# M/S Arif Azim Co. Ltd v. M/S Aptech Ltd

- **Citation:** 2024 INSC 155
- **Court:** Supreme Court of India
- **Decided:** 2024-03-01
- **Case number:** Arbitration Petition No. 29 of 2023
- **Bench:** Dr. Dhananjaya Y. Chandrachud, J.B. Pardiwala, Manoj Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-arif-azim-co-ltd-v-m-s-aptech-ltd-37622
- **Pages:** 54

## Headnote

Whether the Limitation Act, 1963 is applicable to an application for
appointment of arbitrator u/s.11(6), Arbitration and Conciliation Act,
1996; if yes, whether the present petition is barred by limitation;
when does the right to apply u/s.11(6) accrues; whether the court
may refuse to make a reference u/s.11 of the Arbitration and
Conciliation Act, 1996 where the claims are ex-facie and hopelessly
time-barred.
Headnotes
Arbitration and Conciliation Act, 1996 - s.11(6) - Limitation
Act, 1963 - Article 137 - Applicability - Three franchise
agreements entered into between parties in 2013 - As per the
agreements, the petitioner-a company based in Afghanistan,
as the franchisee, was granted a non-exclusive license, by
the respondent to establish and operate businesses under
three trade names - Proposals were invited by the Indian
Council for Cultural Relations (ICCR), for the execution of a
short-term course - Proposal of the respondent accepted -
Course executed by the petitioner at its centre in Kabul from
February to April, 2017 - Disputes arose between the parties in
relation to the renewal and payment of royalties for all the three
franchise agreements - Respondent issued recovery notice
for non-payment of royalty/renewal fees in 2018 - Petitioner
informed the respondent of its decision to not renew two
franchise agreements - In 2021, after a gap of around three
years, the petitioner again took up the issue of non-payment
of dues for the ICCR project with the respondent - Petitioner
invoked a pre-institution mediation in 2022 however, upon
failure thereof, it sent notice for invocation of arbitration to
the respondent - Respondent replied denying the claims
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stating that notwithstanding the merits, the claims were barred
by limitation - Petitioner filed petition u/s.11(6) filed for the
appointment of an arbitrator:
Held: There is no doubt as to the applicability of the Limitation
Act, 1963 to arbitration proceedings in general and that of Article
137 of the Limitation Act, 1963 to a petition u/s.11(6) in particular
- As is evident from Article 137, the limitation period for making
an application u/s.11(6) is three years from the date when the
right to apply accrues - Limitation period for filing an application
seeking appointment of arbitrator commences only after a valid
notice invoking arbitration has been issued by one of the parties
to the other party and there has been either a failure or refusal
on part of the other party to make an appointment as per the
appointment procedure agreed upon between the parties - The
request for appointment of an arbitrator was first made by the
petitioner vide notice dtd. 24.11.2022 and a time of one month from
the date of receipt of notice was given to the respondent to comply
with the said notice - Notice was delivered to the respondent on
29.11.2022 - Hence, the said period of one month from the date
of receipt came to an end on 28.12.2022 - Thus, it is only from
this day that the clock of limitation for filing the present petition
would start to tick - The present petition was filed by the petitioner
on 19.04.2023, well within the time period of 3 years provided by
Article 137 - Thus, the present petition u/s.11(6) cannot be said
to be barred by limitation - Further, the notice invoking arbitration
was received by the respondent on 29.11.2022, which is within
the three-year period from the date on which the cause of action
for the claim had arisen - Thus, it cannot be said that the claims
sought to be raised by the petitioner are ex-facie time-barred or
dead claims on the date of the commencement of arbitration -
Petition allowed, sole arbitrator appointed.[Paras 50-52, 62, 88, 92]
Arbitration and Conciliation Act, 1996 - s.11(6) - Petition
under, issue of limitation - Courts to satisfy themselves on
two aspects by employing a two-pronged test:
Held: While considering the issue of limitation in relation to a petition
u/s.11(6), the cou

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* Author
[2024] 3 S.C.R. 73 : 2024 INSC 155
M/S Arif Azim Co. Ltd.
v.
M/S Aptech Ltd.
(Arbitration Petition No. 29 of 2023)
01 March 2024
[Dr. Dhananjaya Y. Chandrachud, CJI, J.B. Pardiwala*
and Manoj Misra, JJ.]
Issue for Consideration
Whether the Limitation Act, 1963 is applicable to an application for
appointment of arbitrator u/s.11(6), Arbitration and Conciliation Act,
1996; if yes, whether the present petition is barred by limitation;
when does the right to apply u/s.11(6) accrues; whether the court
may refuse to make a reference u/s.11 of the Arbitration and
Conciliation Act, 1996 where the claims are ex-facie and hopelessly
time-barred.
Headnotes
Arbitration and Conciliation Act, 1996 - s.11(6) - Limitation
Act, 1963 - Article 137 - Applicability - Three franchise
agreements entered into between parties in 2013 - As per the
agreements, the petitioner-a company based in Afghanistan,
as the franchisee, was granted a non-exclusive license, by
the respondent to establish and operate businesses under
three trade names - Proposals were invited by the Indian
Council for Cultural Relations (ICCR), for the execution of a
short-term course - Proposal of the respondent accepted -
Course executed by the petitioner at its centre in Kabul from
February to April, 2017 - Disputes arose between the parties in
relation to the renewal and payment of royalties for all the three
franchise agreements - Respondent issued recovery notice
for non-payment of royalty/renewal fees in 2018 - Petitioner
informed the respondent of its decision to not renew two
franchise agreements - In 2021, after a gap of around three
years, the petitioner again took up the issue of non-payment
of dues for the ICCR project with the respondent - Petitioner
invoked a pre-institution mediation in 2022 however, upon
failure thereof, it sent notice for invocation of arbitration to
the respondent - Respondent replied denying the claims
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stating that notwithstanding the merits, the claims were barred
by limitation - Petitioner filed petition u/s.11(6) filed for the
appointment of an arbitrator:
Held: There is no doubt as to the applicability of the Limitation
Act, 1963 to arbitration proceedings in general and that of Article
137 of the Limitation Act, 1963 to a petition u/s.11(6) in particular
- As is evident from Article 137, the limitation period for making
an application u/s.11(6) is three years from the date when the
right to apply accrues - Limitation period for filing an application
seeking appointment of arbitrator commences only after a valid
notice invoking arbitration has been issued by one of the parties
to the other party and there has been either a failure or refusal
on part of the other party to make an appointment as per the
appointment procedure agreed upon between the parties - The
request for appointment of an arbitrator was first made by the
petitioner vide notice dtd. 24.11.2022 and a time of one month from
the date of receipt of notice was given to the respondent to comply
with the said notice - Notice was delivered to the respondent on
29.11.2022 - Hence, the said period of one month from the date
of receipt came to an end on 28.12.2022 - Thus, it is only from
this day that the clock of limitation for filing the present petition
would start to tick - The present petition was filed by the petitioner
on 19.04.2023, well within the time period of 3 years provided by
Article 137 - Thus, the present petition u/s.11(6) cannot be said
to be barred by limitation - Further, the notice invoking arbitration
was received by the respondent on 29.11.2022, which is within
the three-year period from the date on which the cause of action
for the claim had arisen - Thus, it cannot be said that the claims
sought to be raised by the petitioner are ex-facie time-barred or
dead claims on the date of the commencement of arbitration -
Petition allowed, sole arbitrator appointed.[Paras 50-52, 62, 88, 92]
Arbitration and Conciliation Act, 1996 - s.11(6) - Petition
under, issue of limitation - Courts to satisfy themselves on
two aspects by employing a two-pronged test:
Held: While considering the issue of limitation in relation to a petition
u/s.11(6), the courts should satisfy themselves on two aspects by
employing a two-pronged test - first, whether the petition u/s.11(6)
is barred by limitation; and secondly, whether the claims sought
to be arbitrated are ex-facie dead claims and are thus barred by
limitation on the date of commencement of arbitration proceedings
[2024] 3 S.C.R.
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
- If either of these issues are answered against the party seeking
referral of disputes to arbitration, the court may refuse to appoint
an arbitral tribunal. [Para 89]
Arbitration and Conciliation Act, 1996 - s.11(6) - Ascertaining
the relevant point in time when the limitation period for making
a s.11(6) application would begin - Hohfeld's analysis of jural
relations - Discussed.
Arbitration and Conciliation Act, 1996 - s.11(6) - Application
for appointment of arbitrator u/s.11(6) - Categories of issues
- "jurisdictional issues/objections"; "admissibility issues/
objections":
Held: Issues pertaining to the power and authority of the arbitrators
to hear and decide a case are referred to as the "jurisdictional
issues/objections" - Objections to the competence of arbitrators
to adjudicate a dispute, existence/validity of arbitration agreement,
absence of consent of the parties to submit the disputes to
arbitration, dispute falling out of the scope of the arbitration
agreement are some examples of jurisdictional or maintainability
issues - The second category referred to as the "admissibility issues/objections" is of those issues which are related to the nature
of the claim and include challenges to procedural requirements,
viz. a mandatory requirement for pre-reference mediation; claim or
a part thereof being barred by limitation, etc. - Although, limitation
is an admissibility issue, yet it is the duty of the courts to primafacie examine and reject non-arbitrable or dead claims, so as to
protect the other party from being drawn into a time-consuming
and costly arbitration process. [Paras 64, 65]
Arbitration - Cause of action - When arises - Notice for
invocation of arbitration issued by the petitioner within three
years from the date of accrual of cause of action, claims not
ex-facie dead or time-barred on the date of commencement
of the arbitration proceedings:
Held: Mere failure to pay may not give rise to a cause of action
- However, once the applicant has asserted its claim and the
respondent has either denied such claim or failed to reply to it,
the cause of action will arise after such denial or failure - In the
present case, the petitioner alleged that the respondent received
the payment for the course from the ICCR on 03.10.2017 -
However, the perusal of the communication exchanged between
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the parties indicates that it was only on 28.03.2018 that the right
of the petitioner to bring a claim against the respondent could
be said to have been crystallised - Petitioner completed the
course sometime in April and a letter to this effect was issued
on 30.07.2017 by the EOI, Kabul - Allegedly, the ICCR made
payment to the respondent on 03.10.2017 - However, the right
of the petitioner to raise the claim could only be said to have
accrued after the petitioner made a positive assertion in March,
2018 which was denied by the respondent vide email dated
28.03.2018 - Another reminder through email was given by
the petitioner on 29.12.2018, however, mere giving reminders
and sending of letters would not extend the cause of action
any further from 28.03.2018 on which date the rights of the
petitioner could be said to have been crystallised - Thus, in
ordinary circumstances, the limitation period available to the
petitioner for raising a claim would have come to an end after
an expiry of three years, that is, on 27.03.2021 - However, in
March 2020, in view of deadly Covid-19 pandemic, this Court
directed the period commencing from 15.03.2020 to be excluded
for the purposes of computation of limitation - As a result, the
period from 15.03.2020 to 28.02.2022 was finally determined to
be excluded for the computation of limitation - It was provided
that the balance period of limitation as available on 15.03.2020
would become available from 01.03.2022 - The effect of the
said order of this Court in the facts of the present case is that
the balance limitation left on 15.03.2020 would become available
w.e.f. 01.03.2022 - The balance period of limitation remaining on
15.03.2020 can be calculated by computing the number of days
be-tween 15.03.2020 and 27.03.2021, which is the day when
the limitation period would have come to an end under ordinary
circumstances - The balance period thus comes to 1 year 13
days which became available to the petitioner from 01.03.2022,
thereby meaning that the limitation period available to the petitioner
for invoking arbitration proceedings would have come to an end
on 13.03.2023 - Notice for invocation of arbitration having been
issued by the petitioner within three years from the date of accrual
of cause of action, the claims cannot be said to be ex-facie dead
or time-barred on the date of commence-ment of the arbitration
proceedings. [Paras 77, 81, 82, 84 and 91]
Arbitration and Conciliation Act, 1996 - s.21 - Commencement
of arbitral proceedings:
[2024] 3 S.C.R.
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
Held: s.21 provides that the arbitral proceedings in relation to a
dispute commence when a notice invoking arbitration is sent by
the claimant to the other party. [Para 85]
Arbitration and Conciliation Act, 1996 - s.11(6) - Limitation Act,
1963 - Article 137 - Applicability of Article 137 to applications
u/s.11(6), a result of legislative vacuum - Parliament should
consider bringing an amendment to the Act, 1996 prescribing
a specific period of limitation:
Held: Applicability of Article 137 to applications u/s.11(6), a result
of legislative vacuum as there is no statutory prescription regarding
the time limit - Period of three years is an unduly long period
for filing an application u/s.11 of the Act, 1996 and goes against
the very spirit of the Act, 1996 which provides for expeditious
resolution of commercial disputes within a time-bound manner -
Various amendments to the Act, 1996 have been made over the
years to ensure that arbitration proceedings are conducted and
concluded expeditiously - Parliament should consider bringing
an amendment to the Act, 1996 prescribing a specific period of
limitation within which a party may move the court for making an
application for appointment of arbitrators u/s.11 of the Act, 1996.
[Para 94]
Maxims - "Vigilantibus non dormientibus jura subveniunt"
- Discussed.
Case Law Cited
M/s B and T AG v. Ministry of Defence, [2023] 7 SCR
599 : 2023 SCC OnLine SC 657 - held inapplicable.
SBP & Co. v. Patel Engineering Ltd. and Another, [2005]
Suppl. 4 SCR 688 : (2005) 8 SCC 618 - followed.
Geo Miller and Company Private Limited v. Chairman,
Rajasthan Vidyut Utpadan Nigam Limited, [2019] 11
SCR 1108 : (2020) 14 SCC 643; Bharat Sanchar Nigam
Limited & Another v. Nortel Networks India Private
Limited, [2021] 2 SCR 644 : (2021) 5 SCC 738; Utkal
Commercial Corporation v. Central Coal Fields Ltd.,
[1999] 1 SCR 166 : (1999) 2 SCC 571; Secunderabad
Cantonment Board v. B. Rama-chandraiah & Sons,
[2021] 3 SCR 68 : (2021) 5 SCC 705; Vidya Drolia and
Others v. Durga Trading Corporation, [2020] 11 SCR
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1001 : (2021) 2 SCC 1; NTPC Ltd. v. SPML Infra Ltd,
[2023] 2 SCR 846 : (2023) 9 SCC 385; Major (Retd.)
Inder Singh Rekhi v. Delhi Development Authority, [1988]
3 SCR 351 : (1988) 2 SCC 338; Prakash Corporates
v. Dee Vee Projects Ltd., [2022] 8 SCR 889 : (2022)
5 SCC 112; Milkfood Ltd. v. GMC Ice Cream (P) Ltd,
[2004] 3 SCR 854 : (2004) 7 SCC 288 - relied on.
Swissbourgh Diamond Mines (Pty) Ltd. v. Kingdom of
Lesotho: (2019) 1 SLR 263 - referred to.
Books and Periodicals Cited
International Commercial Arbitration, Wolters Kluwer,
3rd Edition, pp. 2873-2875, Gary B. Born; O.P. Malhotra
in The Law & Practice of Arbitration and Conciliation,
3rd Edition, pp. 688-689; Dr. P.C. Mar-kanda in
Law Pertaining to Arbitration and Conciliation, 9th
Edition, LexisNexis, pp. 550-551; Mustiu and Boyd's
Commercial Arbitration (1982 Ed., pp. 436) - referred
to.
List of Acts
Arbitration and Conciliation Act, 1996
List of Keywords
Limitation; Franchise agreements; Limitation Act applicability to
arbitration proceedings; Claims ex-facie and hopelessly time-barred;
Petition not barred by limitation; Cause of action.
Case Arising From
CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.29 of 2023
Petition under Section 11(6) of the Arbitration and Conciliation Act,
1996
Appearances for Parties
R. Sathish, Rajesh Kumar, Mohan Das Kk, Mathen Joseph, Mrs. S.
Geetha, Advs. for the Petitioner.
Rana Mukherjee, Sr. Adv., K.V. Balakrishnan, K.V. Mohan, R.K.
Raghavan, Devesh Kumar Khanduri, Ms. Oindrila Sen, Advs. for
the Respondent.
[2024] 3 S.C.R.
79
M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
Judgment / Order of the Supreme Court
Judgment
J. B. Pardiwala, J.
For the convenience of exposition, this judgment is divided into the
following parts: -
INDEX*
A.
FACTUAL MATRIX ................................................................ 2
B.
SUBMISSIONS ON BEHALF OF THE PETITIONER ........15
C.
SUBMISSIONS ON BEHALF OF THE RESPONDENT ......18
D.
ANALYSIS ...........................................................................21
i.
Issue No. 1: Whether the Limitation Act, 1963 is
applicable to an application for appointment of
arbitrator under Section 11(6) of the Arbitration and
Conciliation Act, 1996? If yes, whether the present
petition is barred by limitation? ..............................22
a.
When does the right to apply under Section 11(6)
accrue? ................................................................27
ii.
Issue No. 2: Whether the court may refuse to make
a reference under Section 11 of the Arbitration and
Conciliation Act, 1996 where the claims are ex-facie
and hopelessly time-barred? ....................................36
a.
Jurisdiction versus Admissibility ..........................37
b.
When does the Cause of Action arise? ..............47
c.
When is Arbitration deemed to have commenced?..54
E.
CONCLUSION .....................................................................56
1.
This is a petition under Section 11(6) of the Arbitration and Conciliation
Act, 1996 (for short, "the Act, 1996") filed at the instance of a
company based in Kabul, Afghanistan and engaged in the business of
* Ed Note : Pagination in index as per original judgment.
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providing training to desirous students in computer education, English
language, information technology, etc. praying for the appointment of
an arbitrator for the adjudication of disputes and claims arising from
the Contract dated 21.03.2013 entered into between the petitioner
and the respondent.
A.
FACTUAL MATRIX
2.
The petitioner, M/s Arif Azim Co. Ltd., is a company based in
Afghanistan, having its registered office at 1st Floor, Zarnigar Hotel,
Mohammed Jan Khan Watt, Kabul, Afghanistan and is engaged in
the business of providing training in computer education, information
technology, English language, etc.
3.
The respondent, M/s Aptech Limited, is a company having its
registered office at Aptech House, A-65, MIDC Marol, Andheri (E),
Mumbai - 400093, Maharashtra, India and is engaged in the business
of providing training and education in information technology through
its network in India and abroad.
4.
On 21.03.2013, three separate franchise agreements were entered
into between petitioner/franchisee and the respondent/franchisor. As
per the terms of the said agreements, the petitioner, as the franchisee,
was granted a non-exclusive license, by the respondent to establish
and operate businesses under the following trade names:
I.
Aptech English Language Academy (for short, "AELA")
II.
Aptech Computer Education (for short, "ACE")
III.
Aptech Hardware and Networking Academy (for short, "AHNA")
5.
The dispute in the present case pertains to the agreement entered
into between the parties for the AELA. A perusal of the recitals of
the said agreement reveals that the respondent company has the
expertise in imparting training in information technology and had
developed content and established programs for training in computerbased information. The programs developed by the respondent under
the brand name AELA included the recurring use of trade names,
trademarks, advertising and publicity, distinctive style and character
of premises and furnishings, support and placement program for
students, etc. The petitioner, desirous of establishing a centre for
providing training in information technology in the courses conducted
by the respondent with a view to train and educate students to enable
[2024] 3 S.C.R.
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
them to appear and qualify in the said courses, had approached the
respondent as a result of which the franchise agreements for AELA,
ACE and AHNA were entered into between the parties.
6.
The relevant clauses of the AELA franchise agreement are reproduced
hereinbelow:
"1. GRANT OF LICENSE
1.01 The Franchisor hereby grants to the Franchisee for the
duration of the term and upon the terms of this Agreement,
an non-exclusive Licence ("the Licence") to establish and
operate in the Territory, a business under the Trade Name
"APTECH ENGLISH LEARNING ACADEMY" in accordance
with the PROGRAM, on the terms and conditions hereinafter
set forth ("the Licensed Business"), from the designated
training centre located at First Floor, Zarnigar Hotel,
Mohammad Jan Khan Watt, Kabul, Afghanistan (hereinafter
the center)) set up in the designated territory, unless
revoked otherwise by the Franchisor. The Franchisor shall
Licence to the Franchisee use of the Trade Name in the
said territory for the purpose of running the said center.
The Franchisee shall conduct only those courses as are
mentioned in Schedule 2. The Franchisee shall be required
to obtain the prior written permission of the Franchisor, if so
directed by the Franchisor before commencing the licensed
business from the said centre. However in respect of any
additional training centers in the designated territory for
carrying out the Licensed Business, the Franchisee shall
be required to obtain such written permissions from the
Franchisor from time to time.
xxx

xxx

xxx
3. APPOINTMENT
Subject to the terms and conditions of this agreement the
Franchisor appoints the franchisee as an independent
non-exclusive partner with the right to market and train
learners in the territory outlined in Schedule 1.
Each party is acting as an independent contractor and
not as an agent, partner or joint venture with the other
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party for any purpose. The franchisee shall bear all costs
relating to the marketing and promotion of the courses as
outlined in Schedule 2.
xxx

xxx

xxx
8. PAYMENTS AND PAYMENT PROCEDURE
8.01 In consideration of the Franchisor agreeing to
grant the licence for the licensed business, in favour
of the Franchisee for a period as mentioned in Clause
2 above and for the use of the technical Know- how,
trade marks, trade names, service marks and logos of
the Franchisor in relation to its business of computer
education and the association of the Franchisee with the
reputation and goodwill of the Franchisor, the Franchisee
agrees to pay to the Franchisor a Non refundable sum
of US$ 30,000 (US Dollars Thirty Thousand only) as
initial lumpsum fees.
8.02 If the Franchisee fails to pay the aforesaid lumpsum
fees within the aforesaid period, the Franchisor shall be
entitled to terminate this Agreement with immediate effect
and shall have the right to forfeit the fees, if any, already
paid by the Franchisee.
8.03 Additionally, in consideration of the License and other
rights granted, and assistance agreed to be provided
hereunder, the Franchisee shall pay to the Franchisor
recurring royalty fees as under.
I.
The recurring royalty payment shall be on the gross
collection, to be paid as given below:

●
10% of the gross collections received in the
1st Year.

●
10% of the gross collections received in the
2nd year.

●
12.5% of the gross collections received in the
3rd Year.

●
15% of the gross collections received in the
4th year.
[2024] 3 S.C.R.
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.

●
17.5% of the gross collections received in the
5th year.
Gross collections means the total gross collections,
which have accrued to the Franchisee (irrespective of
whether realized or not) from the conduct of licensed
business of Aptech in the designated territory.
Amounts payable as Recurring Franchisee Fees will
be remitted on or before 10th of the subsequent month
for the preceding calendar month e.g. Recurring
Franchisee Fees for the gross collections received
during the period 1st April to 30th April will be remitted
on or before May 10th
Such recurring payments shall be made on monthly
basis accompanied by the statement of course fees
for each Course for the relevant month and also for
the total period for which Franchisee's financial year
relates. The Franchisee shall use a format supplied
by the Franchisor for such statements duly supported
with requisite documentation.
II.
All the payments to be made by the Franchisee to the
Franchisor shall be by way of Telegraphic Transfer
/ Demand Draft.
III.
Any and all statutory tax on the payment as above
as per local laws, any other taxes, incidental taxes,
incremental taxes, duties or any other charges
whether statutory or otherwise in respect of the
payments to the Franchisor shall be borne and paid
by the Franchisee alone during the term of this
agreement.
IV.
In case the payments under this agreement are
not received by the due date the Franchisor shall
be entitled to levy monthly compound interest @
24% p.a. on such late payments notwithstanding
the other remedies available under the laws of
the land.
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xxx

xxx
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12. RENEWAL
Not less than one hundred eighty days before the expiry
of this Agreement (whether or not it has previously
been renewed under the provisions of this Clause) the
Franchisee may apply to the Franchisor for renewal of
this Agreement for further period(s). Provided that the
Franchisee has complied fully with the terms and conditions
of this Agreement, the Franchisor shall have option to
renew this Agreement on the terms and conditions for
such mutually agreed period. However in case the renewal
documents and renewal fees are not received in time
as stipulated by the Franchisor, the Franchisor has the
absolute right to charge monthly compound interest @
24% p.a. on the late renewal fees from the due date of
such payment, notwithstanding the right to terminate the
renewal of this agreement.
13. FORCE MAJEURE
Neither party to this agreement shall be liable for any
failure or delay to perform any of its obligations under
this agreement if the performance is prevented, hindered
or delayed by a Force Majeure Event which is beyond
reasonable control of either party and in such a case its
obligations shall be suspended for so long as the Force
Majeure event continues. Each party shall promptly inform
the other in writing of the existence of a Force Majeure Event
and shall consult together to find a mutually acceptable
solution. "Force Majeure Even" means any event due
to any cause beyond reasonable control of parties to
this agreement viz. unavailability of any communication
systems, breach or virus in the processes, fire, storm,
earthquake, Flood. Explosion, Act of God, Civil commotion,
strikes, or industrial action of any kind, riots, rebellion,
war wreck, epidemic failure, statutory laws, regulations or
other Government action, computer hacking, unauthorized
access to computer data, etc.
The affected party shall promptly upon the occurrence of
any such cause so inform the other party in writing and
thereafter such party shall use reasonable endeavors to
[2024] 3 S.C.R.
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
comply with the terms of this Agreement as fully and as
promptly as possible.
xxx

xxx

xxx
17. STATUS OF AGREEMENT
17.01 Nothing in this Agreement shall constitute a
partnership between the parties hereto or constitute the
Franchisee an agent of the Franchisor for any purpose
whatsoever and the Franchisee shall have no authority
or power to bind the Franchisor or to pledge its credit.
17.02 This Agreement shall not be deemed to confer
any right on the Franchisee and the license granted by
this Agreement shall be personal to the Franchisee only
and shall not be capable of being or be assigned by the
Franchisee to any other person.
17.03 This Agreement shall in no way create a contractual
relationship between the students and the Franchisor and
the Franchisee shall, at all times, be wholly liable and
responsible for any claims related to and arising out of
the Licensed Business and the conduct of the Courses.
The Franchisee undertakes to ensure that the students
are made aware at the time of enrolling in the Course
that Franchisee is entirely responsible for the conduct of
the Courses and, that the students shall have no claim
whatsoever against the Franchisor.
xxx

xxx

xxx
21. ARBITRATION AND GOVERNING LAWS
In the event of any dispute or difference arising between
the parties hereto, including the events of termination,
the same shall be settled through conciliation between
the parties. In the event the parties are unable to arrive
at a settlement, the matter will be referred to arbitration.
The party raising the dispute shall serve a notice upon
the other party advising that a dispute or difference has
arisen and nominate on that notice its own arbitrator.
The party receiving the notice shall, within 30 days after
receiving such notice, nominate its arbitrator by advising
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the party raising the dispute and the name of the arbitrator
appointed by the other party. The arbitrators so appointed
shall appoint a third arbitrator. The award of the majority
arbitrators shall be final, conclusive and binding upon the
parties hereto. The venue of arbitration shall be MUMBAI
and the arbitration proceedings shall be conducted in
accordance with the UNCITRAL Model Rules. If arbitration
process fails both the parties shall submit to the jurisdiction
of the Mumbai courts.
22. This Agreement shall be construed in accordance with
and governed by the Indian laws."
7.
Pursuant to the signing of the aforesaid agreement, proposals were
invited by the Indian Council for Cultural Relations, Azad Bhavan,
Indraprastha Estate, New Delhi - 110002 (for short, "the ICCR") in
2016 for the execution of a short-term course for training in English
for students from Afghanistan who were selected to pursue degree
courses in Indian Universities in the academic year 2017-18 under
the scholarship scheme of the Government of India (for short, "the
course"). The proposal of the respondent was accepted by the
ICCR vide Sanction Order No. SSSAN-2017-18 dated 10.10.2016.
The sanction order prescribed the schedule for the conduct of the
course, submission of progress report to the Embassy of India in
Kabul (for short, "EOI, Kabul") etc. and also approved the training
fees at Rs 5,000/- + service tax per student per month. The order
also stipulated that the payments for the course would be released to
the respondent by the ICCR at the end of every month after getting
an endorsement from the EOI, Kabul.
8.
After securing the aforesaid sanction order, the respondent vide email
dated 17.10.2016 addressed to the petitioner Company informed
about the sanction order and stated that the respondent would speak
to the petitioner for the implementation of the said order once the
expectations of the ICCR for the course were understood.
9.
Subsequently, a series of emails were exchanged between
the petitioner and the respondent regarding the details of the
course including the syllabus, learning outcomes, class schedule,
qualifications, salary and number of trainers, etc.
10. The EOI, Kabul vide email dated 24.12.2016, informed the petitioner
that although the applications of Afghan students were already sent
[2024] 3 S.C.R.
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
to the Indian Universities, yet the Universities had not started granting
admissions to them and thus it was suggested by the ICCR that the
course should begin from the last week of January/ First week of
February, 2017.
11. The course was executed by the petitioner at its centre in Kabul
from February to April, 2017 for 440 Afghan students. The same was
certified by the EOI, Kabul vide its letter no. KAB/327/05/2016-17
dated 30.07.2017.
12. Vide letters dated 04.08.2017 and 14.08.2017 respectively addressed
to the EOI, Kabul, the program director for the ICCR requested for
month-wise details/number of students who attended the course so
as to process the payments for the course to the respondent.
13. Meanwhile disputes arose between the parties in relation to
the renewal and payment of royalties for all the three franchise
agreements entered into by the parties in March, 2013. Vide email
dated 20.03.2018 addressed to the petitioner, the respondent issued
a recovery notice for non-payment of royalty/renewal fees. The email
stated that due to the non-payment of outstanding royalty, the portal
operations for AELA and ACE would be shut by 21.03.2018 and by
the month-end for the AHNA portal.
14. The petitioner replied to the aforesaid recovery notice vide email
dated 23.03.2018, however the contents of the same have not been
placed on record. The respondent replied to the reply email of the
petitioner vide email dated 27.03.2018 stating that despite having
sent the invoices for pending royalties, nothing had been received
by the respondent. Responding to the issue of non-payment for the
course conducted by the petitioner, the respondent stated in the
said email that they had not received the full amount from the ICCR,
which had officially held back 22% of the payment for deductions of
quality. The respondent also called upon the petitioner to urgently
address, inter-alia, the issue of renewal of the franchise agreements.
15. Responding to the above referred email on the very same day, i.e.,
27.03.2018, the petitioner stated that it had hired 7 Indian and 4
local English trainers for executing the course and since the course
had been executed in Afghanistan, it was entitled to receive 90% of
the payments received by the respondent from Aptech India. The
petitioner further requested the respondent to share the details of
the amount received from the ICCR after the 22% deduction to
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enable them to make the calculations and finalise the payment
accordingly.
16. The respondent vide an email dated 28.03.2018 replied to the above
email of the petitioner stating that it had received only 61.5% of the
claimed amount from the ICCR after quality and TDS deductions.
The respondent further mentioned that it was entitled to 15% royalty
as opposed to the 10% stated by the petitioner and that it had
incurred some incidental expenses for the project. The respondent
also stressed on the issue of payment of outstanding royalty and
renewal, calling upon the petitioner to address them first.
17. The petitioner replied to the above email on the same day disputing
the percentage of royalty fee to which the respondent was entitled.
The petitioner further stated that it had no issues regarding the
quality deductions made by the ICCR, however it needed to know
the exact amount disbursed by the ICCR to the respondent so that
it could calculate its share from the same and adjust them towards
the pending dues.
18. From the email exchanges placed on record, it is clear that the
discussions regarding the non-payment of the amount received from
the ICCR came to a halt between the parties on 28.03.2018, however
the discussions regarding the renewal of the agreements continued.
Finally, on 23.04.2018, the petitioner informed the respondent of its
decision to not renew the franchise agreements for the ACE and AELA
in light of the dispute regarding the payment for the course executed by
the petitioner. However, the agreement for AHNA was renewed and the
respondent acknowledged the same vide an email on the same day.
19. After about nine months, the petitioner once again sent an email to
the respondent on 29.12.2018, raising the issue of the non-payment
of the dues for the ICCR project. Although the said email refers
to some phone calls and WhatsApp communication regarding the
payment for the course, nothing has been placed on record by the
petitioner to that effect. Vide the said email, the petitioner once
again requested the respondent to provide accounting details for
the expenses incurred and payment received from the ICCR for the
course. The petitioner also mentioned that it had incurred expenses
amounting to $ 60,000/- on salary, lodging and food for the trainers.
20. As it appears from the record, it is only after a gap of around
three years that the petitioner again took up the issue of non-
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
payment of dues for the ICCR project with the respondent,
vide a legal notice dated 26.08.2021. Through the notice, the
petitioner called upon the respondent to pay Rs 73,53,000/- with
18% interest compounded monthly w.e.f. 01.11.2017 within 15
days of the receipt of the notice. The notice further stated that in
the event of the respondent failing to comply with the aforesaid
demand, the petitioner would file appropriate proceedings before
the competent courts including a suit for settlement of accounts
for recovery and also by way of damages or otherwise for breach
of trust and breach of contract.
21. Again, after about 10 months, the petitioner invoked a pre-institution
mediation before the Main Mediation Centre, Bombay High Court
on 05.07.2022 in accordance with Section 12A of the Commercial
Courts Act, 2015 making the respondent and the ICCR as party
respondents. Notice was issued in the said mediation proceedings
and 12.08.2022 was scheduled as the date for appearance of the
parties. Upon failure of the parties to be present on the said date,
24.08.2022 was fixed as the next date for appearance. However, on
the said date, the opposite parties submitted letters refusing to go
into mediation and thus a non-starter report dated 24.08.2022 was
issued under Rule 3(4) of the Commercial Courts (Pre-Institution
Mediation and Settlement) Rules, 2018.
22. After the failure of mediation as aforesaid, the petitioner sent notice
for invocation of arbitration to the respondent on 24.11.2022. Vide the
notice, the petitioner called upon the respondent to pay an amount of
Rs 1,48,31,067/- inclusive of interest of Rs 82,13,367/- and nominated
Mr V. Giri and Mr M.L. Verma, Senior Advocates practicing in this
Court as its nominee arbitrators.
23. The respondent replied to the aforesaid notice vide letter dated
05.04.2023 denying all the claims raised by the petitioner in the notice
dated 24.11.2022. It further stated that notwithstanding the merits,
the claims were barred by limitation. The respondent also stated
that the mediation proceedings initiated before the Bombay High
Court were under Section 12A of the Commercial Courts Act, 2015
which is a mandatory requirement before filing a commercial suit,
and thus it was not open to the petitioner to link it to the conciliation
as envisaged in the clause 21 of the franchise agreement for AELA
as extracted hereinbefore.
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24. The present petition then came to be filed by the petitioner on
19.04.2023 before this Court after the failure of the respondent in
nominating an arbitrator as per the mutually agreed upon procedure
in response to notice for invocation of arbitration.
B.
SUBMISSIONS ON BEHALF OF THE PETITIONER
25. Mr. R. Sathish, the learned counsel appearing for the petitioner
submitted that this Court has the requisite jurisdiction to take
necessary measures for the constitution of an arbitral tribunal under
Section 11(6) of the Act, 1996 as the case at hand pertains to an
"international commercial arbitration" within the meaning of Section
2(f) of the Act, 1996. Further, clause 21 of the AELA agreement
provides for appointment of a three-membered arbitral tribunal in
case a dispute arises and cannot be resolved through conciliation
between the parties.
26. The counsel submitted that the petitioner, as an independent
non-exclusive partner of the respondent, is entirely responsible
for the conduct of the course as per clause 17.03 of the franchise
agreement and is thus entitled to receive 90% of the payments
received by the respondent from the ICCR after successful
completion of the course.
27. The counsel argued that as the principal contract for the course
was signed between the ICCR and the respondent, the grant in aid
of Rs 73,53,000/- was transferred by the ICCR to the respondent
on 03.10.2017 after the certificate of successful completion of the
course was issued by the EOI, Kabul. However, since the course
was executed in Afghanistan by the petitioner as the franchisee, it
is entitled to received 90% of the amount received as per the AELA
franchise agreement.
28. The counsel further submitted that the respondent had neither
informed nor disclosed the amount received from the ICCR despite
repeated requests made by the petitioner for settlement of accounts.
The petitioner further contended that the experience of the respondent
with the ICCR and Government of India cannot be a ground for
withholding of the payments by the respondent.
29. The counsel argued that the cause of action first arose on 03.10.2017
when the respondent withheld the information of receipt of Rs
73,53,000/- from the ICCR. The cause of action further arose on
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M/S Arif Azim Co. Ltd. v. M/S Aptech Ltd.
28.03.2018 when the respondent informed that cash-flow wise it had
received only 61.5% of the claimed amount from the ICCR and that
it had incurred some incidental expenses for the project.
30. The petitioner contended that since the respondent has failed to
disclose the amount received from ICCR till date, it has resulted in
a continuing cause of action as the petitioner couldn't quantify the
total amount due along with interest as exact details of the amount
received by the respondent from the ICCR were not disclosed.
31. The counsel submitted that as the cause of action for full and final
settlement of claims was yet to accrue, the reliance placed by the
respondent on the decision of this Court in M/s B and T AG v.
Ministry of Defence reported in 2023 SCC OnLine SC 657 was
misconceived.
32. The counsel submitted that a force majeure situation as per clause
13 of the AELA agreement was created due to the coming back of
Taliban in Afghanistan in August, 2021. It was contended by the
petitioner that this resulted in the break-down of all communication
channels disabling the petitioner from approaching the courts on
time despite of doing everything in its power.
33. The counsel further submitted that the petitioner is entitled to get the
benefit of the extension of limitation period as directed by this Court
in SMW(C) No.