The main legal point established in the judgment is that an application for appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 is subject to the time limitation prescribed under Article 137 of the Limitation Act, 1963. The court may refuse to make the reference for arbitration in rare and exceptional cases where the claims are ex facie time-barred and there is no subsisting dispute.

JUDGMENT :

1. The instant arbitration application has been filed by the applicant-Company under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘Act of 1996’) claiming the following reliefs :-

“In view of the submissions made above, it is most respectfully prayed that this Hon’ble Court may kindly be pleased to:

a. Appoint a Sole Arbitrator to adjudicate the claims of the Petitioner under the Tender dated 29 March 2013 and Supply Orders dated 02 November 2013; and

b. Pass such other order or further orders as this Hon’ble Court may deem fit and proper in the facts and circumstances of the case in favour of the Petitioner.”

2. Brief facts of the case, as placed before this Court by Mr.Vikas Balia, learned Senior Counsel assisted by Mr. Abhishek Mehta, appearing on behalf of the applicant-Company, are that the respondent no. 1 floated an online notice dated 29.03.2013 inviting tender for procurement of medical equipment bearing no. F.6 () S/MC/JU/2013-14. The equipments sought vide the tender in question were 1 magnetic resonance imaging system (MRI) and 2 CT scanners.

2.1. The applicant submitted its bid, whereafter the applicant was declared as L-1 on 02.11.2013 and the supply order was also issued to the applicant; thereafter, on count of site being not ready for the necessary installation, the applicant successfully completed the supply under the tender in question on 12.06.2015.

2.2. The applicant sent an e-mail dated 18.05.2016 to the respondent no.1 making a request for clearing the outstanding payment. In response, the respondent no.1 sent a letter dated 01.07.2016 intimating deductions towards 10% of liquidated damages and charges of letter of credit amounting to Rs. 1,42,41,593/- on the supply orders.

2.3. The applicant thereafter sent a letter dated 28.08.2016 for clarification of the deductions; the respondent no.1, in response, sent letters dated 19.09.2016 & 18.10.2016 and stated that the amount in question was deducted as per the decision taken by the Departmental Committee. Subsequently, the applicant preferred an appeal on 21.07.2017 before the respondent no.2. The applicant also served legal notices dated 31.10.2017, 17.01.2018, 17.07.2018, 07.05.2019 and 09.08.2019 seeking recovery of the amount in question.

2.4. Thereafter, the applicant issued a notice on 15.11.2019 for invocation of the arbitration clause 40 of the tender in question and requested the respondent no.1 to appoint an arbitrator for resolving the dispute in question, which however remained unresponded; hence, the applicant again sent a notice dated 27.01.2020 making the same request.

3. Learned Senior Counsel for the applicant submitted that there is an existing arbitration clause in the tender in question, and thus, this Hon’ble Court has power to appoint the arbitrator as per the clause 40 of the tender in question.

Clause 40 of the tender in question is reproduced as hereunder :-

“40. If any dispute arise out of contract with regards to the interpretation, meaning and breach of the terms of the contract, the matter shall be referred to by the parties to the Head of the Department (Principal & Controller, Dr. S.N. Medical College, Jodhpur, Rajasthan) who will appoint his senior most officer as the Sole Arbitrator of the dispute who will be related to this contract and whose decision shall be final.”

3.1. Learned Senior Counsel further submitted that the limitation for filing the application under Section 11 of the Act of 1996 is 3 years as per the Article 137 of the Limitation Act, 1963. In the present case, the first notice for appointment of the arbitrator was sent on 15.11.2019, and the present application for appointment of the arbitrator was filed on 31.10.2020, and therefore, the present application was filed within the period of limitation.

3.2. Learned Senior Counsel also submitted that after completion of the work, the applicant was demanded the outstanding amount on 18.05.2016 and the respondent no.1 sent the