Telangana High Court
Raghunath Singh vs M/S Bricmor Infra Projects Private ... on 17 October, 2022
Author: K. Lakshman
Bench: K. Lakshman
THE HONOURABLE SRI JUSTICE K. LAKSHMAN
ARBITRATION APPLICATION No.149 OF 2021
ORDER:
The present Arbitration Application is filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act, 1996') for appointment of a sole arbitrator to resolve the disputes between the parties.
2. Heard Mr. Vivek Jain learned counsel for the Applicants and Mr. Shyam S. Agarwal learned counsel for the Respondent. Perused the record.
3. Contentions of the Applicants:-
i. The Applicants are the owners of agricultural land admeasuring Ac.
10.13 Gts. in Sy. No. 352 situated at Kollur Village, Ramchandrapuram Mandal, Medak District, Telangana (hereinafter 'subject property').
ii. The Applicants and the Respondent entered into a Development Agreement-cum-General Power of Attorney (hereinafter 'DAGPA') dated 15.04.2013 to develop the subject property as a gated community.
iii. The Respondent has abnormally delayed the commencement of the project and has failed to obtain the necessary permissions from the 2 authorities as pert the terms of the DAGPA. Further, the Respondent has failed to complete the said project within a period of 2 years with a grace period of 6 months as agreed under the DAGPA. iv. A notice dated 24.03.2021 was issued to the Respondent to come forward and execute a deed of cancellation of the DAGPA. But the Respondent failed to reply. Therefore, the Applicants invoked Clause 23 of the DAGPA and issued a arbitration notice dated 06.07.2021 and appointed its nominee arbitrator. However, no response was received from the Respondent.
v. Therefore, the present arbitration application is filed.
4. Contentions of the Respondent:-
i. The Applicants have approached the court with unclean hands and by suppressing various facts.
ii. Admittedly, as per Clause 16 of the DAGPA, the permission was to be obtained within 6 months from the date of agreement and the work was to be completed within 2 years with a grace period of 6 months.
All those periods expired by 14.10.2015 and the period of limitation started to run from that date and would expire after three years i.e., by 3 14.10.2018. Therefore, the claim of the Applicants is barred by limitation.
iii. The Applicants have failed to explain the delay in approaching this Court and how the present application is filed within limitation. iv. Therefore, as the claim of the Applicants is barred by limitation, no arbitral dispute exists.
Findings of the Court:-
5. It is clear from the facts of the case that the question before this Court is whether the claim of the Applicants is barred by limitation. It is relevant to note that the Supreme Court in Panchu Gopal Bose v. Board of Trustees for Port of Calcutta1 explained the application of the law of limitation to arbitration proceedings. It was held that the law of limitation applies to arbitral proceedings and the period of limitation shall start to run from the date on which a right to initiate arbitral proceedings accrues on the claimant. The relevant paragraphs are extracted below:
11. Therefore, the period of limitation for the commencement of an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued. Just as in the case of actions the 1 (1993) 4 SCC 338.4
claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued.
12. In Russell on Arbitration, at pages 72 and 73 it is stated thus:
"Disputes under a contract may also be removed, in effect, from the jurisdiction of the court, by including an arbitration clause in the contract, providing that any arbitration under it must be commenced within a certain time or not at all, and going on to provide that if an arbitration is not so commenced the claim concerned shall be barred. Such provisions are not necessarily found together. Thus the contract may limit the time for arbitration without barring the claim depriving a party who is out of time of his right to claim arbitration but leaving open a right of action in the courts. Or it may make compliance with a time-limit a condition of any claim without limiting the operation of the arbitration clause, leaving a party who is out of time with the right to claim arbitration but so that it is a defence in the arbitration that the claim is out of time and barred. Nor, since the provisions concerned are essentially separate, is there anything to prevent the party relying on the limitation clause waiving his objection to arbitration whilst still relying on the clause as barring the claim."
At page 80 it is stated thus:
"An extension of time is not automatic and it is only granted if 'undue hardship' would otherwise be caused. Not all hardship, however, is 'undue hardship'; it may be proper that hardship caused to a party by his own default should be borne by him, and not transferred to the other party by allowing a claim to be reopened after it has become barred. The mere fact that a claim was barred could not be held to be 'undue hardship'."5
13.The Law of Arbitration by Justice Bachawat in Chapter 37 at p. 549 it is stated that 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 claim accrues, so also in the case of arbitrations, the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues. For the purpose of Section 37(1) 'action' and 'cause of action' in the Limitation Act should be construed as arbitration and cause of arbitration. The cause of arbitration, therefore, arises when the claimant becomes entitled to raise the question, i.e. when the claimant acquires the right to require arbitration. The limitation would run from the date when cause of arbitration would have accrued, but for the agreement.
14. Arbitration implies to charter out timeous commencement of arbitration availing the arbitral agreement, as soon as difference or dispute has arisen. Delay defeats justice and equity aid the promptitude and resultant consequences. Defaulting party should bear the hardship and should not transmit the hardship to the other party, after the claim in the cause of arbitration was allowed to be barred. The question, therefore, as posed earlier is whether the court would be justified to permit a contracting party to rescind the contract or the court can revoke the authority to refer the disputes or differences to arbitration. Justice Bachawat in his Law of Arbitration, at p. 552 stated that "in an appropriate case leave should be given to revoke the authority of the arbitrator". It was also stated that an ordinary submission without special stipulation limiting or conditioning the functions of the arbitrator carried with it the implication that the arbitrator should give effect to all legal defences such as that of limitation. Accordingly the arbitrator was entitled and bound to 6 apply the law of limitation. Section 3 of the Limitation Act applied by way of analogy to arbitration proceedings, and like interpretation was given to Section 14 of the Limitation Act. The proceedings before the arbitration are like civil proceedings before the court within the meaning of Section 14 of the Limitation Act. By consent the parties have substituted the arbitrator for a court of law to arbiter their disputes or differences. It is, therefore, open to the parties to plead in the proceedings before him of limitation as a defence. Further, the Supreme Court in Vidya Drolia v. Durga Trading Corporation2 held that the question whether a claim is barred by limitation can be decided at the stage of appointment of an arbitrator. The Court therein held that only where the claims are ex facie time-barred, the Court can refuse to appoint an arbitrator. In all other cases, the matter shall be referred to arbitration where the arbitrator shall decide such issues. The relevant paragraph is extracted below:
148. Section 43(1) of the Arbitration Act states that the Limitation Act,1963 shall apply to arbitrations as it applies to court proceedings. Sub-section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law 2 (2021) 2 SCC 1.7
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. [Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)] , 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.
6. The Applicants contended that the present petition is not barred by limitation in light of Section 22 of the Act, 1963 as there was a continuous breach of contract. The said contention cannot be accepted.
7. It is relevant to note that Section 22 provides that fresh period of limitation begins to run at every moment during which the breach continues. In the present case, the first breach happened on 15.10.2013 as the Respondent failed to obtain the necessary permissions. Thereafter, the breach continued till 14.10.2015 as on which the development of the subject property was to be completed. The Applicant cannot contend that the breach 8 continued beyond the period that was prescribed for completion of the project. Therefore, the cause of action accrued on 14.10.2015 and on the said date the period of limitation began to run.
8. In the present case, the Applicants were silent and failed to take any action against the alleged breaches committed by the Respondent. This Court agrees with the contention of the Respondent that cause of action accrued on the Applicants on multiple occasions and finally on 14.10.2015 by which the construction was supposed to be completed. The period of limitation started to run from 14.10.2015 and expired on 14.10.2018.
9. It was only on 24.03.2021 that a legal notice was issued to cancel the DAGPA. Nothing has been placed on record to explain the delay in invoking the arbitration clause. The Applicants cannot invoke arbitration after a lapse of substantial time. As held in Vidya Drolia (Supra) claims which are ex facie barred by limitation are not arbitrable. According to this Court, the claim of the Applicants is deadwood and is barred by limitation.
10. Therefore, in light of the aforesaid discussion, the present arbitration application is liable to be dismissed. 9
11. In the result, the Arbitration Application is dismissed. Pending miscellaneous petitions, if any, shall stand closed.
_________________ K. LAKSHMAN, J Date:17.10.2022 vvr