator, as the earlier appointment was made by the Court under Section 11(6) of the Act, the substitution was also to be made by the Court, therefore, the right to apply accrued on the same date and the petitioner cannot count period of 30 days while calculating the period of limitation on the wrong premise that respondents were to appoint substitute Arbitrator within 30 days of recusal by Arbitrator.

Analysis by the Court

The Court held that since Section 15 of the A&C Act does not contain any provision of limitation, therefore, the period of limitation would be 3 years as provided under Article 137 of the Limitation Act, 1963.

The Court held that Article 137 of the Limitation Act is not based on knowledge and the Act clearly provides instances where the knowledge of a party is essential for the purpose of commencement of the limitation period i.e., Articles 4, 54, 56, 57, 59, 61, 68, 71, 92, 92-5, 110 and 123. Thus, the Court held that period of limitation for the purpose of Section 15(2) commences on the date of recusal or removal of arbitrator as provided under Section 15(1) of the Act.

The Court held that the period of limitation for appointing a substitute arbitrator under Section 15(2) of the A&C Act commences on the date of recusal/removal of the arbitrator and the date on which the fact of his removal/recusal comes to the knowledge of a party is irrelevant for the purpose of limitation, therefore, the period of limitation for the present application commenced on 27.07.2015 and the period expired on three years from the said date i.e., 27.07.2018, thus, the present application is filed after a delay of 5 days.

Next, the Court rejected the petitioner's argument that the period of limitation would commence only after the expiry of 30 days period from the recusal of the arbitrator and only on the failure of parties to appoint the substitute arbitrator, the right to apply to the Court would begin.

The Court held that in terms of Section 15(2) the substitute arbitrator is to be appointed in the same manner and according to the same Rules that were applicable to the appointment of an arbitrator being substituted and as the earlier appointment was made by the Court in terms of Section 11(6) of the Act, the petitioner did not have the option to resort to the procedure as envisaged under Section 11(5) of the Act to wait for 30 days for the respondent to appoint an arbitrator after recusal by the arbitrator in order to contend that the limitation period in terms of Article 137 of the Limitation Act commenced only after expiry of 30 days. Such a course of action was not available to the petitioner.

The Court held that once the arbitrator is appointed by the Court, the parties forfeit their right to appoint the substitute arbitrator as well, accordingly, the parties need not wait for 30 days to apply for the substitution of the arbitrator as the right to apply to the Court accrues immediately.

Next, the Court decided the application under Section 5 of the Limitation Act for condonation of delay of 5 days. The Court remarked that 3 years limitation provided as provided under Article 137 of the Limitation Act is unduly long for the appointment and substitution of arbitrator. It observed that arbitral proceedings ought to be conducted in a time bound manner and any delay, howsoever small it may be, goes against the objective of the Act. it held that it is not the 'length' of the delay but 'sufficient cause' that is relevant for condoning a delay.

The Court observed that the petitioner did not make any efforts for the appointment of the substitute arbitrator for three long years and permitted the limitation to run out. It held that in its application for condonation of delay it has not provided any 'sufficient' reason for condoning the delay besides covering its fault under the garb of technical default of the mail of the lawyer and the file getting mixed up with other files. It held that without sufficient cause no delay, howsoever small it maybe, can be condoned.

Accordingly, the Court rejected the application as barred by limitation.

Case Title: Tricolor Hotels Limited v. Dinesh Jain

Citation: 2022 LiveLaw (Del) 1082

Date: 09.11.2022

Counsel for the Petitioner: Mr. Ritin Rai, Sr. Advocate with Mr. Soham Kumar, Ms. Aditi Rao, Ms. Prarthana Singhania, Advocates

Counsel for the Respondent: Mr. Vikas Dhawan, Sr. Advocate with Mr. Sabmit Nanda, Mr. S.P. Das and Mr. Koushal Dogra, Advocates

Click Here To Read/Download Order