Manish Todi vs Pawan Agarwal
2023 Latest Caselaw 3303 Cal/2

Calcutta High Court

Manish Todi vs Pawan Agarwal on 5 December, 2023

Author: Moushumi Bhattacharya

Bench: Moushumi Bhattacharya

                 IN THE HIGH COURT AT CALCUTTA
                    Ordinary Original Civil Jurisdiction
                            ORIGINAL SIDE

Present :
Hon'ble Justice Moushumi Bhattacharya


                             AP 555 of 2023


                               Manish Todi

                                     vs

                             Pawan Agarwal


For the petitioner      :         Mr. Ratnanko Banerji, Sr. Adv.

                                  Mr. Sabyasachi Chowdhury, Adv.

                                 Mr. Nirmalya Dasgupta, Adv.

                                  Mr. R.L. Mitra, Adv.

                                 Ms. Priyanka Dhar, Adv.



For the respondent      :         Mr. Suddhasatva Banerjee, Adv.

                                  Mr. Rittick Chowdhury, Adv.

                                  Mr. Roshan Pathak, Adv.



Last heard on           :         23.11.2023


Delivered on            :         05.12.2023
                                       2




Moushumi Bhattacharya, J.

1. The petitioner seeks appointment of an arbitrator. The

application has been filed under section 11(6) of The Arbitration and

Conciliation Act, 1996.

2. The respondent has taken a point of maintainability of the

application on the ground that the application is barred under the laws

of limitation.

3. The decision which follows is on the question of maintainability,

that is, whether the present application can survive the objection on

limitation.

The dispute as presented to the Court

4. A Memorandum of Understanding (MoU) was entered into

between the parties on 28.3.2011 whereby the parties were to

disassociate themselves from each other's businesses. In short, the

petitioner was to resign from the respondent's business and was to

receive Rs. 1.50 crores from the respondent in return. Disputes arose

as the petitioner did not receive this money and with regard to

properties where the parties were to construct residential flats. The

petitioner issued a notice invoking the arbitration clause in the MoU on

11.3.2014. The petitioner was served with an award on 01.6.2015. The

petitioner challenged the award under section 34 of the 1996 Act before

the learned Court at Alipore for setting aside of the award. The

respondent preferred an appeal from the order passed by the Alipore

Court in the petitioner's section 9 application. The respondent was

directed to deposit a sum of Rs. 1.50 crores by the Appeal Court which

the respondent deposited on 30.3.2015. The respondent preferred

another appeal from an order passed by the Alipore Court on

22.02.2019 which was disposed of by the Appeal Court by inter alia

permitting the respondent to withdraw Rs. 1.50 crores by furnishing an

equivalent bank guarantee of an equivalent amount. The learned Court

at Alipore allowed the petitioner's section 34 application by an order

dated 28.9.2022 and set aside the award.

5. By a letter dated 9.4.2023, the respondent invoked the

arbitration clause by way of a notice under section 21 of the Act. The

petitioner sent a similar notice on 8.5.2023. The petitioner issued a

second notice invoking the arbitration clause on 10.7.2023. The

respondent disagreed with the choice of the petitioner's arbitrators by

way of a letter dated 17.7.2023. The petitioner filed an application

under section 11 of the Act on 9.8.2023 (AP 344 of 2023) which was

dismissed for default on 9.8.2023. The petitioner filed the present

application under section 11 of the Act on 17.8.2023.

6. The above facts are common to the submissions made on behalf

of the parties.

7. There is little doubt that a dispute exists between the parties as

to the implementation of the MoU dated 28.3.2011. While the petitioner

states that the petitioner did not receive Rs. 1.50 crores from the

respondent, the respondent says otherwise. The multiple notices issued

by the petitioner and by the respondent for invocation of the arbitration

agreement and the contested proceedings before the learned Court at

Alipore and as well as Court would also contribute to this view.

8. The issue however is whether the disputes are ex facie barred by

limitation.

9. Learned counsel appearing for the petitioner seeks to rely on

section 43(4) of the 1996 Act and say that the entire period from

11.3.2014 (when the petitioner issued the first notice of invocation) to

28.9.2022 (when the petitioner's section 34 application was allowed)

would be excluded. Counsel submits that the first notice of invocation

dated 11.3.2014 was within the period of limitation and that the entire

period from that date till 28.9.2022 would get excluded by virtue of

section 43(4) of the Act. Counsel relies on the respondent's invocation

notice of 9.4.2023 which records the respondent's willingness to refer

the disputes and differences to arbitration.

10. Counsel submits that the statement of the respondent in the

notice dated 9.4.2023 as well as in its affidavit in AP 344 of 2023 would

show that the disputes are alive between the parties. Counsel relies on

decisions to urge that the question of limitation should be decided by

the arbitral tribunal.

11. Learned counsel appearing for the respondent argues that the

present application is not maintainable and that both the application

as well as the claims of the petitioner is time-barred. According to

counsel, the notice under section 21 was issued on 10.7.2023, which is

12 years after the right to sue accrued. Counsel submits that the

petitioner's application would be after 4 years 3 months from the date

on which cause of action accrued, even if the petitioner's case under

section 43(4) of the Act is accepted. Counsel relies on Article 137 of The

Limitation Act to say that the period of limitation commenced from

27.6.2011 and ended on 26.6.2014.

12. The question which should be answered is whether the

petitioner's cause of action can be given a fresh lease of life on the

award being set aside by the learned Court at Alipore on 28.9.2022.

The petitioner and the respondent's arguments essentially revolve

around this issue. The related contentions on The Limitation Act, 1963

and section 43(4) of The Arbitration and Conciliation Act, 1996 will

form part of the answer to the first issue. The relevant dates are pivotal

to the discussion and are briefly stated.

"28.03.2011 - A Memorandum of Understanding (MOU) was executed between the parties. Clause 7 (iii)(c) states that the last tranche of Rs. 50 lakhs to be paid within 90 days from the MOU.

11.03.2014- Notice under section 21 of the Arbitration and Conciliation Act, 1996 issued by the petitioner.

03.01.2015- An award was forwarded to the petitioner by the named Arbitrators namely Mahesh Saraf and Rajesh Tulsian.

28.09.2022- The Award was set aside by the Learned District Judge Alipore in the application filed under Section 34 of the Arbitration and Conciliation Act, 1996.

09.24.2023- Notice of the respondent under section 21 of the Arbitration and Conciliation Act, 1996.

08.05.2023 - Notice of the petitioner under section 21 of the Arbitration and Conciliation Act, 1996 wherein the petitioner has abandoned his claim in respect of the Guwahati Property.

10.07.2023 - Notice of the petitioner under section 21 of the Arbitration and Conciliation Act, 1996 and the notice dated 8th May, 2023 was withdrawn.

17.07.2023 - Reply of the respondent to the notice dated 10 th July, 2023."

13. Clause 7(iii) (c) of the MOU executed between the parties states

that the last tranche of Rs. 50 lakhs was to be paid within 90 days

from the MOU. The MOU was executed on 28.3.2011 and 90 days

therefrom would be 27.6.2011. Article 137 of the Limitation Act, 1963,

is a residual provision and provides that the period of limitation is 3

years from the day when the right to apply accrues. Therefore, the

period of limitation would be counted from 27.6.2011 - which is the

date for performance stipulated in the MOU - and would end on

26.6.2014.

14. Further, the petitioner's cause of action arose on the

respondent's failure to pay the last tranche of Rs. 50 lakhs within the

agreed time frame under the MOU i.e. within 27.6.2011. In other

words, Article 137 of the Limitation Act prescribes that the petitioner

would have to apply within 3 years from the day when the petitioner's

right to apply accrues which would end on 26.6.2014 (27.6.2011 + 3

years).

15. Admittedly, the petitioner invoked the arbitration agreement for

the purpose of the present application on 10.7.2023, which is 12 years

after the petitioner's right to sue / apply accrued under Article 137 of

the Limitation Act. The petitioner's earlier invocations of the arbitration

agreement on 11.3.2014 and on 8.5.2023 are irrelevant since the

present application is founded on the invocation dated 10.7.2023. The

petitioner, has in any event, withdrawn the notice dated 8.5.2023 in

the notice of invocation dated 10.7.2023.

16. The petitioner's argument on section 43(4) of The Arbitration and

Conciliation Act, 1996 is required to be tested on the architecture of

the said provision. Section 43(4) is set out below:

"43(4). Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted."

17. Section 43(4), simply put, excludes the time from commencement

of arbitration to the date of setting aside of the arbitral award for the

purpose of computing the time for commencement of the proceedings

with respect to the dispute between the parties. Sub-section (4) of

section 43 declares that The Limitation Act, 1963 will apply to

arbitrations in the same manner as that of proceedings in a Court of

law.

18. According to counsel appearing for the petitioner, the petitioner

would get the benefit of exclusion between the period starting from

27.12.2014 (which is the respondent's notice of invocation of the

arbitration agreement) and 28.9.2022 (being the date of the order of

setting aside of the arbitral award). This period would span 7 years 9

months.

19. However, even if the petitioner's argument on the applicability of

section 43(4) of the 1996 Act is accepted and the period of 7 years 9

months is excluded from computation of limitation, the present

application would still be after 4 years and 3 days from the date when

the petitioner's right to apply accrued under Article 137 of the

Limitation Act. To repeat, the petitioner's right to apply accrued from

27.6.2011 and ended, as per Article 137 of the Limitation Act, on

26.6.2014. The petitioner's notice of invocation was sent on 10.7.2023

which is 12 Years after the petitioner's right to apply accrued on

27.6.2011. Section 43 of the 1996 Act embraces the Limitation Act and

is not in conflict with the latter. Section 43(4) must hence be read in

the context of Article 137 of the Limitation Act which clearly provides

for 3 years from the day when the right to apply accrues. Therefore,

even if 7 years 9 months is excluded / subtracted from 12 years, the

petitioner would still have exhausted the limitation period by 4 years

and 3 months.

20. To clarify further, by the time the arbitration commenced with

the respondent's section 21 Notice (27.12.2014), the limitation period

for the petitioner to apply under Article 137 was already over. The

petitioner's right to apply accrued, as stated above, on 27.6.2011.

Therefore, the limitation of 3 years ended on 26.6.2014. Further fine-

tuning these dates; the period of limitation from 27.6.2011, (which was

the date where the petitioner's right to apply accrued) to 27.12.2014

(the date for invocation of the arbitration by the respondent's 21 notice)

is 3 years 6 months. The petitioner's section 21 Notice dated 11.3.2014

would hence not revive limitation since the arbitration commenced

under section 21 of the 1996 Act with the respondent's section 21

Notice dated 27.12.2014.

21. The petitioner's recourse to section 43(4) of the 1996 Act, even if

applied to the facts, does not come to the petitioner's rescue since the

petitioner would lag behind the limitation period by 4 years 3 months.

The petitioner's claims as well as the section 21 Notice are hence

clearly barred by limitation.

Section 43(4) of the 1996 Act vs. Section 18 and Article 137 of The

Limitation Act

22. Although, the petitioner relies on sections 18 and 19 of The

Limitation Act - namely effect of acknowledgement in writing and effect

of payment on account of debt, respectively - in support of the

contention that a fresh period of limitation should be computed from

the date of the respondent's acknowledgement, the argument is

unacceptable for the following reason.

23. Both sections 18 and 19 of The Limitation Act presume

subsistence of the period of limitation which would be clear from the

words of the provisions. Both the sections start with

"Where, before the expiration of the prescribed period....." (Section 18)

"Where payment on account of a debt .... is made before the expiration of the

prescribed period......"(Section 19)

Therefore, a claim which is time-barred cannot be resuscitated by

taking recourse either to sections 18 or 19 of the Limitation Act.

24. It is also relevant that limitation should be construed as per the

provisions of the Limitation Act as if there is no arbitration agreement.

Section 43 of the 1996 Act is a special scheme since it makes the

provisions of the Limitation Act applicable to arbitrations in the same

manner as proceedings in a Court of law. Section 43(4) is a beneficial

addition to this scheme for the purpose of commencement of

proceedings relating to a dispute (including of arbitration) without the

parties being confronted with the objection of the dispute being time-

barred. Section 43(4) however, is not in derogation of the Limitation Act

and cannot breathe life into a proceeding which is already dead under

Article 137 of the Limitation Act. Therefore, it cannot be concluded

that the date of setting aside of the award will create a fresh period of

limitation. As stated earlier, the petitioner's right to apply was already

over on 27.12.2014 when the arbitration commenced.

25. Commencement of the period of limitation from the date on

which the cause of action or the claim sought to be arbitrated first

arose was considered by the Supreme Court in Geo Miller v. Chairman,

Rajasthan Vidyut Utpadan Nigam Limited; (2020) 14 SCC 643. The

Supreme Court relied on Panchu Gopal Bose v. Port of Calcutta; (1993) 4

SCC 338 in that decision where the petitioner had sent bills to the

respondent in 1979 but had not received payments. The petitioner sent

a notice after a decade to the respondent in 1989 for reference to

arbitration. The Supreme Court relied on paragraph 11 of the decision

in Panchu Gopal Bose where it categorically held that

"therefore, the period of limitation for the commencement of an arbitration

runs from the date on which, had there been no arbitration clause, the cause

of action would have accrued."

26. The Supreme Court also found in Geo Miller that the respondent

had stated that the final bill became due on 1.8.1989 and the

limitation period therefore ended on 10.8.1992. The appellant had

served notice for appointment of arbitrator in 2002 and made an

application in 2003. The Supreme Court accordingly found the

appellant's claim to be barred by limitation.

27. The petitioner's contention in this case is found to be contrary to

the law and this Court accordingly holds that section 43(4) of the 1996

Act must defer to the other provisions of the Limitation Act.

The period of limitation cannot be extended to create a new window

after expiry of the limitation. The question of limitation must also be

decided on the underlying principles of the Limitation Act and

discounting the existence of an arbitration clause. To use a colloquial

analogy but without the cruelty, one cannot flog a dead horse and force

it to run.

Would the respondent's notice under section 21 dated 9.4.2023 make a

difference?

28. The petitioner seeks to rely on the respondent's notice invoking

arbitration wherein the respondent had egged the petitioner on to file

an application for appointment of an arbitrator.

29. The Court's view would be similar to what has already been

stated above with regard to applicability of section 18 of the Limitation

Act. For ease of reference, any acknowledgement made in writing and

its consequent impact on limitation presumes subsistence of the period

of limitation as on the date of acknowledgement; Sampuran Singh v.

Niranjan Kaur; 1999 2 SCC 679.

30. In the present facts, the prescribed period of limitation had

ended on 26.6.2014, that is before the respondent invoked the

arbitration clause on 9.4.2023. Hence, the respondent's notice,

notwithstanding its encouragement to the petitioner to apply to the

Court for appointment of an arbitrator, cannot give a fresh lease of life

to the period of limitation and postpone the cause of action : B and T

AG v. Ministry of Defence; 2023 SCC OnLine SC 657.

31. Therefore, the respondent's notice of invocation does not support

the petitioner's case for the purpose of enlarging the period of

limitation.

What then, is the test?

32. The consensus from the relevant case-law is that the limitation

for filing an application will start to run from the day when the cause of

action accrues regardless of the existence of an arbitration clause. In

other words, the cause of action arises when the claimant acquires the

right to require arbitration. An application for appointment of an

arbitrator under section 11 of the 1996 Act is governed by Article 137

of the Schedule to the Limitation Act and must be made within 3 years

from the day when the right to apply first accrues. Needless to state,

the right to apply can only arise when such right is unequivocally

denied by the respondent. The claim for arbitration must therefore be

raised, without delay, as soon as the cause for arbitration arises

similar to a civil action.

Should the question of limitation be referred to the arbitrator?

33. The petitioner's argument that the arbitrator is best-suited to

decide the issue of limitation overlooks the settled proposition that the

arbitrator will only step in to decide that question where it's an iffy

affair, that is, where the question of the claims being time-barred is not

patently obvious. The referral Court can reserve the decision to itself

only where the question of delay is clear and undisputed. Ref. BSNL vs

Nortel Networks; (2021) 5 SCC 738.

34. The proposition in Hari Shankar Singhania vs. Gaur Hari

Singhania; (2006) 4 SCC 658 of limitation commencing from the date of

the last correspondence between the parties cannot be sustained after

B and T AG. Shree Ram Mills Ltd. vs. Utility Premises (P) Ltd.; (2007) 4

SCC 599 was a case where existence of a live claim was found on the

facts before the Supreme Court. Dakshin Haryana Bijli Vitran Nigam

Limited vs. Navigant Technologies Private Limited; (2021) 7 SCC 657 was

on the proposition of parties being free to commence a fresh arbitration

after an award is set aside and on whether section 43(4) can be seen in

isolation divorced from the provisions of The Limitation Act.

35. The above reasons are good grounds, in the Court's view, to allow

the objection to maintainability to succeed. The petitioner's claims and

the present application are found to be barred by the laws of limitation

and must accordingly be held as not maintainable.

36. A.P. 555 of 2023 is accordingly dismissed for that reason but

without any order as to costs.

Urgent Photostat certified copies of this judgment, if applied for,

be supplied to the parties upon fulfillment of requisite formalities.

(Moushumi Bhattacharya, J.)