Source: Delhi High Court 

Why in News? 

Recently, the bench of Justice Sachin Datta held that in the absence of any bonafide negotiations after the issuance of the notice invoking arbitration, the period cannot be excluded for the purpose of computing limitation under Section 11(6) of the Arbitration and Conciliation Act, 1996." 

• The Delhi High Court held this in the matter of Tirupati Constwell Private Limited v. Delhi States Employees Federation CGHS Ltd (2025). 

What was the Background of Tirupati Constwell Private Limited v. Delhi States Employees Federation CGHS Ltd.(2025) Case? 

• Tirupati Constwell Private Limited was awarded a tender for civil, sanitary, and electrical works for 131 Dwelling Units of the D.S.N.E.F. Cooperative Group Housing Society Ltd. at Plot No. 1, Sector 19, Dwarka, Phase-I, New Delhi through a letter dated 24th October 2005. 
• An agreement dated 31st October 2005 was executed between Tirupati Constwell Private Limited and Delhi States Employees Federation CGHS Ltd for execution of the project. 
• The agreement stipulated that M/s Khurmi Associates Pvt. Ltd would prepare drawings and specifications describing the work as the architecture consultancy firm. 
• Disputes arose when Delhi States Employees Federation CGHS Ltd allegedly failed to clear Tirupati Constwell's running account bills amounting to Rs. 80,92,26,992/-. 
• The agreement required payment of outstanding dues within one month of receiving running bills from Tirupati Constwell. 
• Tirupati Constwell claimed that the respondent never disputed the outstanding payment during the subsistence of the agreement and repeatedly reassured that the outstanding amount would be paid. 
• Tirupati Constwell issued a conciliation notice dated 11th December 2018 to Delhi States Employees Federation CGHS Ltd, which was opposed by the respondent through a letter dated 10th October 2019. 
• As disputes persisted, Tirupati Constwell issued a notice dated 22nd February 2019 invoking arbitration under clause 39.1 of the agreement. 
• Tirupati Constwell also sent a letter dated 15th March 2019 to M/s Khurmi Associates Pvt. Ltd seeking consent to act as an arbitrator. 
• Delhi States Employees Federation CGHS Ltd responded on 16th March 2019, refusing to consent to arbitration and stating they did not possess a copy of the agreement. 
• According to Tirupati Constwell, Mr. Harpreet Singh Khurmi of the architecture firm subsequently acted as a mediator and issued a notice dated 27th March 2019 to explore the possibility of an amicable resolution. 
• Further communications and alleged "proceedings" were conducted on various dates
• On 24th August 2019, the architect recused from the proceedings, citing that the respondent had questioned his impartiality to act as an arbitrator. 
• Tirupati Constwell subsequently filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 on 02nd July 2024, seeking appointment of arbitrator(s). 
• Tirupati Constwell contended that the period between 27th March 2019 and 24th August 2019 should be excluded when calculating the limitation period for filing the petition. 
• Delhi States Employees Federation CGHS Ltd argued that no mediation proceedings took place between the parties and that the petition was time-barred.

What were the Court’s Observations?

• The Court observed that after issuance of the notice invoking arbitration, Tirupati Constwell addressed a letter to the Managing Director of the architect firm on 15th March 2019 requesting consent to act as an arbitrator, not as a mediator. 
• The Court noted that the communications dated 27th March 2019 and 04th June 2019 from the architect to the respondent did not contain any reference to requests from either party for the architect to act as a mediator or conciliator. 
• The Court examined the "proceedings" issued by the architect on 20.06.2019, 15.07.2019, 30.07.2019, and 24.08.2019, observing that in each instance, the architect described himself as an "Arbitrator" rather than a mediator. 
• The Court determined that nothing in the record indicated that the architect was asked by either party to act as a mediator at any point. 
• The Court concluded that no "bonafide negotiations" were conducted after the issuance of the notice invoking arbitration, nor was the architect authorized to act as a mediator. 
• The Court observed that limitation for filing an application under Section 11 of the Arbitration Act begins once a valid notice invoking arbitration has been sent and there has been a failure or refusal by the other party to comply. 
• The Court noted that the respondent's reply dated 16.03.2019 constituted an unequivocal refusal to comply with the arbitration notice, meaning limitation began to run from that date under Section 9 of the Limitation Act, 1963. 
• The Court cited the Supreme Court judgment in Geo Miller & Company Pvt. Ltd. vs Chairman, Rajasthan Vidyut Utpadan Nigam Ltd., which states that periods of "bonafide negotiating towards an amicable settlement" can be excluded when calculating limitation periods. 
• However, the Court found that the communications and "proceedings" in this case could not be construed as reflecting any "bonafide negotiations" between the parties. 
• The Court distinguished the present case from precedents cited by the petitioner, noting that unlike in Unisys Infosolutions Pvt. Ltd. v. Gurbani Media Pvt. Ltd., the parties here did not engage in a discernible settlement process. 
• The Court noted the clarification provided in SBI General Insurance Co. Ltd. v. Krish Spinning regarding limitation periods in arbitration cases. 
• The Court concluded that the period between 27.03.2019 and 24.08.2019 could not be excluded for determining whether the petition was filed within the limitation period. 
• The Court observed that counsel for Tirupati Constwell had conceded that if this period was not excluded, the petition would be beyond the prescribed limitation period. 
• Based on these observations, the Court determined that the petition was filed beyond the prescribed period of limitation and therefore dismissed it. 

What is Section 11 of the Arbitration and Conciliation Act, 1996? 

• Allows any person of any nationality to be an arbitrator unless parties agree otherwise. 
• Gives parties freedom to agree on appointment procedures, with default mechanisms if they fail to agree. 
• In three-arbitrator tribunals, each party appoints one arbitrator, and those two select the third presiding arbitrator. 
• Provides remedy through Section 11(6) when there's a breakdown in the agreed appointment procedure, allowing courts to intervene after the 30-day period expires. 
• Limits judicial intervention under Section 11(6A) to only determining the existence of an arbitration agreement. 
• Sets limitation periods for filing applications under Section 11(6), which begin running upon issuance of arbitration notice and rejection by the other party.

Cases Referred

• SBI General Insurance Co. Ltd. v. Krish Spinning (2024): 
  • Established that limitation for Section 11 applications begins only when a valid arbitration notice is sent and the other party refuses to comply. 
  • Clarified that courts should not conduct intricate evidentiary inquiries into whether claims are time-barred at the arbitrator appointment stage. 
• Geo Miller & Company Pvt. Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd. (2020): 
  • Held that periods during which parties were conducting bonafide negotiations for settlement can be excluded from limitation calculations. 
  • Required that the entire negotiation history must be specifically pleaded and placed on record for such exclusion. 
• Arif Azim Co. v. M/s Aptech Ltd. (2024): 
  • Created a two-pronged limitation test requiring courts to examine whether the Section 11(6) petition itself is time-barred and whether the claims are clearly dead claims. 
  • Established that courts may refuse to appoint an arbitral tribunal if either prong is answered against the party seeking arbitration.