Bombay High Court
Narendra Shah vs Maharashtra Samaj Ghatkopar Trust And 3 ... on 9 January, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-OS:701
1/10 26 ARBAP-34-2022 .doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION NO. 34 OF 2022
Narendra Shah .. Applicant
Versus
Maharashtra Samaj Ghatkopar Trust And 3 .. Respondents
Ors.
...
Ms.Shilpa Kapil for the Applicant.
Mr.Ieshan Sinha a/w Ms. Dhruvi Mehta i/b Wadia Ghandy & Co. for
respondents.
CORAM: BHARATI DANGRE, J.
DATED : 9th JANUARY 2024 P.C:-
1 The present application filed by Narendra Shah, the sole proprietor of M/s. Encee Rail Linkers seek appointment of sole arbitrator in the wake of an agreement dated 29/05/1999, executed with Maharashtra Samaj Ghatkopar Trust (hereinafter referred to as ' 'The Trust').
The agreement contemplated that the applicant shall carry out the construction for the trust at the agreed cost and in lieu of the construction and the incidental charges, it shall be granted the lease of commercial premises of 400 sq. mtrs, or 15% of the available FSI, whichever is less. It is the claim of the applicant that as the construction cost as agreed was not paid by the trust, the applicant was not required to pay the amount towards the lease of the premises and when on completion of the School building, the respondent failed to handover the commercial premises and enter into a lease deed as agreed, it has invoked the arbitration and seek appointment of an Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 2/10 26 ARBAP-34-2022 .doc arbitrator.
2 Heard the learned counsel Ms.Kapil for the applicant and the learned counsel Mr.Ieshan Sinha for the respondent.
The learned counsel for the respondent has raised an objection about the dispute being referred to arbitration, at this stage, when it has become a deadwood and he would place reliance upon the decision in case, of Bharat Sanchar Nigam Ltd and anr vs Nortel Networks India Pvt Ltd, (2021) 5 SCC, 738 and a decision in case of Secunderabad Cantonment Board vs B. Ramachandraiah and Sons (2021) 5 SCC, 705, wherein the limitation period for filing application for appointment of arbitrator under Section 11 has been held to be governed by the residuary Article 137 of the Limitation Act. Thus, according to him, the aforesaid authoritative pronouncements of the Apex Court have clearly laid down a proposition of law that an application for appointment of Arbitrator under Section 11 (6) shall be filed within 3 years from the date on which 'right to apply' under Section 11(6) accrues.
Inviting my attention to the sequence of events, since the agreement dated 29/05/1999, is not in dispute, he would submit that the respondent being a trust sought the requisite permissions from the Charity Commissioner, under Section 36 of Bombay Public Trusts Act, 1950 to accord sanction to the Trust, to develop the property by constructing the school building and leasing out the commercial area of 400 sq mtrs in favour of the applicant. By an order, the Charity Commissioner directed the trust to file a change report under Section 22 of the Act for recording change in the property held, after completion of the development transaction. The said order came to be modified by directing that the change report shall be filed upon completion of the development and execution of lease to record Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 3/10 26 ARBAP-34-2022 .doc change in the property holding.
3 It is not disputed that the agreement executed between applicant and the respondent trust dated 29/05/1999, comprise of an arbitration clause, which clearly contemplated that any dispute or difference arising out of or touching the agreement shall be referred to arbitration by a named arbitrator and his decision was accorded conclusiveness and finality.
When the communications which are annexed to the application are carefully read, it is evident that the dispute surfaced between the parties as regards the completion of the school building construction as it is a case of the trust that the construction was abandoned and despite an agreement being entered into, an expiry of 6 years, the school building construction was not completed despite several reminders being addressed to the applicant to complete the construction work within a time bound manner.
A specific contention is raised that the Trust had utilized its funds to complete the school building and for ensuring the provisions for drinking water, electric supply, drainage, dressing of ground etc. It also obtained Commencement Certificate upto 6 th floor from the concerned planning authorities. It is therefore, the case of the respondent trust, that since handing over the possession of the commercial area was subject to the permissions from Charity Commissioner and was in lieu of the construction activity being completed by the applicant, they are not entitled for the area as assured in the agreement dated 29/05/1999.
4 The first correspondence placed on record dated 9/11/2005, clearly stipulate the failure on part of the applicant to complete the building construction work, which had constrained the respondent to undertake the remaining balance work by infusing its Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 4/10 26 ARBAP-34-2022 .doc own funds. It was clearly indicated therein to the applicant, that the possession of the commercial area will be finalized after obtaining necessary permissions from the authorities, the collector as well as the Charity Commissioner.
Pursuant to this communication, on 18/11/2005, the applicant addressed a detail communication to the trust with reference to the said letter and flagged the issue about its entitlement of 400 sq mtrs of commercial premises on the ground floor of the school building. By referring to the distinct clauses in the agreement and the order passed by the Charity Commissioner, a clarification was issued by informing that the work of the school building as per the contract is completed long back and only work of provision for lift was left unfinished, as the Trust was insisting installation of the lift with higher capacity, which was not cost effective. Admitting that there was a delay in completion of the work, it was attributed to the interferences and hindrances created by the Trust from time to time during the course of construction of the building. It was indicated that the building is constructed to meet the normal standard of a Marathi medium school and the necessary provisions as contemplated in the contract were provided in the building.
As far as the reciprocal promise to hand over the possession of the commercial premises on the ground floor is concerned, a grievance was raised that there is a failure to abide by the said part of the contract and reiterating that the entire construction cost of the school building was borne by the applicant and the trust in fact started functioning the school of Netherland standard and collecting huge fees from the students with an average earning of Rs. 3.5 to 4 Crore from the building constructed by the applicant. It was reiterated that they are entitle to demand interest of 21% p.a. on the Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 5/10 26 ARBAP-34-2022 .doc construction cost of the building from the date when the work was completed till the vacant possession of the commercial premises is handed over.
What is relevant is the ultimate part of the said notice which reads thus:
"The Trust are therefore requested to look into the matter and hand over the commercial space or compensation as noted above without any further delay as we have suffered very heavy losses in undertaking the work. This may please be treated as a notice for settlement of the dispute by appointing Arbitrator as per the provisions of Clause No.22 of the Contract Agreement within 45 days of receipt of this notice failing which it will be presumed that the Trust are not interested in settling the disputes and thereby forfeiting the opportunity to appoint Arbitrators to settle the disputes and in that case Encee Rail Linkers will be approaching the competent Court to get Arbitrators appointed to settle the disputes as per the provisions of Arbitration and Conciliation Act of 1996, at the cost and consequences of the Trust, which please take note of. Hope the Trust will take early steps to settle all the issues which are pending since long."
5 Another communication dated 8/12/2005, addressed to the trust also reiterate the request to hand over the available commercial area of 215.06 sq.mtr and 184.94 sq.mtr. non commercial area by executing necessary deeds and documents and also seek for the payment of compensation along with the interest on the account of delay. Failure to abide, it is indicated that the arbitration shall be invoked in terms of the clause comprised in the agreement entered between the parties.
However, it is worth to note that despite the communication dated 18/11/2005, invoking arbitration, no steps were taken to approach this Court seeking appointment of an arbitrator since there was a failure on part of the respondents to agree as to the appointment of the arbitrator within period of 30 days as Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 6/10 26 ARBAP-34-2022 .doc contemplated. After lapse of considerable period of time, on 22/02/2021, the applicant addressed a communication to the respondent, reiterating the demand for its entitlement for the commercial premises in terms of the agreement and invoking clause 22 of the agreement calling upon the opponent to resolve the dispute by conducting arbitration proceedings and indicating that there was a failure to respond within period of 30 days, the High Court shall be approached for appointment of an arbitrator.
6 What is most pertinent is the silence on part of the applicant from the date of its first notice dated 18/11/2005, to the notice dated 22/02/2021, which is projected to be the cause of action for invoking arbitration based on the knowledge gained, when an information under the RTI was sought, but I do not find substance in the submission of Ms. Kapil, as it is evident that in the communication dated 8/12/2005, itself the applicant had clearly asserted that the respondent has already started use of the building of a School of Netherland standard, though it had constructed building for a Marathi medium School as stipulated in the agreement. Therefore, it is no gainsay in now submitting that it is upon the knowledge having been acquired that the school building was put to use in the year 2021, the arbitration has been invoked.
The claim that is sought to be staked as on date is nothing but a dead claim and though my attention is invited to subsequent exchange of communications between the parties definitely, these communications can by no stretch of imagination be construed as reviving or making a dead cause of action alive, which has accrued to the parties as early as in 2005 and it was clearly spelt out in the notice dated 18/11/2005.
The breakup point between the parties is clearly Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 7/10 26 ARBAP-34-2022 .doc discerned from the communication exchanged after 18/11/2005, which was response to a notice by the respondent dated 9/11/2005.
7 The Apex Court in case of Bharat Sanchar (supra) has clearly pronounced upon the claims which are not liable to referred to arbitration, by specifically dealing with a contest about the period of limitation for filing the petition seeking appointment of an arbitrator and by relying upon the decision of the Bombay High Court in case Deepdharshan Builders Pvt Ltd as well as the decision of the Delhi High Court in case of Golden Chariot Recreations Pvt Ltd vs. Mukesh Panika and on reference to the three Judge Bench decision in case of Geo Miller & Co (P) Ltd vs. Rajashtan Vidyut Utpadan Nigam Ltd., (2020) 14 SCC 643, in the following words the clear proposition of law was declared:
21. "Given the vacuum in the law to provide a period of limitation under Section 11 of the Arbitration and Conciliation Act, 1996, the courts have taken recourse to the position that the limitation period would be governed by Article 137, which provides a period of 3 years from the date when the right to apply accrues. However, this is an unduly long period for filing an application under Section 11, since it would defeat the very object of the Act, which provides for expeditious resolution of commercial disputes within a time-bound period. The 1996 Act has been amended twice over in 2015 and 2019, to provide for further time-limits to ensure that the arbitration proceedings are conducted and concluded expeditiously. Section 29-A mandates that the Arbitral Tribunal will conclude the proceedings within a period of 18 months. In view of the legislative intent, the period of 3 years for filing an application under Section 11 would run contrary to the scheme of the Act. It would be necessary for Parliament to effect an amendment to Section 11, prescribing a specific period of limitation within which a party may move the court for making an application for appointment of the arbitrator under Section 11 of the 1996 Act.
22. Applying the aforesaid law to the facts of the present case, we find that the application under Section 11 was filed within the limitation period prescribed under Article 137 of the Limitation Act. Nortel issued the notice of arbitration vide letter dated 29-4-
2020, which was rejected by BSNL vide its reply dated 9-6-2020. The application under Section 11 was filed before the High Court Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 8/10 26 ARBAP-34-2022 .doc on 24-7-2020 i.e. within the period of 3 years of rejection of the request for appointment of the arbitrator."
Similarly in case of Secunderabad Cantonment Board, the conclusion is specifically recorded in paragraph 19 which reads to the following effect:
"19 Applying the aforesaid judgments to the facts of this case, so far as the applicability of Article 137 of the Limitation Act to the applications under Section 11 of the Arbitration Act is concerned, it is clear that 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 under Section 11 of the Arbitration Act. themselves being hopelessly time-barred, no arbitrator could have been appointed by the High Court."
8 In case of B and T AG vs. Ministry of Defence, the relevant observations, as regards to when the cause of action accrues, is specifically set out in paragraph no.71 and 72, which read thus:
"71. In Law of Arbitration by Justice Bachawat at p. 549, commenting on Section 37, it is stated that subject to the Act 1963, every arbitration must be commenced within the prescribed period. Just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date when the cause of action accrues, so in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 9/10 26 ARBAP-34-2022 .doc years from the date when the claim accrues. For the purpose of Section 37(1) "action" and "cause of arbitration" should be construed as arbitration and cause of arbitration. The cause of arbitration arises when the claimant becomes entitled to raise the question, that is, when the claimant acquires the right to require arbitration. An application under Section 11 of the Act 1996 is governed by Article 137 of the Schedule to the Act 1963 and must be made within 3 years from the date when the right to apply first accrues. There is no right to apply until there is a clear and unequivocal denial of that right by the respondent. It must, therefore, be clear that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of cause of action arisen in a civil action.
72. Whether any particular facts constitute a cause of action has to be determined with reference to the facts of each case and with reference to, the substance, rather than the form of the action. If an infringement of a right happens at a particular time, the whole cause of action will be said to have arisen then and there. In such a case, it is not open to a party to sit tight and not to file an application for settlement of dispute of his right, which had been infringed, within the time provided by the Limitation Act, and, allow his right to be extinguished by lapse of time, and thereafter, to wait for another cause of action and then file an application under Section 11 of the Act 1996 for establishment of his right which was not then alive, and, which had been long extinguished because, in such a case, such an application would mean an application for revival of a right, which had long been extinguished under the Act 1963 and is, therefore, dead for all purposes. Such proceedings would not be maintainable and would obviously be met by the plea of limitation under Article 137 of the Act 1963."
9 In the wake of the aforesaid authoritative pronouncements, since in terms of Geo Miller, the breaking point between the parties has clearly surfaced in the year 2005 itself seeking reference to the arbitrator in the year 2024 by filing an application under Section 11 would be nothing short of entertaining a dead claim. No plausible explanation except the repeated communications exchanged between the parties has come forward, which in no case can be construed as extension of the period of limitation since the cause of action has accrued to the applicant immediately when it resorted to section 21 by a notice forwarded on Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 ::: 10/10 26 ARBAP-34-2022 .doc 18/11/2005.
In the wake of the aforesaid situation, since the cause of action which is sought to be taken to the arbitrator for adjudication being a dead claim, the request of appointment of an Arbitrator is declined and the application is rejected.
( SMT. BHARATI DANGRE, J.) Ashish ::: Uploaded on - 15/01/2024 ::: Downloaded on - 29/01/2024 22:18:37 :::