Summary: The Supreme Court has created an interesting puzzle over when limitation begins for applications under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of arbitrators. While in Arif Azim, the Supreme Court established that limitation begins only after the other party refuses the request for appointment, in Offshore Infrastructures it decided that limitation starts when the final bill becomes due, i.e., when the substantive cause of action arises, conflating two distinct limitation periods. The article analyses this judicial divergence and highlights the need for legislative clarity to resolve the uncertainty.
The question on the limitation period for filing an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“the Act”), has long vexed Indian courts. Section 11(6) empowers courts to appoint arbitrators when parties fail to agree, but the Act remains silent on the limitation period for such applications. Given the importance of speedy resolution in arbitration matters, the absence of a specific prescription necessarily entails judicial intervention.
Courts’ interpretation has played a crucial role in filling this legislative vacuum. In Arif Azim Company Limited v. Aptech Limited(“Arif Azim”),[1] a Full Bench of the Supreme Court (“SC”) examined the question at length and rendered a definitive ruling.
However, recently, in Offshore Infrastructures Ltd. vs M/s Bharat Petroleum Corporation Ltd. (“Offshore Infrastructures”),[2] a Division Bench of the SC revisited this question without considering Arif Azim. The judgment diverged from Arif Azim in its understanding of when the limitation period begins.
Arif Azim: The Full Bench Clarification on Limitation for Filing Section 11(6) Applications
The dispute in Arif Azim revolved around a franchise agreement and the subsequent invocation of arbitration due to non-payment of dues. The SC identified two key questions: (i) whether the Limitation Act, 1963, applies to an application for the appointment of an arbitrator under Section 11(6), and if so, whether the petition was barred by limitation; and (ii) whether the court may refuse reference under Section 11(6) where the claims are ex facie and hopelessly time-barred. This article discusses the relevance of the SC’s answer to the first question.
The SC observed that in the absence of any specific period of limitation under Section 11(6), Section 43 of the Act would apply, stipulating the applicability of the provisions of the Limitation Act, 1963 (“Limitation Act”). Further, considering that this falls under Article 137 of the Schedule to the Limitation Act (the residual provision for applications not specifically covered by other articles),[3] the limitation period for filing an application is three years from the date when the right to apply accrues.[4]
The SC then had to determine the commencement date, i.e., when the right to apply under Section 11(6) accrues. At the outset, the Full Bench cautioned against conflating the limitation period for making an application seeking appointment of an arbitrator with that for raising substantive claims to be referred to arbitration.[5] The Section 11 court must primarily be concerned with the first aspect and whether the petition under Section 11(6) itself is barred by limitation. It may consider the second aspect only if the claims are ex facie dead and hence barred by limitation on the date of commencement of arbitration proceedings.[6] Otherwise, it is for the arbitrator to decide whether the claims are time-barred or not.
The SC relied on Bharat Sanchar Nigam Limited & Another v. Nortel Networks India Private Limited[7] to conclude that “the limitation period for filing a petition under Section 11(6) of the Act can only commence once a valid notice invoking arbitration has been sent by the applicant to the other party, and there has been a failure or refusal on part of that other party in complying with the requirements mentioned in such notice.”[8] It noted that the applicant’s “right to apply” and the court’s “duty to appoint” accrue only after the completion of all the preliminary steps necessary to institute a Section 11(6) application. This includes invocation of arbitration by issuing a formal notice to the other party. The right to apply would accrue to an applicant only upon the other party’s failure to act on such a notice.
Offshore Infrastructures Ltd v BPCL: The Factual Matrix and Judgment
The Appellant, Offshore Infrastructures Limited, was awarded a contract for works by the Respondent, Bharat Petroleum Corporation Limited. It raised the final bill on March 20, 2018, and subsequently issued a “No Claim Certificate” on October 3, 2018. The final bill was released on March 26, 2019. On April 26, 2021, the Appellant issued a consolidated claim for all outstanding dues.
When the Respondent failed to clear the dues, on June 14, 2021, the Appellant issued a notice to the Respondent’s managing director seeking appointment of an arbitrator as per the contract. On July 2, 2021, the Respondent rejected the Appellant’s claims. Aggrieved, the Appellant filed an application under Section 11(6) for the appointment of an arbitrator before the Madhya Pradesh High Court on March 14, 2022.
Both the Single Bench and the Division Bench dismissed the Appellant’s petitions as time-barred, holding that the limitation period had commenced on October 3, 2018, i.e., the date of issue of the “No Claim Certificate”, and had, accordingly¸ lapsed on October 2, 2021.
On appeal, disagreeing with the High Court decisions, the SC held that the cause of action for filing an arbitration application arises when the final bill handed over to the Respondent becomes due.[9] It relied on Geo Miller and Company Pvt. Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Limited(“Geo Miller”),[10] wherein the cause of action for bringing the substantive claims had arisen in 1983 when the final bill was raised. The arbitration notice was sent in 2002 and the Section 11(6) application made in 2003. The SC had refused to appoint an arbitrator, observing that the claims were clearly time-barred after a delay of nearly 20 years.
The SC determined that since the final bill became due on April 21, 2018, the three-year limitation period would ordinarily have expired on April 21, 2021.[11] However, considering the COVID-19 extension order[12]that had excluded the period from March 15, 2020, to February 28, 2022, for calculation of limitation, the SC ruled that the Appellant’s application was within limitation. It nonetheless observed that in the normal course, it would have been hit by the statutory bar of three years.[13]
Analysis: Offshore Infrastructures’ Departure from Arif Azim
In Offshore Infrastructures, the Appellant had specifically relied on Arif Azim to argue that the HC had erred in holding that the limitation period for the Section 11(6) application had commenced on October 3, 2018. It contended that following Arif Azim, it would commence only on July 2, 2021, i.e., when the Respondent rejected the Appellant’s claims and failed to appoint an arbitrator. Accordingly, the Appellant argued that the application was well within limitation.
In Arif Azim, the SC had cautioned against conflating the limitation period for filing a Section 11(6) application with that for raising substantive claims. The former begins only upon the other party’s refusal or failure to appoint the arbitrator according to the arbitration notice.
Regarding the reliance on Geo Miller, the SC clarified in Arif Azim that appointment of an arbitrator was denied in that case because the arbitration notice was sent nearly 20 years after the cause of action, with the Section 11(6) application filed a year later. This rendered the Appellant’s claims ex facie dead and time-barred.[14]
Relying on Arif Azim,the Appellant argued that the limitation period commenced only when the Respondent rejected the claims, i.e., on July 2, 2021, and that April 21, 2018, should have been recognised as commencement date for raising substantive claims sought to be referred to arbitration, not the Section 11(6) application. The SC appears to have conflated these two distinct limitation periods, diverging from the principle established in Arif Azim.
The Path Forward: Restoring Certainty Through Legislative Action
The SC’s decisions in Offshore Infrastructures and Arif Azim diverge on the critical point of when the limitation period commences for filing Section 11(6) applications. At a policy level, such divergence beckons legislative intervention to restore certainty to the law. The SC has repeatedly urged an amendment to Section 11 to prescribe a specific limitation period. In Arif Azim, the SC noted that the applicability of Article 137 to applications under Section 11(6) results from the absence of statutory prescription and that three years is unduly long, undermining the very spirit of the Act, i.e., expeditious resolution of commercial disputes.
The Draft Arbitration and Conciliation (Amendment) Bill, 2024 (“Draft Bill”), briefly released for public comments by the Department of Legal Affairs, proposed the insertion of a 60-day limitation period from the failure or refusal to appoint an arbitrator or arbitrators for filing an application under Section 11. However, the Draft Bill was withdrawn and removed from the Government of India’s website. A legislative clarification, therefore, will provide much-needed certainty on an issue with two divergent views from the Apex Court.
For further information, please contact:
Abhileen Chaturvedi, Partner, Cyril Amarchand Mangaldas
abhileen.chaturvedi@cyrilshroff.com
[1] (2024) 5 SCC 313.
[2] 2025 INSC 1196.
[3] Arif Azim (n 1), ¶50.
[4] Limitation Act, 1963, Article 137 of the Schedule.
[5] Arif Azim (n 1), ¶52.
[6] Arif Azim (n 1), ¶89.
[7] (2021) 5 SCC 738.
[8] Arif Azim (n 1), ¶56.
[9] Offshore Infrastructures (n 2), ¶21.
[10] (2020) 14 SCC 643.
[11] Offshore Infrastructures (n 2), ¶22.
[12] In Re: Cognizance for Extension of Limitation, (2022) 3 SCC 117.
[13] Offshore Infrastructures (n 2), ¶23.
[14] Arif Azim (n 1), ¶71.
