The court clarified that the appointment of an arbitrator under Section 11(6) of the Act is to put the arbitration proceedings in motion, and the finding on the existence of a live issue and limitation is for that purpose. The court emphasized that the Chief Justice or Designate must record satisfaction that there remains a live issue between the parties and that the claim is not barred by limitation.

JUDGMENT:

(Arising out of SLP (C) No.15656 of 2006)

V.S. SIRPURKAR, J.

1. Leave granted.

2. An order under Section 11(6) of the Arbitration and Conciliation Act, 1996 hereinafter called as "the Act" for short) appointing Arbitrators, passed by the Designate Judge of the Bombay High Court is questioned in this appeal at the instance of Shree Ram Mills Ltd. (hereinafter called "the petitioner").

3. The said order is assailed mainly on two grounds, firstly, that there was no live issue in existence in between the parties and the learned Judge erred in holding that there was a live issue in between the parties and secondly that the claim had become barred by limitation between the parties. As against this the respondents M/s.Utility Premises (P) Ltd., supported the order and pointed out that in pursuance of the order passed not only had the Arbitrator been appointed but they had also chosen the third Arbitrator to preside

over the Arbitral Tribunal and the Arbitral Tribunal had commenced its proceedings. Presently the proceedings before the Arbitral Tribunal are stayed.

4. It has, therefore, to be decided as to whether the order passed under Section 11(6) of the Act appointing the Arbitrators is good order in law particularly in the wake of the above two objections.

5. Following undisputed facts would have to be borne in mind before approaching the questions raised.

6. The appellant is a company incorporated under the Companies Act, 1956, so also the respondent. The appellant company became a sick industrial unit sometime in the year 1987 under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA"). It was ordered to be wound up in the year 1994 and on approaching the Board For Industrial and Financial Reconstruction (BIFR) a rehabilitation scheme was worked out whereby IDBI was appointed as an operating agency under the scheme. The Asset Sale Committee approved the sale of 1.20 lakh sq.ft. FSI owned by the appellant company to the respondent for a total sale consideration of Rs.21.60 crores and accordingly an agreement came to be executed in between the parties on 27.4.1994.

This was a Joint Development Agreement between the parties in respect of the land owned by the appellant. By Clause 1 of the agreement, the area mentioned for development was between 86,000 sq.ft to 1.20 lakh sq.ft. Clause 15 of the said agreement provides that the land owner, the appellant herein, shall not create any encumbrance or third party rights. By Clause 19 the appellant had undertaken to add additional FSI. By Clause 22 the period was fixed for utilization of the full FSI covered under the agreement. Clause 24 was the Arbitration Clause to resolve the disputes, if any, between

the parties. The property covered was described in the Third Schedule of the said agreement which mentions 1.20 lakh sq.ft. FSI.

7. After this agreement a second agreement came to be executed in between the parties on 18.7.1994. This was necessitated because the appellant herein could make available only 86,725 sq.ft. FSI. Under this second agreement it was agreed to by the appellant herein

that the further land admeasuring 2500 sq.mtrs. would be allowed to be developed by the respondent. The said 2500 sq.mtrs. land was reserved by Bombay Municipal Corporation for Municipal Primary School and playground. However, the appellant herein undertook to shift the said reservation to some other property of the appellant at the cost of the respondent. There was an arbitration clause vide Clause No.10 in this agreement also.

8. On 9.11.1994 there was a Tripartite Agreement between the appellant and respondent herein along with one Bhupendra Capital and Finance Limited whereby 50% of the appellants entire interest under the Agreement dated 27.4.1994 and 18.7.1994 was agreed to be transferred.

9. On 22.6.1996 the agreement dated 18.7.1994 was cancelled by mutual consent as the parties were unable to agree on the cost of shifting the rese