2007 (3) TMI 673 - SC - Companies Law

Whether the order passed under Section 11(6) of the Act appointing the Arbitrators is good order in law? Held that - Once we have come to the conclusion that the learned Designate Judge was right in holding that there was a live issue the learned Designate Judge was right in appointing the Arbitrator under Section 11(6) of the Act, We, therefore, proceed to dismiss the Civil Appeal with no order as to costs.

Issues Involved:
1. Existence of a live issue between the parties.
2. Whether the claim was barred by limitation.

Detailed Analysis:

1. Existence of a Live Issue Between the Parties:

The appellant challenged the order appointing arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996, on the grounds that there was no live issue between the parties and that the claim was barred by limitation. The appellant argued that the issue regarding the 1.20 lakh sq.ft. of FSI was settled by a Memorandum of Understanding (MoU) dated 19.1.2005, where the respondent agreed to restrict its claim to 86725 sq.ft. of FSI. The appellant contended that the respondent could not unilaterally cancel the MoU and revert to the original agreement dated 27.4.1994.

The respondent countered that the issue regarding the 1.20 lakh sq.ft. of FSI was never closed, as evidenced by continued negotiations and legal actions, including an undertaking given by the appellant before the Delhi High Court. The respondent argued that the MoU was not a final settlement and that the issue remained unresolved.

The court held that the Designate Judge was correct in finding a live issue between the parties. The court noted that the issue of 1.20 lakh sq.ft. of FSI had been a point of contention in various agreements and legal proceedings, indicating that it was not conclusively settled. The necessity for the MoU itself suggested that the issue was still alive. The court emphasized that it was not within its jurisdiction to decide the validity of the MoU but to determine whether a live issue existed, which it concluded did.

2. Whether the Claim was Barred by Limitation:

The appellant argued that the claim was barred by limitation, asserting that the arbitration notice served in 2005 was too late to revive the agreement dated 27.4.1994. The appellant suggested that the claim for specific performance of the agreement would be time-barred, thus making arbitration on that agreement impossible.

The respondent argued that the issue of limitation should be left to the Arbitral Tribunal to decide under Section 16 of the Act. The respondent cited ongoing negotiations and legal actions as evidence that the limitation period had not expired, as the clock of limitation does not start ticking when parties are still in dialogue.

The court agreed with the respondent, holding that the issue of limitation is a mixed question of law and fact that should be decided by the Arbitral Tribunal. The court referred to the precedent set in Hari Shankar Singhania & Ors. Vs. Gaur Hari Singhania & Ors., which held that ongoing negotiations prevent the limitation period from commencing. The court concluded that the claim was not dead due to limitation and that the Arbitral Tribunal should decide the effect of the MoU and the validity of the respondent's repudiation of it.

Conclusion:

The Supreme Court upheld the order appointing arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996, finding that there was a live issue between the parties and that the question of limitation should be decided by the Arbitral Tribunal. The appeal was dismissed with no order as to costs.

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