FACTS-The petitioner is an Afghanistan-based company (doing business of providing training in computer education, information technology, English language, etc.) that entered 3 franchise agreements with the Mumbai-based respondent (rendering similar services). Under these agreements, the petitioner-franchisee was granted a non-exclusive license by the respondent-franchisor to establish and operate business under 3 trade names. After signing of the above agreements, the respondent submitted a proposal to Indian Council for Cultural Relations for execution of a short-term course. The same was accepted. There was correspondence between the petitioner and the respondent, following which the petitioner executed the course at its centre in Kabul.

Eventually, disputes arose between the parties with respect to the royalty fee and renewal of the franchise agreements. In 2018, the respondent issued a recovery notice for non-payment of the royalty/renewal fee. Finally, the petitioner informed the respondent of its decision to not renew the franchise agreements.

Three years later, in 2021, the petitioner took up the issue of non-payment vide a legal notice. Thereafter, it invoked pre-institution mediation before the Bombay High Court, but when those proceedings failed, it sent notice for invocation of arbitration to the respondent in 2022. In its reply, the respondent denied all claims, besides stating that the same were barred by limitation.

After failure of the respondent to nominate an arbitrator as per mutually agreed upon procedure in response to notice for invocation of arbitration, the petitioner initiated the present proceedings before the Supreme Court in 2023.

ISSUE-

• Whether Court May Refuse to Appoint Arbitral Tribunal If S.11(6) Petition Is Barred By Limitation Or Claim Is Ex-Facie Time Barred?

• Whether the court may refuse to make a reference under Section 11 of the A&C Act where the claims are ex-facie and hopelessly time-barred?

OBSERVATION-Supreme Court held that the Limitation Act, 1963 is applicable to proceedings for appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 ("A&C Act"), and a Court may refuse to make a reference if the claims, on the date of commencement of arbitration proceedings, are ex-facie barred. At the outset, perusing Section 11(6), the Court noted that no time limit has been prescribed in the provision for filing an application for appointment of arbitrator. However, Section 43 stipulates that the Limitation Act would apply to arbitrations as it applies to proceedings in court. Next, it observed that none of the Articles in the Schedule to the Limitation Act provides a time period for filing an application under Section 11(6) of the A&C Act. As such, it would be covered by Article 137 of the Limitation Act - the residual provision.