M/S Trade Swift Developers ... vs Gopal Prasad Kanodia S/O Late Shri ...
2021 Latest Caselaw 7841 Raj/2

       HIGH COURT OF JUDICATURE FOR RAJASTHAN
                   BENCH AT JAIPUR

               S.B. Arbitration Application No. 53/2019

M/s    Trade   Swift     Developers          Private      Limited,    A   Company
Incorporated Under The Provitions Of The Companies Act 1956
Registered Office At Baid House, 01, Tara Nagar, Ajmer Road,
Jaipur Through Its Director Mahendra Kumar Baid.
                                                                      ----Petitioner
                                      Versus
1.      Gopal Prasad Kanodia S/o Late Shri Hanuman Das
        Kanodia, R/o Kanodia Cottage, 32 Q New Road Alipur,
        Kolkata.
2.      Ramaotar Kanodia S/o Late Shri Hanuman Das Kanodia,
        R/o Kanodia Cottage, 32Q, New Road Alipur, Kolkata.
3.      Smt. Saroj Kanodia D/o Shri Gopal Prasad Kanodia W/o
        Om Prakash Kanodia, R/o Kanodia Cottage, 32Q, New
        Road Alipur, Kolkata.
4.      Smt. Shashi Kanodia D/o Shri Gopal Prasad Kanodia W/o
        Anand Kanodia, R/o Kanodia Cottage, 32Q, New Road
        Alipur, Kolkata.
5.      Hari Prasad Kanodia S/o Late Shri Kedarnath Kanodia, R/o
        Kanodia Cottage, 32Q, New Road Alipur, Kolkata.
6.      Banwari Lal Kanodia S/o Late Shri Kedarnath Kanodia,
        R/o Kanodia Cottage, 32Q, New Road Alipur, Kolkata.
7.      Shri Bhagwan Kanodia S/o Late Shri Kedarnath Kanodia,
        R/o Kanodia Cottage, 32Q, New Road Alipur, Kolkata.
8.      Anjan Kumar Kanodia S/o Shri Ramotar Kanodia, R/o
        Kanodia Cottage, 32Q, New Road Alipur, Kolkata.
9.      Anil Kumar Kanodia S/o Shri Ramotar Kanodia, R/o
        Kanodia Cottage, 32Q, New Road Alipur, Kolkata.
                                                                   ----Respondents


For Petitioner(s)           :     Mr. Devidatt Sharma with Mr. Vishnu
                                  Kumar
                                  Mr. Sanjog Kamal Sharma
For Respondent(s)           :     Mr. Shudhanshu Kasliwal, Sr.
                                  Advocate with Mr. Vivek Dangi



      HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA

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                          Judgment/Order

Reserved on : 12/11/2021
Pronounced on      20/12/2021

1.   An application under Section 11 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as, "the Act of

1996") has been filed by the applicant for appointment of an

Arbitrator in order to resolve the dispute which has arisen in

pursuance to the MoU/agreement of sale entered into between the

parties on 19.10.2007 with regard to sale of property situated at

revenue village Barodia, station road Tehsil and District, Jaipur

bearing Khasra No.330 for the total sale consideration of Rs.50.51

crores.

2.   The MoU contained arbitration clause as under:


      "18. That the parties hereto have specifically agreed
      that any dispute or difference of opinion on any of the
      issues pertaining to the terms and conditions of this
      MOU to solve the same by resort to the provisions of
      the Arbitration and Reconciliation Act, 1996 at Kolkata
      and also subject to Kolkata jurisdiction."

3.   The applicant has stated that they had paid a total advance

sum of Rs.6.20 crore to the respondents and despite repeated

requests, the respondents failed to hand over title of the property

while the applicants are ready and willing to perform their part.

4.   It is further stated that vide notice dated 24.10.2010 the

MoU was cancelled by the respondents-non-applicants. It appears

that the applicant has been pursuing the matter relating to

appointment of arbitrator since service of a legal notice to the

respondents on 07.01.2012 under Section 21 of the Act of 1996

invoking arbitration clause whereafter an application was filed

under Section 11 of the Act of 1996 before Calcutta High Court.

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The said application No.129/2012 was dismissed by the Hon'ble

Calcutta High Court vide its order dated 14.09.2012 solely on the

ground of lack of territorial jurisdiction.

5.     It appears that thereafter a dispute arose regarding who

should be appointed as the Arbitrator and no consensus could be

arrived at whereafter an arbitration application was filed by the

applicant before this Court under Seciton 11 of the Act of 1996.

6.   This time, the respondents raised objection regarding the

MoU being insufficiently stamped and the High Court dismissed

the application No.30/2014 on the ground that the MoU was not

sufficiently stamped and further granted liberty to the applicant to

file fresh application after paying the deficit stamp duty.

7.   The applicant staes that he deposited the deficit stamp duty

and whereafter he again filed an application No.52/2018 but this

time, this Court dismissed the application vide order dated

01.02.2019 on the ground that the notice under Section 21 was

not served on the opposite party for nominating the Arbitrator. A

liberty was granted again to approach the court upon failure to

nominate an Arbitrator and comply with the service of notice

under Section 21. It appears that in compliance thereof the

applicant again served a notice under Section 21 and names were

also suggested of proposed arbitrator. However, the respondents

have not agreed to appointment of Arbitrator whereafter the

present application has been filed.

8.   The respondents have contested this application on the

ground of limitation and it is submitted that as per Section 43(1)

of the Act of 1996 read with Article 137 of the Limitation Act, the

present application is time barred as it has not been filed within

three years from the date on which the cause of action accrued. It

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is stated that a cause of action firstly accrued on 18.04.2008 that

is on expiry of six months period set for execution of sale deed

under Clause 16 of the MoU or at least on expiry of 15 days in its

period that is on 03.05.2008.

9.   The respondents submitted that the cause of action cannot

be said to have arisen on the day when the MoU was cancelled or

on the date when the first notice under Section 21 was issued to

them. It is stated that the original title deeds of the property have

been misplaced and were unavailable. The only valid notice under

Section 21 has been firstly issued on 19.03.2019 which is the

basis of the present application under Section 11 of the Act of

1996 and therefore, the period of limitation that is three years

stands expired long back.

10. I have considered the submissions and heard the

counsels at length.

11. The     apex    court       in    the      case       of    Secunderabad

Cantonment Board Versus B. Ramachandraiah and

Sons reported in AIR 2021 SC 1391 has elaborately

examined the case of Geo Miller and Co. Pvt. Ltd. Versus

Chairman, RVUNL reported in AIR 2019 SC 4244 taking

into consideration cantena of judgments and the judgments

cited by both the parties in the present case, whether at

referral stage under Section 11 the High Court can interfere

as to the whether the arbitrability of dispute is barred by

Limitation or not. The upshot of which is as follows:
              " Insofar as the second issue is
              concerned, this Court went into the
              position prior to the Arbitration and
              Conciliation (Amendment) Act, 2015
              ["2015 Amendment"] together with
              the    change      made     by     the

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  introduction of Section 11(6A) by
  the 2015 Amendment, stating:

24. Sub-section (6A) came up for
consideration in the case of Duro
Felguera SA v. Gangavaram Port Ltd.
[MANU/SC/1352/2017 : (2017) 9 SCC
729], wherein this Court held that the
legislative policy was to minimize
judicial     intervention      at    the
appointment stage. In an application
Under Section 11, the Court should
only look into the existence of the
arbitration agreement, before making
the    reference.    Post    the  2015
amendments, all that the courts are
required to examine is whether an
arbitration agreement is in existence--
nothing      more,      nothing    less.

48. Section 11(6-A) added by the
2015 Amendment, reads as follows:

11. (6-A) The Supreme Court or, as
the case may be, the High Court, while
considering any application Under
Sub-section (4) or Sub-section (5) or
Sub-section (6), shall, notwithstanding
any judgment, decree or order of any
court, confine to the examination of
the existence of an arbitration
agreement.

(emphasis                                  supplied)

From a reading of Section 11(6-A), the
intention of the legislature is crystal
clear i.e. the court should and need
only    look   into    one    aspect-the
existence of an arbitration agreement.
What are the factors for deciding as to
whether there is an arbitration
agreement is the next question. The
resolution to that is simple-it needs to

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be seen if the agreement contains a
Clause which provides for arbitration
pertaining to the disputes which have
arisen between the parties to the
agreement.

...

59. The scope of the power Under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co.

v. Patel Engg. Ltd., MANU/SC/1787/2005 : (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., MANU/SC/4056/2008 : (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists-nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected."

25. In Mayavati Trading Co. Private Ltd. v. Pradyut Dev Burman [MANU/SC/1232/2019 : (2019) 8 SCC 714], a three-judge bench held that the scope of power of the Court Under Section 11(6A) had to be construed in the narrow sense. In paragraph 10, it was opined as under:

10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have

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included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment [United India Insurance Co. Ltd. v. Antique Art Exports (P) Ltd., MANU/SC/0465/2019 : (2019) 5 SCC 362 : (2019) 2 SCC (Civ) 785], as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera, SA [Duro Felguera, SA v. Gangavaram Port Ltd., MANU/SC/1352/2017 : (2017) 9 SCC

26. In Uttarakhand Purv Sainik Kalyan Nigam v. Northern Coal Field Limited [MANU/SC/1634/2019 : (2020) 2 SCC 455] this Court took note of the recommendations of the Law Commission in its 246th Report, the relevant extract of which reads as:

7.6. The Law Commission in the 246th Report [Amendments to the Arbitration and Conciliation Act, 1996, Report No. 246, Law Commission of India (August 2014), p. 20.] recommended that:

33.     ...   the   Commission      has
recommended        amendments        to

Sections 8 and 11 of the Arbitration and Conciliation Act, 1996. The scope of the judicial intervention is only restricted to situations where the court/judicial authority finds that the arbitration agreement does not exist or is null and void. Insofar as the nature of intervention is concerned, it

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is recommended that in the event the court/judicial authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the Arbitral Tribunal.

In view of the legislative mandate contained in the amended 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-komptenz principle. The doctrine of kompetenz-komptenz implies that the arbitral tribunal is empowered, and has the competence to Rule on its own jurisdiction, including determination of all jurisdictional issues. This was intended to minimise judicial intervention at the pre-reference stage, so that the arbitral process is not thwarted at the threshold when a preliminary objection is raised by the parties.

(emphasis in original)

19. This Court went on to hold that

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limitation is not a jurisdictional issue but is an admissibility issue. It then referred to a recent judgment of this Court in Vidya Drolia v. Durga Trading Corporation, MANU/SC/0939/2020 : (2021) 2 SCC 1, and stated as follows:

36. In a recent judgment delivered by a three-judge bench in Vidya Drolia v.

Durga Trading Corporation [MANU/SC/0939/2020 : (2021) 2 SCC 1], 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.

In paragraph 144, the Court observed that the judgment in Mayavati Trading had rightly held that the judgment in Patel Engineering had been legislatively overruled.

Paragraph 144 reads as:

144. As observed earlier, Patel Engg. Ltd. explains and holds that Sections 8 and 11 are complementary in nature as both relate to reference to arbitration. Section 8 applies when judicial proceeding is pending and an application is filed for stay of judicial proceeding and for reference to

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arbitration. Amendments to Section 8 vide Act 3 of 2016 have not been omitted. Section 11 covers the situation where the parties approach a court for appointment of an arbitrator. Mayavati Trading (P) Ltd., in our humble opinion, rightly holds that Patel Engg. Ltd. has been legislatively overruled and hence would not apply even post omission of Sub-section (6- A) to Section 11 of the Arbitration Act. Mayavati Trading (P) Ltd. has elaborated upon the object and purposes and history of the amendment to Section 11, with reference to Sub-section (6-A) to elucidate that the section, as originally enacted, was facsimile with Article 11 of the Uncitral Model of law of arbitration on which the Arbitration Act was drafted and enacted.

(emphasis supplied)

While exercising jurisdiction Under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere "only" when it is "manifest" that the claims are ex facie time barred and dead, or there is no subsisting dispute.

Paragraph 148 of the judgment reads as follows:

148. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it

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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. [Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., MANU/UKHL/0067/2007 : 2007 UKHL 40 : 2007 Bus LR 1719 (HL)], 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.

In paragraph         154.4,        it    has       been
concluded                                          that:

154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement

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is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably "non-arbitrable" and to cut off the deadwood. The court by default would refer the matter when contentions relating to non- arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.

(emphasis supplied) In paragraph 244.4 it was concluded that:

244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. "when in doubt, do refer".

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 resurrected the pre-

amendment position on the scope of power as held in SBP & Co. v. Patel Engineering (supra).

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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."

12. From the above, it is apparent that this Court would not

refer the matter for arbitration if ex parte claim is found to be

time barred.

13. The insertion of sub section 6A to Section 11 of the

Arbitration and Conciliation Act 1996 by 2015 Amendment

Act was to reduce the judicial intervention at the appointment

stage. While exercising power under Section 11 the only thing

that the court is set to examine is the existence of arbitration

agreement and the arbitrability of dispute, nothing more and

nothing less. The claims of limitation are to be examined only

in the cases where on the face of it, without a vestigial of

doubt, it appears that the claim is ex-facie time barred and

dead.

14. Taking into consideration the facts of the present case as

noticed above, this Court finds that the applicant has been

continuously vigilant of its rights and intention to get the

matter resolved through arbitration. Of course, it may be on

account of legal advise received that the forum chosen was

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wrongful or the notice was not in proper format. The question

whether MoU being not duly stamped also cannot be treated

as a deliberate delay on the part of the applicant. Thus, this

Court is satisfied that the matter deserves to be referred for

arbitration.

15. The Arbitrator, of course, would be free to decide the

question regarding the delay, if any, in raising the dispute as

laid down in Secunderabad Cantonment Board (supra). Since

in terms of the Arbitration and Conciliation Act, 1996, the

provisions of Limitation Act apply, the Arbitrator would be free

to consider the effect of Section 14 of the Limitation Act also.

Leaving the matter for the Arbitrator to decide, this Court

considers it appropriate that the Arbitrator is appointed to

adjudicate and resolve the dispute betweeen the parties since

the MOU stands duly stamped. The question whether the MoU

could be cancelled would also to be gone into by the

Arbitrator.

16. Accordingly, this arbitration application is allowed and in

exercise of the powers under Section 11(6) of the Act of

1996, Hon'ble Mr. Justice Raghuvendra Singh Rathore (Former

Judge, Raj. High Court), Plot No.5 Nehru Path, Krishna Nagar-II,

Lal Kothi, Jaipur Mobile No.9414047989 is appointed as an

Arbitrator to decide the dispute in terms of the Act of 1996.

(SANJEEV PRAKASH SHARMA),J

Raghu

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