Calcutta High Court
B.K. Consortium Engineers ... vs Indian Institute Of Management on 19 January, 2023
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
(Commercial Division)
Present:
The Hon'ble Justice Shekhar B. Saraf
AP/237/2021
B.K. CONSORTIUM ENGINEERS PRIVATE LIMITED
VS
INDIAN INSTITUTE OF MANAGEMENT, CALCUTTA
For the Petitioner: Mr. Jayanta Kumar Mitra, Sr. Adv.
Mr. Dhruba Ghosh, Sr. Adv.
Mr. Sakya Sen, Adv.
Ms. Dola Adhikari, Adv.
Mr. Rohit Banerjee, Adv.
Mr. Sunil Gupta, Adv.
Mr. Altamash Alim, Adv.
Ms. Ajeyaa Choudhury, Adv
For the Respondent: Mr. Sabyasachi Chowdhury, Adv.
Mr. Bhaskar Mukherjee, Adv.
Ms. Nafisa Yasmin, Adv.
Last heard on: December 16, 2022
Judgment on: January 19, 2023
Page 1 of 54
Shekhar B. Saraf, J.:
1. The petitioner B. K. Consortium Engineers Private Limited
(hereinafter referred to as the 'BKC') has filed this application
under Section 11 of the Arbitration & Conciliation Act, 1996
(hereinafter referred to as 'the Act') praying for appointment of a
sole arbitrator to adjudicate the disputes which have arisen
between the parties.
2. The petitioner has challenged the appointment procedure of the
arbitrator, provided in its contract with the respondent Indian
Institute of Management, Calcutta (hereinafter referred to as the
'IIMC'), which empowers the IIMC director to appoint a sole
arbitrator for dispute resolution between the parties.
Facts
3. The factual matrix of the case is delineated below -
a. A notice inviting tender dated July 9, 2008 was issued by the
respondent for civil work and basic utility works for the
proposed residential (hostel) complex at IIMC, Joka. A bid was
submitted by the petitioner and in response to the same, a
work order was issued on August 29, 2008, in terms of which
the project was required to be completed within August 31,
2009, at a total cost of INR 39,03,20,185 (Rupees Thirty-Nine
Page 2 of 54
Crores Three Lakhs Twenty Thousand One Hundred Eighty-
Five Only). Subsequently, a formal contract being CDP/6 of
2008-09 was entered into by and between the petitioner and
respondent in respect of the said work as stipulated in the
said work order.
b. During the course of execution of the work, the respondent,
from time to time, introduced additions to the scope of work,
and as a result, the value of the contract stood revised to INR
80,23,73,260/- (Rupees Eighty Crores Twenty-Three Lakhs
Seventy-Three Thousand Two Hundred Sixty Only). The
petitioner sought extension from the respondent on the
following grounds -
i. Delay in handing over clear work site; the piling work
being done by another contractor was not completed
before September 2009, and hence the clear site area
could not be handed over to the petitioner till September
2009;
ii. Additions and alterations incorporated during the
contract period;
iii. Various changes in the specifications were introduced;
iv. The execution of the project was suspended for a
considerable period. The work resumed only on March
14, 2011.
Page 3 of 54
In view of the aforesaid, the time for completion of work was
extended by the respondent from time to time. The last of
such extensions was granted till August 31, 2014. The work
was completed in all aspects by August 31, 2014.
c. The respondent issued the final bill on March 11, 2016 and
the petitioner accepted the same by way of a letter dated
March 15, 2016, under the signature of two directors of the
petitioner, namely C. Mozumder and U.S. Mozumder. The
acceptance stated that "we accept the final bill and final
settlement of all demands against the contract and we will not
prefer any claim in future in this regard". By way of another
letter dated March 17, 2016, bearing the signature of B.K.
Mozumder, Chairman and Managing Director of the
respondent, the acceptance of the final bill was reiterated but
in addition to this, a request for price escalation was made.
Pursuant to the acceptance of the final bill, the final
completion certificate was issued by the respondent on May 5,
2016. It is to be noted here that this was not the first time
price escalation requests were submitted to the respondent.
d. On May 16, 2016, the petitioner sent another letter claiming
price escalation. It was acknowledged in the said letter that
the final bill against work done has been settled, and the
retention money against the contract has been refunded by
Page 4 of 54
the respondent. However, the petitioner also stated, in the
said letter, that its escalation claim under Clause 10(CC) of
the contract has not been settled yet. Surprisingly, it also
sought permission from the petitioner to invoke arbitration in
terms of clause 25 of the said contract.
e. After a brief lull, letter dated August 25, 2017 was sent by the
petitioner with respect to the earlier price escalation requests.
In response, the respondent replied vide letter September 12,
2017 denying the validity of any such claim in light of the full
& final settlement of the claim and bill pertaining to the job
contract. It was reiterated by the respondent that "any claim
related to the escalation thus cannot be accepted under the
said contract agreement; hence can't be entertained at this
stage". A reply to this was sent by the petitioner vide letter
dated September 15, 2017 wherein they claimed to have
accepted the final settlement of the bill under coercion.
f. The last in the series of price escalation letters by the
petitioner was sent on February 22, 2019 wherein the earlier
claims were reiterated. The respondent responded vide its
advocate's letter dated March 13, 2020, denying the existence
of any claims whatsoever in the first place. It was again
clarified by the respondent that basis the terms of the
contract and subsequent acceptance of the entire
Page 5 of 54
consideration money in lieu of full and final settlement
against the enhanced work order, the respondent was not
liable to pay for any further claims.
g. Furthermore, letters dated February 26, 2021, and February
3, 2021, were delivered by the petitioners reiterating their
escalation claims.
h. Finally, the petitioner dispatched a Section 21 notice dated
March 8, 2021 invoking arbitration. Through the said notice,
disputes arising as a result of non-payment of escalation
claims were sought to be referred to an arbitrator. In the same
notice, the appointment procedure of the sole arbitrator was
challenged as invalid under the provisions of Arbitration &
Conciliation Act, 1996 and as such, Justice (Retd.) Ashim
Kumar Banerjee was nominated by the petitioner as their
nominee arbitrator.
i. In response to the aforesaid notice invoking arbitration, the
respondent denied the existence of any further dispute and
reiterated that all claims have been settled and that the
petitioner is not entitled to any further amount from the
respondent. However, despite denying the existence of any
dispute, the respondent appointed Shri Basab Majumdar,
retired DG, CPWD as their nominee arbitrator. The respondent
Page 6 of 54
also stated that such appointment was without prejudice to
their contentions regarding non-existence of any dispute.
Submissions
4. Mr. Jayanta Kumar Mitra, Senior Advocate, appearing on behalf of
the petitioner has put forth the following arguments:
a. The counsel argued that the resumption of work on March 14,
2011 was accepted by the petitioner subject to its right to
receive price escalation under clause 10(CC) of the contract.
Further, the counsel stated, there was no contemporaneous
denial of such a proposal by the respondent. On this basis
and being assured that escalation would be considered, work
was resumed and completed to the utmost satisfaction of
IIMC on August 31, 2014. The counsel added that the final
completion certificate dated May 5, 2016 not only
acknowledged the satisfactory completion of work but also the
fact that prolongation of the contract period was not
attributable to any fault on part of the petitioner. This, as per
the petitioner, has been clearly and unambiguously admitted
by the respondent.
b. The counsel submitted that keeping in mind the afore stated
admission, the petitioner suffered considerable loss by reason
Page 7 of 54
of being paid on the basis of the rates quoted way back in the
year 2008. Therefore, the counsel contended that the
petitioner became entitled to invoke the clause 10(CC) of the
contract which provided for the escalation as per the formula
provided therein. The counsel stated that both time and cost
overrun of the project had caused huge financial losses to the
petitioner and this issue was brought to the notice of
respondent through protracted contemporaneous undisputed
correspondence. He argued that the petitioner's bills were
never disputed by the respondent and in fact, the petitioner
was assured that the same would be taken care after
completion of the work.
c. The counsel submitted that pursuant to the request of the
petitioner, a sub-committee of IIMC was constituted which
held a meeting with the petitioner on November 12, 2012.
Here, the claim was discussed in detail and the petitioner was
requested to complete the work in all respects with an
assurance to settle escalation claim thereafter. Headed that
BKC relied upon the said assurance and duly proceeded
thereafter to complete the work. It is only after about 14
months from the date of submission of the final bill, the
executive engineer of the respondent vide its letter dated
March 11, 2016 instructed the petitioner to accept the final
bill as prepared by the respondent in their specified format.
Page 8 of 54
Hence, the counsel argued, the petitioner had no option other
than to accept the final bill, as prepared by the respondent,
under compulsion and duress even though the same did not
accommodate their price escalation claims.
d. Continuing his submissions on the point of acceptance of the
final bill, the counsel stated that the long-standing dues of
the petitioner could not be realized even after repeated
persuasions and being under tremendous financial stress, it
was impossible for the petitioner to wait for realization of the
outstanding sum, and under such circumstances, the
petitioner accepted the final bill by way of a letter dated
March 15, 2016 undersigned by two directors of the petitioner
company. Immediately afterwards, in the letter dated March
17, 2016, the managing director of the petitioner company not
only reiterated its acceptance but also reminded the
respondent of its price escalation claim.
e. The counsel submitted that the final payment was accepted
under duress and hence to overcome the damaging 'No
Objection Certificate' issued on March 15, 2016, and after
receipt of payment on May 05, 2016, the petitioner
superseded the earlier acceptance by way of another
communication dated May 16, 2016. The counsel argued that
the certificate issued by petitioner through letters dated
Page 9 of 54
March 15, 2016 and March 17, 2016 stood withdrawn in view
of the petitioner's fresh communication dated May 16, 2016.
Therefore, the counsel contended that the acceptance
certificate of the final bill was earlier issued under compelling
circumstances and the same cannot tantamount to negation
or waiver of the petitioner's right to claim price escalation in
terms of clause 10(CC) of the contract.
f. Moving on, the counsel submitted the escalation claim was
disputed by the respondent for the very first time on
September 12, 2017 and on the grounds that the petitioner
had issued a full and final acceptance certificate of the final
bill was by way of a letter dated March 15, 2016. The counsel
contested that the escalation bill was not separately dealt
with nor was specifically rejected by the respondent. The
counsel also put forth the argument that since September 12,
2017 was the first time wherein the price escalation claim was
disputed by the respondent, the same should be considered
as the starting point for the purposes of calculation of
limitation period for issuance of Section 21 notice. In support
of this contention, reliance was placed upon Geo Miller &
Company Private Ltd. -v- Rajasthan Vidyut Utpadan
Nigam Limited reported in 2019 SCC OnLine SC 1137, the
relevant paragraph of which has been reproduced below -
Page 10 of 54
"Having perused through the relevant precedents, we
agree that on a certain set of facts and circumstances, the
period during which the parties were bona fide negotiating
towards an amicable settlement may be excluded for the
purpose of computing the period of limitation for reference
to arbitration under the 1996 Act. However, in such cases
the entire negotiation history between the parties must be
specifically pleaded and placed on the record. The Court
upon careful consideration of such history must find out
what was the 'breaking point' at which any reasonable
party would have abandoned efforts at arriving at a
settlement and contemplated referral of the dispute for
arbitration. This 'breaking point' would then be treated as
the date on which the cause of action arises, for the
purpose of limitation. The threshold for determining when
such a point arises will be lower in the case of commercial
disputes, where the party's primary interest is in securing
the payment due to them, than in family disputes where it
may be said that the parties have a greater stake in
settling the dispute amicably, and therefore delaying
formal adjudication of the claim."
g. Continuing his arguments, the counsel added that the
limitation for issuing the said Section 21 notice would expire
Page 11 of 54
on September 12, 2020 but in the light of the Supreme Court
order in In Re: Cognizance for Extension of Limitation
with M.A. No. 29 Of 2022 in M.A. No. 665 Of 2021 in Suo
Moto Writ Petition (C) No. 3 Of 2020, the period from March
15, 2020 till February 28, 2022 stood excluded in computing
the limitation period. Therefore, the Section 21 notice issued
by the petitioner on March 08, 2021 is well within the
limitation period.
h. The counsel submitted that pursuant to the aforementioned
letter dated September 12, 2017, the petitioner responded on
September 15, 2017 wherein it restated that the final bill was
accepted under constraint. The counsel argued that the
respondent thereafter never refuted the petitioner's stance
and the same being in accordance with the settled position of
law as enunciated in various judgments of the Supreme Court
which clearly lays down that mere issuance of full and final
certificate cannot prevent a contractor to ventilate its
legitimate claims arising under a contract.
i. Moving forward, the counsel asserted that the petitioner
continued to pursue its claim and the last letter in this
connection was the one dated February 22, 2019. This was
replied to by the respondent on March 13, 2020 wherein it
denied and disputed the liability to pay any amount and in
Page 12 of 54
doing so, as per the counsel, erroneously relied upon
acceptance issued on March 15, 2016. Here, the counsel
argued that the communications dated March 15, 2016, and
March 17, 2016, stood withdrawn pursuant to their
correspondence dated May 16, 2016.
j. The counsel submitted that the stand taken by the
respondent as indicated in the advocate's notice dated March
13, 2020 was given a go-by and the matter was looked into
and considered by a Special Committee comprising of high-
level IIMC officials. He drew the attention of the Court towards
the fact that the petitioner was invited for a virtual meeting
scheduled for January 13, 2021 where it duly presented its
escalation claim and pursuant to request of the said
committee, written submissions were also submitted on
January 20, 2021, and February 3, 2021 together with
relevant documents.
k. In response to the respondent's contentions that the claims
are time barred and deadwood, the counsel opposed the same
and stated that by the virtue of negotiations in such meetings
and exchange of documents, the claim stands alive and falls
out of the purview of being a deadwood.
Page 13 of 54
l. The counsel contended that by reason of such a legitimate
claim being withheld and/or denied, a dispute has arisen
between the parties which are referable to arbitration as per
the terms of the contract. The counsel further submitted that
no intimation was received about the final bill being ready for
payment and as such, the period for invoking the arbitration
clause has not lapsed. Elaborating further on the point of
arbitration, the counsel questioned the appointment
procedure as invalid as it empowered the respondent to
appoint a sole arbitrator and the same is hit by the
disqualification contained in Schedule V to the Arbitration
and Conciliation Act, 1996.
m. The counsel in support of his contentions cited the judgment
of the Supreme Court in Vidya Drolia and Ors -v- Durga
Trading Corporation reported in [2020] 11 S.C.R. 1001
and advocated that the Court's approach in a Section 11
arbitration petition should be "when in doubt, do refer".
n. Next, the counsel relied upon the judgment of the Supreme
Court in Bharat Sanchar Nigam Ltd. & Anr. -v- M/S Nortel
Networks India Pvt. Ltd. reported in [2021] 2 S.C.R. 644,
and submitted that this Court can deny reference to
arbitration in a Section 11 arbitration application 'only if there
is not even a vestige of doubt that the disputes are ex-facie
Page 14 of 54
time-barred and deadwood'. The counsel opined that the
present case is not one of complete deadwood as it is clear
that the issue herein does not fall within the category of those
which are ex-facie time barred and which would have
otherwise been liable to be dismissed per the afore-cited
judgments.
o. Elaborating upon his contentions, the counsel put forth the
judgment of the Supreme Court in the case Uttarakhand
PurvSainik Kalyan Nigam Ltd. -v- Northern Coal Field
Ltd. reported in [2019] 14 S.C.R. 999. The following
paragraphs were cited by the counsel:
9.8 In view of the legislative mandate contained in Section
11(6A), the Court is now required only to examine the
existence of the arbitration agreement. All other
preliminary or threshold issues are left to be decided by
the arbitrator under Section 16, which enshrines the
Kompetenz-Kompetenz principle.
9.9. The doctrine of "Kompetenz-Kompetenz", also referred
to as "Compétence-Compétence", or "Compétence de la
recognized", implies that the arbitral tribunal is
empowered and has the competence to rule on its own
jurisdiction, including determining all jurisdictional issues,
Page 15 of 54
and the existence or validity of the arbitration agreement.
This doctrine is intended to minimize judicial intervention,
so that the arbitral process is not thwarted at the
threshold, when a preliminary objection is raised by one of
the parties.
*
Limitation is a mixed question of fact and law. In ITW
Signode India Ltd. v. Collector of Central Excise, a three
judge bench of this Court held that the question of
limitation involves a question of jurisdiction. The findings
on the issue of limitation would be a jurisdictional issue.
Such a jurisdictional issue is to be determined having
regard to the facts and the law."
Seeking support from this judgment, the counsel reminded
the Court that the respondent did not raise any dispute
regarding the existence of the arbitration clause invoked by
the petitioner, and that in the absence of such an objection,
this Court has to refer the matter to arbitration and any
questions with respect to the jurisdiction or otherwise has to
be adjudicated upon and decided by the arbitrator. Further,
the respondent had itself acknowledged that the matter in
hand can be referred to arbitration process and had also
independently suggested an arbitrator vide its letter dated
April 10, 2021.
5. Mr. Sabyasachi Chowdhry, Advocate appearing on behalf of the
respondent, has propounded the following arguments:
a. The counsel submitted that the said petition is misconceived,
not maintainable and is liable to be dismissed. He contended
that the alleged claim, on the face of the record, is barred by
limitation and even considered otherwise, the said claim is
beyond the scope of the contract and therefore, is not
maintainable.
b. The counsel asserted that it is a matter of record that all
claims under the contract were settled, resulting in final
payment on March 15, 2016 which in turn was accepted by
the petitioner as 'final settlement' of all demands against the
contract. Not only that, the petitioner undertook to 'not prefer
any claim in future in this regard'. The counsel continued to
argue that the respondent vide its letter dated March 17,
2016 iterated their acceptance once again and merely made a
'request' to consider 'some relief in the form of escalation
against the contract'.
c. The counsel further contended that the dispute subsequently
was raised as an afterthought to wriggle out of such
settlement on the allegation of 'duress'. The counsel
vehemently denied that the petitioner was 'instructed' by the
respondent to accept the final bill in any specified format or
under any 'compelling circumstances'.
d. Be that as it may, the counsel contended that mere bald plea
of fraud, coercion, duress or undue influence is not enough
and a party who sets up such plea must prima facie establish
the said allegation by placing relevant material before the
Chief Justice or his designate. He relied upon the decision of
the Supreme Court in New India Assurance Company
Limited -v- Genus Power Infrastructure Limited reported
in 2015 2 SCC 424 in support of his contentions to argue
that in the present case, the ratio of the aforementioned case
squarely applies, particularly in the context of the letters
dated March 15, 2016, and March 17, 2016, whereby the
petitioner had accepted the final bill as full and final
settlement and had merely made a 'request' which cannot be
subsequently elevated to claim or demand.
e. In any case, he argued that a period of more than three years
has lapsed from the date on which the right to sue, if any,
had first accrued, i.e., from March 15, 2016 onwards.
Therefore, the counsel added, that on March 8, 2020 when
the arbitration was invoked by the petitioner, there could not
have been any subsisting dispute between the parties.
Moreover, the counsel reasoned that the unilateral letters by
the petitioner in geminating the same points will not save
limitation and any reply to such letters is not an
acknowledgement within the meaning of Article 18 of the
Limitation Act, 1963, and consequently, there exists no jural
relationship between the petitioner and respondent.
f. The counsel contested that the petitioner is not entitled to
invoke clause 10(CC) of the contract and does not have any
right to receive any escalation claim under the said clause or
otherwise at all. Further, as per clause 17 of the special terms
and conditions, no escalation was payable in relation to the
said contract for any reasons whatsoever. He contended that
the allegations regarding escalation are immaterial and
irrelevant, particularly after the contract was revised on
September 27, 2013 wherein the total value thereof was
enhanced to INR 80.23 crores from the original value of
around INR 39 crores.
g. The counsel submitted that in view of petitioner's acceptance
of the final bill and the final settlement of all its demands on
March 16, 2016, there was no occasion to make any response
thereafter. He observed that the contents of the letter dated
September 12, 2017, are self-explanatory and merely
reiterated their earlier stated position.
h. The counsel denied that any high level committee was
constituted to reconsider the grievance of the petitioner as
alleged. In any event, the counsel submitted, the formation of
any internal committee will not entitle the applicant to
reagitate its stale and dead claim afresh. The counsel states
that by repeatedly raising the issue of barred claim in diverse
places was to desperately seek a response in an attempt to
create evidence.
i. The counsel stated that in light of the principles laid down by
the Supreme Court in Vidya Drolia and Ors. -v- Durga
Trading Corporation reported in [2020] 11 S.C.R. 1001, it
is now very well settled that "the Court at the referral stage can
interfere only when it is manifest that the claims are ex-facie
time-barred and dead, or there is no subsisting dispute." The
present petition, he contended, fell within the category of a
deadwood and therefore is liable to be dismissed as there does
not exist anything in the present dispute which would make it
eligible to be referred to arbitration.
j. The counsel submitted that even if the letter dated May 16,
2016 is treated as a notice under Section 21 of the Arbitration
and Conciliation Act, 1996, then this arbitration petition is
also barred by limitation as per Article 137 of the Limitation
Act, 1963.
k. Elaborating on the scope of judicial interference in a Section
11 application, the counsel cited the judgment of the
Supreme Court in the case of Bharat Sanchar Nigam Ltd.
& Anr. -v- M/S Nortel Networks India Pvt. Ltd. reported in
[2021] 2 S.C.R. 644 to argue that "while exercising
jurisdiction under Section 11 as judicial forum, the Court may
exercise the prima facie test to screen and knockdown, ex-facie
meritless, frivolous and dishonest litigation."
l. Lastly, the counsel, in the hearings, placed reliance upon the
judgment of Supreme Court in Geo Miller & Company
Private Limited -v- Rajasthan Vidyut Utpadan Nigam
Limited reported in 2019 SCC OnLine SC 1137 to contend
that the petitioner cannot justify the unreasonable delay in
invocation of arbitration merely on the grounds of purported
settlement discussions. He argued that the breaking point, if
any, for invocation of arbitration would be March 11, 2016,
i.e, the date when the final bill was issued by the respondent.
He further submitted (for argument's sake) that in any event,
the starting day for the limitation point to begin would be May
16, 2016, that is, the date when the petitioner sought to
invoke arbitration for the first time. The relevant paragraph
has been extracted below-
29. Moreover, in a commercial dispute, while mere failure
to pay may not give rise to a cause of action, once the
applicant has asserted their claim and the respondent
fails to respond to such claim, such failure will be treated
as a denial of the applicant's claim giving rise to a dispute,
and therefore the cause of action for reference to
arbitration. It does not lie to the applicant to plead that it
waited for an unreasonably long period to refer the
dispute to arbitration merely on account of the
respondent's failure to settle their claim and because they
were writing representations and reminders to the
respondent in the meanwhile."
(Emphasis supplied)
m. Concluding his arguments, Mr. Chowdhury placed reliance
upon the judgment of Supreme Court in Secunderabad
Cantonment Board -v- B. Ramachandraiah and Sons
reported in (2021) 5 SCC 705, which further endorses the
principles as laid down in Vidya Drolia (supra) and BSNL -v-
Nortel (supra), to argue that mere exchange of letters or
settlement discussions will not be sufficient to stretch the
limitation period.
Observations & Analysis
6. I have heard the counsel appearing on behalf of the parties and
perused the materials on record.
7. Before delving into other major issues plaguing the present
application, I will proceed first with the petitioner's challenge to
the appointment procedure of the sole arbitrator as laid down by
clause 25 of the contract between the parties. In my view, this
challenge is at the centre point of the present petition, which later
expands like a banyan tree spreading outwards.
8. In the light of the apex court's pronouncements in Perkins
Eastman Architects DPC & Another -v- HSCC (India) Ltd.
reported in [2019] 17 S.C.R. 275 and TRF Ltd. -v- Energo
Engineering Projects Ltd. reported in [2017] 7 S.C.R. 409, it is
crystal clear that unilateral appointment of an arbitrator by a
party who has some sort of interest in the final outcome or
decision is not permissible. The cardinal importance of the
independence and neutrality of the arbitral tribunal has been
reiterated by the Supreme Court on multiple occasions. For
arbitration to be seen as a viable dispute resolution mechanism
and as an alternate recourse to litigation, the independence of
arbitration process outside the purview of undue influence and
favor needs to be ensured in both letter and spirit. And in case of
non-adherence to such principles, the courts must step in. If one
takes a careful look, the very basic essence of the principle laid
down in the above-mentioned case laws is the natural justice
principle of nemo judex in causa sua that is 'no one should be
made a judge in his own case'. For arbitration decisions to be
respected and accepted as decrees of the court, a similar level of
integrity in the appointment of arbitrators must be ensured.
9. Keeping the aforesaid principles in mind, this Court is in absolute
agreement with arguments advanced by Mr. Mitra that the
appointment procedure as per clause 25 of the contract cannot be
sustained as it is in direct contravention to the aforecited judicial
pronouncements and legal principles.
10. Nonetheless, as the saying goes it is not the end of the world or in
our case, the end of the matter. Therefore, before proceeding ahead
with the appointment of an arbitrator the arguments advanced by
Mr. Chowdhury cannot be overlooked and needs to be adjudicated
upon by this Court. He argued on the point of limitation and
stated that the claims are hopelessly time-barred and the same
would entail this Court to decline referring the matter to
arbitration at the first instance.
11. Mr. Mitra, Senior Advocate, appearing on behalf of the petitioner
argued that judicial intervention in a Section 11 arbitration
application is limited to mere examination of the validity and
existence of the arbitration agreement. I find myself in
disagreement with this argument as in a Section 11 application,
the Court is not supposed to undertake a meager cosmetic exercise
to examine the existence and/or validity of the arbitration
agreement, and then simply refer the matter to arbitration just
because the arbitration clause is valid. Had this been the intent of
the law makers and the judicial pronouncements on this subject,
the determination could have been delegated to an AI-empowered
computer system, thereby eliminating the need for applicability of
a judicial mind and relieving the courts of the sedulous task of
adjudicating such matters.
12. In my view, if it is manifestly evident on the face of it that the
issues purported to be referred to arbitration are hopelessly time-
barred and/or are non-arbitrable, the courts can intervene and
decline reference to arbitration in such cases. The entire objective
of judicial intervention, in certain circumstances, has been to
ensure the efficacy and utility of the arbitration process. Just like
water is crucial to a fish's survival, the presence of an arbitrability
element in a Section 11 application is a must for it to be accepted
and referred to an arbitrator for further adjudication. For instance,
if a person appears to be dead and when on examination of the
pulse, it is palpably evident that there is no life left, one is not
supposed to send the body to the operation theatre but rather to a
morgue.
13. At this juncture, this Court finds it imperative to broach the
Supreme Court's decision in Vidya Drolia (supra) wherein the
scope of intervention in a Section 11 application was defined and
made permissible in certain circumstances only. The same has
been enumerated herein below -
92. (iv) Most jurisdictions accept and require prima facie
review by the court on non-arbitrability aspects at the
referral stage.
*
(vi) Exercise of power of prima facie judicial review of
existence as including validity is justified as a court is the
first forum that examines and decides the request for the
referral. Absolute "hands off" approach would be
counterproductive and harm arbitration, as an alternative
dispute resolution mechanism. Limited, yet effective
intervention is acceptable as it does not obstruct but
effectuates arbitration.
(vii) Exercise of the limited prima facie review does not in
any way interfere with the principle of competence-
competence and separation as to obstruct arbitration
proceedings but ensures that vexatious and frivolous
matters get over at the initial stage.
(viii) Exercise of prima facie power of judicial review as to
the validity of the arbitration agreement would save costs
and check harassment of objecting parties when there is
clearly no justification and a good reason not to accept
plea of non-arbitrability......
*
(xi) The interpretation appropriately balances the
allocation of the decision-making authority between the
court at the referral stage and the arbitrators' primary
jurisdiction to decide disputes on merits. The court as the
judicial forum of the first instance can exercise prima facie
test jurisdiction to screen and knockdown ex facie
meritless, frivolous and dishonest litigation. Limited
jurisdiction of the courts ensures expeditious, alacritous
and efficient disposal when required at the referral stage."
The Court further went on to hold that-
93. Section 43(1) of the Arbitration Act states that the
Limitation Act, 1963 shall apply to arbitrations as it
applies to court proceedings. Sub-section (2) states that for
the purposes of the Arbitration Act and Limitation Act,
arbitration shall be deemed to have commenced on the
date referred to in Section 21. Limitation law is procedural
and normally disputes, being factual, would be for the
arbitrator to decide guided by the facts found and the law
applicable. The court at the referral stage can interfere
only when it is manifest that the claims are ex facie time
barred and dead, or there is no subsisting dispute. All
other cases should be referred to the arbitral tribunal for
decision on merits. Similar would be the position in case of
disputed 'no claim certificate' or defence on the plea of
novation and 'accord and satisfaction'. As observed in
Premium Nafta Products Ltd., it is not to be expected that
commercial men while entering transactions inter se
would knowingly create a system which would require
that the court should first decide whether the contract
should be rectified or avoided or rescinded, as the case
may be, and then if the contract is held to be valid, it
would require the arbitrator to resolve the issues that have
arisen.
14. A bare reading of the aforementioned paragraphs will nullify the
arguments raised by Mr. Mitra that there is no scope for judicial
intervention in Section 11 applications except to determine the
existence and validity of the arbitration agreement. Within a
certain category of cases which satisfy the principles as laid down
in Vidya Drolia (supra) and expanded in subsequent decisions
(cited later in this judgment), the courts as opposed to a
completely hands-off approach can put their hands back on and
decline the appointment of the arbitrator provided the facts fall
within the ambit of those certain category of cases.
15. It is not a universal principle that every case calls for the
appointment of an arbitrator and that any and all disputes should
be decided by the arbitrator. The courts act as a doorkeeper where
entry is permitted for all the disputes but the doorkeeper can
restrict the entry if certain specific criteria as laid down in the
aforementioned judgments are not met. Reliance can be placed
upon the decision of the Supreme Court in DLF Home Developers
Limited -v- Rajapura Homes Pvt. Ltd. & Anr. in Arbitration
Petition (Civil) No. 16 of 2020 wherein it was clarified that -
"18. The jurisdiction of this Court under Section 11 is primarily
to find out whether there exists a written agreement between
the parties for resolution of disputes through arbitration and
whether the aggrieved party has made out a prima facie
arbitrable case. The limited jurisdiction, however, does not
denude this Court of its judicial function to look beyond the
bare existence of an arbitration clause to cut the deadwood. A
three-judge bench in Vidya Drolia (Supra), has eloquently
clarified that this Court, with a view to prevent wastage of
public and private resources, may conduct 'prima facie review'
at the stage of reference to weed out any frivolous or vexatious
claims.......
*
19. To say it differently, this Court or a High Court, as the case
may be, are not expected to act mechanically merely to deliver
a purported dispute raised by an applicant at the doors of the
chosen arbitrator. On the contrary, the Court(s) are obliged to
apply their mind to the core preliminary issues, albeit, within
the framework of Section 11(6-A) of the Act. Such a review, as
already clarified by this Court, is not intended to usurp the
jurisdiction of the Arbitral Tribunal but is aimed at streamlining
the process of arbitration. Therefore, even when an arbitration
agreement exists, it would not prevent the Court to decline a
prayer for reference if the dispute in question does not correlate
to the said agreement."
16. Reference can also be made to the apex court's decision in Bharat
Sanchar Nigam Ltd. & Anr. -v- M/s Nortel Networks India Pvt.
Ltd. reported in [2021] 2 S.C.R. 644 wherein the court held that
adjudication of the limitation issue at the referral stage does not
tantamount to stepping into the arbitrator's jurisdictional territory.
The relevant paragraphs have been delineated below-
30. Issue of Limitation is normally a mixed question of fact
and law, and would lie within the domain of the arbitral
tribunal. There is, however, a distinction between
jurisdictional and admissibility issues. An issue of
'jurisdiction' pertains to the power and authority of the
arbitrators to hear and decide a case. Jurisdictional
issues include objections to the competence of the
arbitrator or tribunal to hear a dispute, such as lack of
consent, or a dispute falling outside the scope of the
arbitration agreement. Issues with respect to the
existence, scope and validity of the arbitration agreement
are invariably regarded as jurisdictional issues, since
these issues pertain to the jurisdiction of the tribunal.
*
32. The issue of limitation, in essence, goes to the
maintainability or admissibility of the claim, which is to be
decided by the arbitral tribunal. For instance, a challenge
that a claim is time-barred, or prohibited until some pre-
condition is fulfilled, is a challenge to the admissibility of
that claim, and not a challenge to the jurisdiction of the
arbitrator to decide the claim itself.
*
36. In a recent judgment delivered by a three-judge bench
in Vidya Drolia v. Durga Trading Corporation, on the scope
of power under Sections 8 and 11, it has been held that
the Court must undertake a primary first review to weed
out "manifestly ex facie non-existent and invalid
arbitration agreements, or non-arbitrable disputes." The
prima facie review at the reference stage is to cut the
deadwood, where dismissal is bare faced and pellucid,
and when on the facts and law, the litigation must stop at
the first stage. Only when the Court is certain that no
valid arbitration agreement exists, or that the subject
matter is not arbitrable, that reference may be refused.
*
37. The upshot of the judgment in Vidya Drolia is
affirmation of the position of law expounded in Duro
Felguera and Mayavati Trading, which continue to hold
the field. It must be understood clearly that Vidya Drolia
has not re-surrected the pre-amendment position on the
scope of power as held in SBP & Co. v. Patel Engineering
(supra). It is only in the very limited category of cases,
where there is not even a vestige of doubt that the claim is
ex facie time-barred, or that the dispute is non-arbitrable,
that the court may decline to make the reference.
However, if there is even the slightest doubt, the rule is to
refer the disputes to arbitration, otherwise it would
encroach upon what is essentially a matter to be
determined by the tribunal.
17. I disagree with Mr. Mitra's argument that the principle in case of a
Section 11 application is that of non - interference. In my view, the
principle is rather of very limited and selective interference in
certain category of cases. While party autonomy and independence
of the arbitral tribunal are the cornerstones of creating an
arbitration friendly atmosphere, but at the same time, the courts
are not supposed to act as mere spectators in every Section 11
application.
18. Mr. Mitra relied upon Uttarakhand Purv Sainik (supra) to argue
that the Court is 'only required to examine the existence of
arbitration agreement' and 'all other preliminary or threshold issues
are left to be decided by the arbitrator under Section 16, which
enshrines the kompetenz-kompetenz principle'.
19. However, to my mind, this is an incomplete reading of the position
of law on the aspect of judicial interference in a Section 11
application as the kompetenz-kompetenz principle upheld in
Uttarakhand Purv Sainik (supra) emanated from the reasoning
where the question of limitation is within the arbitrator's domain
under Section 16 of the Act. Having said that, the apex court in
BSNL -v- Nortel (supra) held that the question of limitation is not
a challenge to the arbitrator's jurisdiction under Section 16 of the
Act but rather it is a challenge to the admissibility of the claims
itself. In the light of the same, the judgment adduced by Mr. Mitra
is not concrete enough to seize the judicial hands of this Court in
determining the question of limitation at the referral stage.
20. In addition to the above, in Vidya Drolia (supra), the Supreme
Court has upheld in that -
"92.(vii) Exercise of the limited prima facie review does not
in any way interfere with the principle of competence-
competence and separation as to obstruct arbitration
proceedings but ensures that vexatious and frivolous
matters get over at the initial stage."
21. Now, the question before me is whether the claims here are ex-
facie time barred and therefore, falls under the restrictive category
of deadwood. To determine the starting point of cause of action
and ascertain the expiry of the limitation period, this Court finds it
pertinent to refer back to the judgment of the Supreme Court in
BSNL -v- Nortel (supra) wherein it made explicitly clear that a
notice invoking arbitration must be sent by the claimant party
within three years from the date on which the escalation claim is
rejected. The relevant paragraphs have been extracted -
"17. Given the vacuum in the law to provide a period of
limitation under Section 11 of the Arbitration and
Conciliation 1996, the Courts have taken recourse to the
position that the limitation period would be governed by
Article 137, which provides a period of 3 years from the
date when the right to apply accrues. However, this is an
unduly long period for filing an application u/s. 11, since
it would defeat the very object of the Act, which provides
for expeditious resolution of commercial disputes within a
time bound period. The 1996 Act has been amended twice
over in 2015 and 2019, to provide for further time limits to
ensure that the arbitration proceedings are conducted and
concluded expeditiously. Section 29A mandates that the
arbitral tribunal will conclude the proceedings within a
period of 18 months. In view of the legislative intent, the
period of 3 years for filing an application under Section 11
would run contrary to the scheme of the Act. It would be
necessary for Parliament to effect an amendment to
Section 11, prescribing a specific period of limitation
within which a party may move the court for making an
application for appointment of the arbitration under
Section 11 of the 1996 Act.
*
39. The present case is a case of deadwood / no
subsisting dispute since the cause of action arose on
04.08.2014, when the claims made by Nortel were
rejected by BSNL. The Respondent has not stated any
event which would extend the period of limitation, which
commenced as per Article 55 of the Schedule of the
Limitation Act (which provides the limitation for cases
pertaining to breach of contract) immediately after the
rejection of the Final Bill by making deductions. In the
notice invoking arbitration dated 29.04.2020, it has been
averred that: "Various communications have been
exchanged between the Petitioner and the Respondents
ever since and a dispute has arisen between the Petitioner
and the Respondents, regarding non payment of the
amounts due under the Tender Document." The period of
limitation for issuing notice of arbitration would not get
extended by mere exchange of letters, or mere settlement
discussions, where a final bill is rejected by making
deductions or otherwise. Sections 5 to 20 of the Limitation
Act do not exclude the time taken on account of settlement
discussions. Section 9 of the Limitation Act makes it clear
that : "where once the time has begun to run, no
subsequent disability or inability to institute a suit or
make an application stops it." There must be a clear notice
invoking arbitration setting out the "particular dispute"
(including claims / amounts) which must be received by
the other party within a period of 3 years from the
rejection of a final bill, failing which, the time bar would
prevail."
22. Now, the task before this Court is to apply the above-mentioned
cases in the present issue at hand and to determine when the
cause of action first arose. After perusing the facts of the present
case and looking at the materials placed on record, this becomes
quite evident that the final bill was prepared by the respondent
IIMC on March 11, 2016, and was accepted by the petitioner on
March 15, 2016 and the acceptance iterated on March 17, 2016.
Pursuant to receipt of such an acceptance, the respondent issued
a final completion certificate to the respondent on May 5, 2016.
23. Therefore, the way I see it, the right to sue / cause of action first
arose when the final bill was first issued on March 11, 2016. The
limitation clock in the present case started ticking from March 11,
2016, and despite multiple opportunities to reject the final bill and
invoke arbitration, the petitioner BKC opted not to do that and
instead proceeded with acceptance of the final bill. In this context,
the argument of Mr. Mitra that rejection of the price escalation for
first time by the respondent on September 12, 2017 is when the
cause of action first arose becomes meritless.
24. On top of that, the aforesaid argument of Mr. Mitra stands on a
foundationless ground as well. A careful examination of the
materials placed on record makes it evident that even before the
preparation of the final bill, the escalation claims were raised
multiple times by the petitioner. In my view, the very fact that the
final bill was prepared by the respondent on March 11, 2016
without taking into account the said escalation claim would
undoubtedly tantamount to being the first instance of rejection of
the petitioner's price escalation claim which in turn would give rise
to the cause of action for invoking arbitration. The acceptance of
the final bill by the petitioner would also mean the acceptance of
such rejection by the respondent.
25. At this point, it would be apt to refer to the decision of the apex
court in Secunderabad Cantonment Board -v- B.
Ramachandraiah & Sons (supra) as cited by Mr. Chowdhury.
On perusal of the paragraphs reproduced below, it becomes crystal
clear that the factual situation in that case is akin to the one in
the present matter. The relevant portion has been extracted below
-
"19. Applying the aforesaid judgments to the facts of this
case, so far as the applicability of Article 137 of the
Limitation Act to the applications under Section 11 of the
Arbitration Act is concerned, it is clear that the demand for
arbitration in the present case was made by the letter
dated 7-11-2006. This demand was reiterated by a letter
dated 13-1-2007, which letter itself informed the appellant
that appointment of an arbitrator would have to be made
within 30 days. At the very latest, therefore, on the facts
of this case, time began to run on and from 12-2-2007.
The appellant's laconic letter dated 23-1-2007, which
stated that the matter was under consideration, was
within the 30-day period. On and from 12-2-2007, when
no arbitrator was appointed, the cause of action for
appointment of an arbitrator accrued to the respondent
and time began running from that day. Obviously, once
time has started running, any final rejection by the
appellant by its letter dated 10-11-2010 would not give
any fresh start to a limitation period which has already
begun running, following the mandate of Section 9 of the
Limitation Act. This being the case, the High Court was
clearly in error in stating that since the applications under
Section 11 of the Arbitration Act were filed on 6-11-2013,
they were within the limitation period of three years
starting from 10-11-2020. On this count, the applications
under Section 11 of the Arbitration Act, themselves being
hopelessly time-barred, no arbitrator could have been
appointed by the High Court."
Likewise in the present matter, the limitation is set to have
commenced on March 11, 2016 itself when the final bill was
prepared by the respondent after due consideration of the
petitioner's price escalation claims. This being the case, once the
time has started running, any further rejection of the earlier
claims will not give fresh start to the limitation period.
26. In addition to that, Mr. Mitra's contention that the acceptance of
the final bill was revoked by the petitioner vide its letter dated May
16, 2016 is also ought to be rejected as a bare reading of the said
acceptance letter reveals that it was mere repetition of its earlier
acceptance letters dated March 15, 2016, and March 17, 2016 and
in fact, there was no mention of any sort of revocation of these
earlier acceptance letters.
27. Moreover, I found it strange for the petitioner to seek respondent's
permission to invoke arbitration in terms of clause 25 of the
contract as the said clause contains no such requirement
necessitating one party to seek another's permission to invoke
arbitration.
28. There is a limited period within which an arbitration notice has to
be sent, failing which a party's right to do so would extinguish. The
Supreme Court in BSNL -v- Nortel (supra) held that by merely
sending letter a party cannot claim an extension of the limitation
period. Therefore, if Mr. Mitra's stance is accepted then it would be
highly damaging wherein the period of limitation would expand by
merely sending letters, thereby, putting the other party at a huge
disadvantage. Logically, repetition of its earlier stance by the
respondent would not amount to initiating a fresh cause of action
or extend the limitation period.
29. Mr. Chowdhury, counsel appearing on behalf of the respondent
cited the decision of the Supreme Court in Geo Miller &
Company Private Ltd. -v- Rajasthan Vidyut Utpadan Nigam
Ltd., reported in 2019 SCC OnLine SC 1137 to argue that the
limitation period in the present case had already expired and that
the petitioner cannot justify the unreasonable delay in invocation
of arbitration by taking refuge in the purported settlement
discussions. While this Court accepts the principle propounded in
the aforesaid case as was also done by the apex court in BSNL -v-
Nortel (supra) but the present case factually differs from the
situation in Geo Miller (supra). In Geo Miller (supra), the final
bill was still pending settlement whereas in the present case the
final bill was not only settled but the retention money was also
refunded to the petitioner. The petitioner clearly accepted the
settlement by two letters, indicating no duress or coercion
whatsoever, accepted the payments as per the final bill and the
refund of the retention money.
30. Next, Mr. Mitra sought to challenge the acceptance of such final
bill on the grounds that the same was done under duress from the
respondent. This reminded me of the old saying of hitting arrows
in the dark in the hope that one of them will hit the intended
target. I firmly believe that one should not keep arguing for
argument's sake. If a certain claim is made before the Court, the
same needs to be backed up by some evidence. He failed to satisfy
this Court regarding the existence of duress or any such
extraneous factor which led the petitioner to accept the final bill.
In my view, compelling financial circumstances and the
petitioner's eagerness to receive the payment cannot tantamount
to duress from the respondent's side.
31. It is now well settled that the claims in the present petition are ex-
facie time barred. However, as a last ditch effort Mr. Mitra
contended that since the respondent in its letter dated April 10,
2021 had themselves appointed the arbitrator, the question
regarding the existence of any dispute does not arise anymore. In
my view, limitation is not something to be decided by the consent
between the parties, but it is something which is statutorily
mandated and judicially enforced. If there is a boundary drawn by
the legislature and enforced by the judiciary, parties cannot act
outside of it on the grounds that their consent should be the
primary consideration in such cases. While this Court accepts that
appointment of arbitrator by the respondent is impermissible but
that would not permit the parties to venture beyond the
boundaries of limitation.
32. The letter dated April 10, 2021 of the respondent is quite explicit
with regards to non-admissibility of the claim and on the point of
limitation. Even though the respondent appointed an arbitrator it
clearly stated as follows:-
"In view of the above, our client states that there is no existing
dispute referable to arbitration as alleged in your letter under
reference. In any event the alleged claim sought to raised, is
clearly barred by limitation.
Without prejudice to the above contentions, since your client
has sought to invoke the arbitration clause, our client hereby
nominates Shri. Basab Majumdar, Retd. DG, CPWD as its
nominee arbitrator."
Ergo, the appointment per se cannot be treated as an acceptance of
the claim resulting in extension of the limitation as the letter
specifically denies the claim and states that the same is barred by
limitation.
33. At this juncture, reference can be made to the Delhi High Court's
decision in Extramarks Education India Pvt. Ltd -v- Shri Ram
School and Anr. reported in 2022 SCC OnLine Del 3123
wherein Bhambani J. held that limitation cannot be extended by
consent. The relevant portions have been extracted below -
14. To be abundantly clear as to the concept of 'limitation'
barring a legal remedy, the following observations of the
Hon'ble Supreme Court in N.9Balakrishnan v. M.
Krishnamurthy may be noticed:
"11. Rules of limitation are not meant to destroy the
rights of parties. They are meant to see that parties
do not resort to dilatory tactics, but seek their remedy
promptly. The object of providing a legal remedy is to
repair the damage caused by reason of legal
injury. The law of limitation fixes a lifespan for such
legal remedy for the redress of the legal injury so
suffered. Time is precious and wasted time would
never revisit. During the efflux of time, newer causes
would sprout up necessitating newer persons to seek
legal remedy by approaching the courts. So a lifespan
must be fixed for each remedy. Unending period for
launching the remedy may lead to unending
uncertainty and consequential anarchy. The law of
limitation is thus founded on public policy. It is
enshrined in the maxim interest reipublicae up sit
finislitium (it is for the general welfare that a period
be put to litigation). Rules of limitation are not meant
to destroy the rights of the parties. They are meant to
see that parties do not resort to dilatory tactics but
seek their remedy promptly. The idea is that every
legal remedy must be kept alive for a legislatively
fixed period of time."
(emphasis supplied)
*
34. For completeness, the two other objections raised on
behalf of the petitioner may also be answered. The
petitioner's objection that the schedule of payments, as
set-out in Annexure 3 to Agreement dated 31.03.2015, ran
up-to May 2018 is of no relevance of consequence, for the
reason that admittedly the petitioner terminated the
contract with the respondent by Notice dated 04.01.2017;
and could not therefore have demanded payment up-to
May 2018 in the same breath. The petitioner's other
objection, that since in its reply dated 31.08.2021 the
respondent themselves were willing to accept and had
given their consent for appointment of an arbitrator "near
to the locality" where the respondents were located, is
neither here nor there, since if the court finds that the
payments made are ex-facie time-barred, limitation for
invoking a legal remedy cannot be extended even by
consent. Conceptually, limitation bars a legal remedy and
not a legal right, the legal policy being to ensure that legal
remedies are not available endlessly but only up-to a
certain point in time. Needless to add however, that if the
respondents are conceding the petitioner's claim itself, and
are ready and willing to pay-up, such payment would not
be illegal and there could not be any legal impediment in
doing so. A party may concede a claim at any time; but
cannot concede availability of a legal remedy beyond the
prescribed period of limitation."
35. This Court is in agreement with the principles laid down by the
Delhi High Court in the aforesaid judgment. While time should
never be a hindrance in dispensing justice, the same would not
mean that the time for claiming recourse to a remedy never ends
as this would defeat the very purpose for which such remedies
exist. The goal is never just to ensure that justice is done but also
to make sure it is done in a timely manner, and within certain
boundaries of limitation as laid down by the law. In my view,
limitation does not act as a barrier in the pathway of justice, but
instead it acts as a means to ensure efficiency in the process of
justice.
36. For ease of reference of the parties, I have attempted to
encapsulate below the relevant juridical principles which emerge
from the various judgments discussed above -
a. The Supreme Court vide its decisions in Perkins Eastman
Architects DPC & Another -v- HSCC (India) Ltd. (supra)
and TRF Ltd. -v- Energo Engineering Projects Ltd. (supra)
has univocally made it clear that unilateral appointment of an
arbitrator by an interested party is not permissible.
b. The three judges' bench in Vidya Drolia -v- Durga Trading
Corporation (supra) empowered the Courts adjudicating a
Section 11 application to intervene in certain circumstances
and held that such interventional exercise does not interfere
with the principle of competence-competence and separation
as to obstruct arbitration proceedings but ensures that
vexatious and frivolous matters gets weeded out at the initial
stage. It is to be noted that the Supreme Court in this case
observed that an absolute hands off approach would be
counterproductive and harm arbitration, whereas limited yet
effective intervention is acceptable as it does not obstruct but
effectuates arbitration. Thus, the Courts at the Section 11
referral stage, with a view to prevent wastage of public and
private resources, can interfere when it is manifest that the
claims are ex-facie time barred and dead, or there is no
subsisting dispute.
c. Similarly, in DLF Home Developers Limited -v- Rajapura
Homes Pvt. Ltd., (supra) the apex court affirmed that the
limited jurisdiction under Section 11 does not denude this
Court of its judicial function to look beyond the bare existence
of an arbitration clause to cut the deadwood. The Court went
ahead to say it differently that this Court or a High Court, as
the case may be, are not expected to act mechanically merely
to deliver a purported dispute raised by an applicant at the
doors of the chosen arbitrator. A limited review by the Court
is not intended to usurp the jurisdiction of the Arbitral
Tribunal but is aimed at streamlining the process of
arbitration.
d. The Supreme Court further clarified in Bharat Sanchar
Nigam Limited -v- Nortel Networks India Pvt. Ltd. (supra)
that adjudication of the limitation issue at the Section 11
referral stage does not tantamount to stepping into the
arbitrator's jurisdictional territory. In essence, it opined, that
the issue of limitation is a challenge to the maintainability or
admissibility of the claim itself and not a challenge to the
jurisdiction of the arbitrator to decide the claim. Basis this
reasoning, Uttrakhand Purv Sainik (supra) cited by Mr.
Mitra stood distinguished.
e. Again in Bharat Sanchar Nigam Limited -v- Nortel
Networks India Pvt. Ltd. (supra), the Supreme Court held
that there must be a clear notice invoking arbitration setting
out the particular dispute (including claims / amounts) which
must be received by the other party within a period of 3 years
from the rejection of a final bill, failing which, the time bar
would prevail. It also concluded that the period of limitation
for issuing notice of arbitration would not get extended by
mere exchange of letters, or mere settlement discussions,
where a final bill is rejected by making deductions or
otherwise.
Likewise in Geo Miller & Company Private Ltd. -v-
Rajasthan Vidyut Utpadan Nigam Ltd. (supra), the apex
court held that 'breaking point' is the date where any
reasonable party would have abandoned efforts at arriving at
a settlement and contemplated referral of the dispute for
arbitration. This date would then be treated as the date on
which the cause of action arises, for the purpose of limitation.
The threshold for determining when such a point arises will
be lower in the case of commercial disputes, where the party's
primary interest is in securing the payment due to them, than
in family disputes where it may be said that the parties have
a greater stake in settling the dispute amicably, and therefore
delaying formal adjudication of the claim.
f. In Secunderabad Cantonment Board -v- B.
Ramachandraiah & Sons (supra), the apex court ruled that
once the limitation period has started running, any final
rejection by the respondent would not give any fresh start to
the limitation period which has already begun running,
following the mandate of Section 9 of the Limitation Act,
1963.
g. Lastly, in Extramarks Education India Pvt. Ltd -v- Shri
Ram School (supra), the Delhi High Court remarked that
limitation for invoking a legal remedy cannot be extended
even by consent and that unending period for launching the
remedy may lead to unending uncertainty and consequential
anarchy.
37. For the convenience of the parties, I have summarized below the
factual findings of this Court -
a. The final bill of March 11, 2016 was a result of reworking and
enhancement of the initial costs from a figure of INR
39,03,20,185 to INR 80,23,73,260/-.
b. Therefore, the cause of action arose on March 11, 2016 itself,
i.e., on the day when the final bill was issued by the
respondent, and therefore, the limitation period started to run
from that day itself;
c. Two letters were issued by the respondent accepting the final
bill, and subsequently, they received payments for the same
and also refund of the retention money. In fact, the
petitioner's letter of acceptance only makes a 'request' for
further enhancement and nothing more.
d. Subsequent demand letters by the petitioners do not utter a
single word on coercion or duress, and in any case, no
evidence was ever produced to show that their acceptance of
the final bill dated March 11, 2016, was made under duress
or coercion;
e. The letter by the respondent in 2017 rejecting the demands of
the petitioner is only a reiteration of its earlier stand and
cannot be accepted as the breaking point of negotiations to
allow a fresh period of limitation. This argument of Mr. Mitra
and his reliance on Geo Miller (supra) is misplaced as in that
case, the final bill was never settled, and therefore, in that
case, the rejection was taken as the starting point of
limitation. The present case is clearly distinguishable on
facts.
f. In light of the above, the limitation period started on March
11, 2016 itself and the notice of arbitration under Section 21
issued on March 8, 2021, is patently barred by limitation as
per Article 137 of the Limitation Act, 1963.
g. In arguendo, if May 16, 2016, is assumed to be the 'breaking
point,' i.e., the day when the petitioner raised their escalation
claims for the first-time post receipt of payment, retention
money, and the final completion certificate, and also sought
to invoke arbitration, even then the present application is
barred by limitation.
h. Even though the respondent appointed an arbitrator in their
letter dated April 10, 2021, the same would not be treated as
an acknowledgement of the petitioner's claim as the letter not
only denied such a claim but also stated that the same is
barred by limitation.
38. I would like to put on record my appreciation of the lawyers
appearing for both parties for their assiduous efforts in trying to
convince the court on behalf of their clients. Arguments made
during the course of the hearing were both invasive and thought-
provoking and have resulted in substantial enhancement in the
ken of knowledge of this Court on the subject.
39. In view of the above-mentioned findings by this Court, and humbly
disagreeing with Mr. Mitra, I hold that it is patently clear that the
claim giving rise to the present dispute is ex-facie time barred and
falls within the limited category of deadwood. Resultingly, the
reference to arbitration is hereby declined.
40. Accordingly, AP 237/2021 is dismissed. There shall be no order as
to costs.
41. An urgent photostat-certified copy of this order, if applied for,
should be made available to the parties upon compliance with
requisite formalities.
(Shekhar B. Saraf, J.)
