Safiya Malik

The High Court at Calcutta Single Bench of Justice Shampa Sarkar allowed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, appointing a sole arbitrator to adjudicate disputes between the parties. The Court held that the dispute fell within the scope of the arbitration clause in the agreement and could not be said to be ex facie time barred at this stage. The Court directed that the issue of limitation, along with the arbitrability of the claims, be decided by the appointed arbitrator. The Court further held that the petitioner should be given the opportunity to adduce evidence to establish claims and that dismissal at this stage would not be appropriate.

The application arose under Section 11(6) of the Arbitration and Conciliation Act, 1996. Clause 14 of an agreement dated April 13, 2012, provided for arbitration of disputes in accordance with the Act, with proceedings to be held in Kolkata in English. The petitioner contended that the respondents had entered into a development agreement, agreeing to provide two flats and two car parking spaces for a total consideration of Rs. 1 crore, paid on April 13, 2012. The respondents were to deliver possession by December 2013. The timeline was extended due to delays in obtaining the sanction plan.

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The petitioner alleged repeated requests to the respondents for execution of the sale deed or refund, with respondent no. 2 assuring resolution. On December 15, 2020, the respondents stated their decision to sell the project land and refund Rs. 1 crore with Rs. 25 lakhs as penalty, requesting the petitioner to return the agreement and cancel it upon receipt of payment. However, no refund occurred, and no sale deed was executed. The petitioner alleged that financial statements showed misutilisation of funds and that construction had not commenced.

An application under Section 9 of the Act led to an interim order restraining the respondents from encumbering the property up to Rs. 1.25 crore, which remained in force. Arbitration was invoked on August 7, 2023. The respondents, in their reply dated August 28, 2023, denied the validity of the arbitration agreement and refused reference to arbitration.

The petitioner relied on case law to contend that extension of time could be inferred from parties’ conduct. The respondents argued that the claim was time barred, asserting that the cause of action arose in January 2014 when performance was refused, making the 2023 invocation of arbitration beyond limitation. They cited earlier communications in 2016 and 2017 demanding performance or refund and claimed that the December 2020 letter could not extend limitation as it was beyond three years from the alleged breach. They further referred to proceedings before the NCLT and the Consumer Forum, contending that these demonstrated the claim was stale.

The respondents relied on Supreme Court precedents to argue that ex facie time barred claims should not be referred to arbitration, to prevent parties from being drawn into expensive proceedings over inadmissible claims. They submitted that no acknowledgment of liability occurred within the limitation period and that the December 2020 letter was too late to revive the claim.

The Court recorded: "The above clause is a binding arbitration agreement. The disputes arose due to failure on the part of the respondents to construct and handover possession of the flats and car parking spaces... Thereafter, the respondents undertook to refund the money advanced by the petitioner upon sale of the land upon acknowledging that the contract could not be performed."

It was further noted: "The letter dated December 15, 2020, prima facie, gives rise to a presumption that there must have been some kind of an assurance... The very fact that the respondents requested the petitioner to cancel the agreement upon receipt of the money, indicates that the agreement was alive."

The Court stated: "Whether the petitioner shall be entitled to specific performance or refund of the money... are matters to be decided by the learned Arbitrator... Even if the petitioner’s cause of action for specific performance... was barred, the issue still remains as to whether the petitioner’s claim for refund... can give rise to a fresh claim and a fresh cause of action."

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On limitation, the Court referred to the two-pronged test from Arif Azim to assess prima facie if the petition was within time and whether the claims were dead claims. The Court found that it could not reject the application at this stage and that the arbitrator should decide on limitation.

The Court allowed the application and appointed Mr. Suddhasatva Banerjee, Advocate, as sole arbitrator to adjudicate the disputes. It directed that the respondents could raise limitation as a preliminary issue before the arbitrator. The Court ordered: "Urgent Photostat certified copies of this judgment, if applied for, be supplied to the respective parties upon fulfillment of requisite formalities."

Advocates Representing the Parties:

For the Petitioners: Mr. Rudraman Bhattacharyya, Sr. Adv., Ms. Amrita Panja Moulick, Adv., Mr. Sourajit Dasgupta, Adv., Mr. Akash Munshi, Adv., Mr. Siddharth Banerjee, Adv., Ms. Shivangi Agarwal, Adv.

For the Respondents: Mr. Aritra Basu, Adv., Mr. Ritoban Sarkar, Adv., Mr. Arka Banerjee, Adv., Ms. Surabita Biswas, Adv.

Case Title: Kamini Ferrous Limited vs. Om Shiv Mangalam Builders Private Limited & Anr.

Neutral Citation: 2025: CHC-OS:142

Case Number: A.P. 43 of 2024

Bench: Justice Shampa Sarkar