J&K & Ladakh High Court Refers Contract Dispute To Arbitration, Leaves Limitation Issue To Tribunal

The High Court of Jammu & Kashmir and Ladakh has recently reiterated that while deciding petitions for appointment of an arbitrator, the court cannot undertake a detailed inquiry into limitation, and such issues must be decided by the arbitral tribunal.

The court was hearing four petitions filed under Section 11(6) of the Arbitration and Conciliation Act, seeking appointment of an independent arbitrator to adjudicate disputes arising between Ace Consultants, a proprietorship firm, and J&K Projects Construction Corporation Limited, regarding unpaid contractual amounts under certain works.

Justice Sanjay Dhar observed, “This Court, while exercising its power under Section 11 (6) of the Act, cannot go into this issue and it is only the arbitral tribunal, who can go into all these issues during arbitral proceedings.”

Background

The petitioner, Ace Consultants, filed four arbitration petitions seeking appointment of an arbitrator in relation to disputes arising out of four allotment orders issued in December 2012 for supply, installation, testing and commissioning of lifts at various government institutions in Srinagar and Baramulla.

According to it, despite completion of the works, the respondents did not release the entire contractual amounts. Certificates issued by the respondent authorities recorded that substantial amounts remained unpaid in relation to each of the contracts.

It had earlier approached the High Court through a writ petition seeking release of the pending payments. The writ petition was disposed of with a direction to the respondents to treat the petition as a representation and consider the petitioner's claim in accordance with law.

Subsequently, the respondents rejected the petitioner's claims through a consideration order dated December 23, 2019. The petitioner thereafter pursued contempt proceedings, which were disposed of on October 22, 2020, granting liberty to the petitioner to pursue appropriate remedies in accordance with law.

The petitioner invoked the arbitration clause in May 2023. As the respondents did not act upon the request for appointment of an arbitrator, the present petitions were filed in May 2025 seeking appointment of an arbitrator.

The construction objected to the maintainability of the petitions on the ground that the claims raised by the petitioner were stale and time-barred and therefore non-arbitrable. The Court examined the scope of jurisdiction under Section 11(6) of the Arbitration and Conciliation Act.

Court's Observations

Referring to the decisions of the Supreme Court in Vidya Drolia v. Durga Trading Corporation and Bharat Sanchar Nigam Ltd. v. Nortel Networks India Pvt. Ltd., the Court noted that at the referral stage the Court may refuse reference only when the claims are manifestly and ex facie time-barred or the dispute is demonstrably non-arbitrable.

The Court also referred to NTPC Limited v. SPML Infra Limited, observing that the arbitral tribunal is the preferred authority to determine questions relating to arbitrability and limitation, and that the referral court may undertake only a prima facie examination to ascertain whether the dispute is clearly non-arbitrable.

Further reliance was placed on Aslam Ismail Khan Deshmukh v. Asap Fluids Pvt. Ltd., where the Supreme Court held that while exercising powers under Section 11(6), the referral court should not conduct an intricate evidentiary inquiry into limitation and must restrict itself to examining whether the Section 11 application has been filed within the prescribed period.

The Court explained that Section 43 of the Arbitration and Conciliation Act makes the Limitation Act applicable to arbitration proceedings, and that arbitration is deemed to commence on the date on which the request for reference is received by the respondent.

The bench further clarified the distinction between the limitation applicable to the underlying claim and the limitation for filing a petition under Section 11 of the Act. While limitation for the claim is calculated with reference to the date of commencement of arbitration proceedings, the limitation for filing a Section 11 petition arises when the opposite party fails to act upon the notice invoking arbitration.

Applying these principles, the Court noted that the petitioner's claims had been rejected by the respondents through the consideration order dated December 23, 2019, and the contempt proceedings were closed on October 22, 2020, with liberty to pursue appropriate remedies.

The arbitration clause was invoked by the petitioner in May 2023, which the Court held to be within three years from the date the cause of action arose. The petitions seeking appointment of an arbitrator were filed in May 2025, also within three years from the date of invocation of arbitration.

In these circumstances, the Court held that the claims could not be regarded as ex facie time-barred at the referral stage and the question of limitation would require examination by the arbitral tribunal during the course of arbitration proceedings.

The Court held that once it is found that an arbitration clause exists between the parties and the request for arbitration has not been acted upon, the dispute must be referred to arbitration.

Accordingly, the Court appointed a sole arbitrator to adjudicate the disputes arising out of the agreements, and directed that the arbitrator shall first decide the issue of limitation after hearing the parties before proceeding to examine the merits of the claims.