Waited Too Long to Act? SC Rejects Man’s Arbitration Plea as Time-Barred
The Supreme Court dismisses arbitration plea citing delay and limitation for appointment.
The Supreme Court recently dismissed a plea for the appointment of a sole arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996, finding that the notice of arbitration was barred by limitation and the arbitration request was made two years after the initial notice.
A bench of Chief Justice of India B R Gavai and Justice K Vinod Chandran rejected the arbitration petition filed by Alan Mervyn Arthur Stephenson, a resident of the United Kingdom, in his partnership deed dispute with respondent J Xavier Jayarajan. The partnership deed contained an arbitration clause.
The facts of the matter showed that the petitioner's sister and the respondent entered into a partnership on April 10, 2008, with the objective of engaging in a real estate business, specifically the construction of service apartments. The respondent submitted that the business was carried on with the active involvement of the petitioner, who is the brother of one of the original partners. This initial partnership was dissolved on December 22, 2008. Both parties admitted that a new partnership was then entered into between the petitioner and the respondent on September 20, 2014.
The petitioner alleged that he paid substantial sums amounting to Rs 2,31,85,600 based on Clause 6 of the Partnership Agreement, which obligated 75% of the profits to be transferred to him. He contended that nothing was done with the property purchased on May 04, 2016. Consequently, the petitioner sought a direction from the court for the appointment of an arbitrator.
The bench observed that, admittedly, the purchase of the land was on May 4, 2016, and as per the notice of December 9, 2020 produced before the court, the amounts were paid before the said date. The bench noted that, as on the date of the notice, the claim for recovery of amounts was therefore barred by limitation. The bench also found that the petitioner, in the arbitration request itself, admitted that on May 06, 2017, a Police Complaint was raised before the Police Commissioner, Bangalore, against the respondent for fraud and cheating. This complaint was eventually closed, which led the petitioner to approach the Chief Metropolitan Magistrate, Mayohall at Bangalore under Section 200 of the Criminal Procedure Code, 1973. That application stood rejected on June 16, 2017.
The bench held that the petitioner's claim was time-barred, stating: ''The petitioner in the arbitration request speaks of the receipt of payment of Rs 1 lakh on 04.08.2017. Even if limitation is computed from the said date, the claim stands barred on 09.12.2020, when the notice was issued seeking appointment of arbitrator.''
Court also took note that the respondent's counter affidavit mentioned a delayed challenge made to the Magistrate's order after about a year, which the Sessions Judge also rejected because no explanation was offered for the delay of 234 days.
Regarding the subsequent steps, the bench further observed, ''Even after the notice issued on December 09, 2020, the arbitration request was first made before the High Court of Karnataka at Bengaluru on 22.06.2022 which remained in that Court till 20.01.2025, when the same was disposed of leaving liberty to take appropriate remedies.''
Relying on the high court's liberty, the petitioner filed the current special leave petition before the Supreme Court.
Dismissing the arbitration petition seeking the appointment of an arbitrator, the bench concluded, "It goes without saying even the notice of arbitration was delayed and barred by limitation and the arbitration request itself was made two years after the initial notice.''
Case Title: Alan Mervyn Arthur Stephenson Vs J Xavier Jayarajan
Bench: Chief Justice of India B R Gavai and Justice K Vinod Chandran