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 Section 34 of the Arbitration Act.

JUDGMENT :

K. GOVINDARAJAN THILAKAVADI, J.

1. This is an Appeal under Section 37 of the Arbitration and Conciliation Act, 1996, (hereinafter ‘the Act’) against the order dated 21.07.2023 passed by the learned Single Judge of this Court in O.P. No. 595 of 2019, whereby the application preferred by the respondent herein under Section 34 of the Act for setting aside the award dated 20.02.2019 of the Sole Arbitrator was allowed.

2. The claimant before the Arbitral Tribunal is the appellant and the respondent herein is the counter claimant before the Arbitral Tribunal.

3. The present dispute arises out of a Memorandum of Understanding dated 18.05.2006 entered between the appellant and respondent for purchasing immovable properties measuring about 200 acres at Moosivakkam Village, Kancheepuram. As per the terms of agreement the appellant paid a sum of Rs.50,00,000/- as advance and thereafter, made payments on various dates to the respondent for the said purpose. Since the respondent failed to comply with the terms of agreement, the appellant initiated Arbitral proceeding for the following reliefs:

(A) Directing the respondent to pay the sum of Rs.5,33,76,000/- (Rupees Five Crores Thirty Three Lakhs Seventy Six Thousand only)

(B) Award interest at the rate of 24% per annum compounded annually from 01.04.2007 till the date of realization.

(C) Directing the respondent to pay the compensation at Rs.1,00,000/- (Rupees One Lakh only) per acre of shortfall as envisaged under the MOU dated 18.05.2006.

4. The respondent herein resisted the claim as barred by limitation and sought for counter claim in the statement of the defence. The same is extracted as hereunder:

(i) Dismiss the claim filed by the claimant as time barred or otherwise.

(ii) Direct the claimant to pay a sum of Rs.1,42,89,000/- (Rupees One Crore Forty Two Lakhs Eighty Nine Thousand only) or such other sum as determined by this Hon’ble Tribunal to the respondent along with interest at 24% per annum from the due date till date of payment.

5. The Learned Arbitrator framed 9 issues. The Appellant had examined himself as CW-1 and on behalf of the Respondent, Mr. Padam Challani was examined as R.W.1. On the side of the Appellant, 17 documents were marked as Exhibits C.1 to C.17 and on the side of the Respondent, 21 documents were marked as Exhibits R1 to R21.

6. The Sole Arbitrator after hearing the respective parties pronounced the award dated 20.02.2019 directing the respondent to pay a sum of Rs.6,48,35,500/- with interest at the rate of 9% per annum from 27.04.2012 till the date of award and in the event of the said amount not being paid within a period of two months from the date of award, the respondent was directed to pay interest at the rate of 18% per annum on the sum of Rs.6,48,35,500/- from the date of award till the date of realization.

7. Under the Arbitral award 20.02.2019, the learned Arbitrator has decided the issue of limitation in favour of the appellant on the following premises:

(1) That the nature of the transaction between the parties is one of continuing accounts and was with reference to running accounts between the parties and not a loan or a concluded transaction of any debt, which alone will be governed by Section 18 of Limitation Act,1963, as both parties are bound by mutual accounting.

(2) The claim is not barred by limitation and that it would be covered under Section 25(3) of the Indian Contract Act, 1872.

8. Aggrieved against the award dated 20.02.2019 of the learned Sole Arbitrator, the respondent herein preferred an application under Section 34 of the Act before the Commercial Division of this Court, which was registered as O.P. No. 595 of 2019.

9. The proceedings under Section 34 of Arbitration and Conciliation Act of 1996 was initiated assailing the Arbitral award dated 20.02.2019 broadly on two grounds, namely:

1. The claims are ex facie time barred.

2. The learned Arbitral Tribunal has exceeded the scope of its reference as well as the MOU and allowed the claim.

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