Arbitration In IndiaParties Cannot Be Referred To Arbitration if Invocation itself is Time Barred

The Telangana High Court, in Sri Athelli Mallikarjun & Ors. v. S.S.B Constructions & Anr. [Arbitration Application No. 169 of 2022 decided 08.01.2024] that a dispute between parties cannot be referred to arbitration if the invocation of arbitration is ex facie time-barred.

FACTS

S.S.B  Constructions (hereinafter referred to as the “Respondent”) entered into two  Development Agreements-cum-General Powers of Attorney dated 07.12.2012 ( hereinafter referred to as the “Agreement”) with Sri Athelli Mallikarjun and others (hereinafter referred to as the “Applicants”) on 07.12.2012 for the development of two different properties at i.e. Schedule A Property and Schedule B Property at Secunderabad (hereinafter referred to as the “properties”).

As per the Agreement, the Respondents were supposed to complete the construction within the period of 12 months subject to the grace period of 6 months. The Respondents delayed the construction of the property, and the  occupancy certificate was not obtained even after 8 years. Further, the Respondents failed to provide staircase in Schedule A property. Moreover, other deficiencies were faced by the Applicants and hence, served a legal notice dated 19.05.2022 invoking Arbitration and suggested Smt. Shantha Kumari, Retired District Judge, as a sole arbitrator.

The Respondent vide letter dated 19.06.2022 refused to resolve the disputes through arbitration and hence, Applicants have filed the present arbitration application under Section 11(5) &(6) of the Arbitration and Conciliation Act, 1996( hereinafter referred to as the “A&C Act”)

ISSUE BEFORE THE HIGH COURT

Whether a dispute between the parties can be referred to arbitration when notice invoking arbitration itself is ex-facie time barred?

CONTENTIONS OF THE PARTIES

The Applicants submitted that the Respondents delayed the construction of the building by 12 months and have yet not availed the occupancy certificate even after 8 years. Furthermore, there are several deficiencies on the part of the Respondent. Hence, the contractual obligations are not fulfilled by the Applicant.

The Respondent contended that the 50%  of the construction work was completed and was handed over to the Applicants in 2015. Furthermore, the Applicants had occupied the property peacefully for 7 years and had invoked arbitration belatedly after the lapse of the time. Hence, the application is time barred.

DECISION AND FINDINGS

The High Court referred the Agreements and observed that the possession was handed over to the Applicants in 2014-15 and the present application has been filed after 7 years.

The High Court relied on Bharat Sanchar Nigam Limited and another v. Nortel Networks (India) Private Limited [(2021) 5 SCC 738 ] and held that mere negotiations will not postpone the cause of action for purpose of limitation. Moreover, the limitation under Article 137 of the Limitation Act would be applicable for filing of an Application under Section 11 of the A&C Act. Section 43 of the A&C Act  also provides that the Limitation Act shall apply to the Arbitrators as it applies to the court proceedings.

The High Court dismissed the present Application as it was time barred.

AMLEGALS REMARKS

The Telangana High Court in the present case upheld the long-standing legal principle that mere negotiations do not postpone the cause of action for limitation. Art 137of the Limitation Act was invoked by the court being given that the Arbitration Act does not establish a time restriction for filing an application under Section 11,  This judgment serves as a precedent to prevent legal claims from being brought too long after the cause of action has accrued.

-Team AMLEGALS, assisted by Ms. Saswat Banerjee (Intern)

For any query or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or himanshi.patwa@amlegals.com