ARBITRATION SUBJECT TO LIMITATION?

The Delhi High Court Bench consisting of Justice Pratibha M Singh in the case of SSIPL Lifestyle Private Limited v. Vama Apparels (India) Private Limited evaluated the applicability of limitation period on Section 8 of the Arbitration and Conciliation Act,1996 which deals with the power to refer parties to arbitration where there is an arbitration agreement.

The Supreme Court in the year 2011 decided in the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. & Ors that the limitation period will not apply to Section 8 of the Arbitration Act and that the written statement must be filed as early as possible. Post four years of this judgement an amendment was made to the Arbitration and Conciliation Act, which amended Section 8 as follows:

"If an action relating to the subject matter of an arbitration agreement has been brought before the judicial authority by a party not later than the date of submitting his first statement on the substance of the dispute, then the judicial authority shall refer the parties to arbitration provided a valid arbitration agreement exists between the parties."

The phrase "the date:" was added to the section. This addition was founded on the idea to achieve the object of the arbitration that is speedy disposal of cases by making a restriction on the period during which an application to refer to arbitration had to be made. There were differing opinions regarding the same, and the SSIPL case has brought clarity on it.

The petitioner and Defendant of the case entered into an agreement in 2016. The parties had a dispute among them which led to the petitioner filing two suits of recovery of money in 2018. Summons from the court were issued, and the Defendant had not filed a written statement. Only later the defendants filed an application for referral to arbitration which was contested by the petitioner to be time-barred.

The questions mentioned below were to be addressed by the bench in the case:

◊ Is the Application under Section 8 of the Arbitration and Conciliation Act subject to a limited filing period?

◊ Is the time period prescribed for filing of written statement by the Civil Procedure Code, 1908 as well as Commercial Courts Act,2015 applicable to the Section 8 Application?

Senior Counsel Darpan Wadhwa stated that there was varied opinion regarding a restricted time limit on such application and pointed out the decision in the 2011 case where the court denied any limitation on the Act. SSIPL Lifestyle Private Limited contested that there was no dispute that could be arbitrated as the application made by Vama Apparel was time-barred, whereas Vama Apparel maintained the validity of the application on the basis that no written statement had been submitted.

After closely examining the submission of the petitioners and Defendant, the court came to the following conclusion:

1) The Article 8 of the United Nation Commission on International Trade Law(UNCITRAL) Model law existed in Section 8 of the Act prior to Amendment which allowed for Section 8 Application to be simultaneously submitted along with the written statement.

2) Post Amendment, there was a deviation and the inclusion of the word "the date" symbolized for conformity of application to a specified period as such a symbolization is in consonance with the object of the Amendment the Arbitration Act as well as Civil Procedure Code in relation to Commercial Courts Act 2015.

3) The limitation for filing such application is 120 days which is similar to that of the filing period in commercial suits as well as a written statement with respect to Arbitration Act.

The judgement observed that "The entire intention is that those parties who wish to proceed for arbitration ought to do so with alacrity and speed and not merely procrastinate.

The Defendant cannot defeat the intention behind the amendments in the Civil Procedure Code and the Arbitration Act, by choosing to file a Section 8 application at its own sweet will"

The decision has enabled to attain clarity on the issue, but in time to come, the Supreme Court may have to adjudicate concretely on the same. For the present, the judgement will subject parties to strict adherence to the prescribed time limit and expedite the beginning of arbitration proceedings sooner than before.