Zamil Steel Buildings INDIA PVT. LTD. vs. Cinda Engineering & Construction Private Limited

Facts

The petitioner, Zamil Steel Buildings India Pvt. Ltd., filed a petition under Section 11(5) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The disputes arose from a Purchase Order dated 09.12.2019, issued by the respondent, Cinda Engineering & Construction Private Limited, for steel structure supply and fabrication for a project in Dahej, Gujarat. The Purchase Order was for an amount of Rs. 32,67,00,00,000/-, with GST extra. The respondent terminated the Purchase Order on 26.03.2021. The petitioner claimed outstanding amounts totaling Rs. 3,23,68,206/-. The petitioner had previously filed Section 9 petitions for interim relief, which were disposed of. After failed settlement negotiations, the petitioner issued a statutory notice under Section 21 of the Act on 17.09.2021. The respondent denied liability. The present petition was filed on 13.05.2024.

Held

The Court held that the petition was not barred by limitation. It reasoned that the commencement of arbitral proceedings, for the purpose of the Limitation Act, is deemed to have occurred when a party serves a notice requiring the appointment of an arbitrator, as per Section 21 of the Act. The Court noted that the Purchase Order was terminated on 26.03.2021, and the Notice of Invocation under Section 21 was issued on 17.09.2021, which is within three years of the cause of action. The present petition was filed on 13.05.2024. The Court also considered the period of negotiations and settlement talks between 2022 and 2023 as potentially tolling the limitation period. Citing Arif Azim Co. Ltd. vs. Aptech Ltd., the Court acknowledged that while there is a legislative vacuum regarding the specific time limit for filing a Section 11(6) petition after a Section 21 notice, Article 137 of the Limitation Act provides a three-year period. The Court found the respondent's objections to be untenable and allowed the petition, appointing Justice Rajiv Sahai Endlaw (Retd.) as the sole arbitrator. The Court clarified that this discussion was for the purpose of Section 11 adjudication and without prejudice to the parties' rights before the arbitrator.

Key Issues

1. Whether the petition filed under Section 11(5) of the Arbitration and Conciliation Act, 1996, is barred by limitation, considering the termination of the Purchase Order on 26.03.2021 and the filing of the petition on 13.05.2024. Petitioner's arguments: The petitioner contended that the petition is within the limitation period. They argued that amounts were credited to their account on 15.12.2022, and the present petition was filed within three years of the Notice of Invocation under Section 21 of the Act, which was issued on 17.09.2021. They also submitted that the period of negotiations and settlement talks between 2022 and 2023, and potentially the COVID period, should be excluded in computing the limitation period. Respondent's arguments: The respondent argued that the claims are hopelessly barred by time. They contended that the dispute arose in 2020, the first Notice of Invocation was sent on 17.09.2021, and the present petition was filed on 17.09.2024 (though the judgment later clarifies the filing date as 13.05.2024). They relied on the decision in Arif Azim Co. Ltd. vs. Aptech Ltd., 2024 SCC OnLine SC 215.