Due to legislative loopholes, the current arbitration landscape has a number of underlying difficulties that allow the defaulting party to use delay tactics in violation of the Arbitration & Conciliation Act, 1996's mandate. For example, if the party receives interim relief under Section 9, they are not required to take any further action to start arbitration within the time frame specified in Section 9(3); rather, it is purely directory. Similar to this, the Limitation Act gives an excessively long three-year time since no Section 11 limitation period has been specified for the nomination of an arbitrator following arbitration.

Analysing the recent decision of the Supreme Court in the case of Arif Azim vs. Aptech Ltd (2024) as a guide, this article aims to offer possible solutions to the problems listed above by introducing strict time limits for filing lawsuits through the appropriate legislative actions in order to settle disputes quickly.

Introduction
The recent Supreme Court ruling in Arif Azim vs. Aptech Ltd.[i], relating to arbitration delays and finding clarity on the limitation period that is applicable under the Arbitration Act, has brought new issues into focus. The foremost objective of parties choosing arbitration is to expedite justice, but the current three-year limitation period stands as a barrier to this purpose. This judgment does clarifies many aspects regarding the limitation period for filing section 11 applications, but it does not tackle the bigger issue of systemic delays caused by legislative gaps in sections 9 and 11.

The extended three-year period allows parties to delay arbitrator appointments, undermining the purpose of arbitration as a swift dispute resolution method. This article analyses the gaps within Sections 9 and 11 of the Act and proposes reforms to address these concerns. The Court, while recognizing the need for legislative reform, emphasized the importance of reducing this extended timeframe to prevent misuse and ensure that arbitration remains an efficient alternative to litigation.

Understanding Arif Azim vs Aptech Ltd.

The case is a transnational dispute involving the Afghan franchisee M/s Arif Azim Co. Ltd Afghan franchisee, M/s Arif Azim Co. Ltd., (the Petitioner), and its Indian franchisor, M/s Aptech Ltd., the Respondent, both being in the business of IT training and education. This is primarily based upon three franchise agreements entered by the parties with each other back in 2013 whereby the petitioner was allowed to set up and run training centres in Afghanistan under the brand and expertise of the Respondent.

In 2017, the Petitioner conducted a training course for students selected by the Indian Council for Cultural Relations (ICCR) under a proposal accepted by the Respondent. This led to disagreements regarding the renewal of franchise agreements, payment of royalties and entitlement of the Petitioner to a share of the fees for the ICCR programme. A notice invoking arbitration was issued by the petitioner in November 2022. Since the respondent failed to appoint an arbitrator, a Section 11(6) application was filed by the petitioner with the Supreme Court in April 2023.

The key legal question was whether the claims of the Petitioner were hopelessly time-barred. And whether the provisions of the Limitation Act, 1963, apply to applications for the appointment of arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Supreme Court's Reasoning
The Supreme Court affirmed the applicability of Section 137 of the Limitation Act, 1963, in the case of Arif Azim vs. Aptech Ltd to applications filed under Section 11(6) of the Arbitration and Conciliation Act, 1996. While the Arbitration Act aims at speedy redressal of disputes, the Court had to determine whether this long period for appointments of arbitrators is in consonance with that legislative intent.

The Court recognized the challenges posed by this extended schedule, acknowledging that delays in the nomination of arbitrators hinder the effectiveness of arbitration, which is meant to be a faster alternative to litigation. Although the Court followed the existing legal framework, it highlighted the need for legislative changes to shorten the limitation period, reducing delays and ensuring that arbitration serves as an effective means of resolving disputes.

Analysis of the Judgment's Impact

Section 9 - Interim Relief

This leads us to consider the broader implications of the Court's reasoning on the arbitration process. As the Supreme Court held in its judgment that parties can indeed abuse the provision of Section 9 for interim protection even before or at the arbitration stage. Though the clause is one to prevent permanent damage, it may result in delay if the party requiring the relief delays the arbitration. Though Section 9(2) sets out a time limit of 90 days within which arbitration must commence upon securing interim relief, the Court stuck by its previous decision that this time period is not binding or mandatory.
  In Sundaram Finance Ltd. v. NEPC India Ltd, the Supreme Court emphasized that the parties must show intent to arbitrate, although the 90-day window is flexible. This flexibility may allow a party to delay arbitration, undermining the goal of expeditious conflict settlement.
  Subhash Projects & Marketing Ltd. v. State of Himachal Pradesh cited recent judgments, which elaborately stated that undue delay in the commencement of arbitration proceedings makes an interim order inexecutable and hence calls for legislative clarification as well as stringent policy regarding timelines for interim relief.
 

Section 11 - Appointment of Arbitrators

The Court restated that the applications for appointment of arbitrators are governed under section 137 of the Limitation Act, 1963. When the right to apply arises—usually after notice—the opposing party fails to appoint its arbitrator, then the three-year statute of limitation begins. In Bharat Sanchar Nigam Ltd. v. Nortel Networks India Pvt. Ltd., it was clarified by the Hon'ble Supreme Court that although the Limitation Act is applicable, the arbitration process is actually meant to hasten the redressal process, and three-year limitation prevents delays but simultaneously defeats the purpose of expediting dispute resolution. It followed the wide precinct of limitation but called for legislative amendments to avoid such undue delay again.
 

Need for Reforms in Light of the Judgment

A swift resolution of disputes is the main objective of arbitration, and the three-year limitation period under section 137 for appointing arbitrators (Section 11) is counterproductive. Allowing these delays undermines the purpose of arbitration as a swift alternative to litigation. A shorter, mandatory timeline—ideally 90-120 days—would prevent abuse of this provision and ensure that arbitrators are appointed swiftly.
  Additionally, the directory nature of Section 9(2)'s 90-day deadline for starting arbitration after obtaining interim relief allows parties to secure favourable orders while delaying arbitration. Legislative changes should impose stricter consequences, such as automatically dismissing interim orders if arbitration is not initiated within the allotted period.
 

International Perspectives on Arbitration Delays

International arbitration is fast becoming the most sought-after mechanism of international dispute settlement. Each nation has developed a distinctive approach to ensure that the process is expeditious and efficient. It has often been said that the Indian arbitration regime is too lenient and pliant. Lately, there have been undue delays especially at the stage of deciding in the appointment of arbitrators and grant of interim reliefs. International arbitral institutions, such as the Singapore International Arbitration Centre (SIAC), International Chamber of Commerce (ICC), and the London Court of International Arbitration (LCIA), for example, have published prescribed timelines and clear procedural stages that may deter parties from unduly dragging the arbitration on. The international arbitration institutions would, therefore, provide useful lessons for India in how to construct and benchmark its own arbitration institution against the global gold standard.

• LCIA: Streamlined Procedures and Prompt Appointments with Arbitrators
  It is well known for its detailed arbitration rules, including a time frame with specific deadlines on the appointment of arbitrators. Under LCIA Arbitration Rules 2020, the LCIA Court shall nominate arbitrators and inform parties of such nominations within 35 days from the actual outcome of a formal notice of arbitration. Such a schedule also ensures that pending disputes are not allowed to fester and thwart the purpose of arbitration.
   
• ICC: High Procedure Compliance Standards and Expedient Case Processing
  The International Chamber of Commerce (ICC) is known for its strict adherence to institutional case management procedures and compliance guidelines. The ICC arbitration procedures are designed with care to prevent delays without reasons, which speeds up the process of resolving disputes. The main reason arbitration was created as a quick way to resolve disputes is that this arrangement ensures that the processes move forward on schedule and without interruptions. Because of this, the ICC has persisted in establishing itself as the arbiter of international arbitration by making sure that there are no effective and ineffective ways to handle the proceedings.
   
• SIAC: Swift Arbitration and Swift Relief
  Singapore is one such hub for arbitration in the entire world—Singapore International Arbitration Centre (SIAC) which guarantees to give direction and speedy procedure through the time-taking process. Conflicting parties may select to resolve their disputes below the SIAC expedited arbitration rules in six months from the date on which the Tribunal is constructed. Under Rule 5.1 of the Singapore International Arbitration Centre Arbitration Rules 2016, parties to an arbitration may agree to have their disputes resolved by way of expedited arbitration where all the parties so agree and the sum in dispute does not equal or exceed a threshold amount prescribed.

Lessons for India
The LCIA, ICC, and SIAC arbitration systems can be of immense value to India. Appointments of arbitrators can also be made much more stringent by curtailing the currently reasonable 30- to 35-day intervals these institutions follow. This would alone prevent the unwarranted delays caused by the easiness of the three-year limitation term provided under Article 137.

Moreover, arbitration procedure that is speedy in nature, like the SIAC procedure, would enable the parties to seek an early resolution even in smaller disputes and even if the parties agree to a faster procedure. While procedures for emergency arbitration would be indispensable to avoid a repetition of delays that are frequently observed under the current usage of Section 9 of India, it would also be very important to have well-defined and time-bound processes for granting interim relief.

Such truncation of judicial discretion to grant orders granting extensions of time would ensure that the legislatures can ensure arbitration might also serve as an effective and speedy alternative to judicial determination. Such amendments would ensure that the framework of arbitration in India is more efficient and appealing as a global hub for arbitration in terms of being aligned with the international standards.

Conclusion
Arif Azim vs. Aptech Ltd. The verdict brings out the tension between flexibility and efficiency within India's arbitration framework. While Section 137's three-year statute of limitation is sustained by the Supreme Court, it acknowledged that such an elongated period is well against the basic aim of dispute resolution in arbitration. It also highlighted the portals in Section 9, where the provision of 90 days to file an application for arbitration after the interim relief has been awarded is mere directory.

Judgments such as Bharat Sanchar Nigam Ltd. and Subhash Projects criticized the gaps in the legislation but nothing much changed. This case emphasizes the urgent need for legislative reforms to accelerate arbitration procedures and prevent delays. Although the judiciary has raised some points of concern, only binding legislative reforms can ensure that arbitration does not become as slow and unduly inconsequential as traditional litigation.

End Notes:

1. Arif Azim vs. Aptech Ltd, 2024 INSC 155.
2. Sundaram Finance Ltd. vs. NEPC India Ltd., MANU/SC/0012/1999.
3. Subhash Project and Marketing Limited vs. State of Himachal Pradesh, MANU/PH/0419/2000.
4. Bharat Sanchar Nigam Ltd. and Ors. vs. Nortel Networks India Pvt. Ltd., MANU/SC/0171/202.
5. Kim Bronwyn, The Impact of the International Arbitration Act on the Choice of South Africa as a Seat for International Commercial Arbitration, PROQUEST (2019, 10:00PM),
   https://www.proquest.com/openview/0fa5e4392268e547823908b25e5425e3/1?pq-origsite=gscholar&cbl=18750&diss=y

Written By:

• Lakshita Magar, 4th Year Students at National University of Study and Research in Law, Ranchi &
• Nikhil Verma, 4th Year Students at National University of Study and Research in Law, Ranchi