Calcutta High Court
P.K Thakur And Company Private Limited vs Steel Authority Of India Limited on 6 August, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
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IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISON
BEFORE :-
THE HON'BLE JUSTICE SHAMPA SARKAR
AP-COM 461 of 2024
P.K THAKUR AND COMPANY PRIVATE LIMITED
Vs.
STEEL AUTHORITY OF INDIA LIMITED
For the Petitioner : Ms. Suchismita Chatterjee Ghosh, Adv.
Mr. Samridha Sen, Adv.
Mr. Malay Kumar Seal, Adv.
For the Respondent : Mr. Chayan Gupta, Adv.
Mr. Pourush Bandyopadhyay, Adv.
Mr. Dwip Raj Basu, Adv.
Reserved on : 04.08.2025
Judgment on : 06.08.2025
Shampa Sarkar, J.
1. This is an application for appointment of an arbitrator. Sometime in
February 11, 2008, a notice inviting tender was published by the respondents
for setting up of Intake Works & Plant Make-Up Water & Drinking Water
System (package 20) at IISCO Steel Plant. The petitioner participated in the
tender process by forming a consortium with ION Exchange (India) Limited.
The consortium was selected as the highest bidder on November 28, 2008. A
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contract was executed by and between the parties. The scope of the work
involved construction of "Raw Water Reservoir 1 and 2". According to the
petitioner, during the course of execution of the work, hard rocks had to be
removed from the top soil. The rock cutting was an essential feature for
effective execution and completion of the work. On May 12, 2011, the
consortium raised a demand on the respondent and the payment was released.
On June 20, 2011, a letter was written to the SAIL authorities by the petitioner
with a categorical explanation and break up of the calculation for the demand
on account of additional works. The claim of the petitioner was denied by the
respondents on January 30, 2015, after 4 years. The petitioner alleged that a
discriminatory treatment was meted out to the petitioner, inasmuch as, the
consortium was paid for similar work. The petitioner filed a writ petition before
this Court being W.P No. 17280(W) of 2017. The said writ petition was
dismissed by a learned Single Judge on July 14, 2017. The order was
challenged in M.A.T No. 1223 of 2017, which was renumbered as F.M.A 1400
of 2017. The appeal was also dismissed on June 27, 2023. The petitioner filed
a Special Leave Petition (SLP) before the Hon'ble Supreme Court of India, which
was dismissed. The petitioner laid emphasis on the observation of the Hon'ble
Supreme Court while dismissing the SLP that, the petitioner would be entitled
to take recourse to arbitration. On February 6, 2024, arbitration was invoked.
The date of the letter went down wrongly. The letter of invocation was received
by the respondent, which was replied to on February 16, 2024. According to
the respondent, the contract ended in 2017, which made the invocation barred
by limitation. The petitioner contended that, the claim was in respect of
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additional work done up to July 15, 2013. The claim was rejected on January
30, 2015. The cause of action arose on the date of rejection i.e. 30th January,
2015. Up to 2016, the petitioner made several requests for payment. Having no
other alternative, the writ petition was filed upon obtaining legal advice. The
petitioner sought for exclusion of the period between June, 2017 and January
2, 2024 i.e. the time between filing of the writ petition and dismissal of the SLP,
in computing the period of limitation in invoking arbitration. The petitioner's
contention was that, the observation of the Hon'ble Supreme Court that the
petitioner had an alternative remedy by way of arbitration, was a liberty
granted to the petitioner to invoke the arbitration clause, upon dismissal of the
SLP. The petitioner claimed Rs. 13,89,37,291/- on account of additional work
along with interest at the rate of 18% per annum, from the date of demand till
the date of actual payment. Article 10 of the contract was relied upon and a
prayer was made for reference of the dispute to arbitration. The petitioner
contended that any further attempt at conciliation of the dispute, would be a
futile exercise. The rejection of the claim, the vehement opposition before the
writ court and in the appeal, clearly indicated that the respondent was
unwilling to settle the dispute. Thus, the requirement for conciliation under
clause 18 was not mandatory in the instant case. The petitioner's next
contention was that, in view of the absence of an agreement between the
parties as to whether the arbitration would be governed by the rules of Indian
Council of Arbitration (ICA) or Scope Forum of Conciliation and Arbitration
(SFCA), the mechanism provided under the clause failed, and this court under
Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred
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to as the said Act) should refer the dispute. The jurisdiction clause was referred
to in support of the contention that the entire cause of action arose within West
Bengal. The parties had agreed to an exclusive jurisdiction clause which
provided that, the Courts of Asansol, West Bengal, would have jurisdiction.
2. It was submitted that, the challenge in the writ petition was on the
discriminatory treatment meted out to the petitioner by refusing to pay the
amount raised for the additional work done, although, the consortium was paid
money for similar work. Ms. Chatterjee Ghosh submitted that the scope of
adjudication by a writ court and the scope of adjudication by an arbitrator were
different and distinct. The writ petition was dismissed on the ground that,
disputed questions were involved. The learned Single Judge did not reject the
claims of the petitioner. The argument before the writ court was that, the
respondent being an authority under Article 12 of the Constitution of India had
acted in an arbitrary manner, by denying the claim of the petitioner. The
arbitrator was the proper forum to determine the validity and admissibility of
the claim, upon interpretation of the terms and conditions of the contract and
upon appreciation of evidence to be adduced by the respective parties.
According to the learned Advocate, the scope of work under the contract
included all works which would have to be done for effective execution of the
project. The scope of the work was not restricted only to works mentioned in
the contract, but also to all such works which were required to be undertaken
for proper completion of the project. Clause 8.2 of the contract was relied upon
to substantiate such argument. It was urged that the writ petition was
dismissed on the ground that adjudication of the writ petition would involve
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interpretation of the terms of the contract, which was beyond the scope of
judicial review. Learned Advocate further submitted that in the appeal, the
Division Bench also observed that the issue as to whether additional work of
blasting / removal of the hard rock was either beyond the terms of the contract
or an essential part, for the purpose of total and effective completion of the
project, were questions of fact, which could only be determined upon
appreciation of evidence. Ms. Chatterjee Ghosh contended that the impugned
Memo dated January 30, 2015, by which the claim for the additional work
done (rock cutting) was refused, had not been interfered with, as the courts
held that the facts put forward ought to be proved by leading evidence and the
writ court was not the proper forum to weigh evidence. The arbitrability of the
claim was not decided in those proceedings. Hence, the referral court should
appoint an arbitrator to adjudicate the claim.
3. Learned Advocate relied on the following decisions to substantiate that
the scope of interference of a referral court under section 11(6) of the said Act :-
(a) Goqii Technologies Private Limited Versus Sokrati Technologies
Private Limited (Civil Appeal No. 12234 of 2024, arising out of SLP
(C) No. 15562 of 2024),
(b) Interplay Between Arbitration Agreements under Arbitration and
Conciliation Act, 1996 & Stamp Act, 1899, In re, reported in (2024)
6 SCC 1
(c) Aslam Ismail Khan Deshmukh v. ASAP Fluids (P) Ltd. and Anr.,
reported in 2024 SCC Online SC 3191
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4. It was urged that the existence of the arbitration agreement between the
parties was not in dispute. The scope of enquiry of this Court was microscopic.
A, prima facie, examination as to the existence of such arbitration agreement
would suffice the need to refer the dispute to arbitration. A detailed
examination on the factual matrix was not contemplated by law. The referral
court could not go deeper into the facts and weigh the probative value of the
documents on record, while deciding the prayer for reference. A deeper probe
would be contrary to the legislative intent behind the amendment of 2015. The
said amendment further limited the scope of judicial scrutiny to a, prima facie,
determination of the existence of an arbitration agreement.
5. On the proposition that the provisions of section 14 of the Limitation Act,
1963 (hereinafter referred to as the 'Limitation Act') would be applicable in the
instant case, in computing the period of limitation, reliance was placed on the
following decisions:-
(a) M.P. Steel Corpn. v. CCE, reported in (2015) 7 SCC 58,
(b) Gimpex (P) Ltd. v. Manoj Goel, reported in (2022) 11 SCC 705
(c) Laxmi Srinivasa R & P Boiled Rice Mill v. State of A.P. and Anr,
reported in 2022 SCC OnLine SC 1790.
6. It was submitted that, as long as the petitioner was pursuing the legal
remedy, in a bona fide manner, the entire period between the filing of the writ
petition and disposal of the SLP, should be excluded. Learned Advocate
submitted that exclusion of time under section 14 of the Limitation Act was
wide enough to cover all such cases in which the courts refused to entertain a
matter as the lis could not be decided by the said forum for various reasons
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and not only on the ground of lack of jurisdiction. Any reason, be it legal or
factual, which inhibited entertainment of the writ petition on merits, was
covered by the provisions of section 14 of the Limitation Act. The section
deserved a liberal approach in its interpretation and applicability.
7. Reliance was placed on the following decisions in support of the
contention that the principles of res judicata, provisions of Order II Rule 2 and
estoppel would not apply at the stage of reference:-
(a) Parsvnath Developers Ltd. & Anr. v. Rail Land Development
Authority, reported in 2018 SCC OnLine Del 12399.
(b) Subodh Prakash vs. Rajiv Gaddh decided in (ARB 578 of 2021)
(c) Gannon Dunkerley & Co. Limited vs Union of India, Ministry of
Road Transport and Highways decided in ARB.P. 1073 of 2022.
8. The petitioner's contention was that the arbitral tribunal was the
appropriate forum to examine and decide whether the claim was barred by res
judicata. Such determination would involve appreciation of evidence. Learned
Advocate further submitted that any extensive enquiry or scrutiny into the
nature of the claim in the writ petition or in the appeal, would exceed the
limited jurisdiction of this Court. It was urged that clause 7.1.2 read with
clauses 8.2. of the contract permitted the petitioner to claim money in lieu of
the additional work done. Unless removal of the hard rock was achieved, the
project could not be completed. According to Ms. Chatterjee Ghosh, this was a
fit case for reference of the dispute to arbitration.
9. Mr. Chayan Gupta, learned Advocate for the respondent submitted that
the claim was ex facie barred by limitation and "dead wood". The period of
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limitation would be three years from the date of accrual of the claim. The
petitioner ought to have invoked arbitration within three years from the date
when the payment became due. The first letter of demand for the price for the
additional work of hard rock excavation, was issued on June 20, 2011. That
was the starting point of limitation and the period of limitation expired on June
20, 2014. The extra claim made by the petitioner was denied after the expiry of
the period of limitation on January 30, 2015. Such denial would not extend
the period of limitation. The writ petition was affirmed on June 16, 2017. The
cause of action at that time was already barred by limitation. The writ petition
was filed beyond a period of 1092 days. By the time the SLP was dismissed,
the cause of action was barred by a period of 3483 days. The notice under
Section 21 of the said Act was issued after expiry of 3518 days from the date of
accrual of the cause of action i.e. on February 6, 2024. The application for
reference to arbitration was barred by a period of 3554 days. Thus, the cause
of action was barred by 3554 days, by the time the application for appointment
of an arbitrator was filed.
10. Mr. Gupta placed reliance on Section 14 of the Limitation Act and
submitted that, the exclusion of time as contemplated under the said provision
would have been available to the petitioner, had the writ petition and appeal
therefrom, as also, the SLP had been rejected on the ground of lack of
jurisdiction. The writ petition and the proceedings therefrom were all decided
on merits, and as such, the provision of Section 14 would not apply. It was
nobody's case that the petitioner was pursuing a remedy before a wrong forum,
which did not have jurisdiction to entertain the proceeding.
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11. It was contended that the findings of the learned single Judge and the
Division Bench would indicate that the courts were of the view that the claim
for additional work was not tenable in law and could not be entertained. Thus,
the issues were finally determined in those proceedings and the prayer for
reference of the dispute for a further decision by an arbitrator, was barred by
the principles of res judicata and issue estoppel.
12. Referring to the affidavit-in-reply filed by the petitioner to the affidavit-in-
opposition of SAIL filed in the writ proceeding, Mr. Gupta contended that, it
was the petitioner's own case that, the additional work was not covered by the
scope of the contract and the arbitration clause would not be binding, insofar
as, the determination of the money claim arising out of such additional work
was concerned. The petitioner urged before the writ court that, no other
speedy, efficacious or alternative remedy was available to the petitioner. Such
submissions of the learned Advocate for the petitioner were recorded in the
order dated July 14, 2017, by the learned Single Judge while disposing of the
writ petition. Mr. Gupta submitted that the writ petitioner always understood
that such additional work was outside the scope of the contract, and as such,
the arbitration clause would not be a deterrent for the writ court to adjudicate
the issues involved in the writ petition. The averments in the writ petition were
placed in great detail to demonstrate that the entire cause of action in the writ
petition arose out of the claim for the extra work done in removal of the hard
Rock. The same claim was sought to be further reopened in an arbitration
proceeding.
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13. According to Mr. Gupta, having failed in the attempt to get an order for
payment of the money for the additional work, the petitioner was reopening the
entire issue, by invoking the arbitration clause. Mr. Gupta submitted that the
decisions relied upon by the petitioner on the scope of interference by a referral
court, were not applicable in the facts of the present case. The petitioner's own
submission before the writ court and the Division Bench was that the claim for
additional works were not covered by the arbitration agreement and those
claims were beyond the scope of the contract.
14. Mr. Gupta further submitted that by the time the writ petition was filed,
the claim was barred by limitation. The period between the pendency of the
writ petition and the ultimate dismissal of the SLP, should not be excluded in
this case. Moreover, the petitioner was not pursuing a remedy before a wrong
forum. The writ court petition was not dismissed on account of want of
jurisdiction or any other cause of like nature, but the prayers were rejected on
merits.
15. Reliance was placed on the following decisions:-
(a) Consolidated Engineering Enterprises vs Principal Irrigation
Department reported in (2008) 7 SCC 169,
(b) Haryana State Cooperative Labour and Construction Federation
Limited vs Unique Cooperative Labour and Construction
Cooperative Society Limited and Anr. reported in (2018) 14 SCC 248,
(c) Sesh nath Singh & Anr. vs Baidyabati Seoraphuli Cooperative
Bank Limited & Anr. reported in (2021) 7 SCC 313.
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16. According to Mr. Gupta, the exclusion of time as contemplated under
Section 14 of the Limitation Act, would not be applicable is the facts of the
present case.
17. Reliance was placed on paragraphs 16, 17 and 18 of the order dated
June 27, 2023, passed in FMA 1400 of 2017, in support of the contention that
the Division Bench had dealt with the subject matter of the dispute. Paragraph
18 of the decision of the Hon'ble Division Bench was specially emphasized. It
was urged that the Division Bench held that, the rejection of the claim by the
learned single Judge in the writ petition, was proper. Thus, the petitioner
could not invoke arbitration on the self-same cause of-action, for further
determination of the claim for extra work which had been rejected in the writ
proceeding and ultimately by the Hon'ble Supreme Court. With regard to the
observation of the Hon'ble Supreme Court and the liberty allegedly granted, it
was submitted that such liberty was always subject to the applicable laws. The
liberty could not mean that the laws of limitation, the doctrine of res judicata,
estoppel and any other similar principle would not be applicable. Lastly, it was
urged that, the referral court should not exercise its power under Section 11(6)
of the said Act, when the existence of the arbitration clause in respect of the
self-same claim was denied by the petitioner in other proceedings.
18. The question, therefore, is whether in the above background, this court
should refer the dispute to arbitration.
19. It is an admitted position that a litigation was continuing between the
parties for a long time and the respondent had always refused to pay for the
alleged extra work involving hard rock excavation. Thus, the conciliation clause
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has now become redundant. The court is of the view that any further direction
for settlement of the dispute by conciliation, will be an empty formality.
Reference is made to the decisions of Visa International Limited vs.
Continental Resources (USA) Limited reported in (2009) 2 SCC 55 and
Demerara Distilleries Private Limited and Anr. vs. Demerara Distillers
Limited reported in (2015) 13 SCC 610.
20. The relevant paragraph of Visa International (supra) is quoted below:-
"38. It was contended that the pre-condition for amicable
settlement of the dispute between the parties has not been
exhausted and therefore the application seeking appointment of
arbitrator is premature. From the correspondence exchanged
between the parties at pp. 54-77 of the paper book, it is clear that
there was no scope for amicable settlement, for both the parties
have taken rigid stand making allegations against each other. In
this regard a reference may be made to the letter dated 15-9-2006
from the respondent herein in which it is inter alia stated "...
since February 2005 after the execution of the agreements,
various meetings/discussions have taken place between both the
parties for furtherance of the objective and purpose with which
the agreement and the MoU were signed between the parties.
Several correspondences have been made by CRL to VISA to help
and support its endeavour for achieving the goal for which the
abovementioned agreements were executed". In the same letter it
is alleged that in spite of repeated requests the petitioner has not
provided any funding schedules for their portion of equity along
with supporting documents to help in convincing OMC of
financial capabilities of the parties and ultimately to obtain
financial closure of the project. The exchange of letters between
the parties undoubtedly discloses that attempts were made for an
amicable settlement but without any result leaving no option but
to invoke the arbitration clause."
21. The relevant paragraph of Demerara Distilleries (supra) is quoted
below:-
"5. Of the various contentions advanced by the respondent
Company to resist the prayer for appointment of an arbitrator
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under Section 11(6) of the Act, the objections with regard the
application being premature; the disputes not being arbitrable,
and the proceedings pending before the Company Law Board,
would not merit any serious consideration. The elaborate
correspondence by and between the parties, as brought on record
of the present proceeding, would indicate that any attempt, at this
stage, to resolve the disputes by mutual discussions and
mediation would be an empty formality. The proceedings before
the Company Law Board at the instance of the present
respondent and the prayer of the petitioners therein for reference
to arbitration cannot logically and reasonably be construed to be
a bar to the entertainment of the present application. Admittedly,
a dispute has occurred with regard to the commitments of the
respondent Company as regards equity participation and
dissemination of technology as visualised under the Agreement. It
would, therefore, be difficult to hold that the same would not be
arbitrable, if otherwise, the arbitration clause can be legitimately
invoked."
22. Undoubtedly, the parties agreed to refer disputes arising out of the
contract to arbitration, in the event conciliation failed. The arbitration clause is
quoted below:-
"Any disputes differences, whatsoever, arising between the parties out of
relating to the construction, meaning, scope, operation or effect of this
Contract shall be settled between the Employer and the Contractor
amicably. If however, the Employer and the Contractor are not able to
resolve their disputes/ differences amicably as aforesaid the said
disputes/ differences shall be settled by Conciliation, failing which,
through Arbitration.
Conciliation shall be resorted to prior to invoking Arbitration. The
applicable rules for conciliation preceeding shall be that of "SCOPE
Forum of Conciliation and Arbitration " (SCFA). The Arbitration Clause is
to be invoked by the parties to the Contract only on failure of conciliation
proceedings.
The Arbitration shall be governed in accordance with Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the "Act"). The language
of Arbitration shall be English.
Arbitration shall be governed by the Rules of Indian Council of
Arbitration (ICA)/"SCOPE" Forum of Conciliation and Arbitration (SCFA)
as agreed by the Party. The Venue shall be New Delhi.
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During the pendency of the Conciliation or Arbitration proceedings both
the parties (i.e. the Contractor and the Employer) shall continue to
perform their contractual obligations.
The Arbitral Tribunal shall give reasons for its Award. The Tribunal shall
apportion the cost of Arbitration between the parties, the award rendered
in any Arbitration hereunder shall be final and binding upon the parties.
The parties agree that neither party shall have any right to commence or
maintain any suit or legal proceeding concerning any dispute under this
Agreement until the dispute has been determined in accordance with the
Arbitration proceeding provided for herein and then only to enforce or
facilitate the execution of an award rendered in such Arbitration.
The Court of Assansol, West Bengal India (with exclusion of all other
Courts) shall have exclusive jurisdiction over all matters of dispute"
23. It appears that the parties agreed to be governed either by the ICA rules
or SCFA rules and the venue in such case would be New Delhi. Admittedly, the
parties did not agree to be guided by the rules of either of the institutional
arbitration. The jurisdiction clause provided that courts of Asansol, West
Bengal would have exclusive jurisdiction. The entire cause of action arose
within the jurisdiction of West Bengal. Thus, as the mechanism for settlement
of dispute by an arbitrator failed, and the cause of action arose within West
Bengal, this court has jurisdiction to entertain this application.
24. The contention of Mr. Gupta that, Section 14 of the Limitation Act would
not be applicable as the petitioner was not pursuing its remedy in a wrong
forum, is now dealt with. Mr. Gupta urged that, the rejection of the writ
petition and the dismissal of the appeal were not on the ground of lack of
jurisdiction or any other similar clause. The relevant paragraphs were also
relied upon by Mr. Gupta in support of the contention that, each and every
factual matter with regard to the claim of the petitioner was placed before the
courts in detail and the courts had specifically denied the entitlement of the
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petitioner to the money claim for the extra work. In this connection, it would be
prudent to refer to the order dated July 14, 2017 passed in WP 17280(W) of
2017. The contention of the learned Advocate for the petitioner before the writ
court was that, the work did not come within the scope of the contract and as
such, the arbitration clause would not be binding. However the learned Single
Judge found that disputed questions of facts were involved and the questions
raised by the petitioner with regard to non-payment for the additional work
undertaken by the petitioner, fell within the purview of contractual obligations.
As such, it was observed that the writ court was not in a position to entertain
such disputed questions. The relevant paragraph is quoted below:-
"The petitioner and the respondent no.2 had entered into a commercial
contract. The impugned memo is dated January 30, 2015. By such
memo, the respondent no.2 had sought to repudiate the contract. There
are disputed questions of facts involved. One of the issues raised is
whether or not the additional work undertaken by the petitioner comes
within the purview of the contract or not. As a writ Court I am not
minded to enter into such disputed questions of facts on affidavit."
25. The Hon'ble Division Bench, by the order dated June 27, 2023, held that
the existence of a right and infringement thereof were the foundations for
exercise of jurisdiction under Article 226 of the Constitution of India. Matters
relating to tenders could not be tested by running a fine toothed comb through
the decision making process of the authority, to discover which 'i' had been
dotted and which 't' had been crossed. The conditions incorporated in the
contracts were to be treated together and not in isolation. A particular clause
could not be picked up and highlighted. According to the Division Bench, the
materials on record indicated that the contractors were asked to visit the site,
examine the actual ground conditions and its local features, before submitting
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their offer. The respondent appointed MECON as a project consultant. The
claim was not found to be tenable by the consultant and reasons were also
provided. The claim for extra work that was submitted by ION was approved
about four years prior to the rejection of the claim of the petitioner. There were
no contemporaneous correspondence during the said period from the end of
the petitioner, with regard to the amount claimed by the petitioner. The
Division Bench observed that appropriate standards of probity and
accountability would be required in order to determine the issue involved. The
claim of the petitioner was against a public authority and the same was
required to be categorically established by evidence. Under such
circumstances, in the opinion of the Division Bench, the prayer of the
petitioner was rightfully rejected by the learned writ court. It was held that no
mala fide could be attributed to the exercise of jurisdiction by the authorities,
in rejecting the claim.
26. This Court finds that, before the Division Bench, the petitioner failed to
establish arbitrariness and unreasonableness on the part of the respondent in
rejecting the claim. Admittedly, the writ petition and the appeal were dismissed
on the ground that, adjudication would involve appreciation of evidence. The
relevant paragraphs of the order of the Division Bench are quoted below:-
"17. The existence of a right and infringement thereto are the foundation
of exercise of jurisdiction under Article 226 of the Constitution of India.
Tender matters are not tested by running a fine tooth-comb over the
process to discover which 'i' has not been dotted and which 't' has not
been crossed. The conditions incorporated in the contract agreement
need to be considered together and not in isolation. A particular clause
cannot be picked up and highlighted. It appears from the materials on
record that specific instructions were given to the contractors to
ascertain themselves by visiting the site the actual site conditions and
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local factors before submitting their offer and it was specifically stated
that no extra claim on account of site conditions and local factors would
be admissible during execution of the contract. The contract document
also appointed MECON as the project consultant. The appellants' claim
was found to be not tenable by the said consultant and the reasons
thereof were also disclosed in the resolutions adopted by the appropriate
authority. The claim for extra work submitted by ION was approved
about four years prior to rejection of the appellants' claim. There was no
contemporaneous correspondence during the said period by the
appellants. As regards the amount payable to the appellant for alleged
extra work, appropriate standards of probity and accountability is
required to be on record. As the appellant's claim is in respect of public
money of a State instrumentality, the same needs to be categorically
established and this Court cannot come to any conclusion, in the
absence of appropriate evidence on record. The judgments upon which
reliance has been placed by the appellants are all distinguishable on
facts.
18. From the sequence of facts it is explicit that the appellants' claim was
not abruptly rejected. The issue was deliberated upon and discussed in
the meetings of various authorities. There is also no error in the decision
making process. Invitation to tender is in the realm of contract. It is not a
case that the final decision was taken by the authorities in a perfunctory
manner. No mala fide can be attributed to such action of the authorities.
The appellants have also failed to establish any arbitrariness or
unreasonableness against the respondents."
27. This court, prima facie, finds that the Division Bench was of the specific
view that without weighing the evidence, the claim of the petitioner could not
be determined. The dispute was within the realm of contractual obligation. The
claim was rejected on the ground that the petitioner had failed to prove that the
respondent had rejected the claim in an arbitrary and unreasonable manner.
The scope of entertainability of a writ petition was discussed, but the Hon'ble
Division Bench neither adjudicated the validity nor the admissibility of the
claim. The tenor of the orders of the Single Bench and the Division Bench were
that the dispute was in the realm of contractual obligations, and depended on
interpretation of the terms of the contract. The decision of the respondent was
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tested on the touchstone of Article 14. It was held that in view of the factual
disputes, a deeper probe would be necessary to arrive at a finding on such
claim, which could not be done by a writ court. The rejection by the authority
was upheld on the ground that the decision making process could not be
flawed. The question whether the claim of the petitioner was invalid, had not
been decided. The Hon'ble Supreme Court recorded that in the writ petition
before the High Court, the petitioner raised disputed questions of fact with
regard to the entitlement of the petitioner to receive payment for the extra work
of removal of hard rock. Although, it was observed that the rejection of the writ
petition could not be faulted, the Hon'ble Supreme Court recorded that there
was an arbitration agreement and it would be open to the petitioner to pursue
such alternative remedy in accordance with law.
28. Thus, the tenor of the orders passed earlier was that the dispute arose
out of a contract entered into between the parties, which involved
interpretation of the contractual terms and weighing of evidence, and such
questions were beyond the scope of judicial review of the decision making
process. The decision of the Hon'ble Supreme Court was that, in view of the
arbitration agreement between the parties, the petitioner should pursue the
alternative remedy in accordance with the law. The Hon'ble Supreme Court
was of the prima facie view that, the dispute in this regard should be settled by
arbitration. Mr. Gupta's contention was that, the observation of the Hon'ble
Supreme Court was qualified by the expression "in accordance with law" which
could not be ignored. In my view, the arbitral tribunal should be the forum to
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apply the principles of law pertaining to limitation, res judicata estoppel etc. as
urged by the respondent, and not the referral court.
29. With regard to the question of applicability of the doctrine of res judicata
this court, prima facie, finds that none of the courts decided the admissibility
of the claim. Rather, the courts held that the petitioner failed to establish
unreasonableness or arbitrariness in the decision of the authority and disputed
questions of fact, could not be decided in the writ petition. That, there was no
corroborating evidence to support the allegation of discrimination against the
petitioner. The writ court could not go beyond what was pleaded. The courts
were alive to the fact that the questions involved in the writ petition were
matters of evidence. The Hon'ble Supreme Court expressed a view that, the
petitioner had the alternative remedy to approach the arbitrator in view of the
arbitral clause. Such liberty was granted subject to the laws applicable. The
learned Arbitrator should decide whether the claim is barred by res judicata or
issue estoppel.
30. In the matter of Parsvnath Developers Ltd. and Anr. v. Rail Land
Development Authority, reported in 2018 SCC OnLine Del 12399, the Delhi
High Court held as follows:-
"8. I have considered the submissions made by the counsels for the
parties. It cannot be denied that there was an Arbitration Agreement
between the parties in the Development Agreement. It is also a matter of
fact that the petitioners have invoked the said Arbitration Agreement on
more than one occasion. It can also not be denied that the petitioners
had pleaded for reservation of its rights to claim further amounts in the
second arbitration proceedings which have resulted in the Arbitration
Award dated 25.11.2017. The question whether the claims now sought to
be raised by the petitioners would be barred by the principles of Order II
Rule 2 of CPC or on the ground of res judicata or estoppel, in my opinion,
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are questions on the merit of the claim of the petitioner and defence of
the respondent. These questions are to be determined by the Arbitral
Tribunal alone on the basis of the pleadings and/or evidence led by the
parties on these issues.
9. Counsel for the petitioner has placed reliance on the judgment of the
Supreme Court in SBP & CO. v. Patel Engineering Ltd., (2005) 8 SCC
618, to contend that the power exercised by this Court is a judicial power
and, therefore, this Court must determine whether the Arbitration
Agreement ceases to exist upon passing of the Award dated 25.11.2017.
10. In my opinion, the existence of the Arbitration Agreement itself is not
in dispute. The dispute is whether the claim now sought to be raised by
the petitioner would be barred by the principles of Order II Rule 2 of
the CPC and/or principles of res judicata and/or estoppel. It cannot be
denied that an Arbitration Agreement can be invoked a number of times
and does not cease to exist only with the invocation for the first time. The
Supreme Court in Dolphin Drilling Ltd. v. Oil and Natural Gas
Corporation Ltd., (2010) 3 SCC 267, has held as under:
"8. The plea of the respondent is based on the words "all disputes"
occurring in Para 28.3 of the agreement. Mr. Aggrawal submitted that
those two words must be understood to mean "all disputes under the
agreement" that might arise between the parties throughout the
period of its subsistence. However, he had no answer as to what
would happen to such disputes that might arise in the earlier period
of the contract and get barred by limitation till the time comes to refer
"all disputes" at the conclusion of the contract. The words "all
disputes" in Clause 28.3 of the agreement can only mean "all
disputes" that might be in existence when the arbitration clause is
invoked and one of the parties to the agreement gives the arbitration
notice to the other. In its present form Clause 28 of the agreement
cannot be said to be a one-time measure and it cannot be held that
once the arbitration clause is invoked the remedy of arbitration is no
longer available in regard to other disputes that might arise in future."
11. The question whether the claim of the petitioner would be barred by
the principles of res judicata or estoppel or by Order II Rule 2 of
the CPC are not matters to be considered by this Court while exercising
its jurisdiction under Section 11 of the Act. (Indian Oil Corporation
Ltd. v. SPS Engineering Ltd., (2011) 3 SCC 507)).
12. The legislature by amending the Act by way of the Arbitration and
Conciliation (Amendment Act) 2015 and the insertion of Section 11(6A) of
the Act has also restricted the scrutiny of the Court at the stage of
adjudicating an application under Section 11 of the Act only to the
existence of the Arbitration Agreement.
13. In view of the above, I see no impediment in appointing a nominee
Arbitrator for the respondent to adjudicate the disputes that are sought
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to be raised by the petitioners in relation to the abovementioned
Development Agreement. In such proceedings, all objections of the
respondent shall remain open and it would be for the Arbitral Tribunal to
decide the same, may be as primary issues."
31. In the matter of Subodh Parkash vs Rajiv Gaddh, reported in
2024:PHHC:146097, the High Court of Punjab and Haryana held as follows:-
"7 In Parsvnath Developers Limited & Anr. Versus Rail Land
Development Authority, 2020 (3) ArbiLR 536, High Court of Delhi
has observed that the issue of res judicata or claims being barred
under the principles of Order 2, Rule 2, CPC touch upon the merits
of the claim and can be decided only by the Arbitral Tribunal. The
power under Section 11 (6) of the Arbitration Act is only restricted
to examining the existence of the arbitration clause. The objection
raised by the respondent requiring the High Court to examine
whether the disputes sought to be raised are overlapping with the
claims raised before other fora cannot be sustained. Issues clearly
fall within the domain of the Arbitral Tribunal and would be
decided if and when raised by the respondent."
32. In the matter of Gannon Dunkerley and Company Limited vs Union of
India Ministry of Road Transport and Highways, reported in
2024:DHC:2663, the Delhi High Court held as follows:-
"36. The petitioner further states that it is settled law that whether the
claims of the petitioner would be barred by the principles of res-judicata
or estoppel are not matters to be considered by this court while
exercising jurisdiction under section 11 of the Arbitration and
Conciliation Act, 1996. Reliance is placed on Prasvnath Developers
Limited and Anr. v Rail Land Development Authority, Arb. P. No.
724/2018 dated 31.10.2018. The operative portion reads as under:-
" 11. The question whether the claim of the petitioner would be
barred by the principles of res judicata or estoppel or by Order II
Rule 2 of the CPC are not matters to be considered by this Court
while exercising its jurisdiction under Section 11 of the Act. (Indian
Oil Corporation Ltd. vs. SPS Engineering Ltd. (2011) 3 SCC 507)).
12. The legislature by amending the Act by way of the Arbitration
and Conciliation (Amendment Act) 2015 and the insertion
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of Section 11(6A) of the Act has also restricted the scrutiny of the
Court at the stage of adjudicating an application under Section
11 of the Act only to the existence of the Arbitration Agreement."
33. Thus, whether the principles of res judicata and estoppel apply, are
within the domain of the arbitrator.
34. Reference is made to the decision of Goqii Technologies Private
Limited vs Sokrati Technologies Private Limited reported in 2024 INSC
853. the Hon'ble Supreme Court held as follows:-
"20. Before we conclude, we must clarify that the limited jurisdiction of
the referral Courts under Section 11 must not be misused by parties in
order to force other parties to the arbitration agreement to participate in
a time-consuming and costly arbitration process. This is possible in
instances, including but not limited to, where the claimant canvasses the
adjudication of non-existent and mala fide claims through arbitration.
With a view to balance the limited scope of judicial interference of the
referral Courts with the interests of the parties who might be constrained
to participate in the arbitration proceedings, the Arbitral Tribunal may
direct that the costs of the arbitration shall be borne by the party which
the Tribunal ultimately finds to have abused the process of law and
caused unnecessary harassment to the other party to the arbitration.
Having said that, it is clarified that the aforesaid is not to be construed
as a determination of the merits of the matter before us, which the
Arbitral Tribunal will rightfully be equipped to determine."
35. In the decision of SBI General Insurance Co. Ltd. vs Krish Spinning
reported in 2024 SCC Online SC 1754, the Hon'ble Supreme Court held as
follows:-
"92. The position that emerges from the aforesaid discussion of law
on the subject as undertaken by us can be summarised as follows:--
i. There were two conflicting views which occupied the field under
the Arbitration Act, 1940. While the decisions in Damodar
Valley (supra) and Amar Nath (supra) took the view that the
disputes pertaining to "accord and satisfaction" should be left
to the arbitrator to decide, the view taken in P.K.
Ramaiah (supra) and Nathani Steels (supra) was that once a
"full and final settlement" is entered into between the parties,
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no arbitrable disputes subsist and therefore reference to
arbitration must not be allowed.
ii. Under the Act, 1996, the power under Section 11 was
characterised as an administrative one as acknowledged in the
decision in Konkan Railway (supra) and this continued till the
decision of a seven-Judge Bench in SBP & Co. (supra)
overruled it and significantly expanded the scope of judicial
interference under Sections 8 and 11 respectively of the Act,
1996. The decision in Jayesh Engineering (supra) adopted this
approach in the context of "accord and satisfaction" cases and
held that the issue whether the contract had been fully worked
out and whether payments had been made in full and final
settlement of the claims are issues which should be left for the
arbitrator to adjudicate upon.
iii.The decision in SBP & Co. (supra) was applied in Boghara
Polyfab (supra) and it was held by this Court that the Chief
Justice or his designate, in exercise of the powers available to
them under Section 11 of the Act, 1996, can either look into
the question of "accord and satisfaction" or leave it for the
decision of the arbitrator. However, it also specified that in
cases where the Chief Justice was satisfied that there was
indeed "accord and satisfaction", he could reject the application
for appointment of arbitrator. The prima facie standard of
scrutiny was also expounded, stating that the party seeking
arbitration would have to prima facie establish that there was
fraud or coercion involved in the signing of the discharge
certificate. The position elaborated in Boghara Polyfab (supra)
was adopted in a number of subsequent decisions, wherein it
was held that a mere bald plea of fraud or coercion was not
sufficient for a party to seek reference to arbitration and prima
facie evidence for the same was required to be provided, even at
the stage of the Section 11 petition.
iv. The view taken by SBP & Co. (supra) and Boghara
Polyfab (supra) was seen by the legislature as causing delays in
the disposal of Section 11 petitions, and with a view to
overcome the same, Section 11(6-A) was introduced in the Act,
1996 to limit the scope of enquiry under Section 11 only to the
extent of determining the "existence" of an arbitration
agreement. This intention was acknowledged and given effect to
by this Court in the decision in Duro Felguera (supra) wherein
it was held that the enquiry under Section 11 only entailed an
examination whether an arbitration agreement existed between
the parties or not and "nothing more or nothing less".
v. Despite the introduction of Section 11(6-A) and the decision
in Duro Felguera (supra), there have been diverging views of
this Court on whether the scope of referral court under Section
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11 of the Act, 1996 includes the power to go into the question
of "accord and satisfaction". In Antique Art (supra) it was held
that unless some prima facie proof of duress or coercion is
adduced by the claimant, there could not be a referral of the
disputes to arbitration. This view, however, was overruled
in Mayavati Trading (supra) which reiterated the view taken
in Duro Felguera (supra) and held that post the 2015
amendment to the Act, 1996, it was no more open to the Court
while exercising its power under Section 11 of the Act, 1996 to
go into the question of whether "accord and satisfaction" had
taken place.
vi. The decision in Vidya Drolia (supra) although adopted the view
taken in Mayawati Trading (supra) yet it provided that in
exceptional cases, where it was manifest that the claims
were exfacie time barred and deadwood, the Court could
interfere and refuse reference to arbitration. Recently, this view
in the context of "accord and satisfaction" was adopted
in NTPC v. SPML (supra) wherein the "eye of the needle" test
was elaborated. It permits the referral court to reject arbitration
in such exceptional cases where the plea of fraud or coercion
appears to be ex-facie frivolous and devoid of merit.
93. Thus, the position after the decisions in Mayavati Trading (supra)
and Vidya Drolia (supra) is that ordinarily, the Court while acting in
exercise of its powers under Section 11 of the Act, 1996, will only look
into the existence of the arbitration agreement and would refuse
arbitration only as a demurrer when the claims are ex-facie frivolous
and non-arbitrable.
iii. What is the effect of the decision of this Court in In Re : Interplay
Between Arbitration Agreements under the Arbitration and
Conciliation Act, 1966 and the Indian Stamp Act 1899 on the scope
of powers of the referral court under Section 11 of the Act, 1996?
94. A seven-Judge Bench of this Court, in In Re : Interplay Between
Arbitration Agreements under the Arbitration and Conciliation Act,
1966 and the Indian Stamp Act, 1899 reported in 2023 INSC 1066,
speaking eruditely through one of us, Dr Dhananjaya Y.
Chandrachud, Chief Justice of India, undertook a comprehensive
analysis of Sections 8 and 11 respectively of the Act, 1996 and, inter
alia, made poignant observations about the nature of the power
vested in the Courts insofar as the aspect of appointment of
arbitrator is concerned. Some of the relevant observations made by
this Court in In Re : Interplay (supra) are extracted hereinbelow:
"179. [...] However, the effect of the principle of competence-
competence is that the arbitral tribunal is vested with the power and
authority to determine its enforceability. The question of
enforceability survives, pending the curing of the defect which
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renders the instrument inadmissible. By appointing a tribunal or its
members, this Court (or the High Courts, as the case may be) is
merely giving effect to the principle enshrined in Section 16. The
appointment of an arbitral tribunal does not necessarily mean that
the agreement in which the arbitration clause is contained as well as
the arbitration agreement itself are enforceable. The arbitral tribunal
will answer precisely these questions.
xxx xxx xxx
"129. Insofar as the first issue is concerned, we are of the opinion that the
observations made by us in Arif Azim (supra) do not require any
clarification and should be construed as explained therein.
130. On the second issue it was observed by us in paragraph 67 that the
referral courts, while exercising their powers under Section 11 of the Act,
1996, are under a duty to "prima-facie examine and reject non -arbitrable
or dead claims, so as to protect the other party from being drawn into a
time-consuming and costly arbitration process."
131. Our findings on both the aforesaid Issues have been summarised in
paragraph 89 of the said decision thus:-
"89. Thus, from an exhaustive analysis of the position of law on the issues,
we are of the view that while considering the issue of limitation in relation
to petition under Section 11(6) of the Act, 1996, the courts should satisfy
themselves on two aspects by employing a two-pronged test - first,
whether the petition under Section 11(6) of the Act. 1996 is barred by
limitation; and secondly, whether the claims sought to be arbitrated are ex-
facle dead claims and are thus barred by limitation on the date of
commencement of arbitration proceedings. If either of these issues are
answered against the party seeking referral of disputes to arbitration. the
court may refuse to appoint an arbitral tribunal."
132. Insofar as our observations on the second issue are concerned, we
clarify that the same were made in light of the observations made by this
Court in many of its previous decisions, more particularly in Vidya Drolia
(supra) and NTPC v. SPML (supra). However, in the case at hand, as is
evident from the discussion in the preceding parts of this judgment, we
have had the benefit of reconsidering certain aspects of the two decisions
referred to above in the light of the pertinent observations made by a
seven-Judge Bench of this Court in In Re: Interplay (supra).
133. Thus, we clarify that while determining the issue of limitation in
exercise of the powers under Section 11(6) of the Act, 1996, the referral
court should limit its enquiry to examining whether Section 11 (6)
application has been filed within the period of limitation of three years or
not. The date of commencement of limitation period for this purpose shall
have to be construed as per the decision in Arif Azim (supra). As a natural
corollary, it is further clarified that the referral courts, at the stage of
deciding an application for appointment of arbitrator, must not conduct an
intricate evidentiary enquiry into the question whether the claims raised by
the applicant are time barred and should leave that question for
determination by the arbitrator. Such an approach gives true meaning to
the legislative intention underlying Section 11(6-A) of the Act, and also to
the view taken in In Re: Interplay (supra)."
2025:CHC-OS:143
XXXXXXX
185. The corollary of the doctrine of competence-competence is that
courts may only examine whether an arbitration agreement exists on
the basis of the prima facie standard of review. The nature of
objections to the jurisdiction of an arbitral tribunal on the basis that
stamp-duty has not been paid or is inadequate is such as cannot be
decided on a prima facie basis. Objections of this kind will require a
detailed consideration of evidence and submissions and a finding as
to the law as well as the facts. Obligating the court to decide issues of
stamping at the Section 8 or Section 11 stage will defeat the
legislative intent underlying the Arbitration Act.
186. The purpose of vesting courts with certain powers under
Sections 8 and 11 of the Arbitration Act is to facilitate and enable
arbitration as well as to ensure that parties comply with arbitration
agreements. The disputes which have arisen between them remain
the domain of the arbitral tribunal (subject to the scope of its
jurisdiction as defined by the arbitration clause). The exercise of the
jurisdiction of the courts of the country over the substantive dispute
between the parties is only possible at two stages:
a. If an application for interim measures is filed under Section 9 of
the Arbitration Act; or
b. If the award is challenged under Section 34.
Issues which concern the payment of stamp-duty fall within the remit
of the arbitral tribunal. The discussion in the preceding segments
also make it evident that courts are not required to deal with the
issue of stamping at the stage of granting interim measures under
Section 9."
36. Hence, the Hon'ble Supreme Court held that if the arbitrator finds that a
party was unnecessarily dragged into a prolonged adjudicatory process, he may
be compensated with cost. In the decision of Interplay Between Arbitration
Agreements under Arbitration and Conciliation Act, 1996 and Stamp
Act, 1899, In Re reported in (2024) 6 SCC 1, the Hon'ble Supreme Court
discussed the scope of interference by a referral court and held that the referral
court was entitled to cause a, prima facie, examination with regard to existence
2025:CHC-OS:143
of an arbitration clause.. The relevant paragraphs of Interplay (supra) are as
follows :-
"114. In view of the observations made by this Court in In Re: Interplay
(supra), it is clear that the scope of enquiry at the stage of appointment of
arbitrator is limited to the scrutiny of prima facie existence of the
arbitration agreement, and nothing else. For this reason, we find it difficult
to hold that the observations made in Vidya Drolia (supra) and adopted in
NTPC v. SPML (supra) that the jurisdiction of the referral court when
dealing with the issue of "accord and satisfaction" under Section 11
extends to weeding out ex-facie non-arbitrable and frivolous disputes
would continue to apply despite the subsequent decision in In Re: Interplay
(supra).
xxx xxx xxx
125. We are also of the view that ex-facie frivolity and dishonesty in
litigation is an aspect which the arbitral tribunal is equally, if not more,
capable to decide upon the appreciation of the evidence adduced by the
parties. We say so because the arbitral tribunal has the benefit of going
through all the relevant evidence and pleadings in much more detail than
the referral court. If the referral court is able to see the frivolity in the
litigation on the basis of bare minimum pleadings, then it would be
incorrect to doubt that the arbitral tribunal would not be able to arrive at
the same inference, most likely in the first few hearings itself, with the
benefit of extensive pleadings and evidentiary material.
xxxxxxxxxxxxx
166. The burden of proving the existence of arbitration agreement
generally lies on the party seeking to rely on such agreement. In
jurisdictions such as India, which accept the doctrine of competence-
competence, only prima facie proof of the existence of an arbitration
agreement must be adduced before the Referral Court. The Referral Court
is not the appropriate forum to conduct a mini-trial by allowing the parties
to adduce the evidence in regard to the existence or validity of an
arbitration agreement. The determination of the existence and validity of
an arbitration agreement on the basis of evidence ought to be left to the
Arbitral Tribunal. This position of law can also be gauged from the plain
language of the statute.
167. Section 11(6-A) uses the expression "examination of the existence of
an arbitration agreement". The purport of using the word "examination"
connotes that the legislature intends that the Referral Court has to inspect
or scrutinise the dealings between the parties for the existence of an
arbitration agreement. Moreover, the expression "examination" does not
connote or imply a laborious or contested inquiry. [P. Ramanatha
Aiyar, The Law Lexicon (2nd Edn., 1997) 666.] On the other hand, Section
16 provides that the Arbitral Tribunal can "rule" on its jurisdiction,
including the existence and validity of an arbitration agreement. A "ruling"
connotes adjudication of disputes after admitting evidence from the
parties. Therefore, it is evident that the Referral Court is only
required to examine the existence of arbitration agreements,
whereas the Arbitral Tribunal ought to rule on its jurisdiction,
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including the issues pertaining to the existence and validity of an
arbitration agreement. A similar view was adopted by this Court
in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. [Shin-Etsu Chemical
Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234]"
37. Reference is made to the decision of the Hon'ble Supreme Court in
Aslam Ismail Khan Deshmukh vs ASAP Fluids Private Limited and
Another reported in (2025) 1 SCC 502. The relevant part is quoted below:-
"50. As evident from the aforesaid discussion and especially in
light of the observations made in Krish Spg. [SBI General Insurance
Co. Ltd. v. Krish Spg., (2024) 12 SCC 1 : 2024 SCC OnLine SC
1754] , this Court cannot conduct an intricate evidentiary enquiry
into the question of when the cause of action can be said to have
arisen between the parties and whether the claim raised by the
petitioner is time-barred. This has to be strictly left for the
determination by the Arbitral Tribunal. All other submissions
made by the parties regarding the entitlement of the petitioner to
4,00,000 and 2,00,010 equity shares in Respondent 1 company
are concerned with the merits of the dispute which squarely falls
within the domain of the Arbitral Tribunal.
51. It is now well-settled law that, at the stage of Section 11
application, the referral Courts need only to examine whether the
arbitration agreement exists -- nothing more, nothing less. This
approach upholds the intention of the parties, at the time of
entering into the agreement, to refer all disputes arising between
themselves to arbitration. However, some parties might take undue
advantage of such a limited scope of judicial interference of the
referral Courts and force other parties to the agreement into
participating in a time-consuming and costly arbitration process.
This is especially possible in instances, including but not limited
to, where the claimant canvasses either ex facie time-barred claims
or claims which have been discharged through "accord and
satisfaction", or cases where the impleadment of a non-signatory to
the arbitration agreement is sought, etc.
52. In order to balance such a limited scope of judicial interference
with the interests of the parties who might be constrained to
participate in the arbitration proceedings, the Arbitral Tribunal
may direct that the costs of the arbitration shall be borne by the
party which the Tribunal ultimately finds to have abused the
process of law and caused unnecessary harassment to the other
party to the arbitration."
2025:CHC-OS:143
38. In the matter of Adavya Projects Pvt. Ltd. vs M/s Vishal Structutals
Pvt. Ltd. and Ors. reported in 2025 INSC 507, the Hon'ble Supreme Court
held as follows:-
"40. Summary of Conclusions: Our legal analysis of the issues
that we set out above, as well as our findings in the facts of the
given appeal, can be stated as follows:
I. A notice invoking arbitration under Section 21 of the ACA is
mandatory as it fixes the date of commencement of arbitration,
which is essential for determining limitation periods and the
applicable law, and it is a prerequisite to filing an application
under Section 11. However, merely because such a notice was not
issued to certain persons who are parties to the arbitration
agreement does not denude the arbitral tribunal of its jurisdiction
to implead them as parties during the arbitral proceedings.
II. The purpose of an application under Section 11 is for the court
to appoint an arbitrator, so as to enable dispute resolution through
arbitration when the appointment procedure in the agreement
fails. The court only undertakes a limited and prima facie
examination into the existence of the arbitration agreement and its
parties at this stage. Hence, merely because a court does not refer
a certain party to arbitration in its order does not denude the
jurisdiction of the arbitral tribunal from impleading them during
the arbitral proceedings as the referral court's view does not finally
determine this issue."
39. In Arif Azim Company Limited vs Aptech Limited reported in (2024)
5 SCC 313, it was held that:-
"27. The standard of scrutiny to examine the non-arbitrability of a
claim is only prima facie. Referral Courts must not undertake a full
review of the contested facts; they must only be confined to a primary
first review [VidyaDrolia case, (2021) 2 SCC 1, para 134] and let facts
speak for themselves. This also requires the Courts to examine
whether the assertion on arbitrability is bona fide or not. [VidyaDrolia
case, (2021) 2 SCC 1, para 154.4] The prima facie scrutiny of the facts
must lead to a clear conclusion that there is not even a vestige of
doubt that the claim is non-arbitrable. [Nortel Networks case, (2021) 5
SCC 738, para 47] On the other hand, even if there is the slightest
doubt, the rule is to refer the dispute to arbitration [VidyaDrolia case,
(2021) 2 SCC 1, para 154.4] .
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28. The limited scrutiny, through the eye of the needle, is necessary
and compelling. It is intertwined with the duty of the Referral Court to
protect the parties from being forced to arbitrate when the matter is
demonstrably non-arbitrable [VidyaDrolia case, (2021) 2 SCC 1, para
154.4] . It has been termed as a legitimate interference by Courts to
refuse reference in order to prevent wastage of public and private
resources [VidyaDrolia case, (2021) 2 SCC 1, para 139] . Further, as
noted inVidyaDrolia [VidyaDrolia v. Durga Trading Corpn., (2021) 2
SCC 1 : (2021) 1 SCC (Civ) 549] , if this duty within the limited
compass is not exercised, and the Court becomes too reluctant to
intervene, it may undermine the effectiveness of both, arbitration and
the Court [VidyaDrolia case, (2021) 2 SCC 1, para 139] . Therefore,
this Court or a High Court, as the case may be, while exercising
jurisdiction under Section 11(6) of the Act, is not expected to act
mechanically merely to deliver a purported dispute raised by an
applicant at the doors of the chosen arbitrator, as explained in DLF
Home Developers Ltd. v. Rajapura Homes (P) Ltd. [DLF Home
Developers Ltd. v. Rajapura Homes (P) Ltd., (2021) 16 SCC 743, paras
22 & 26]"
40. Having considered the above decisions, this court is of the view that, a
deeper probe into the documents relied upon in the writ petition and in the
appeals, will not be proper. The same would amount to a mini trial by the
referral court. Secondly, as soon as the liberty was granted by the Supreme
Court, the arbitration clause was invoked and the application before this court
was filed within time. This is not a case in which the court can come to a
conclusion that the claim is inadmissible upon taking a cursory look at the
pleading.
41. The application of section 14 of the Limitation Act cannot be restricted
only to a civil suit, but can be resorted to in respect of proceedings before
tribunals and writ courts. Whether the period consumed before the writ court
and up to the Supreme Court should be excluded while computing the
limitation, must be decided by the learned Arbitrator. In any event, when
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limitation is a mixed question of law and fact, the same should be determined
by the learned arbitrator.
42. The law is well-established that Section 14 cannot be limited only to
situations when a party had approached a wrong forum which could not take
up the matter due to lack of jurisdiction or any other cause of like nature,
bordering on jurisdictional incapacity. The expression should be given a liberal
construction. The writ court and the Hon'ble Division Bench found that the
claim could not be decided without evidence as the issues involved would
require an interpretation of the contract and scope of the contract. The
inhibition to allow the writ petition was something akin to inability of a writ
court to hold a trial on evidence by a writ court.
43. In the decision of M.P. Steel Corpn. v. CCE, reported in (2015) 7 SCC
58, the Hon'ble Supreme Court held as follows:-
"50. Section 14 has been interpreted by this Court extremely liberally
inasmuch as it is a provision which furthers the cause of justice. Thus,
in Union of India v. West Coast Paper Mills Ltd. [(2004) 3 SCC 458] , this
Court held : (SCC p. 464, para 14)
14. "... In the submission of the learned Senior Counsel, filing of
civil writ petition claiming money relief cannot be said to be a
proceeding instituted in good faith and secondly, dismissal of writ
petition on the ground that it was not an appropriate remedy for
seeking money relief cannot be said to be 'defect of jurisdiction or
other cause of a like nature' within the meaning of Section 14 of
the Limitation Act. It is true that the writ petition was not
dismissed by the High Court on the ground of defect of
jurisdiction. However, Section 14 of the Limitation Act is wide in its
application, inasmuch as it is not confined in its applicability only
to cases of defect of jurisdiction but it is applicable also to cases
where the prior proceedings have failed on account of other causes
of like nature. The expression 'other cause of like nature' came up
for the consideration of this Court in Roshanlal Kuthalia v. R.B.
Mohan Singh Oberoi [(1975) 4 SCC 628] and it was held that
Section 14 of the Limitation Act is wide enough to cover such cases
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where the defects are not merely jurisdictional strictly so called but
others more or less neighbours to such deficiencies. Any
circumstance, legal or factual, which inhibits entertainment or
consideration by the court of the dispute on the merits comes
within the scope of the section and a liberal touch must inform the
interpretation of the Limitation Act which deprives the remedy of
one who has a right."
44. In the decision of Gimpex Private Ltd. v. Manoj Goel, reported in
(2022) 11 SCC 705, the Hon'ble Supreme Court held that a civil proceeding
will also include a writ petition filed under Article 226 of the Constitution:-
"28. The nature of the offence under Section 138 of the NI Act is quasi-
criminal in that, while it arises out of a civil wrong, the law, however,
imposes a criminal penalty in the form of imprisonment or fine. The
purpose of the enactment is to provide security to creditors and instil
confidence in the banking system of the country. The nature of the
proceedings under Section 138 of the NI Act was considered by a three-
Judge Bench decision of this Court in P. Mohanraj v. Shah Bros. Ispat (P)
Ltd. [P. Mohanraj v. Shah Bros. Ispat (P) Ltd., (2021) 6 SCC 258 : (2021)
3 SCC (Civ) 427 : (2021) 2 SCC (Cri) 818] , where R.F. Nariman, J., after
adverting to the precedents of this Court, observed that : (SCC p. 317,
para 53)
"53. A perusal of the judgment in Ishwarlal Bhagwandas [S.A.L.
Narayan Row v. Ishwarlal Bhagwandas, (1966) 1 SCR 190 : AIR
1965 SC 1818] would show that a civil proceeding is not
necessarily a proceeding which begins with the filing of a suit and
culminates in execution of a decree. It would include a revenue
proceeding as well as a writ petition filed under Article 226 of the
Constitution, if the reliefs therein are to enforce rights of a civil
nature. Interestingly, criminal proceedings are stated to be
proceedings in which the larger interest of the State is concerned.
Given these tests, it is clear that a Section 138 proceeding can be
said to be a "civil sheep" in a "criminal wolf's" clothing, as it is the
interest of the victim that is sought to be protected, the larger
interest of the State being subsumed in the victim alone moving a
court in cheque bouncing cases, as has been seen by us in the
analysis made hereinabove of Chapter XVII of the Negotiable
Instruments Act."
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45. In the decision of Laxmi Srinivasa R and P Boiled Rice Mill vs State
of Andhra Pradesh and Another, reported in 2022 SCC Online SC 1790,
the Hon'ble Supreme Court held as follows:-
"4. In the facts of the present case, we find that the period from the date
of filing of the writ petition on 24.02.2018 and the date on which it was
dismissed as not entertained viz. 07.03.2018, should have been
excluded. The writ proceedings were maintainable, but not entertained.
Bona fides of the appellant in filing the writ petition are not challenged.
Further, immediately after the dismissal of the writ petition, the
appellant did file an appeal before the Appellate Authority. On exclusion
of the aforesaid period, the appeal preferred by the appellant would be
within the condonable period. Accordingly, we direct that the application
for condonation of delay filed by the appellant would be treated as
allowed. The delay is directed to be condoned."
46. In the decision of Kirpal Singh vs Government of India, New Delhi &
Ors. reported in 2024 INSC 944, the Hon'ble Supreme Court held that Section
14 of the Limitation Act would apply to proceedings under Section 34 of the
Arbitration and Conciliation Act:-
"6. Mr. Gaurav Agarwal, learned Senior Advocate appearing for the
appellant has submitted that his client is entitled to the exclusion
of period from 20.10.2011 to 20.01.2012 under Section 14 of the
Limitation Act. For this purpose, he relied on the judgment of this
Court in Consolidated Engineering Enterprises vs. Principal
Secretary, Irrigation Department and Others reported in 2008
(7) SCC 169. The relevant portion of the judgment is quoted
hereunder:
"23.At this stage it would be relevant to ascertain whether
there is any express provision in the Act of 1996, which
excludes the applicability of Section 14 of the Limitation Act.
On review of the provisions of the Act of 1996 this Court
finds that there is no provision in the said Act which
excludes the applicability of the provisions of Section 14 of
the said Act..... Hence, Section 43 incorporating the
Limitation Act will apply to the proceedings in the arbitration
as it applies to the proceedings of a suit in the court. Sub-
section (4) of Section 43, inter alia, provides that where the
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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, for the
commencement of the proceedings with respect to the
dispute submitted. If the period between the commencement
of the arbitration proceedings till the award is set aside by
the court, has to be excluded in computing the period of
limitation provided for any proceedings with respect to the
dispute, there is no good reason as to why it should not be
held that the provisions of Section 14 of the Limitation Act
would be applicable to an application submitted under
Section 34 of the Act of 1996, more particularly where no
provision is to be found in the Act of 1996, which excludes
the applicability of Section 14 of the Limitation Act, to an
application made under Section 34 of the Act. It is to be
noticed that the powers under Section 34 of the Act can be
exercised by the court only if the aggrieved party makes an
application. The jurisdiction under Section 34 of the Act,
cannot be exercised suo motu. The total period of four
months within which an application, for setting aside an
arbitral award, has to be made is not unusually long. Section
34 of the Act of 1996 would be unduly oppressive, if it is
held that the provisions of Section 14 of the Limitation Act
are not applicable to it, because cases are no doubt
conceivable where an aggrieved party, despite exercise of due
diligence and good faith, is unable to make an application
within a period of four months. From the scheme and
language of Section 34 of the Act of 1996, the intention of
the legislature to exclude the applicability of Section 14 of
the Limitation Act is not manifest. It is well to remember that
Section 14 of the Limitation Act does not provide for a fresh
period of limitation but only provides for the exclusion of a
certain period. Having regard to the legislative intent, it will
have to be held that the provisions of Section 14 of the
Limitation Act, 1963 would be applicable to an application
submitted under Section 34 of the Act of 1996 for setting
aside an arbitral award."
***
***
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9. Having considered the matter in detail, we are of the opinion
that the issue is covered by the decision of this court in
Consolidated Engg. Enterprises v. Principal Secretary,
Irrigation Dept. (supra).
10. We may hasten to add that when the substantive remedies
under Sections 34 and/or 37 of the Arbitration Act are by their
very nature limited in their scope due to statutory prescription, it
is necessary to interpret the limitation provisions liberally, or else,
even that limited window to challenge an arbitral award will be
lost. The remedies under Sections 34 and 37 are precious. Courts
of law will keep in mind the need to secure and protect such a
remedy while calculating the period of limitation for invoking these
jurisdictions.
11. Applying Section 14 of the Limitation Act, we hold that there is
sufficient cause for excluding the period commencing from
20.10.2011 to 23.02.2012. In view of the fact that this period is
excluded, the appellant will be entitled to the statutory remedy
under Section 34 of the Act."
47. In the matter of United India Insurance Co. Ltd. vs J.A. Infra
Structure Pvt. Ltd. reported in (2006) Supp 5 SCR 638, the Hon'ble Supreme
Court held as follows:-
"8. In the result, this Court was of the opinion that the view taken
by the court below excluding the applicability of Section 14 in the
said proceeding was not correct. This Court held that Section 14 of
the Limitation Act, 1963 was applicable in the Arbitration and
Conciliation Act, 1996 and accordingly this Court set aside the
judgments and order and remanded the matters back to the
District Court for deciding the application under Section 14 of the
Limitation Act on merit. In view of the Judgment in State of Goa
vs. M/s.Western Builders (supra), the counsel for the respondent
has not seriously opposed to the applicability of Section 14 of the
Limitation Act which deals with exclusion of time spent in
prosecuting the remedy before the wrong forum bona fide.
Therefore, we set aside the order passed by the High Court and
remit the matter back to the District Court, Nagpur to decide the
objections raised by the appellant-Insurance Company under
Section 34(3) of the Arbitration and Conciliation Act, 1996 and
decide the same on merit after affording opportunity to the
respondent herein."
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48. The decision of this Court in NC Construction vs Union of India and
ors. decided in A.P. (COM) 120 of 2025, which has been cited by Mr. Gupta is
not applicable in the facts of this case, inasmuch as, in the cited case, the
Court found the claim to be manifestly deadwood. The bills were submitted in
April, 2010 and the demand for the first time was made in 2017, and thereafter
in 2020 and 2024. All the notices disclosed the intention of the petitioner
therein to go for arbitration, but the petitioner did not take steps.
49. The decision in Consolidated Engineering Enterprise (supra) will not
be applicable at this stage. In a later decision, the Hon'ble Supreme Court laid
down that, the applicability of section 14 of the Limitation Act had not been
excluded under the Arbitration and Conciliation Act, 1996 and the legislative
intent was to apply the provisions of the Limitation Act to all proceedings under
the Arbitration and Conciliation Act. Moreover, applicability or inapplicability of
the provisions of section 14 of the Limitation Act, should be adjudicated by the
Arbitrator.
50. In the decision of Haryana State Cooperative Labour and
Construction Federation Limited (supra) the Hon'ble Supreme Court held
that in order to bring a case within the ambit of section 14 of the Limitation
Act, certain conditions must be fulfilled, namely, that the previous suit was
being prosecuted with due diligence and in good faith; that the matter in issue
in previous suit and the new suit were the same; that the Court was unable to
entertain the suit on account of the defect of jurisdiction or cause of like
nature. In the case before the Hon'ble Supreme Court, none of the referred
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conditions had been fulfilled by the applicant during the period which was
spent in prosecuting litigations before other courts. Moreover, the matter was
with regard to condonation of delay in filing an application under section 34 of
the 1996 Act and not at the stage of reference.
51. The decision in Sesh nath Singh and Another (Supra) laid down that
the expression "Court" in section 14(2) would be deemed to be any forum for a
civil proceeding including any Tribunal or forum under the SARFAESI ACT. The
said judgment does not come to the aid of the respondent.
52. With regard to the admissibility of the claim and scope of the work, the
arbitrator is the appropriate authority to determine and interpret the clauses of
the contract. Interpretation of contract and validity of claims are to be decided
by the arbitrator. The arbitrator is the master of facts.
53. Thus, in my view, when the existence of the arbitration clause is not in
dispute and there is no final determination as to the validity of the claim of the
petitioner, but only rejection of the writ petition and the appeals on the
grounds that the matter could not be decided without evidence as contractual
obligations were involved, the dispute must be referred. Whether the dispute is
non-arbitrable in view of the applicability of the doctrine of res judicata or
estoppel, whether the claim is barred by limitation, whether the period between
filing of the writ petition and the dismissal of the SLP by the Hon'ble Supreme
Court should be excluded in computing the period of limitation etc., must also
be decided by the learned arbitrator on evidence. The referral court should not
venture into this territory. It is the duty of the referral court to uphold party
autonomy by giving credence to the arbitration agreement. The parties had
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already agreed and intended to get all their disputes settled by a learned
arbitrator, in case conciliation failed.
54. The application is thus, allowed, the dispute is referred to the sole
arbitrator, Mr. Samrat Sen, learned Senior Advocate, Bar Library Club.
55. The learned arbitrator shall apply provision of Section 12 of the
Arbitration and Conciliation Act. The learned arbitrator will fix his own
remuneration in accordance with the provisions of the schedule of the Act.
56. Under such circumstances, AP-COM/461/2024 is, accordingly, disposed
of.
57. No order is passed as to costs.
Urgent Photostat certified copies of this judgment, if applied for, be
supplied to the parties, upon fulfilment of requisite formalities.
(Shampa Sarkar, J.)
