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TMI Blog2007 (3) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... live issue in between the parties and secondly that the claim had become barred by limitation between the parties. As against this the respondents M/s.Utility Premises (P) Ltd., supported the order and pointed out that in pursuance of the order passed not only had the Arbitrator been appointed but they had also chosen the third Arbitrator to preside over the Arbitral Tribunal and the Arbitral Tribunal had commenced its proceedings. Presently the proceedings before the Arbitral Tribunal are stayed. 4. It has, therefore, to be decided as to whether the order passed under Section 11(6) of the Act appointing the Arbitrators is good order in law particularly in the wake of the above two objections. 5. Following undisputed facts would have to be borne in mind before approaching the questions raised. 6. The appellant is a company incorporated under the Companies Act, 1956, so also the respondent. The appellant company became a sick industrial unit sometime in the year 1987 under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA"). It was ordered to be wound up in the year 1994 and on approaching the Board For Industrial and Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital and Finance Ltd., would have no right or claim in respect of the said property belonging to the appellant and more particularly described in the First Schedule, save and except, the 86725 sq.ft. FSI. 10. On 28.6.1996 the respondent herein entered into an Assignment Agreement with Ansal Housing and Construction to build flats on the area with FSI of 86725 sq.ft. 11. On 4.5.2001 the respondent herein had filed a petition under Section 9 of the Act seeking injunction and appointment of Receiver in respect of 2500 sq.mtrs. of land. However, that was dismissed by the High Court on the ground that the area was covered under the agreement dated 18.7.1994 and it was cancelled by an agreement dated 22.6.1996 and, therefore, the application was not maintainable. The appeal against this order also failed vide order dated 3.6.2002. 12. On 12.9.2001 respondent and one Santosh Singh Bagla who was the Promoter of the respondent company, filed application before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) contending therein that the promoters of the petitioner company were guilty of misfeasance and hence those acts were liable to be inquired into. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent on 8.3.2005 and the respondent returned the amount of Rs.10 lakhs. 19. The respondent invoked the Arbitration Clause under the Agreements dated 27.4.1994 and 18.7.1994 by a notice dated 24.5.2005. The said notice was replied to by the appellant vide its reply dated 21.6.2005 denying its liability and as a result an Arbitration Petition under Section 11(6) of the Act was filed on 1.7.2005 for appointing Shri S.C. Agarwal as the Sole Arbitrator. It is this application which was disposed of by the learned Judge on 11.8.2006 which is the subject matter of the present proceedings before us at the instance of the appellant. 20. As has been stated earlier, the learned Senior Counsel Shri Salve basically raised two points, they being (i) that there was no live issue left in between the parties and controversy had become dead; and (ii) that the claim, if any, of the respondent had become barred by limitation. In support of his arguments the learned counsel painstakingly took us through the whole record. 21. Shortly stated the argument of the learned counsel is that there is no live issue remaining between the parties particularly in respect of 1.20 lakh sq.ft. of FSI. Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel lastly states that while passing the order under Section 11(6) of the Act, the issues regarding the limitation and the jurisdiction could be left open to be decided by the Arbitral Tribunal, however, since the learned Designated Judge has decided those issues, there will be no question of the Arbitral Tribunal deciding these questions and it is, therefore, that the appellant is required to challenge the order under Section 11(6) of the Act. 24. Shri Venugopal, the learned Senior Counsel appearing on behalf of the respondent, however, pointed out that the controversy regarding the liability of the appellant to make available 1.20 lakh sq.ft. of FSI was never dead as otherwise there was no question of the respondent executing the MoU as late as on 19.1.2005. He points out that the appellant had given an undertaking in respect of that property before the Delhi High Court in a writ petition which writ petition is still pending before the Delhi High Court and the appellant is facing contempt proceedings on account of the breach of the undertaking. Learned counsel further points out that firstly there was no necessity on the part of the appellant to extend the agreement da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of appointing the Arbitrator that the learned Designated Judge has referred the live issue and the issue of limitation. 26. On these rival contentions it has to be seen as to whether the learned Judge was right in passing the order. 27. We shall take up the last contention raised by the appellant regarding the scope of the order passed by the Chief Justice or his Designate Judge. It was contended that since the Designate Judge has already given findings regarding the existence of live claim as also the limitation, it would be for this Court to test the correctness of the findings. As against this it was argued by the respondent that such issues regarding the live claim as also the limitation are decided by the Chief Justice or his Designate not finally but for the purpose of making appointment of the Arbitrators under Section 11(6) of the Act. In our opinion what the Chief Justice or his Designate does is to put the arbitration proceedings in motion by appointing an Arbitrator and it is for that purpose that the finding is given in respect of the existence of the arbitration clause, the territorial jurisdiction, live issue and the limitation. It cannot be disputed that un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether there exists an arbitration agreement between the parties and whether such party has approached the court for appointment of the Arbitrator. The Chief Justice has to examine as to whether the claim is a dead one or in the sense whether the parties have already concluded the transaction and have recorded satisfaction of their mutual rights and obligations or whether the parties concerned have recorded their satisfaction regarding the financial claims. In examining this if the parties have recorded their satisfaction regarding the financial claims, there will be no question of any issue remaining. It is in this sense that the Chief Justice has to examine as to whether their remains anything to be decided between the parties in respect of the agreement and whether the parties are still at issue on any such matter. If the Chief Justice does not, in the strict sense, decide the issue, in that event it is for him to locate such issue and record his satisfaction that such issue exists between the parties. It is only in that sense that the finding on a live issue is given. Even at the cost of repetition we must state that it is only for the purpose of finding out whether the arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e third party, namely, Bhupendra Capital Finance Limited was excluded. If the things had remained at this stage, there was no question of the issue regarding the 1,20,000 sq.ft. of FSI remaining alive. However, it is clear from the developments thereafter that this issue remained burning in between the parties which is evident from the fact that the respondents moved an application under Section 9 of the Act on 4.5.2001 in respect of 2500 sq.mtrs. of land obviously to safeguard their interest regarding the 1,20,000 sq.ft. of FSI. It is obvious that this FSI was linked with the aforementioned land measuring 2500 sq.mtrs.. Though the respondents failed in their attempt to get an injunction under Section 9 of the Act, they did not leave the things at that and brought in the such issue firstly by serving the notice dated 11.6.2002 invoking the arbitration clause and secondly by including this issue in their writ petition filed before the Delhi High Court wherein the appellants were made to give an undertaking that they will not sell the property which was covered under the agreement dated 27.4.1994 which obviously included the 1,20,000 sq.ft. of FSI. Now this undertaking is still con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r difference in relation to a matter covered under the Arbitration clause in the contract and that dispute or difference is finally settled by and between the parties, such a dispute or difference does not remain to be an arbitrable dispute and the Arbitration clause cannot be invoked even though for certain other matters, the contract may be in subsistence. Once the parties have arrived at a settlement in respect of any dispute or difference arising under a contract and that dispute or difference is amicably settled by way of a final settlement by and between the parties, unless that settlement set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and proceed to invoke the arbitration clause. If this is permitted the sanctity of contract, the settlement also being a contract would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside" Though the observations at the first blush appear to be in favour of the appellants, on the closer look they are not so. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. 30. Once we have come to the conclusion that the learned Designate Judge was right in holding that there was a live issue, the question of limitation automatically gets resolved. This Court in Hari Shanker Singhania's case (supra) held that till such time as the settlement talks are going on directly or by way of correspondence no issue arises and with the result the clock of limitation does not start ticking. This Court observed: "Where a settlement with or without conciliation is not possible, then comes the stage of adjudication by way of arbitration. Article 137 as construed in this sense, then as long as parties are in dialogue and even the differences would have surfaced it cannot be asserted that a limitation under Article 137 has commenced. Such an interpretation will compel the parties to resort to litigation/ arbitration even where there is serious hope of the parties themselves resolving the issues. The learned Judges of the High Court, in our view have erred in dismissing the appellants' appeal and affirming the findings of the learned Single Judge to the effect that the application made by the appellants under Section 20 of the Act, 1940 asking for a referen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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