Referral court's limitation inquiry under Section 11 must be restricted to the filing of the application itself.

In brief

The question

1. Whether the Section 11 petition for appointment of an arbitrator is maintainable and within the period of limitation.

The court held

The Court held that the Section 11 application was filed within time and the existence of the arbitration agreement was undisputed.

It also directed

The Court allowed the petition and appointed Ms. Amrita Pandey, Advocate, as the Sole Arbitrator, while granting liberty to the Arbitrator to decide objections regarding the limitation of individual claims and the maintainability of the proceedings in light of the pending civil suit as preliminary issues.

01Facts

The Petitioners (Developers) entered into a registered Development Agreement dated 04.12.2014 with Late Shri Ashim Kumar (Owner) for a construction project at Premises No. 160, G.T. Road, Bally.

¶ 2-3

The Petitioners paid Rs. 2,00,000/- as an adjustable sum and alleged incurring further expenses for building sanctions and additional payments to the Owner; however, the Owner allegedly failed to deliver vacant possession due to existing tenants.

¶ 5

Following the Owner's death on 31.05.2023, his legal heirs (Respondents) refused to execute a fresh Power of Attorney to continue work.

¶ 7

The Petitioners invoked the arbitration clause on 15.09.2023.

¶ 7

The Respondents opposed the petition, arguing the claims were time-barred as the cause of action purportedly arose in 2018, and noted that the Petitioners had suppressed the fact of a pending civil suit (T.S. No. 77/2028) for specific performance.

¶ 12-13

02Issues

i.1. Whether the Section 11 petition for appointment of an arbitrator is maintainable and within the period of limitation.

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ii.2. Whether the Court at the Section 11 stage can adjudicate if the underlying claims are barred by limitation.

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iii.3. Whether the non-disclosure of a pending civil suit disentitles the Petitioner from seeking appointment of an arbitrator.

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03Law Applied

Section 11(6) of the Arbitration and Conciliation Act, 1996, regarding the appointment of arbitrators.

¶ 1

The precedent set by the Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning (2024), which established that judicial inquiry under Section 11 is restricted to the prima facie existence of an arbitration agreement and whether the Section 11 application itself was filed within the three-year limitation period under Article 137 of the Limitation Act, 1963.

¶ 17-18

The principle that the "separability" of an arbitration clause ensures it remains binding on legal heirs/successors.

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Provisions in the judgment · 7 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 7 Section 9 Section 11 Section 12 Section 17 Section 21

Limitation Act, 1963 Section 137

04Reasoning

The Court found that a valid arbitration agreement existed in Clause 5, Article XVII of the 2014 Agreement, which bound the Respondents both as confirming parties and as legal heirs.

¶ 15

Applying the Krish Spinning standard, the Court held that its scope is limited to verifying the Section 11 filing timeline, not the merits of the underlying claims.

¶ 18-19

Since the arbitration was invoked in September 2023 and the Respondents failed to appoint an arbitrator within 30 days, the Section 11 petition filed in 2025 was within the three-year limitation period.

¶ 19

The Court observed that the question of whether the underlying claims (arising after the 2023 demise of the owner) were stale is a mixed question of fact and law that must be decided by the Arbitral Tribunal, not the referral court.

¶ 20

Regarding the non-disclosure of the civil suit, the Court held that while such conduct is deprecated, it does not bar the "ministerial relief" of appointing an arbitrator, provided the Tribunal is allowed to consider the impact of the suit as a preliminary issue.

¶ 21