IMPORTANT POINT
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 time of invoking arbitration, with the period of limitation potentially extended due to exceptional circumstances such as the COVID-19 pandemic.

ORDER :

REKHA BORANA, J.

1. The present application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act of 1996’) has been preferred for appointment of an independent and impartial sole arbitrator.

2. The facts as submitted are as under:

(i) The applicant company (hereinafter referred to as ‘the contractor’) was into a transportation business and vide office order dated 29.01.2013, a work order bearing No.HZ12SLK211/5100013067 for “Zinc Smelter Debari Material Handling in Roaster-3 and Bagging of Calcine into bags, Loading into trucks at R&A Plant” was issued in its favour by non-applicant (hereinafter referred to as ‘the Company’) pursuant to its Notice Inviting Tender having finalised in favour of the contractor.

(ii) As per the work order, 3,12,000 M.T. work was to be carried out every year and 90% of the said completed work i.e. 2,80,000 M.T. was payable. But, an amount for only 2,65,000 M.T. work was paid to the contractor which became one of the causes of dispute between the parties.

(iii) The work order was stipulated for a period of three years i.e. from 01.02.2013 to 31.01.2016 but the same was terminated four months prior to the stipulated date of completion. As the contractor had spent substantial amount in collecting the assets so as to ensure the completion of contract as per the requirements of the Company, because of the termination of the contract prior to its stipulated period, it suffered huge losses and also suffered loss of profit which it could have gained, if it would have been permitted to complete the work. The same too became a cause of dispute between the parties.

(iv) The non-payment of amount qua the extra work got completed by the contractor and further, the extension of maintenance period to 30-45 days, instead of 15 days as agreed upon, also became the cause of dispute.

(v) Qua the unpaid amounts and losses occurred, a demand notice dated 02.04.2018 was served by the contractor on the Company requesting for the payment of the same. However, the same was denied by the Company and hence, as the agreement entered into between the parties contained an arbitration clause, vide notice dated 01.04.2022, the same was invoked by the contractor. Vide the notice, the Company was called upon to appoint an arbitrator in terms of the arbitration clause for resolution of the disputes as arisen between the parties.

(vi) The notice dated 01.04.2022 having not been responded to/acted upon, the present application under Section 11(6) of the Act of 1996 was preferred on 11.08.2023.

3. A reply to the application has been preferred on behalf of the Company raising a preliminary objection to the effect that the present application is barred by limitation and hence, deserves to be dismissed. It has been submitted that admittedly the demand notice was served in the year 2018 whereas the notice invoking arbitration clause was issued on 01.04.2022 i.e. after a period of more than 3 years and hence, was clearly barred by limitation.

(ii) Regarding the termination of the contract before the stipulated date, it has been submitted that the same was permissible as per clause 14.3 of the agreement and hence, cannot be said to be a cause of any dispute.

4. Learned counsel for the non-applicant Company while submitting the preliminary objection on the issue of the limitation relied upon the Hon’ble Apex Court judgment in the case of Bharat Sanchar Nigam Limited and Others Vs. Nortel Networks India Private Limited, (2021) 5 SCC 738, wherein it has been held that the period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters. Sections 5 to 20 of the Limitation Act do not exclude the time taken on account of settlement discussions. The Hon’ble Apex Court further held that where once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it. There must be a clear notice invoking arbitration