The Parties had executed various Development Agreements-cum-General Power of Attorney in relation to the construction of certain properties, which was required to be completed within a span of 18 months. The Project was constructed and handed over to the applicant after a delay of 12 months. Certain defects in the construction were pointed out to the respondent after taking possession of the project. Regarding the defects and delay in the project, the parties kept on negotiating among themselves, and the appellant, after a period of 7 years, issued notice for invoking arbitration proceedings.
The construction company declined arbitration, asserting that the matter was time-barred and therefore, it is not legally maintainable. In the response, the applicant initiated an arbitration Application under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996 (herein referred as “A&C Act”)
Whether a dispute between the parties can be referred to arbitration when notice invoking arbitration proceedings is ex-facie time barred?
The Applicants submitted that the Respondents delayed the construction of the building by 12 months and have yet not availed the occupancy certificate even after 8 years. Furthermore, there are several deficiencies on the part of the Respondent. Hence, the contractual obligations are not fulfilled by the Applicant.
The Respondent contended that the 50% of the construction work was completed and was handed over to the Applicants in 2015. Furthermore, the Applicants had occupied the property peacefully for 7 years and had invoked arbitration belatedly after the lapse of the time. Hence, the application is time barred.
The Court held that the applicants, despite notifying the respondents of construction-related issues and loss, have not raised any dispute to resolve the disputes by an arbitrator. As per the agreement, the construction was to be finished within 18 months from the date of the agreement.
The High Court relied on Bharat Sanchar Nigam Limited and another v. Nortel Networks (India) Private Limited [(2021) 5 SCC 738] and held that mere negotiations will not postpone the cause of action for purpose of limitation. Section 43 of the A&C Act also provides that the Limitation Act shall apply to the Arbitrators as it applies to the court proceedings. Moreover, the limitation under Article 137 of the Limitation Act would be applicable for filing of an Application under Section 11 of the A&C Act.
The High Court dismissed the present Application as it was time barred.
Sri Athelli Mallikarjun & Ors v. S.S.B Constructions, Arbitration Application No. 169/2022, Telangana High Court
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