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TMI Blog2023 (1) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11(6-A) of the Act. Such a review, as already clarified by this Court, is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement. Reference can also be made to the apex court s decision in BHARAT SANCHAR NIGAM LTD. ANR. VERSUS M/S NORTEL NETWORKS INDIA PVT. LTD. [ 2021 (3) TMI 447 - SUPREME COURT] wherein the court held that adjudication of the limitation issue at the referral stage does not tantamount to stepping into the arbitrator s jurisdictional territory. Whether the claims here are exfacie time barred and therefore, falls under the restrictive category of deadwood? - HELD THAT:- To determine the starting point of cause of action and ascertain the expiry of the limitation period, this Court finds it pertinent to refer back to the judgment of the Supreme Court in BHARAT SANCHAR NIGAM LTD. ANR. VERSUS M/S NORTEL NETWORKS INDIA PVT. LTD. [ 2021 (3) TMI 447 - SUPREME COURT] wherein it made explicitly clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atrix of the case is delineated below a. A notice inviting tender dated July 9, 2008 was issued by the respondent for civil work and basic utility works for the proposed residential (hostel) complex at IIMC, Joka. A bid was submitted by the petitioner and in response to the same, a work order was issued on August 29, 2008, in terms of which the project was required to be completed within August 31, 2009, at a total cost of INR 39,03,20,185 (Rupees Thirty-Nine Crores Three Lakhs Twenty Thousand One Hundred Eighty-five Only). Subsequently, a formal contract being CDP/6 of 2008-09 was entered into by and between the petitioner and respondent in respect of the said work as stipulated in the said work order. b. During the course of execution of the work, the respondent, from time to time, introduced additions to the scope of work, and as a result, the value of the contract stood revised to INR 80,23,73,260/- (Rupees Eighty Crores Twenty-Three Lakhs Seventy-Three Thousand Two Hundred Sixty Only). The petitioner sought extension from the respondent on the following grounds i. Delay in handing over clear work site; the piling work being done by another contractor was not compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent that any claim related to the escalation thus cannot be accepted under the said contract agreement; hence can t be entertained at this stage . A reply to this was sent by the petitioner vide letter dated September 15, 2017 wherein they claimed to have accepted the final settlement of the bill under coercion. f. The last in the series of price escalation letters by the petitioner was sent on February 22, 2019 wherein the earlier claims were reiterated. The respondent responded vide its advocate s letter dated March 13, 2020, denying the existence of any claims whatsoever in the first place. It was again clarified by the respondent that basis the terms of the contract and subsequent acceptance of the entire consideration money in lieu of full and final settlement against the enhanced work order, the respondent was not liable to pay for any further claims. g. Furthermore, letters dated February 26, 2021, and February 3, 2021, were delivered by the petitioners reiterating their escalation claims. h. Finally, the petitioner dispatched a Section 21 notice dated March 8, 2021 invoking arbitration. Through the said notice, disputes arising as a result of non-payment of escal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence. He argued that the petitioner s bills were never disputed by the respondent and in fact, the petitioner was assured that the same would be taken care after completion of the work. c. The counsel submitted that pursuant to the request of the petitioner, a sub-committee of IIMC was constituted which held a meeting with the petitioner on November 12, 2012. Here, the claim was discussed in detail and the petitioner was requested to complete the work in all respects with an assurance to settle escalation claim thereafter. Headed that BKC relied upon the said assurance and duly proceeded thereafter to complete the work. It is only after about 14 months from the date of submission of the final bill, the executive engineer of the respondent vide its letter dated March 11, 2016 instructed the petitioner to accept the final bill as prepared by the respondent in their specified format. Hence, the counsel argued, the petitioner had no option other than to accept the final bill, as prepared by the respondent, under compulsion and duress even though the same did not accommodate their price escalation claims. d. Continuing his submissions on the point of acceptance of the final bill, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt precedents, we agree that on a certain set of facts and circumstances, the period during which the parties were bona fide negotiating towards an amicable settlement may be excluded for the purpose of computing the period of limitation for reference to arbitration under the 1996 Act. However, in such cases the entire negotiation history between the parties must be specifically pleaded and placed on the record. The Court upon careful consideration of such history must find out what was the breaking point at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This breaking point would then be treated as the date on which the cause of action arises, for the purpose of limitation. The threshold for determining when such a point arises will be lower in the case of commercial disputes, where the party s primary interest is in securing the payment due to them, than in family disputes where it may be said that the parties have a greater stake in settling the dispute amicably, and therefore delaying formal adjudication of the claim. g. Continuing his arguments, the counsel added that the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch meetings and exchange of documents, the claim stands alive and falls out of the purview of being a deadwood. l. The counsel contended that by reason of such a legitimate claim being withheld and/or denied, a dispute has arisen between the parties which are referable to arbitration as per the terms of the contract. The counsel further submitted that no intimation was received about the final bill being ready for payment and as such, the period for invoking the arbitration clause has not lapsed. Elaborating further on the point of arbitration, the counsel questioned the appointment procedure as invalid as it empowered the respondent to appoint a sole arbitrator and the same is hit by the disqualification contained in Schedule V to the Arbitration and Conciliation Act, 1996. m. The counsel in support of his contentions cited the judgment of the Supreme Court in Vidya Drolia and Ors -v- Durga Trading Corporation reported in [2020] 11 S.C.R. 1001 and advocated that the Court s approach in a Section 11 arbitration petition should be when in doubt, do refer . n. Next, the counsel relied upon the judgment of the Supreme Court in Bharat Sanchar Nigam Ltd. Anr. -v- M/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be adjudicated upon and decided by the arbitrator. Further, the respondent had itself acknowledged that the matter in hand can be referred to arbitration process and had also independently suggested an arbitrator vide its letter dated April 10, 2021. 5. Mr. Sabyasachi Chowdhry, Advocate appearing on behalf of the respondent, has propounded the following arguments: a. The counsel submitted that the said petition is misconceived, not maintainable and is liable to be dismissed. He contended that the alleged claim, on the face of the record, is barred by limitation and even considered otherwise, the said claim is beyond the scope of the contract and therefore, is not maintainable. b. The counsel asserted that it is a matter of record that all claims under the contract were settled, resulting in final payment on March 15, 2016 which in turn was accepted by the petitioner as final settlement of all demands against the contract. Not only that, the petitioner undertook to not prefer any claim in future in this regard . The counsel continued to argue that the respondent vide its letter dated March 17, 2016 iterated their acceptance once again and merely made a reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as revised on September 27, 2013 wherein the total value thereof was enhanced to INR 80.23 crores from the original value of around INR 39 crores. g. The counsel submitted that in view of petitioner s acceptance of the final bill and the final settlement of all its demands on March 16, 2016, there was no occasion to make any response thereafter. He observed that the contents of the letter dated September 12, 2017, are self-explanatory and merely reiterated their earlier stated position. h. The counsel denied that any high level committee was constituted to reconsider the grievance of the petitioner as alleged. In any event, the counsel submitted, the formation of any internal committee will not entitle the applicant to reagitate its stale and dead claim afresh. The counsel states that by repeatedly raising the issue of barred claim in diverse places was to desperately seek a response in an attempt to create evidence. i. The counsel stated that in light of the principles laid down by the Supreme Court in Vidya Drolia and Ors. -v- Durga Trading Corporation reported in [2020] 11 S.C.R. 1001, it is now very well settled that the Court at the referral stage can interfere o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent's failure to settle their claim and because they were writing representations and reminders to the respondent in the meanwhile. (Emphasis supplied) m. Concluding his arguments, Mr. Chowdhury placed reliance upon the judgment of Supreme Court in Secunderabad Cantonment Board v- B. Ramachandraiah and Sons reported in (2021) 5 SCC 705, which further endorses the principles as laid down in Vidya Drolia (supra) and BSNL v- Nortel (supra), to argue that mere exchange of letters or settlement discussions will not be sufficient to stretch the limitation period. Observations Analysis 6. I have heard the counsel appearing on behalf of the parties and perused the materials on record. 7. Before delving into other major issues plaguing the present application, I will proceed first with the petitioner s challenge to the appointment procedure of the sole arbitrator as laid down by clause 25 of the contract between the parties. In my view, this challenge is at the centre point of the present petition, which later expands like a banyan tree spreading outwards. 8. In the light of the apex court s pronouncements in Perkins Eastman Architects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration agreement, and then simply refer the matter to arbitration just because the arbitration clause is valid. Had this been the intent of the law makers and the judicial pronouncements on this subject, the determination could have been delegated to an AI-empowered computer system, thereby eliminating the need for applicability of a judicial mind and relieving the courts of the sedulous task of adjudicating such matters. 12. In my view, if it is manifestly evident on the face of it that the issues purported to be referred to arbitration are hopelessly time barred and/or are non-arbitrable, the courts can intervene and decline reference to arbitration in such cases. The entire objective of judicial intervention, in certain circumstances, has been to ensure the efficacy and utility of the arbitration process. Just like water is crucial to a fish s survival, the presence of an arbitrability element in a Section 11 application is a must for it to be accepted and referred to an arbitrator for further adjudication. For instance, if a person appears to be dead and when on examination of the pulse, it is palpably evident that there is no life left, one is not supposed to send the body ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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., 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. 14. A bare reading of the aforementioned paragraphs will nullify the arguments raised by Mr. Mitra that there is no scope for judicial intervention in Section 11 applications except to determine the existence and validity of the arbitration agreement. Within a certain category of cases which satisfy the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decision in Bharat Sanchar Nigam Ltd. Anr. -v- M/s Nortel Networks India Pvt. Ltd. reported in [2021] 2 S.C.R. 644 wherein the court held that adjudication of the limitation issue at the referral stage does not tantamount to stepping into the arbitrator s jurisdictional territory. The relevant paragraphs have been delineated below 30. Issue of Limitation is normally a mixed question of fact and law, and would lie within the domain of the arbitral tribunal. There is, however, a distinction between jurisdictional and admissibility issues. An issue of jurisdiction pertains to the power and authority of the arbitrators to hear and decide a case. Jurisdictional issues include objections to the competence of the arbitrator or tribunal to hear a dispute, such as lack of consent, or a dispute falling outside the scope of the arbitration agreement. Issues with respect to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional issues, since these issues pertain to the jurisdiction of the tribunal. * 32. The issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reshold issues are left to be decided by the arbitrator under Section 16, which enshrines the kompetenz-kompetenz principle . 19. However, to my mind, this is an incomplete reading of the position of law on the aspect of judicial interference in a Section 11 application as the kompetenz-kompetenz principle upheld in Uttarakhand Purv Sainik (supra) emanated from the reasoning where the question of limitation is within the arbitrator s domain under Section 16 of the Act. Having said that, the apex court in BSNL v- Nortel (supra) held that the question of limitation is not a challenge to the arbitrator s jurisdiction under Section 16 of the Act but rather it is a challenge to the admissibility of the claims itself. In the light of the same, the judgment adduced by Mr. Mitra is not concrete enough to seize the judicial hands of this Court in determining the question of limitation at the referral stage. 20. In addition to the above, in Vidya Drolia (supra), the Supreme Court has upheld in that 92.(vii) Exercise of the limited prima facie review does not in any way interfere with the principle of competence competence and separation as to obstruct arbitration proceedings b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration dated 29.04.2020, it has been averred that: Various communications have been exchanged between the Petitioner and the Respondents ever since and a dispute has arisen between the Petitioner and the Respondents, regarding non payment of the amounts due under the Tender Document. The period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters, or mere settlement discussions, where a final bill is rejected by making deductions or otherwise . Sections 5 to 20 of the Limitation Act do not exclude the time taken on account of settlement discussions. Section 9 of the Limitation Act makes it clear that : where once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it. There must be a clear notice invoking arbitration setting out the particular dispute (including claims / amounts) which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail. 22. Now, the task before this Court is to apply the above-mentioned cases in the present issue at hand and to determine when the cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the demand for arbitration in the present case was made by the letter dated 7-11-2006. This demand was reiterated by a letter dated 13-1-2007, which letter itself informed the appellant that appointment of an arbitrator would have to be made within 30 days. At the very latest, therefore, on the facts of this case, time began to run on and from 12-2-2007. The appellant's laconic letter dated 23-1-2007, which stated that the matter was under consideration, was within the 30-day period. On and from 12-2-2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the respondent and time began running from that day. Obviously, once time has started running, any final rejection by the appellant by its letter dated 10-11-2010 would not give any fresh start to a limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 6-11-2013, they were within the limitation period of three years starting from 10-11-2020. On this count, the applications u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one by the apex court in BSNL-v-Nortel (supra) but the present case factually differs from the situation in Geo Miller (supra). In Geo Miller (supra), the final bill was still pending settlement whereas in the present case the final bill was not only settled but the retention money was also refunded to the petitioner. The petitioner clearly accepted the settlement by two letters, indicating no duress or coercion whatsoever, accepted the payments as per the final bill and the refund of the retention money. 30. Next, Mr. Mitra sought to challenge the acceptance of such final bill on the grounds that the same was done under duress from the respondent. This reminded me of the old saying of hitting arrows in the dark in the hope that one of them will hit the intended target. I firmly believe that one should not keep arguing for argument s sake. If a certain claim is made before the Court, the same needs to be backed up by some evidence. He failed to satisfy this Court regarding the existence of duress or any such extraneous factor which led the petitioner to accept the final bill. In my view, compelling financial circumstances and the petitioner s eagerness to receive the payment can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. The law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. Time is precious and wasted time would never revisit. During the efflux of time, newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a lifespan must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. The law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae up sit finislitium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. (emphasis supplied) * 34. For completeness, the two other objections ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. (supra) has univocally made it clear that unilateral appointment of an arbitrator by an interested party is not permissible. b. The three judges bench in Vidya Drolia v- Durga Trading Corporation (supra) empowered the Courts adjudicating a Section 11 application to intervene in certain circumstances and held that such interventional exercise does not interfere with the principle of competence-competence and separation as to obstruct arbitration proceedings but ensures that vexatious and frivolous matters gets weeded out at the initial stage. It is to be noted that the Supreme Court in this case observed that an absolute hands off approach would be counterproductive and harm arbitration, whereas limited yet effective intervention is acceptable as it does not obstruct but effectuates arbitration. Thus, the Courts at the Section 11 referral stage, with a view to prevent wastage of public and private resources, can interfere when it is manifest that the claims are ex-facie time barred and dead, or there is no subsisting dispute. c. Similarly, in DLF Home Developers Limited v- Rajapura Homes Pvt. Ltd., (supra) the apex court affirmed that the limited jurisdiction under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute amicably, and therefore delaying formal adjudication of the claim. f. In Secunderabad Cantonment Board v- B. Ramachandraiah Sons (supra), the apex court ruled that once the limitation period has started running, any final rejection by the respondent would not give any fresh start to the limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act, 1963. g. Lastly, in Extramarks Education India Pvt. Ltd -v- Shri Ram School (supra), the Delhi High Court remarked that limitation for invoking a legal remedy cannot be extended even by consent and that unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. 37. For the convenience of the parties, I have summarized below the factual findings of this Court a. The final bill of March 11, 2016 was a result of reworking and enhancement of the initial costs from a figure of INR 39,03,20,185 to INR 80,23,73,260/-. b. Therefore, the cause of action arose on March 11, 2016 itself, i.e., on the day when the final bill was issued by the respondent, and therefore, the limitation period started to run from that day itself; c. Two letter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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