In Arif Azim Company Limited v. Aptech Limited, (Supreme Court of India, Coram: Chandrachud, CJI, Pardiwala and Manoj Misra, JJ; 03 January 2024), the Court set down important principles surrounding issues of limitation governing applications for appointment of arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996, the extent of the Court’s jurisdiction under Section 11 to decide whether the dispute itself is barred by limitation and the date from which limitation should be computed in relation to claims of money.
The following important principles (some of which are already settled and were reiterated by the Court) emerge from the Judgement, viz.:
Article 137 of the Schedule to the Limitation Act, 1963 applies to applications under Section 11; consequently, an application for appointment of an arbitrator has to be filed within three years from the date on which the right to apply accrues.
The right to apply accrues when a valid notice invoking arbitration has been issued by one of the parties to the other party and there has been either a failure or refusal on part of the other party to make an appointment as per the appointment procedure agreed upon between the parties, i.e., in complying with the requirements mentioned in such notice.
The Court, in deciding an application under Section 11, may consider two types of objections to the request for appointment : (i) jurisdictional issues, which pertain to the power and authority of arbitrators to hear and decide a case and (ii) admissibility issues, which pertain to nature of the claim or procedural requirements such as non-compliance with mandatory pre-reference mediation, bar of limitation, etcetera.
The question whether the claim is barred by limitation is an admissibility issue and not a jurisdictional issue. However, the Court is duty bound to, in the course of deciding an application for appointment, prima facie examine and reject non-arbitrable or dead claims so as to protect the other party from being drawn into a time-consuming and costly arbitration process. The scope of the enquiry, however, is limited and the Court must not undertake a full review of the contested facts - 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.
In claims for payment, the cause of action to sue arises and, resultantly, limitation begins to run, not from the date on which the payment became due but from the date on which a dispute arose from claim being made by one party and its repudiation or denial by the other party.