2013 (5) TMI 401 - SC - Companies Law

Arbitration agreement - whether the petition is liable to be dismissed on the ground of limitation as it raises dead claims? - powers of Chief Justice or the designated Judge to decided the question on limitation - Held that - A bare perusal of the observations made by this Court in judgment in SBP & Co. (2005 (10) TMI 495 - SUPREME COURT) makes it clear that the Chief Justice or the designated Judge can also decide whether the claim was dead one or a long-barred claim. But it is not imperative for the Chief Justice or his designate to decide the questions at the threshold. It can be left to be decided by the Arbitral Tribunal. The observations made in SBP & Co. (supra) were explained by this Court in Indian Oil Co. Ltd. (2013 (5) TMI 375 - SUPREME COURT) These observations make it clear that it is optional for the Chief Justice or his designate to decide whether the claim is dead (long-barred). The Chief Justice or his designate would do so only when the claim is evidently and patently a long time-barred claim. The claim could be said to be patently long time-barred, if the contractor makes it a decade or so after completion of the work without referring to any acknowledgment of a liability or other factors that kept the claim alive in law. On the other hand, if the contractor makes a claim, which is slightly beyond the period of three years of completing the work say within five years of completion, the Court will not enter into disputed questions of fact as to whether the claim was barred by limitation or not. In the present case, there is a dispute as to whether the repeated notices sent by the petitioner to the respondents were ever received. There are further disputes (even if the notices were received by ONGC) as to whether they were actually received in the correct section of ONGC. These are matters of evidence which are normally best left to be decided by the Arbitral Tribunal. Thus it would be appropriate for this Court to constitute the entire Arbitral Tribunal in exercise of my powers under Section 11(6) of the Arbitration and Conciliation Act, 1996. In exercise of the aforesaid powers, Justice V.N. Khare, Former Chief Justice of India as the Chairman and Justice D.P. Wadhwa and Justice S.N. Variava, former Judges of this Court are nomimated as Arbitrators to adjudicate the disputes that have arisen between the parties. The arbitrators shall fix their own remuneration in consultation with the parties.

Summary

Issues Involved:
1. Maintainability of the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996.
2. Alleged abuse of process of law and whether the claims were barred by limitation.
3. Appointment of Arbitrators as per the arbitration clause in the contract.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition:
The petitioner filed the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a nominee Arbitrator on behalf of the respondent and a third Arbitrator (Presiding Arbitrator) to adjudicate disputes between the parties. The respondent raised a preliminary objection, asserting that the petition was an abuse of process and the claims were barred by time, thus dead claims.

2. Alleged Abuse of Process and Limitation:
The contract between the parties, dated 7th December 2004, included an arbitration clause (Clause 27) for dispute resolution. The petitioner performed work under the contract and raised invoices, some of which were unpaid. Despite repeated notices from the petitioner, the respondent failed to appoint an Arbitrator, leading to the present petition.

The respondent argued that the petitioner had accepted payments without demur in 2007 and that the claims were settled. They contended that the cause of action arose in 2007, and the petition, filed in January 2013, was beyond the limitation period. The respondent highlighted that the arbitration petition should have been filed within three years from the expiry of 30 days after the first notice dated 14th November 2008, i.e., by 14th December 2011. They also pointed out issues with the addresses to which notices were sent and claimed non-receipt of some notices.

The petitioner countered that the limitation stopped running from the date mentioned in the notice invoking arbitration (14th November 2008) and that the final notice was sent on 9th January 2012, with the respondent denying the claim on 29th February 2012. Thus, disputes arose only from 29th February 2012.

3. Appointment of Arbitrators:
The court examined the observations in SBP & Co. Vs. Patel Engineering Ltd. & Anr. (2005) and Indian Oil Corporation Ltd. Vs. SPS Engineering Ltd. (2011). It noted that while the Chief Justice or the designated Judge could decide whether a claim was dead or long-barred, it was not imperative to do so at the threshold. Such matters could be left to the Arbitral Tribunal, especially when there were disputes about the receipt of notices and other factual issues.

Given the disputes about the receipt of notices and the section of the respondent that received them, the court found it appropriate to constitute the Arbitral Tribunal to decide these matters. Thus, the court exercised its powers under Section 11(6) of the Arbitration and Conciliation Act, 1996, and nominated Justice V.N. Khare, Former Chief Justice of India, as the Chairman, and Justice D.P. Wadhwa and Justice S.N. Variava, former Judges of the Supreme Court, as Arbitrators to adjudicate the disputes.

Conclusion:
The court allowed the arbitration petition, directing the Registry to communicate the order to the Chairman of the Arbitral Tribunal and the other Arbitrators to enable them to enter upon reference promptly. The petition was allowed with no order as to costs.