Madras High Court
Sai Saraswathi Construction Pvt. Ltd vs Vijay Saras Builders (P) Ltd on 20 September, 2021
Arb.O.P.(Comm Div.)No.23 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 20.9.2021
CORAM
THE HONOURABLE MR.JUSTICE N.SATHISHKUMAR
Arb. O.P.(Comm.Div.) No.23 of 2021
Sai Saraswathi Construction Pvt. Ltd.
Rep. By its Managing Director
R.Balakumar
No.15/29, North Usman road,
T.Nagar, Chennai 600 017. ... Petitioner
Vs.
1. Vijay Saras Builders (P) Ltd.,
Rep. by is Managing Director
J.S.Vijayakumar
No.55/27, R.P.Road,
Hasthinapuram, Chennai-64.
2. J.Praveena
No.30, Miaikal street,
Vikkaravandi,
Villupuram 605 652 ... Respondents
Prayer: Petition filed under Section 11 of the Arbitration and Conciliation
Act, 1996 for appointment of an arbitrator to resolve the disputes between
the petitioner and respondents under the provisions of the Arbitration and
Conciliation Act, 1996.
For Petitioner : Mr.V.Vijayshankar
For Respondent No.1 : Mr.N.Manoharan
For Respondent No.2 : Ms.K.Sindhuja
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Arb.O.P.(Comm Div.)No.23 of 2021
*****
ORDER
The petition has been filed for appointment of an Arbitrator to resolve the disputes arisen between the parties.
2. According to the petitioner, the petitioner is doing business in the real estates. The petitioner has entered into an agreement with the first respondent for purchase of 6.42 acres of land. It is contended by the petitioner that Clause 14 of the agreement, dated 6.6.2011 provides that all dispute between the parties shall be referred to arbitration. It is specifically agreed at Clause 7 and 8 of the agreement that the first respondent will obtain lay out approval and the sale shall be completed within 12 months from the date of lay out approval from the concerned authorities. It is further contended that in the year 2013, the respondent sent notice, dated 13.9.2013 and thereafter, tried to alienate the property, as a result, the petitioner had filed O.P.No.51 of 2014 for appointment of an Arbitrator and O.A.No.611 of 2013 under Sec.9 of the Act. When the matter is pending before this Court, the matter has been referred to meditation. However, nothing could be fructified in the mediation. Thereafter, in the year 2015, O.P.No.51 of 2014 and O.A.No.611 of 2013 were dismissed for non prosecution and the same came to the notice of the petitioner in the year 2017. Again, 2/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 the petitioner has filed an application in S.R.No.4681 of 2017 which was also not processed. Now, the petitioner came to know that only during November, 2019, the first respondent obtained lay out approval from the concerned authorities and the petitioner aware of the same in January, 2021. Therefore, it is the contention of the petitioner that Clause 14 of the agreement enable the parties to resolve the dispute through arbitration and the parties are governed by the Clause 14 to appoint an Arbitrator to resolve the dispute between the parties.
3. The learned counsel appearing for the petitioner vehemently contended that what has to be seen under Sec.11 of the Arbitration and conciliation Act, is only existence of agreement and the question of limitation cannot be gone into at this stage. Hence, it is the contention that the rest of the matter relegated to the jurisdiction of the Arbitration. Therefore, Court cannot look into the question of limitation at this stage. In support of his submission, he relied upon the following decisions of the Hon'ble Supreme Court.
1. 2017 (9) SCC 729 [DURO FELGUERA, S.A. Vs. GANGAVARAM PORT LTD.]
2. 2009 (5) SCC 182 [N.SRINIVASA Vs. KUTTUKARAN MACHINE TOOLS LTD.]
3. 2019 (8) SCC 714 [MAYAVATI TRADING PVT. LTD. Vs. PRADYUAT DEB BURMAN] 3/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021
4. 2016 (13) SCC 61 [EMM ENN ASSOCIATES Vs. COMMANDER WORKS ENGINEER AND OTHERS]
4. It is the contention of the counsel for the respondent that the claim itself is barred by limitation as the dispute arose between the petitioner and the first respondent in the year 2013. The petition filed by the petitioner for appointment of an Arbitrator in O.P.No.51 of 2014 before this Court was dismissed for non prosecution. Therefore, the petition filed under Sec.11 of the Arbitration and Conciliation Act, after 10 years of the contract is not maintainable. Clause 7 in the contract to save the limitation period cannot be pressed into service, since the dispute arose in the year 2013 itself. In fact, the respondent has shown his unwillingness to perform his part of the contract. In such case, limitation to enforce the contract is only for a period of three years under Article 137 and 54 of the Limitation Act. Therefore, the claim is hopelessly barred by limitation. Hence, the petition is liable to be dismissed. In support of his submission, the learned counsel appearing for the respondent relied upon the following decisions
1. AIR 2010 SC 1296 [DOLPHIN DRILLING LTD. VS. ONGC]
2. 2011 (1) SCC 320 [S.N.PRASAD VS. MONNET FINANCE LTD.]
3. (2003) 5 SCC 531 [SUKANYA HOLDINGS (P) LTD. VS. JAYESH H. PANDYA]
4. (2016) 10 SCC 386 [A.AYYASAMY VS. A.PARAMASIVAM AND OTHERS]. 4/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021
5. Heard the learned counsel appearing for the petitioner, learned counsel appearing for the respondents and perused the materials available on record.
6. What has to be seen while deciding the petition filed under Sec.11 of the Arbitration and Conciliation Act is existence of agreement. Since claim itself hopelessly barred and became dead, there is no purpose in appointing an Arbitrator. In this regard, as rightly pointed out by the learned counsel appearing for the respondent submitted that the agreement between the parties entered into on 6.6.2011. Clause 7 of the agreement provides period of performance of the contract i.e. 12 months from the date of lay out approved by the concerned authorities. Clause 6, 7 and 8 of the agreement reads as follows:
''6. The Party of the first part grant in favour of the Party of the second part right by way of license, to enter upon the property set out in the schedule hereunder, for the purpose of developing residential layout therein.
7. The period of performance agreed to under this agreement is Twelve (12) months from the date of obtaining layout approval from the concern authorities. The time limit, may be extended by mutual consent of both the parties.
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8. The party of the first part shall sign all applications, forms, documents and other papers that may be required or be included to apply for, maintain and secure the grant of approval, permissions, and consents for the proposed layout in the item I of the Schedule mentioned property.''
7. Therefore, when the Court finds that the claim itself hopelessly barred and became dead, this Court is of the view that the petition filed under Sec.11 of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator is nothing but futile exercise.
8. Though the period of performance of contract agreed between the parties is 12 months from the date of obtaining layout approval, it is to be noted that it is not specifically mentioned that layout obtained only by the vendor viz., the first respondent herein, the obligation cast upon the petitioner for taking steps to obtain layout. Therefore, when the purchaser failed to perform his part of the contract at the relevant point of time, the petitioner cannot invoke arbitration clause contending that cause of action arose only after obtaining approval form the concerned authorities. It is relevant to note that on 30.9.2013 itself, dispute arose between the parties and in fact, the vendor repudiated the contract and issued legal 6/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 notice when the vendor shown his unwillingness, the cause of action to enforce the contract arose on the date of legal notice issued. When the intention of the vendor is not to honour the obligation of the contract, therefore, three years limitation period to enforce the contract starts from the date on which legal notice was issued by way of reply, dated 30.9.2013 itself by the first respondent. Though petition has been filed for appointment of an Arbitrator in the year 2014 in O.P.No.51 of 2014, and sought interim relief in O.A.No.611 of 2013 under Sec.9 of the Act, both O.P. and application were dismissed for non prosecution. It is stated that since matter is pending before the mediation at the relevant point of time, the aforesaid O.P. and application were not prosecuted. It is admitted by both sides that as no settlement was arrived between the parties, mediation was failed on 5.6.2015 itself. Even thereafter, the petitioner has not taken any steps to enforce the contract within a period of limitation. On the contrary, all along slept over the matter, now the petitioner, suddenly woke up by filing the present petition on the ground that the first respondent obtained lay out approval in the year 2017 only which according to the petitioner they came to know only in the year 2021. It is to be noted that when there is no period of limitation is provided, limitation period of three years under article 54 of the Limitation Act, to enforce the contract starts from the date on which 7/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 legal notice was issued. Though refusal shown by the first respondent in the year 2013 itself, no steps have been taken by the petitioner to enforce the contract. Even assuming that Clause 7 will extend the period of limitation, it is the case of the petitioner that in the year 2017 itself, layout approval has been obtained by the first respondent, therefore, this court is of the view that the entire claim is totally barred by limitation under Sec.54 and 137 of Limitation Act.
9. In 2017 (9) SCC 729 [DURO FELGUERA, S.A. Vs. GANGAVARAM PORT LTD.] the Hon'ble Supreme Court has held as under:
''59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] . This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists— nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected.'' 8/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021
10. In 2009 (5) SCC 182 [N.SRINIVASA Vs. KUTTUKARAN MACHINE TOOLS LTD.] the Hon'ble Supreme Court has held as under:
“37. It is well settled that even if an agreement ceases to exist, the arbitration clause remains in force and any dispute pertaining to the agreement ought to be resolved according to the conditions mentioned in the arbitration clause. Therefore, in our view, the High Court was not justified in setting aside the order of the trial court directing the parties to maintain status quo in the matter of transferring, alienating or creating any third-party interest in the same till the award is passed by the sole arbitrator.
11. In 2019 (8) SCC 714 [MAYAVATI TRADING PVT. LTD. Vs. PRADYUAT DEB BURMAN] the Hon'ble Supreme Court has held as under:
''10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment [United India Insurance Co. Ltd.v. Antique Art Exports (P) Ltd., (2019) 5 SCC 362 : (2019) 2 SCC (Civ) 785] , as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid 9/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 down in the judgment in Duro Felguera, SA [Duro Felguera, Sav. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764] — see paras 48 & 59''
12. In 2016 (13) SCC 61 [EMM ENN ASSOCIATES Vs. COMMANDER WORKS ENGINEER AND OTHERS] the Hon'ble Supreme Court has held that there should be existence of dispute to file an application under Sec.11 of the Act and the applicant is not expected to justify the claim with regard to limitation or production of documents. Absolutely, there is no dispute in the above judgment.
''19. [Ed.: Para 19 corrected vide Official Corrigendum No. F.3/Ed. B.J./25/2016 dated 21-7- 2016.] . A two-Judge Bench of this Court inIndian Oil Corpn. Ltd.v.SPS Engg. Ltd.[Indian Oil Corpn. Ltd. v. SPS Engg. Ltd., (2011) 3 SCC 507] had occasion to consider what is a “live claim” within the meaning of Section 11 of the Act. Elaborating the jurisdiction of the Chief Justice, under Section 11 of the Act following was laid down by this Court in para 14 of the judgment: (SCC p. 515) “14. … The Chief Justice or his designate may however choose to decide whether the claim is a dead (long-barred) claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration 10/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 agreement survived. When it is said that the Chief Justice or his designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time-barred claim and there is no need for any detailed consideration of evidence. We may elucidate by an illustration: if the contractor makes a claim 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, and the claim is patently long time-barred, the Chief Justice or his designate will examine whether the claim is a dead claim (that is, a long time-barred claim). On the other hand, if the contractor makes a claim for payment, beyond three years of completing of the work but say within five years of completion of work, and alleges that the final bill was drawn up and payments were made within three years before the claim, the Court will not enter into a disputed question whether the claim was barred by limitation or not. The Court will leave the matter to the decision of the Tribunal. If the distinction between apparent and obvious dead claims, and claims involving disputed issues of limitation is not kept in view, the Chief Justice or his designate will end up deciding the question of limitation in all applications under Section 11 of the Act.”
20. [Ed.: Para 20 corrected vide Official Corrigendum No. F.3/Ed. B.J./25/2016 dated 21-7-2016.] . 11/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 Further, this Court has observed that an application under Section 11 of the Act is expected to contain pleading about the existence of a dispute and the applicant is not expected to justify the claim or plead extensively in regard to limitation or production of document to demonstrate that claim is within time in proceeding under Section 11 and that issue should normally be left to the Arbitral Tribunal. Following was observed in para 15: (Indian Oil Corpn. Ltd. case [Indian Oil Corpn. Ltd. v. SPS Engg. Ltd., (2011) 3 SCC 507] , SCC pp. 515-16) “15. An application under Section 11 of the Act is expected to contain pleadings about the existence of a dispute and the existence of an arbitration agreement to decide such dispute. The applicant is not expected to justify the claim or plead exhaustively in regard to limitation or produce documents to demonstrate that the claim is within time in a proceeding under Section 11 of the Act. That issue should normally be left to the Arbitral Tribunal. If the Chief Justice or his designate is of the view that in addition to examining whether there is an arbitration agreement between the parties, he should consider the issue whether the claim is a dead one (long time-barred) or whether there has been satisfaction of mutual rights and obligation under the contract, he should record his intention to do so and give an opportunity to the parties to place their materials on such issue. Unless the parties are put on notice that such an 12/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 issue will be examined, they will be under the impression that only questions of jurisdiction and existence of arbitration agreement between the parties will be considered in such proceedings.”
13. In view of the above settled position of law, when the claim itself has become dead, limitation is hopelessly expired, as the dispute between the parties in respect of the agreement arose in the year 2013 itself, invoking Sec.11 of the Arbitration and Conciliation Act in the year 2021 cannot be entertained. Therefore, this Court finds no merit in the petition.
Accordingly, the Arbitration O.P. Is dismissed. No costs.
20.09.2021 Index: Yes/No Internet: Yes/No Speaking/non speaking Order vaan 13/14 http://www.judis.nic.in Arb.O.P.(Comm Div.)No.23 of 2021 N. SATHISHKUMAR, J.
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