Recently, the Supreme Court held that the limitation period for filing Section 11 Application seeking appointment of Arbitrator is governed by Article 137 of Limitation Act i.e . three years.
The Limitation will run from the date of failure to appoint the arbitrator.
The Bench of Justice Indu Malhotra and Justice Ajay Rastogi also held that in rare and exceptional cases, where the dispute is ex facie time barred and there is no subsisting dispute, the court may refuse to appoint an arbitrator under Section 11 application.
Further the court advised that an amendment be brought under Section 11 providing the limitation period for filing such applications, to ensure expeditious disposal of application.
The Supreme Court was considering the he appeal against the Kerala High Court judgment filed by BSNL, where in the High Court allowed the application filed by Nortel under Section 11 of the Act for appointment of arbitrator
The Court held that since there is no limitation period provided under the Arbitration and Conciliation Act for filing of Section 11 Application, therefore the same will be governed by the Limitation Act. The Court referred to Article 43 of the Limitation Act, which provides that the Limitation Act shall apply to Arbitrations.
Further, the Bench observed that since the object of Arbitration Act is expeditious disposal of the disputes, therefore the period of 3 years for filing Section 11 application is too long and therefore it would be necessary for Parliament to provide a specific period within with section 11 application can be filed.
On the merits of the case, the court held that since the notice invoking arbitration clause was sent after five and half years after rejection of claim, therefore the application under section 11 is Ex facie time barred and as such dispute cannot be referred to arbitration.