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IN THE HIGH COURT OF BOMBAY
Bharat P.Deshpande, J.
Vedanta Limited - Appellant
Versus
Prowess International Pvt. Ltd - Respondent
Application For Appointment of Arbitrator No. 1 of 2023
Decided On : 20-12-2023
ARBITRATION - DISPUTE RESOLUTION - Arbitration and Conciliation Act, 1996, Sec. 11 - The court analyzed the arbitration clause in the EPC contract, emphasizing that the existence of an arbitration agreement is the primary consideration under Sec. 11 of the Arbitration and Conciliation Act, 1996. The court highlighted that the limitation period for invoking arbitration begins from the date of failure to appoint an arbitrator, not merely from the initial cause of action. The court concluded that the applicant's invocation of the arbitration clause was timely, as it was based on the failure of the respondent to adhere to the amended timelines, thus justifying the appointment of a sole arbitrator to resolve the dispute.
Fact of the Case:
The applicant sought the appointment of an arbitral tribunal under Sec. 11 of the Arbitration and Conciliation Act, 1996, due to disputes arising from an EPC contract dated 2/6/2018. The applicant claimed that the respondent failed to complete the work within the stipulated time, leading to a notice of termination and subsequent correspondence acknowledging the delays. After unsuccessful mediation attempts, the applicant invoked the arbitration clause, prompting the current application.
Finding of the Court:
The court found that there was a valid arbitration clause in the contract and that a dispute existed between the parties. It ruled that the limitation issue raised by the respondent was a mixed question of fact and law, which should be determined by the arbitral tribunal rather than the court. The court concluded that the application for arbitration was within the limitation period.
Issues: 1. Whether the application for appointment of an arbitrator was within the limitation period. 2. Whether the court should consider the limitation aspect or leave it to the arbitral tribunal.
Ratio Decidendi: The court held that the limitation for invoking arbitration begins from the date of failure to appoint an arbitrator, and not merely from the initial cause of action. The court emphasized that the existence of an arbitration agreement is the primary concern under Sec. 11, and other issues, including limitation of substantive claims, should be resolved by the arbitral tribunal.
Final Decision: The court appointed Justice U. V. Bakre (Retired) as the sole arbitrator to adjudicate the disputes between the parties, confirming that the arbitration clause was valid and that a dispute existed.
JUDGMENT/ORDER
1. By this application filed under Sec. 11 of Arbitration and Conciliation Act, 1996( "the said Act" for short) applicant seeks an appointment of Arbitral Tribunal consisting of three Arbitrators for the purpose of resolving dispute that have arisen between the parties out of Contract dtd. 2/6/2018 which is in reference to the EPC Contract for De-Dusting System for Blast Furnace 2 Cast House, Ladle Dumping Chamber, Coal Handling Plant and Coke Screening Plant 1 and 2.
2. Since in terms of the said contract, time was essence for completion of the work and a specific schedule was fixed for completion of each stage of the work as provided therein, respondent were liable to perform their part within stipulated period.
3. During the correspondence between the parties, it was pointed out to the respondent that they failed to perform their part and within time framed, however, respondent turned a blind eye to such correspondence. Applicant then issued notice of termination of contract dtd. 8/12/2018 which was received by the respondent on 21/12/2018. In response, respondent acknowledged their fault but agreed to complete the work as mentioned in the amendment dtd. 9/1/2019, which they failed to adhere to the time line. The applicant informed the respondent about their default which they accepted and agreed to rectify the breach. However, the applicant vide another notice of intention to terminate the contract dtd. 22/5/2019 communicated to the respondent their intention and also the breach committed by them inspite of assurance. In response to such notice, respondent accepted their default but failed to remedy the breach.
4. Applicant had to appoint another agency to complete the work and had to spent huge amount. The applicant completed the said work through another agency and therefor entitled to recover the costs and other charges from the respondent which is around Rs.4.00crores.
5. Applicant therefore sent a notice dtd. 19/9/2022 calling upon the respondent to pay such amount of around Rs.4.00 crores with interest within a period of 15 days from the date of receipt of the said notice. There was no response from the respondent though they received such notice. Applicant in terms of the conditions of the contract and the dispute resolution clause even attempted to amicably settle the dispute by way of mediation, in their notice dtd. 1/12/2022. Since mediation between the applicant and the respondent failed on account of no response from the respondent, the applicant vide notice dtd. 11/1/2023 invoked arbitration clause no. 16 and requested the respondent to appoint Arbitral Tribunal. Since there was no response from the respondent, applicant had to approach this Court.
6. Respondent appeared and contested the application.
7. Mr. Gosavi, would submit that in view of the settled proposition of law as laid down by various decisions, this Court has to only consider whether there is clause of arbitration and whether any arbitral dispute exist. Beyond this, all other aspects are required to be left to be decided by the Arbitral Tribunal. In this respect Mr. Gosavi placed reliance in the case of Uttarakhand Purv Sainik Valyan Nigam Limited Vs Northern Coal Field Limited, (2020) 2 SCC 455. TLG India Pvt. Ltd Vs Rebel Foods Pvt. Ltd., to canvass his proposition. He submits that Supreme Court extended the period of limitation during the Covid period and therefore application filed before this Court under Sec. 11 of the Act is within limitation.
8. Per contra, Mr Shrivastava, appearing for the respondent raised objection with regards to limitation. His specific submission is, that substantive claim arose in the year 2018 itself when the notice of termination was issued, which is triggering point for cause of action. According to him, application filed for referring the matter to the arbitration is beyond the period of three years. He submits that even the Apex Court judgment extending the period of limitation would not help the
Arbitration requests must be filed within three years of the cause of action; failure to act in time bars subsequent petitions.
An application under Section 11 for appointment of an arbitrator is time-barred if filed after three years from the refusal to appoint, with delays not justified.
The main legal point established in the judgment is that the limitation for filing an application under Section 11 of the Arbitration Act arises upon the failure to make the appointment of the arbitr....
The main legal point established in the judgment is that the limitation period for filing an application seeking appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation A....
The limitation period for filing an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 is governed by Article 137 of the Limitation Act, and the claims must be alive at the....
The Arbitration and Conciliation Act requires strict adherence to limitation periods for the appointment of arbitrators; delays exceeding three years render petitions ex-facie time-barred.
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