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2025 Supreme(Online)(Bom) 1580
BOMBAY HIGH COURT
ALOK ARADHE, CJ, M.S. Karnik, J
Urban Infrastructure Real Estate Fund – Appellant
Versus
Neelkanth Realty Private Ltd. – Respondent
Commercial Appeal No. 37 of 2020|Commercial Appeal No. 40 of 2020|Commercial Appeal No. 38 of 2020
For the Appellants/Petitioners: Mr. Fredun Devitre, Mr. Aditya Bapat, Mr. Siddharth Joshi, Mr. Hamd Bhati
For the Respondents: Mr. Venkatesh Dhond, Ms. Gulnar Mistry, Mr. Akshay Petkar
The court held that the arbitral tribunal must not decide limitation issues without evidence, underscoring the need for a judicial approach to uphold fairness in arbitration.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Applicability of demurrer in determining claims of limitation - Arbitrator’s preliminary award modified due to failure to adopt a judicial approach in assessing claims on their merits based on evidence. (Paras 15 and 24)
(B) It was contended by the appellant that claims respected the terms of the arbitration and were within established legal bounds. The learned Single Judge modified the interim award because the issue of limitation necessitated a factual analysis and evidence, which was not placed before the Arbitrator. (Paras 9 and 12)
Facts of the case:
The appellant entered into agreements for a substantial investment and alleged multiple breaches by the respondents, leading to arbitration proceedings where the issue of limitation was contested.
Findings of Court:
The Arbitrator failed to adopt a fair judicial approach in ruling on the claims without evidence, necessitating the learned Single Judge’s intervention.
Issues: Determining the procedure for resolving questions of limitation under arbitration law and the effects of previous findings made without evidence.
Ratio Decidendi: The court found that the Arbitrator's approach did not meet the required standards of judicial review, and the issue of limitation wasn’t appropriately decided based solely on demurrer.
Result: Appeals dismissed.
| Table of Content |
|---|
| 1. claims of appellant were based on breached agreements. (Para 2 , 3 , 4) |
| 2. requirement for judicial review in determining claims through evidence. (Para 15 , 19) |
| 3. the award was interfered with due to failure in adopting judicial approach. (Para 24 , 25) |
JUDGMENT [PER : CHIEF JUSTICE]
These appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996 (1996 Act) emanate from a common order dated 4th December 2019 passed by the learned Single Judge in three petitions filed under Section 34 of the 1996 Act. The learned Single Judge, by impugned order has modified the interim award dated 27th August 2019 passed by the Arbitrator to the extent that finding recorded by the Arbitrator on the basis of demurrer on issue No.1 viz. whether claims of the appellant are within limitation would not foreclose the issue and would not preclude the Arbitrator from examining the issue of limitation on the basis of material on record if tendered and if so warranted. In order to appreciate the challenge of the appellant to the impugned order, relevant facts need mention, which are stated infra.
(A) FACTS:
2. The appellant is a private equity fund incorporated as a public company in Mauritius. The respondent No.1 is a private limited company incorporated under the Companies Act 2013. Respondent Nos.2, 4 and 5 are the Directors of the said Company. Whereas respondent Nos.3(a) to 3(d) are legal representatives of original respondent No.3.
3. The appellant as well as respondent Nos.1, 2, 4 and 5 and original respondent No.3 entered into a share subscription agreement and shareholders agreement (hereinafter referred to as the agreements) on 23rd July 2008. The appellant invested a sum of Rs.25,00,00,000/- (Rs. Twenty-Five Crores) in shares and debentures of respondent No.5 company on the basis of agreements and the respondents were required to put up a project on 700 acres in Pune district through respondent No.5 company. According to the appellant, the respondents failed to comply with the terms and conditions of the agreement and committed various breaches of the agreement. The Supreme Court, on the application of the appellant, by an order dated 15th January 2018, appointed sole Arbitrator to adjudicate the dispute between the parties.
4. The appellant filed a statement of claim, whereas respondent No.5 filed a statement of defence and respondent No.1 filed a counter claim before the Arbitrator on 1st October 2018, 22nd November 2018 and 26th November 2018, respectively. The arbitral tribunal framed the issues on 26th June 2019. Issue No.1, which is relevant for the purposes of instant appeal, is extracted below for the facility of reference:
(i) Whether all or any of the claims made by the claimant are barred by law of limitation?
5. Thereafter on 14th August 2019 affidavit in lieu of examination in chief of witness No.1 of the claimant was filed. The arbitral tribunal on 27th August 2019 decided to deal with the aforesaid issue of limitation viz. issue No.1 as a preliminary issue on the basis of demurrer. The Arbitrator, by an interim award dated 27th August 2019 answered the issue No.1 in the negative and held that the entire claim of the appellant was within limitation.
6. The interim award passed by the Arbitrator was challenged in three petitions filed under Section 37 of the 1996 Act. The learned Single Judge, by impugned order dated 4th December 2019, inter alia; held that issue of limitation was heard as a preliminary issue on the basis of statement of claim and finding recorded on that basis by the Arbitrator being a preliminary issue decided on demurrer would remain a preliminary finding subject to evidence which may be tendered by the parties. The learned Single Judge further noted that Arbitrator himself recorded the finding that if the issue of limitation would have been answered after all the evidence had been recorded, the Arbitrator would have been inclined to accept some of the submissions of the responden
