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TMI Blog2024 (3) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Conciliation Act, 1996? If yes, whether the present petition is barred by limitation? ............................................................. 22 a. When does the right to apply under Section 11(6) accrue? .............. 27 ii. ISSUE NO. 2: Whether the court may refuse to make a reference under Section 11 of the Arbitration and Conciliation Act, 1996 where the claims are ex-facie and hopelessly time-barred? .................................. 36 a. Jurisdiction versus Admissibility ...................................................... 37 b. When does the Cause of Action arise? ............................................. 47 c. When is Arbitration deemed to have commenced? .......................... 54 E. CONCLUSION ........................................................................................... 56 1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, "the Act, 1996") filed at the instance of a company based in Kabul, Afghanistan and engaged in the business of providing training to desirous students in computer education, English language, information technology, etc. praying for the appointment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Franchisor hereby grants to the Franchisee for the duration of the term and upon the terms of this Agreement, an non-exclusive Licence ("the Licence") to establish and operate in the Territory, a business under the Trade Name "APTECH ENGLISH LEARNING ACADEMY" in accordance with the PROGRAM, on the terms and conditions hereinafter set forth ("the Licensed Business"), from the designated training centre located at First Floor, Zarnigar Hotel, Mohammad Jan Khan Watt, Kabul, Afghanistan (hereinafter the center)) set up in the designated territory, unless revoked otherwise by the Franchisor. The Franchisor shall Licence to the Franchisee use of the Trade Name in the said territory for the purpose of running the said center. The Franchisee shall conduct only those courses as are mentioned in Schedule 2. The Franchisee shall be required to obtain the prior written permission of the Franchisor, if so directed by the Franchisor before commencing the licensed business from the said centre. However in respect of any additional training centers in the designated territory for carrying out the Licensed Business, the Franchisee shall be required to obtain such written permissions from the Fran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the gross collections received during the period 1st April to 30th April will be remitted on or before May 10th Such recurring payments shall be made on monthly basis accompanied by the statement of course fees for each Course for the relevant month and also for the total period for which Franchisee's financial year relates. The Franchisee shall use a format supplied by the Franchisor for such statements duly supported with requisite documentation. II. All the payments to be made by the Franchisee to the Franchisor shall be by way of Telegraphic Transfer / Demand Draft. III. Any and all statutory tax on the payment as above as per local laws, any other taxes, incidental taxes, incremental taxes, duties or any other charges whether statutory or otherwise in respect of the payments to the Franchisor shall be borne and paid by the Franchisee alone during the term of this agreement. IV. In case the payments under this agreement are not received by the due date the Franchisor shall be entitled to levy monthly compound interest @ 24% p.a. on such late payments notwithstanding the other remedies available under the laws of the land. xxx xxx xxx 12. RENEWAL Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment shall not be deemed to confer any right on the Franchisee and the license granted by this Agreement shall be personal to the Franchisee only and shall not be capable of being or be assigned by the Franchisee to any other person. 17.03 This Agreement shall in no way create a contractual relationship between the students and the Franchisor and the Franchisee shall, at all times, be wholly liable and responsible for any claims related to and arising out of the Licensed Business and the conduct of the Courses. The Franchisee undertakes to ensure that the students are made aware at the time of enrolling in the Course that Franchisee is entirely responsible for the conduct of the Courses and, that the students shall have no claim whatsoever against the Franchisor. xxx xxx xxx 21. ARBITRATION AND GOVERNING LAWS In the event of any dispute or difference arising between the parties hereto, including the events of termination, the same shall be settled through conciliation between the parties. In the event the parties are unable to arrive at a settlement, the matter will be referred to arbitration. The party raising the dispute shall serve a notice upon the other party advis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 10. The EOI, Kabul vide email dated 24.12.2016, informed the petitioner that although the applications of Afghan students were already sent to the Indian Universities, yet the Universities had not started granting admissions to them and thus it was suggested by the ICCR that the course should begin from the last week of January/ First week of February, 2017. 11. The course was executed by the petitioner at its centre in Kabul from February to April, 2017 for 440 Afghan students. The same was certified by the EOI, Kabul vide its letter no. KAB/327/05/2016-17 dated 30.07.2017. 12. Vide letters dated 04.08.2017 and 14.08.2017 respectively addressed to the EOI, Kabul, the program director for the ICCR requested for month-wise details/number of students who attended the course so as to process the payments for the course to the respondent. 13. Meanwhile disputes arose between the parties in relation to the renewal and payment of royalties for all the three franchise agreements entered into by the parties in March, 2013. Vide email dated 20.03.2018 addressed to the petitioner, the respondent issued a recovery notice for non-payment of royalty/renewal fees. The email stated that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he email exchanges placed on record, it is clear that the discussions regarding the non-payment of the amount received from the ICCR came to a halt between the parties on 28.03.2018, however the discussions regarding the renewal of the agreements continued. Finally, on 23.04.2018, the petitioner informed the respondent of its decision to not renew the franchise agreements for the ACE and AELA in light of the dispute regarding the payment for the course executed by the petitioner. However, the agreement for AHNA was renewed and the respondent acknowledged the same vide an email on the same day. 19. After about nine months, the petitioner once again sent an email to the respondent on 29.12.2018, raising the issue of the non-payment of the dues for the ICCR project. Although the said email refers to some phone calls and WhatsApp communication regarding the payment for the course, nothing has been placed on record by the petitioner to that effect. Vide the said email, the petitioner once again requested the respondent to provide accounting details for the expenses incurred and payment received from the ICCR for the course. The petitioner also mentioned that it had incurred expenses am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore filing a commercial suit, and thus it was not open to the petitioner to link it to the conciliation as envisaged in the clause 21 of the franchise agreement for AELA as extracted hereinbefore. 24. The present petition then came to be filed by the petitioner on 19.04.2023 before this Court after the failure of the respondent in nominating an arbitrator as per the mutually agreed upon procedure in response to notice for invocation of arbitration. B. SUBMISSIONS ON BEHALF OF THE PETITIONER 25. Mr. R. Sathish, the learned counsel appearing for the petitioner submitted that this Court has the requisite jurisdiction to take necessary measures for the constitution of an arbitral tribunal under Section 11(6) of the Act, 1996 as the case at hand pertains to an "international commercial arbitration" within the meaning of Section 2(f) of the Act, 1996. Further, clause 21 of the AELA agreement provides for appointment of a three-membered arbitral tribunal in case a dispute arises and cannot be resolved through conciliation between the parties. 26. The counsel submitted that the petitioner, as an independent non-exclusive partner of the respondent, is entirely responsible for the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on time despite of doing everything in its power. 33. The counsel further submitted that the petitioner is entitled to get the benefit of the extension of limitation period as directed by this Court in SMW(C) No. 03 of 2020 by which the period from 15.03.2020 to 28.02.2022 is liable to be excluded for the purposes of computing limitation. 34. The counsel submitted that upon failure of the respondent in replying to its claims and legal notice, it had approached the Bombay High Court Mediation Centre under Section 12A of the Commercial Courts Act, 2015 and had initiated pre-reference mediation in accordance with the terms of the arbitration clause in the AELA agreement. It was further submitted that in any view of the matter, the petitioner is not estopped from invoking arbitration under clause 21 of the AELA agreement after having invoked pre-litigation mediation under the Commercial Courts Act, 2015. 35. Finally, the counsel prayed for passing an order referring the dispute to arbitration with a view to adjudicate the differences between the parties as contemplated in clause 21 of the AELA agreement dated 21.03.2013. C. SUBMISSIONS ON BEHALF OF THE RESPONDENT 36. At the out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2015 which is a mandatory pre-condition before institution of a commercial suit under the said Act and the petitioner should not be allowed to change course by invoking arbitration after having previously submitted to the jurisdiction of the Commercial Courts Act, 2015. Further, the petitioner made the ICCR as a party in the mediation proceedings before the High Court and the ICCR also participated in the said proceedings. Thus, it is evident that the dispute arising out of the tripartite arrangement between the petitioner, respondent and the ICCR has no nexus with the arbitration clause of the AELA franchise agreement. 40. An objection was raised by the learned counsel towards the identity of the Deponent to the affidavit in support of the present arbitration petition on the ground that no Power of Attorney or Letter of Authority could have been executed by the petitioner in favour of the Deponent to the Affidavit. 41. One another submission made by the counsel was that the notice for invocation of arbitration sent by the petitioner was not a valid notice as per clause 21 of the franchise agreement being contrary to the arbitration clause which provides for appointment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll apply to arbitrations as it applies to proceedings in court. (2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred to in section 21. (3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper. (4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted." 46. Since none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Act are in pari materia with Sections 37(1) and (4) of the 1940 Act. It is well-settled that by virtue of Article 137 of the First Schedule to the Limitation Act, 1963 the limitation period for reference of a dispute to arbitration or for seeking appointment of an arbitrator before a court under the 1940 Act (see State of Orissa v. Damodar Das [(1996) 2 SCC 216] ) as well as the 1996 Act (see Grasim Industries Ltd. v. State of Kerala [ (2018) 14 SCC 265 : (2018) 4 SCC (Civ) 612] ) is three years from the date on which the cause of action or the claim which is sought to be arbitrated first arises. 15. In Damodar Das [(1996) 2 SCC 216], this Court observed, relying upon Russell on Arbitration by Anthony Walton (19th Edn.) at pp. 4-5 and an earlier decision of a two-Judge Bench in Panchu Gopal Bose v. Port of Calcutta [(1993) 4 SCC 338], that the period of limitation for an application for appointment of arbitrator under Sections 8 and 20 of the 1940 Act commences on the date on which the "cause of arbitration" accrued i.e. from the date when the claimant first acquired either a right of action or a right to require that an arbitration take place upon the dispute concerned. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral and that of Article 137 of the Limitation Act, 1963 to a petition under Section 11(6) of the Act, 1996 in particular. Having held thus, the next question that falls for our determination is whether the present petition seeking appointment of an arbitrator is barred by limitation. 51. The determination of the aforesaid question is an exercise involving both law and facts. As is evident from Article 137 of the Limitation Act, 1963, the limitation period for making an application under Section 11(6) of the Act, 1996 is three years from the date when the right to apply accrues. Thus, to determine whether the present petition is barred by limitation, it is necessary to ascertain when the right to file the present petition under Section 11(6) of the Act, 1996 accrued in favour of the petitioner. a. When does the right to apply under Section 11(6) accrue? 52. It has been held in a catena of decisions of this Court that the limitation period for making an application seeking appointment of arbitrator must not be conflated or confused with the limitation period for raising the substantive claims which are sought to be referred to an arbitral tribunal. The limitation period for fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to apply accrued in favour of the petitioner. It is the date on which the right to apply accrues that determines the starting point. The starting point does not coincide with the date on which the cause of action for filing a suit arises. Whether the claims of a party are barred by limitation or not is for the arbitrator to see, but it is the duty of the court to see whether the application filed in the court is within limitation or not. Limitation for filing application under sub-section (4) would commence only from the expiry of 30 days from the receipt of request mentioned in sub-section (4)(a) or (b) and the limitation for an application under sub-section (6) would commence from the happening of the contingencies mentioned in sub-clauses (a) or (b) or (c) thereof. The procedure prescribed under this section is mandatory and Art. 137, Limitation Act providing for limitation shall apply. xxx xxx xxx It would be entirely wrong to mix the two aspects, namely whether there was any valid claim and secondly the claim to be adjudicated by the arbitrator was barred by time. As for the second matter, it is for the arbitrator to see whether the claim was within limitation or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration is deemed to have commenced when one party to the arbitration agreement serves on the other party, a notice requiring the appointment of an arbitrator. Para 26 of this judgment reads as follows : (SCC p. 460) "26. Section 37(3) of the Act provides that for the purpose of the Limitation Act, an arbitration is deemed to have been commenced when one party to the arbitration agreement serves on the other party thereto, a notice requiring the appointment of an arbitrator. Such a notice having been served on 4-6-1980, it has to be seen whether the claims were in time as on that date. If the claims were barred on 4-6-1980, it follows that the claims had to be rejected by the arbitrator on the ground that the claims were barred by limitation. The said period has nothing to do with the period of limitation for filing a petition under Section 8(2) of the Act. Insofar as a petition under Section 8(2) is concerned, the cause of action would arise when the other party fails to comply with the notice invoking arbitration. Therefore, the period of limitation for filing a petition under Section 8(2) seeking appointment of an arbitrator cannot be confused with the period of limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the right to make an application under Section 8 accrues. Section 8 of the Arbitration Act, which is relevant for our present purposes, is reproduced below: "8. Power of court to appoint arbitrator or umpire.-(1) In any of the following cases- (a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or (b)-(c)*** any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy. (2) If the appointment is not made within fifteen clear days after service of the said notice, the court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties." 7. Therefore, under Section 8, before an application can be made to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the mandate of Section 9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 6-11-2013, they were within the limitation period of three years starting from 10-11-2020. On this count, the applications under Section 11 of the Arbitration Act, themselves being hopelessly time-barred, no arbitrator could have been appointed by the High Court." ( emphasis supplied ) 59. Similarly, in Bharat Sanchar Nigam Limited (supra), this Court after applying the settled position of law held as follows: "22. Applying the aforesaid law to the facts of the present case, we find that the application under Section 11 was filed within the limitation period prescribed under Article 137 of the Limitation Act. Nortel issued the notice of arbitration vide letter dated 29-4-2020, which was rejected by BSNL vide its reply dated 9-6-2020. The application under Section 11 was filed before the High Court on 24- 7-2020 i.e. within the period of 3 years of rejection of the request for appointment of the arbitrator." ( emphasis supplied ) 60. It's time now to apply the dicta laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble High Court. 6. My client states that your clients have misinterpreted the clause of the Arbitration under the Franchise Agreement dated 21.3.2013 i.e., the conciliation/mediation process and are linking the same to the proceedings of mediation filed before the Hon'ble Bombay High Court. My client states that the mediation proceedings filed before the Hon'ble Bombay High Court was filed under section 2(1)(c) of the Commercial Court Act which is mandatory provision before instituting the Commercial Suit. Therefore, my clients therefore state that the invocation of arbitration clause under the Franchise Agreement dated 21.3.2013 and your notice dated 24.11.2022 is illegal, invalid, non-est and unjustified and is liable to be withdrawn forthwith. 7. My clients state that in view of the aforesaid position, there is no cause of action for referring any dispute to the Arbitration and your notice is defective, illegal and invalid. Therefore, there is no question of my clients consenting to the invocation of the arbitration clause and/or appointment of an Arbitrator. 8. My clients state that despite having conveyed the above should your client insists in initiating a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim and include challenges to procedural requirements, viz. a mandatory requirement for pre-reference mediation; claim or a part thereof being barred by limitation, etc. This category is referred to as the "admissibility issues/objections". 66. This Court in Bharat Sanchar Nigam Limited (supra), explained the difference between the aforesaid two category of objections and held that the issue of limitation is essentially an admissibility issue and is not a challenge to the jurisdiction of the arbitrator to decide the claim. While placing reliance on decision of the Singapore Court of Appeal in Swissbourgh Diamond Mines (Pty) Ltd. v. Kingdom of Lesotho reported in (2019) 1 SLR 263, this Court explained the "tribunal v. claim" test thus: "43. Applying the "tribunal v. claim" test, a plea of statutory time bar goes towards admissibility as it attacks the claim. It makes no difference whether the applicable statute of limitations is classified as substantive (extinguishing the claim) or procedural (barring the remedy) in the private international law sense. 44. The issue of limitation which concerns the "admissibility" of the claim, must be decided by the Arbitral Tribunal eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the Arbitral Tribunal for decision on merits. Similar would be the position in case of disputed "no-claim certificate" or defence on the plea of novation and "accord and satisfaction". As observed in Premium Nafta Products Ltd. [Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)], it is not to be expected that commercial men while entering transactions inter se would knowingly create a system which would require that the court should first decide whether the contract should be rectified or avoided or rescinded, as the case may be, and then if the contract is held to be valid, it would require the arbitrator to resolve the issues that have arisen. xxx xxx xxx 154.4. Rarely as a dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les laid down in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549], this Court in a subsequent decision in Nortel Networks [BSNL v. Nortel Networks (India) (P) Ltd., (2021) 5 SCC 738 : (2021) 3 SCC (Civ) 352] held [BSNL v. Nortel Networks (India) (P) Ltd., (2021) 5 SCC 738, para 45.1 : (2021) 3 SCC (Civ) 352] : (Nortel Networks case [BSNL v. Nortel Networks (India) (P) Ltd., (2021) 5 SCC 738 : (2021) 3 SCC (Civ) 352], SCC p. 764, para 45) "45. ... 45.1. ... While exercising jurisdiction under Section 11 as the judicial forum, the Court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere "only" when it is "manifest" that the claims are ex facie time-barred and dead, or there is no subsisting dispute." 27. The standard of scrutiny to examine the non-arbitrability of a claim is only prima facie. Referral Courts must not undertake a full review of the contested facts; they must only be confined to a primary first review [Vidy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hereinbelow: "21. Applying the aforementioned principles to the present case, we find ourselves in agreement with the finding of the High Court that the appellant's cause of action in respect of Arbitration Applications Nos. 25/2003 and 27/2003, relating to the work orders dated 7-10- 1979 and 4-4-1980 arose on 8-2-1983, which is when the final bill handed over to the respondent became due. Mere correspondence of the appellant by way of writing letters/reminders to the respondent subsequent to this date would not extend the time of limitation. Hence the maximum period during which this Court could have allowed the appellant's application for appointment of an arbitrator is 3 years from the date on which cause of action arose i.e. 8-2-1986. Similarly, with respect to Arbitration Application No. 28/2003 relating to the work order dated 3-5-1985, the respondent has stated that final bill was handed over and became due on 10-8-1989. This has not been disputed by the appellant. Hence the limitation period ended on 10-8-1992. Since the appellant served notice for appointment of arbitrator in 2002, and requested the appointment of an arbitrator before a court only by the end o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final bill is rejected by making deductions or otherwise. Sections 5 to 20 of the Limitation Act do not exclude the time taken on account of settlement discussions. Section 9 of the Limitation Act makes it clear 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 setting out the "particular dispute" [ Section 21 of the Arbitration and Conciliation Act, 1996.] (including claims/amounts) which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail. 52. In the present case, the notice invoking arbitration was issued 5½ years after rejection of the claims on 4-8-2014. Consequently, the notice invoking arbitration is ex facie time-barred, and the disputes between the parties cannot be referred to arbitration in the facts of this case." ( emphasis supplied ) 73. This Court, in M/s B and T AG (supra), to which two of us, the Chief Justice, Dr. D.Y. Chandrachud and Justice J.B. Pardiwala, were members of the Bench, had the occasion to ascertain in the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s right for more than five years. Statutory arbitrations stand apart." ( emphasis supplied ) 74. The learned senior counsel appearing for the respondent has strongly relied on the judgment in M/s B and T AG (supra) to argue that the facts of the present case are squarely covered by the dicta laid down in the said judgment. However, we are of the view that the said judgment is of no avail to the respondent. 75. The respondent, relying upon the legal notice dated 26.08.2021 issued by the petitioner, submitted that the cause of action arose on 01.11.2017. The relevant part of the said notice is extracted here: "10. Our client is entitled to receive 90% of the amount certified by the Embassy in Kabul. While reserving our rights without prejudice and subject to settlement of accounts illegally withheld, this notice is issued calling upon you to pay Rs. 73,53,000/- with interest compounded monthly @18% w.e.f. 1st November 2017 within 15 days of from the receipt of this notice, under intimation to us, failing which our client has given instructions to file appropriate legal proceedings before competent courts in India including a suit for settlement of accounts for recovery of mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determined. First, that the right to receive the payment ordinarily begins upon completion of the work. Secondly, a dispute arises only when there is a claim by one side and its denial/repudiation by the other and thirdly, the accrual of cause of action cannot be indefinitely postponed by repeatedly writing letters or sending reminders. It was further emphasised by this Court that it was important to find out the "breaking point" at which any reasonable party would have abandoned the efforts at arriving at a settlement and contemplated referral of the dispute to arbitration. Such breaking point would then become the date on which the cause of action could be said to have commenced. 79. This Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority reported in (1988) 2 SCC 338 held as follows: "4. Therefore, in order to be entitled to order of reference under Section 20, it is necessary that there should be an arbitration agreement and secondly, difference must arise to which this agreement applied. In this case, there is no dispute that there was an arbitration agreement. There has been an assertion of claim by the appellant and silence as well as refusal in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be specifically pleaded and placed on the record. The Court upon careful consideration of such history must find out what was the "breaking point" at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This "breaking point" would then be treated as the date on which the cause of action arises, for the purpose of limitation. The threshold for determining when such a point arises will be lower in the case of commercial disputes, where the party's primary interest is in securing the payment due to them, than in family disputes where it may be said that the parties have a greater stake in settling the dispute amicably, and therefore delaying formal adjudication of the claim. 29. Moreover, in a commercial dispute, while mere failure to pay may not give rise to a cause of action, once the applicant has asserted their claim and the respondent fails to respond to such claim, such failure will be treated as a denial of the applicant's claim giving rise to a dispute, and therefore the cause of action for reference to arbitration. It does not lie to the applicant to plead that it waited for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings. II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 days becomes available to the petitioner from 01.03.2022, thereby meaning that the limitation period available to the petitioner for invoking arbitration proceedings would have come to an end on 13.03.2023. c. When is Arbitration deemed to have commenced? 85. Section 21 of the Act, 1996 provides that the arbitral proceedings in relation to a dispute commence when a notice invoking arbitration is sent by the claimant to the other party. "21. Commencement of arbitral proceedings. - Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent." 86. In Milkfood Ltd. v. GMC Ice Cream (P) Ltd. reported in (2004) 7 SCC 288, it was observed thus: "26. The commencement of an arbitration proceeding for the purpose of applicability of the provisions of the Indian Limitation Act is of great significance. Even Section 43(1) of the 1996 Act provides that the Limitation Act, 1963 shall apply to the arbitration as it applies to proceedings in court. Sub-section (2) thereof provides that for the purpose of the said section and the Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it clear 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 setting out the "particular dispute" [ Section 21 of the Arbitration and Conciliation Act, 1996.] (including claims/amounts) which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail." ( emphasis supplied ) 88. In the present case, the notice invoking arbitration was received by the respondent on 29.11.2022, which is within the three-year period from the date on which the cause of action for the claim had arisen. Thus, it cannot be said that the claims sought to be raised by the petitioner are ex-facie time-barred or dead claims on the date of the commencement of arbitration. 89. Thus, from an exhaustive analysis of the position of law on the issues, we are of the view that while considering the issue of limitation in relation to a petition under Section 11(6) of the Act, 1996, the courts should satisfy themselves on two aspects by employing a two-pronged test - first, whether the petition under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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