Arbitration In IndiaCourts may address only in specific circumstances in case of issue of Limitation under Section 11 of The Arbitration and Conciliation Act,1996. 

INTRODUCTION

The Hon’ble Delhi High Court, in M/S Kimaya Buildtech LLP versus K. C. SOFTWARE Private Limited and Others [Arbitration Petition no. 691 of 2023] decided on 29.04.23 held that issue of limitation under Section 11 shall be adjudicated by  the arbitral tribunal and the courts may address only in specific circumstances.

FACTS

The petition was filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) as the M/S Kimaya Buildtech LLP (hereinafter referred to as the “Petitioner”) wanted to appoint  a sole arbitrator to adjudicate disputes between the parties under an Agreement dated 21.05.2018(hereinafter referred to as “Agreement”).

The clause 13 of the Agreement contained the arbitration clause which provides that all disputes with respect to the said Agreement, shall be referred to arbitration and further provides that the place of arbitration shall be New Delhi.

 Disputes subsequently arose between the parties, and  the Petitioner invoked arbitration by issuing a notice on 08.04.2021. The Petitioner sought to resolve the disputes through the arbitration process outlined in the Agreement. In response, some of the Respondents contended that the invocation of arbitration was barred by limitation

ISSUE BEFORE THE DELHI HIGH COURT

Whether the invocation notice of the petitioner is barred by limitation under Section 11 of the Act ?

CONTENTIONS OF THE PARTIES

The Petitioner contended that the Petitioner has invoked the arbitration clause within the prescribed limitation period through a notice dated 08.04.2021. The Petitioner contended that there is a valid arbitration Agreement and that all Respondents have been served with the Notice within the limitation period.

The Respondents argued that the Petitioner’s invocation of arbitration is barred by limitation, challenging the validity of the Notice dated 08.04.2021.

DECISIONS AND FINDINGS

The Hon’ble Delhi High Court allowed the petition and held that the disputes between the parties under the Agreement dated 21.05.2018 shall be referred to arbitration under the aegis of Delhi International Arbitration Centre (hereinafter referred to as “DIAC”). DIAC was requested to nominate an arbitrator from its panel. Moreover, the Hon’ble Court held that all rights and contentions of the parties, including on limitation and maintainability of claims, are left open for adjudication before the learned arbitrator which will be appointed by the DIAC.

The Hon’ble Delhi High Court placed reliance on the judgments of the Supreme Court in Vidya Drolia v. Durga Trading Corpn. [(2021) 2 SCC 1] and BSNL vs. Nortel Networks (India) (P) Ltd. [(2021) 5 SCC 738], wherein it was held that the issue of limitation may be considered by the Court at the stage of a petition under Section 11 of the Arbitration and Conciliation  Act,1996,  but only in limited circumstances where the bar of limitation is ex facie evident from the petition and documents filed. The Court’s jurisdiction at the pre-reference stage is only to determine the prime facie existence of an arbitration agreement and the final adjudication, even on the question of limitation, is to be left to the arbitral tribunal, being the parties’ chosen forum.

In the present case, the Hon’ble Court was of the same opinion that since the Respondents have not denied the existence of the arbitration agreement, nor have they contended otherwise in their respective replies to the present petition. The issue with respect to limitation of the notice by petitioner under Section 11 is ought to be left open for final adjudication by the arbitral tribunal only.

The Hon’ble High Court in this case held that all rights and contentions of the parties, including on limitation and maintainability of claims, shall be adjudicated by the Arbitral Tribunal and the Courts does not have the jurisdiction to rule  upon the issue of limitation under Section 11 of the Act.

AMLEGALS REMARKS

The recent ruling from the Hon’ble Delhi High Court highlights the principle under Section 11 of the Act, emphasizing its limited role in establishing the initial existence of an arbitration agreement.

The Hon’ble Delhi High Court appropriately acknowledged that issues like the bar of limitation are more suitably determined by the arbitral tribunal, which the parties have chosen as their preferred forum. By delegating the final adjudication on matters including limitation and the validity of claims to the arbitral tribunal, the Court not only upheld the parties’ autonomy but also encouraged the swift resolution of disputes through arbitration.

 The present case reaffirms the judiciary’s commitment to facilitating effective alternative dispute resolution mechanisms and underscores the importance of respecting the parties’ choice of forum in settling their disagreements.

– Team AMLEGALS assisted by Ms. Harshita Mewade (Intern)