Beautex vs Vfs Global Services Private ...
2023 Latest Caselaw 2430 Bom

                                                                903.apl.3423.2023.doc


 Chaitali Ekke


                 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                     ORDINARY ORIGINAL CIVIL JURISDICTION

                        APPEAL (L) NO. 3423 OF 2023
                                    IN
                 ARBITRATION PETITION (L) NO. 26720 OF 2022

 M/s. Beautex and Ors.                           ...Appellants
                                                  (Org. Respondents)
              Versus
 VFS Global Services Private Limited         ...Respondent
                                   ....
 Mr. Shyam Kapadia a/w Gauri Tyagi a/w Ms. Samiksha Manek i/b M.M.
 Legal Associates, Advocates for Appellants.
 Mr. Atul Rajadhyakshya, Senior Advocate a/w Mr. Aniesh Jadhav i/b Mr.
 Vinay S. Bandiwdekar, Advocates for Respondents.
                                   ....

                                 CORAM      : K. R. SHRIRAM &
                                              RAJESH S. PATIL, JJ.

                                 DATED      : 14th March 2023
 P.C.:

 1                This is an Appeal under Section 37 of the Arbitration and

Conciliation Act, 1996 (the said Act) impugning an order pronounced

on 23.12.2022. The learned single judge allowed the petition that was

filed by Respondent in this Appeal under Section 34 of the said Act. The

question for determination before the learned single judge was

"whether the learned Arbitrator was justified in dismissing the claim

raised by Petitioner (Respondent herein) solely on the ground of

limitation, which was framed as a preliminary issue". Consequently, the

contentions of Respondent herein on merits were not considered.

903.apl.3423.2023.doc

2 Appellants and Respondent had entered into two leave

leave and licence agreements for two office premises being Unit No.4

and Unit No.18 in Tulsiani Chambers, Plot No.212, Block III, Backbay

Reclamation Area, Nariman Point, Mumbai - 400021. The leave and

licence agreements were for a period of three years and they stood

terminated by efflux of time on 31.01.2011. This was extended upto

31.01.2014 by his fresh leave and license agreements dated 03.02.2011.

By efflux of time the renewed agreement also expired.

3 The dispute between the parties pertains to a specific

clause in the said agreements relating to the payment of municipal

taxes. The clause provided that municipal taxes of all nature upto

Rs.21,168/- per annum would be borne by Appellant and any increase

in the said taxes beyond the said figure would be shared by both parties

in equal proportion. A clause also stipulated that if the increase was

specifically on account of the nature of business run by Respondent,

Respondent will have to bear the entire liability pertaining to such

increase. Respondent was also required to keep a deposit in the sum of

Rs.42,85,350/- for each of the premises. This was refundable deposit

without interest and were to be refunded to Respondent on expiry or

early termination of the agreements.

4 It is Respondent's case that during the currency of the

agreements, Appellants did not inform Respondent of any additional

903.apl.3423.2023.doc

municipal or property taxes. Certain other issues also arose between the

parties, regarding deduction of TDS etc. and it was decided that

Appellants would adjust a sum of Rs. 4,00,000/- equally between the

parties from the security deposits and Appellants would return a sum of

Rs.81,70,700/-. That was reduced by another sum of Rs.2,00,000/- to

cover a further issue of TDS and it was agreed between the parties that

Appellants would refund a sum of Rs. 79,70,700/- when Respondent

would handover possession of the premises. It was also agreed that

Appellants would return the balance security deposit by 31.01.2015.

5 The issue of TDS remained unresolved till December 2014

and in this backdrop, Appellants handed over four post-dated cheques

for a total sum of Rs.79,70,700/- and requested Respondent to hand

over possession of the two premises. Respondent accepted the post-

dated cheques and handed over the premises on 09.12.2014.

Immediately on the next day, i.e., 10.12.2014, Appellants addressed two

letters to Respondent in the context of the two premises for the first

time raising the issue of having received the demand notice from

municipal corporation with respect to property taxes for a sum of

Rs.49,06,866/- for the period from 2000 to 2010. According to

Appellants, Respondent was to pay a sum of Rs.49,06,866/- for each of

the premises towards the amount demanded by the Municipal

Corporation. Appellants also advised Respondent not to deposit the

903.apl.3423.2023.doc

post-dated cheques because no amounts were payable to Respondent

and Appellants would be issuing stop payment instructions to their

bankers. Communications were exchanged between the parties with

Respondent calling upon Appellants to furnish documents regarding the

purported additional property tax and Appellants replying thereto. It is

Respondent's case that till October 2018 Appellants kept giving

assurances to refund the security deposit amount and resolve the

matter. Respondent also called upon Appellants repeatedly to refund the

security deposit. As nothing seemed to happen, Respondent commenced

Arbitration proceedings. By an order dated 22.02.2022 an Arbitrator

came to be appointed pursuant to an application filed by Respondent

under Section 11 of the said Act. Respondent filed its statement of claim

on 28.03.2022. Appellants filed an application under Section 16 of the

said Act for framing preliminary issue on the ground of limitation. By an

award dated 12.07.2022, the learned arbitrator, exercising powers

under Section 16 of the said Act, decided the preliminary issue and held

that Respondent's claim was barred by limitation and dismissed the

claim. It was this order that was impugned by Respondent in the

Petition filed under Section 34 of the said Act.

6 The learned single judge after hearing the parties interfered

with the order of the learned Arbitrator and held that whether

Respondent's claim was barred by limitation was a mixed question of

903.apl.3423.2023.doc

law and fact and the learned Arbitrator erred in failing to give

opportunity to Respondent to lead evidence to prove that its claim was

not barred by limitation. On the facts and circumstances of the case, the

learned single judge concluded that the conduct of the rival parties after

the letters dated 10.12.2014 were sent by Appellants required

examination.

7 Shri Kapadia appearing for Appellants relying upon a

judgment of the Apex Court in Bharat Sanchar Nigam Limited and

Another vs. Nortel Networks India Private Limited 1, submitted that the

period of limitation for issuing notice of Arbitration would not get

extended by mere exchange of letters or mere settlement discussions.

Mr. Kapadia submitted that Sections 5 to 20 of the Limitation Act do not

exclude the time taken on account of settlement discussions and where

once the time has begun to run, no subsequent disability or inability to

institute a suit or make an application stops it. We have no issues on the

preposition submitted by Mr. Kapadia.

8 Limitation is a mixed question of law and fact and whether

the period of limitation got extended by exchange of letters or

settlement discussions is a question of fact which requires to be

considered and decided by the learned Arbitrator. A claimant must be

given an opportunity to prove the claim to be within limitation by

1 (2021) 5 SCC 738

903.apl.3423.2023.doc

leading evidence. By allowing the application under section 16 the

learned Arbitrator deprived Respondent of an opportunity of

consideration of its claim on merits. The material on record in the

present case and the facts merited an opportunity for leading evidence

on the question of limitation.

9 In the circumstances we agree with the view expressed by

the learned single judge that the issue of limitation ought to have been

decided alongwith other issues after leading of evidence in the facts and

circumstances of the case. Therefore, Appeal dismissed.

10 Mr. Rajadhyakshya is pressing for costs. Appellants to pay a

sum of Rs. 2,00,000/- as costs to Respondent, which amount shall be

paid within two weeks from today by way of cheque to Respondent's

Advocates.

 (RAJESH S. PATIL, J.)                             (K. R. SHRIRAM, J.)