Mere correspondence between the parties would not extend the period of limitation for filing an application under Section 11 seeking the appointment of an arbitrator.

Secunderabad Cantonment Board v. B. Ramachandraiah and Sons decided on 15.03.2021 by the Hon’ble Supreme Court

FACTS: The present matter involves appeals that arise out of petition under Section 11 of the Arbitration and Conciliation Act, 1996 (Arbitration Act). The appellant Secunderabad Cantonment Board (Appellant) had floated a Notice Inviting Tender (NIT) for a contract to repair roads. Pursuant to the NIT, three agreements were entered into between the Appellant and the respondent, B. Ramachandraiah and Sons (Respondent).

The following are the important dates to consider:

• Issuance of final contract certificate: 18.02.2003
• Receipt of final payment: 26.03.2003
• Letter of appointment of arbitrator: 07.11.2006 and 13.01.2007
• Exchange of other correspondences: 2007-2009
• Rejection of demand to appoint arbitrator: 30.01.2010 and 10.11.2010
• Petition under sec 11 filed: 06.11.2013

ISSUE: Whether issuance of letters/ correspondences would extend the period of limitation for filing Section 11 petition and whether the Court can dismiss the petition u/s 11 for being barred by time.

HELD: The Hon’ble Supreme Court referred to Geo Miller & Co. Pvt. Ltd. v. Rajasthan Vidyut Nigam Ltd., 2020 14 SCC 643; Inder Singh Rekhi v. DDA, 1988 2 SCC 338 to hold that the cause of action arises on the date when the final bill is handed over or becomes due. Mere correspondence by the contractor by way of writing letters and reminders would not extend the time of limitation.

Further, the Hon’ble Supreme Court placing reliance on two recent judgments namely, Bharat Sanchar Nigam Ltd. and Anr. v. M/s. Nortel Networks India Pvt. Ltd. and Vidya Drolia v. Durga Trading Corporation clarified that since limitation was not a jurisdictional issue but rather an issue on admissibility, it was empowered to decide the present dispute as the same was ex-facie time-barred and the same need not be referred to the arbitral tribunal.

On the present case’s facts, the Hon’ble Supreme Court noted that the demand for arbitration in the present case was made by the letter dated 07.11.2006. This demand was reiterated in another letter dated 13.01.2007 wherein it was also informed that the appointment of arbitrator had to made within 30 (thirty) days. Therefore, the Hon’ble Supreme Court held that the limitation began to run on and from 12 February 2007. Even taking 16.02.2010, being the date 30 days after the first rejection of appointment of arbitrator by the Appellant as the starting point for limitation on merits, a period of three years having elapsed by February 2013, the claim made on merits were held to be hopelessly time-barred.

Hence, the Hon’ble Supreme Court concluded that no arbitrator could have been appointed by the High Court. Accordingly, the appeals were allowed.