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IN THE HIGH COURT OF JUDICATURE AT MADRAS
ABDUL QUDDHOSE, J.
M/s. Saravana Global Holdings Ltd., (Formerly known as Saravana Foundations Ltd.,) Chennai – Appellant
Versus
N. Jayamurugan – Respondent
O.P. No. 595 of 2019 & A. No. 5367 of 2019
Decided On : 21-07-2023
Arbitration and Conciliation Act - Time Barred Debt - Section 25 (3) of the Indian Contract Act - MOU dated 18.05.2006
Fact of the Case:
The respondent invested money with the petitioner for the purchase of 200 acres of land under a Memorandum of Understanding (MOU) dated 18.05.2006. A dispute arose, and the respondent filed a claim against the petitioner, relying on letters dated 26.02.2015 and 05.03.2015 as a promise to pay a time-barred debt.
Finding of the Court:
The court found that the alleged promise to pay was not an express promise in writing and did not satisfy the requirements of Section 25 (3) of the Indian Contract Act. The court also held that the arbitration clause in the MOU could not be made applicable to the alleged promise to pay, as it amounted to a fresh contract and the terms of the MOU had become unenforceable due to the lapse of time.
Issues: The issues included whether the letters constituted a promise to pay a time-barred debt, whether the arbitration clause in the MOU could be applied to the alleged promise, and whether the claim was within the period of limitation.
Ratio Decidendi: The court held that for Section 25 (3) of the Indian Contract Act to apply, there must be an express promise to pay a time-barred debt in writing, which was not present in this case. The court also determined that the alleged promise to pay constituted a fresh contract, and the arbitration clause in the MOU could not be invoked for the new contract.
Final Decision: The court set aside the arbitral award, finding that the claim was time-barred and the alleged promise to pay did not meet the statutory requirements. The court allowed the petition and closed the connected application.
JUDGMENT
(Prayer: Petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 20.02.2019.)
1.The issues that arise for consideration in this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the arbitral award dated 20.02.2019 are as follows:
a) Whether the arbitrator was correct in treating the letter dated 05.03.2015 sent by the petitioner to the respondent as a promise to pay a time barred debt which saves limitation attracting Section 25 (3) of the Indian Contract Act;
b) Whether the alleged promise to pay the time barred debt through the petitioner''s letter dated 05.03.2015 is a fresh contract giving rise to a fresh cause of action and whether the terms and conditions of the earlier contract including the arbitration agreement can be made applicable when admittedly the earlier MOU dated 18.05.2006 had become unenforceable on account of it becoming time barred;
c) Whether the alleged promise to pay through the petitioner''s letter dated 05.03.2015 has satisfied the requirements of Section 25 (3) of the Indian Contract Act enabling the respondent to make a claim for a time barred debt;
d) Whether the arbitrator was right in awarding compensation to the respondent at the rate of Rs.1,00,000/- per acre, when the alleged promise to pay through the petitioner''s letter dated 05.03.2015 does not cover a promise to pay compensation;
e) The difference between an acknowledgment of debt given within the period of limitation coming within the purview of Section 18 of the Limitation Act, 1963 and a promise to pay a time barred debt as per Section 25 (3) of the Indian Contract Act which enables the claimant to seek payment despite the debt being a time barred debt.
2. Brief facts leading to the filing of this petition under Section 34 of the Arbitration and Conciliation Act, 1996:
The respondent in this petition is the claimant and the petitioner is the respondent in the arbitration who has also made a counter claim against the respondent. The respondent had invested money with the petitioner for the purchase of 200 acres of land at Moosivakkam Village, Kancheepuram under a Memorandum of Understanding (MOU) dated 18.05.2006.
3. As per the MOU dated 18.05.2006, the petitioner agreed to identify and acquire 200 acres of land for and on behalf of the respondent. The terms and conditions entered into between the parties are found in the MOU dated 18.05.2006. One of the conditions is that the time fixed for completing the process of acquisition was 90 days from the date of MOU. There arose a dispute between the petitioner and the respondent under the MOU dated 18.05.2006. Admittedly, there is an arbitration clause in the MOU dated 18.05.2006. However, as per the general law of limitation under the Limitation Act, 1963, the debt if at all payable to the respondent by the petitioner has become a time barred debt. The respondent claims a sum of Rs.5,33,76,000/- which is the alleged balance unutilized amount retained by the petitioner out of the total payment made by the respondent which the petitioner has refused to return to the respondent, despite the petitioner not having invested the said amount for and on behalf of the respondent for the purchase of the properties as stipulated under the MOU dated 18.05.2006.
4. According to the respondent, only a portion of the payments made by the respondent was utilized by the petitioner for the purchase of properties for and on behalf of the respondent.The last payment made bythe respondent to the petitioner for the purchase of properties as per theMOU dated 18.05.2006 was on 02.09.2006.
5. The respondent had relied upon the following documents in support of his contention that his claim before the arbitrator is within the period of limitation as per the provisions of Section 25 (3) of the Indian Contract Act:
The alleged promise to pay a time-barred debt must be an express, clear, and unconditional promise in writing to satisfy the requirements of Section 25 (3) of the Indian Contract Act.
The court affirmed that a promise to pay a time-barred debt under Section 25(3) of the Indian Contract Act can revive the claim, and the Arbitrator's findings were not subject to re-evaluation under ....
The Court emphasized the Arbitrator's jurisdiction to interpret Contract terms and upheld the Award based on the plausible interpretation of 'outstanding dues' under the Term Loan Agreement.
A written acknowledgment of debt as a promise to pay under Section 25(3) of the Indian Contract Act can validate a recovery claim even if time-barred, thus distinguishing it from an acknowledgment un....
The main legal point established in the judgment is that a promise made in writing and signed to pay a time-barred debt is valid and enforceable under Section 25(3) of the Indian Contract Act.
Arbitration petition – Limitation – A claim which is time-barred cannot be resuscitated by taking recourse either to Sections 18 or 19 of Limitation Act.
The main legal point established in the judgment is the application of limitation principles under the Arbitration and Conciliation Act to determine the timeliness of the counter claim and the reject....
An acknowledgment of liability can extend the limitation period for claims; communications indicating a debt recognition are crucial in determining time-barred status under the Limitation Act.
Point of Law : Arbitration - Since the claimant in this case has invoked section 60 of the Indian Contract Act, 1872, section 61 of the Indian Contract Act cannot be invoked.
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