INTRODUCTION
India marked a significant step in the field of arbitration with the introduction of the Arbitration and Conciliation Act in 1996.[1] This Act is shaped by prevailing mistrust in the arbitral process and offers enough room for litigants to seek judicial intervention. Along with the sluggish judicial system, this can lead to significant delays, rendering arbitration inefficient and unattractive.[2] A revealing note of the same was evident in the 1981 judgement of the Supreme Court, where Justice DA Desai, in agony, stated that ‘the way in which the proceedings under the (1940) Act are conducted and without an exception challenged in courts, have made lawyers laugh and legal philosophers weep…..’.[3]
Arbitration is a widely used method for resolving disputes among individuals. It consists of an agreement between both parties where they mutually appoint one or more arbitrators, who then render a binding decision.[4] Section 2(1)(a) of the Arbitration and Conciliation Act,1996,[5] “Arbitration means any arbitration, whether or not administered by a permanent arbitral institution.” It comprises a simplified trial with clear rules of evidence with no discovery.
What is the ‘breaking point’?
In Arbitration, “breaking point” is defined as the point at which any prudent person or party would abandon efforts for reaching a mutual settlement and consider the redressal of disputes through arbitration, by clearly and unequivocally expressing its intention to arbitrate the disputes, and the other party refuses or fails to cooperate with the said party in resolving their disputes amicably or through arbitration.
Significance of ‘breaking point’ in Arbitration
The significance of the ‘breaking point’ in any arbitration to decide the limitation period is that it marks the date on which the cause of action for the appointment of an arbitrator arises. The statutory period for initiating an application under Section 11 (6) of the Act[6] Commences only from the date of the ‘breaking point’, regardless of whether the arbitration agreement mentions a clause on pre-arbitration negotiation or not. The purpose of this principle is to avoid unnecessary delay and multiplicity of proceedings in arbitration and to ensure that the parties invoke arbitration within a reasonable time after exhausting their attempts to resolve their disputes amicably.
Legal Provisions
The Arbitration and Conciliation Act, 1996, gives the parties the freedom to choose their own arbitrators and devise their own procedure for appointment, subject to the provisions of the Act. However, if no appointment has been made within the statutory timeframe, then either party can approach the court for the appointment of an arbitrator under Section 11 of the Act.[7]
- Section 43 (1)of the Arbitration and Conciliation Act, 1996, states that the Limitation Act, 1963 (the Limitation Act) applies to arbitration as it applies to proceedings in court.
- Section 43 (2)of the Act states that for the Limitation Act and of setting in motion the legal machinery for enforcement of any award, the arbitration shall be deemed to have commenced on the date referred to in Section 21 of the Act.
- Section 21 of the act states that unless there is an agreement to the contrary, an arbitral proceeding concerning a particular dispute should start from the date when the respondent is provided with a request for reference to arbitration.[8]
- Article 137of the Schedule to the Limitation Act[9] Provides that any additional applications that do not have a time limit specified elsewhere in this division must be submitted within three years of the application date.
When does the right to apply for the appointment of an arbitrator and the invocation of arbitration accrue?
The Supreme Court has reiterated that an application for the appointment of an arbitrator cannot be filed beyond three years and would be bound by the limitation period.[10] It has also been held in several cases that the cause of action for the appointment of an arbitrator arises when there is a ‘deadlock’ or a ‘breaking point’ between the parties with respect to their disputes. This means that when one party refuses or fails to cooperate with the other party in resolving their disputes amicably or through arbitration, then the other party has a right to apply for the appointment of an arbitrator.
In its decision in State of Goa v. Praveen Enterprises,[11] The Supreme Court held that:
“The cause of action for applying Section 11(6) would arise only after the expiry of thirty days from receipt by one party from another party a notice invoking the arbitration clause and calling upon him to appoint his arbitrator.”
The statute of limitations for the appointment of an arbitrator is not triggered by the parties’ disagreements alone. There must be a clear indication from one party that it is not willing or able to participate in arbitration or appoint its arbitrator. This could be done by sending a notice invoking arbitration and requesting the appointment of an arbitrator, or by responding negatively or evasively to such a notice from the other party.
However, it is also possible that there may be more than one cause of action for the appointment of an arbitrator, depending on how many disputes arise between the parties and how they communicate with each other regarding them. For example, if one party sends a notice invoking arbitration for some disputes and later sends another notice for some additional disputes, then each notice may give rise to a separate cause of action for the appointment of an arbitrator. Similarly, if one party responds to a notice invoking arbitration by denying some disputes and admitting others, then there may be different causes of action for different disputes.
Therefore, it is advisable for parties who wish to resort to arbitration to keep track of their correspondence and communication with each other regarding their disputes and their attempts to resolve them through arbitration. They should also ensure that they invoke arbitration and seek the appointment of an arbitrator within the prescribed limitation period of three years from the date of the ‘breaking point’ between them, failing which they may lose their right to arbitrate their disputes.
Landmark Judgments
In M/S NN Global Mercantile Pvt Ltd v. M/S Indo Unique Flame Ltd & Others,[12] The Supreme Court held that the arbitration agreement is an independent agreement between the parties, and is not chargeable to payment of stamp duty. The non-payment of stamp duty on the commercial contract would not invalidate the arbitration clause since it has an independent existence of its own.
In Future Coupons Private Limited & Ors v. Amazon.com NV Investment Holdings LLC,[13] The Delhi High Court decided the legal status of the appointment of emergency arbitrators between the parties and held that an emergency arbitrator is an arbitrator for all purposes, and his order is enforceable as an order of the court under Section 17 (2) of the Act. The court also held that the bar under Section 9 (3) of the Act would not apply to an application already entertained by the court before the constitution of the tribunal.
In Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund & Ors,[14] The Supreme Court held that if a petition under Section 7 of the IBC is admitted, any application under Section 8 of the Act made thereafter will not be maintainable. The court also held that an arbitration clause in a shareholder’s agreement would not be rendered inoperative or incapable of being performed merely because it is contained in or related to a contract that is alleged to have been induced by fraud or misrepresentation.
In M/s. Zillion Infraprojects Pvt. vs Bharat Heavy Electricals Limited,[15] The High Court of Calcutta held that the Breaking point should be decisive for concluding on the limitation while deciding upon a Section 11 Application under the Arbitration & Conciliation Act, 1996.
Conclusion
When examining the “breaking point” between parties in arbitration and its relationship to the limitation period, several key considerations arise. Firstly, the period of genuine negotiations aimed at reaching an amicable settlement can be excluded when calculating the limitation period for referral to arbitration. However, it is essential to thoroughly document the entire negotiation history and present it to the Court for a comprehensive review. The Court’s responsibility is to identify the specific moment when a reasonable party would have ceased settlement efforts and turned to arbitration. This critical “breaking point” becomes the starting date for the cause of action within the limitation period. It is essential to acknowledge that the threshold for determining this point may vary depending on the nature of the specific dispute. By comprehending the significance of the breaking point and its impact on the limitation period, we can ensure a fair and efficient arbitration process.
Notes:
[1] Sumeet Kachwaha, The Arbitration Law of India: A Critical Analysis, volume 2, Asian International Arbitration Journal, 2005
[2] Supra
[3] Guru Nanak Found. v. Rattan Singh & Sons, (1981) 4 SCC 634, 641
[4] Yuman Islam and Naman Kasliwal, Stamping the Path to Validity: A Critical Analysis of Arbitration Agreements in Indian Legal Landscape, International Journal of Law Management and Humanities, https://ijlmh.com/paper/stamping-the-path-to-validity-a-critical-analysis-of-arbitration-agreements-in-indian-legal-landscape/ (last visited on December 12, 2025).
[5] Arbitration and Conciliation Act, No. 26 of 1996, § 2(1)(a)
[6] Arbitration and Conciliation Act, No. 26 of 1996, § 11(6)
[7] Arbitration and Conciliation Act, No. 26 of 1996, § 11
[8] Arbitration and Conciliation Act, No. 26 of 1996, § 21
[9] Limitation Act, No. 36 of 1963, art. 137
[10] Apoorva, Seeking appointments of Arbitrators beyond three years is barred by limitation: Supreme Court reiterates, SCC Online Blog, (Dec. 15, 2025, 5:45 PM), https://www.scconline.com/blog/post/2023/05/25/seeking-appointment-of-arbitrator-beyond-3-years-is-barred-by-limitation-supreme-court-reiterates-legal-news/
[11] State of Goa v. Praveen Enters., (2012) 12 SCC 581
[12] N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379
[13] Future Coupons (P) Ltd. v. Amazon.com NV Inv. Holdings LLC, 2021 SCC OnLine Del 349
[14] Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund, (2021) 6 SCC 436
[15] Zillion Infraprojects (P) Ltd. v. Bharat Heavy Elec. Ltd., 2022 SCC OnLine Cal 1303
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