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M/S Arif Azim Co. Ltd. vs. M/S Aptech Ltd.

Not available · 2024 INSC 155Decided 1 Mar 2024
Not available
Chief Justice Dr. Dhananjaya Y. Chandrachud · Justice J.B. Pardiwala · Justice Manoj Misra

Background

Arif Azim Co. Ltd. (an Afghanistan-based company) and Aptech Ltd. had franchise agreements and also collaborated on a training-course project in Kabul funded through the Indian Council for Cultural Relations. Disputes arose over unpaid royalties on the franchise agreements and over the petitioner's share of payments received from the ICCR for the training course, with disagreement over the deduction percentages and the parties' respective entitlements. After settlement talks broke down, the petitioner issued a notice invoking arbitration in November 2022, but the respondent did not cooperate, prompting the petitioner to approach the Supreme Court directly under Section 11(6) to have an arbitrator appointed. The respondent argued the claims were long time-barred.

Decision Breakdown

The Supreme Court undertook a detailed review of the law on limitation in Section 11 petitions, laying down a two-pronged test: courts must check (i) whether the Section 11(6) petition itself is filed within limitation, and (ii) whether the underlying claims sought to be arbitrated are "ex-facie dead" or time-barred as of the date arbitration was invoked. Applying this, the Court found the arbitration-invocation notice was issued within three years of the cause of action arising, so neither the petition nor the underlying claims were time-barred. It allowed the petition and appointed former Supreme Court Judge Justice Sanjay Kishan Kaul as the sole arbitrator, leaving all other contentions open for the parties to raise before him. The Court also flagged, as an aside, that a 3-year limitation period for filing such petitions is unduly long given arbitration's goal of speedy dispute resolution, and urged Parliament to prescribe a specific, shorter limitation period.

Lesson Learnt

When a court is asked to appoint an arbitrator, it will screen out claims that are hopelessly stale, but it applies a structured two-step limitation test rather than refusing arbitration outright merely because a dispute is old: parties should still invoke arbitration promptly and keep clear records of when their cause of action and notice dates fall.

Official source (sci.gov.in)View Judgment (PDF)

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