Bombay High Court: Limitation Issue Which Normally Is Mixed Question Of Law & Fact Can Be Tried As Preliminary Issue Only If It Doesn’t Require Evidence
The Bombay High Court dismissed Appeals under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the Single Judge's Order.
The Bombay High Court observed that an issue of limitation which normally is a mixed question of law and fact, can be tried as a preliminary issue only if it does not require any evidence.
The Court observed thus in Appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996 (A&C Act), challenging the Order of the Single Judge in three Petitions filed under Section 34 of the A&C Act.
A Division Bench of Chief Justice Alok Aradhe and Justice M.S. Karnik held, “The Court or other authority dealing with the rights of parties has power to try the issue as a preliminary issue if the same relates to the jurisdiction of the Court or a bar created by any law for the time being in force. An issue of limitation which normally is a mixed question of law and fact could be tried as a preliminary issue only if the same does not require any evidence.”
Senior Advocate Fredun Devitre represented the Appellant while Senior Advocate Venkatesh Dhond represented the Respondents.
Brief Facts
The Appellant was a private equity fund incorporated as a public company in Mauritius and the Respondent was a private limited company incorporated under the Companies Act, 2013. The parties entered into a share subscription agreement and shareholders agreement. The Appellant invested a sum of Rs. 25 crores in shares and debentures of the Respondent company based on the agreements. The Respondents were required to put up a project on 700 acres in Pune District and according to the Appellant, they failed to comply with the terms and conditions of the agreement and committed various breaches of the agreement.
The Supreme Court on the Appellant’s Application, appointed a Sole Arbitrator to adjudicate the dispute between the parties. The Arbitrator held that the entire claim of the Appellant was within limitation. Thie interim award was challenged before the High Court. The Single Judge modified the same to the extent that preliminary finding on the issue of limitation based on demurrer would not foreclose the issue and would not preclude the Arbitrator from examining the same based on the evidence and materials on record. Being aggrieved, the Appellant filed Appeals.
Reasoning
The High Court in view of the above facts, said, “An award shall be treated to be in conflict with public policy of India if it is in contravention of fundamental policy of Indian law or is conflict with most basic notions of morality or justice. The phrase ‘fundamental policy of Indian law’ requires a Court or other authority determining the rights of citizen to adopt a judicial approach. The expression ‘fundamental policy of Indian law’ would include within its ambit a decision which is so perverse or irrational that no reasonable person would arrive at the same.”
The Court further emphasised that the Arbitrator while deciding the issue of limitation is required to adopt a judicial approach. It noted that even though Section 19(1) of the A&C Act provides that Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 (CPC) or by the Indian Evidence Act, 1872 (IEA), however, Section 19(1) does not prohibit the Arbitral Tribunal from following the fundamental principles underlying the CPC or IEA.
“In the instant case, the Arbitrator has not recorded a finding that the issue of jurisdiction is an issue which does not require the parties to adduce any evidence. The Arbitrator himself in para 37 of the interim award has held that had parties adduced evidence it would have arrived at a different conclusion. In our opinion, the Arbitrator, while passing the impugned award has failed to adopt a judicial approach and has arrived at a decision which no reasonable person would have arrived at, specially in absence of any finding in the impugned award whether the issue of limitation is a mixed question of law and fact and whether the same can be decided without recording any evidence”, it also remarked.
The Court concluded that it is axiomatic that the impugned award has been passed in violation of “fundamental policy of Indian law” and a ground for interference with the impugned award under Section 34(2)(b)(ii) is made out.
Accordingly, the High Court dismissed the Appeals.
Cause Title- Urban Infrastructure Real Estate Fund v. Neelkanth Realty Private Ltd. & Ors. (Neutral Citation: 2025:BHC-OS:5596-DB)
Appearance:
Appellant: Senior Advocate Fredun Devitre, Advocates Aditya Bapat, Siddharth Joshi, and Hamad Bhati.
Respondents: Senior Advocate Venkatesh Dhond, Advocates Runali Samgiskar, Gulnar Mistry, Saket More, Subit Chakrabarti, Shrey Shah, Bhupen Garud, and Akshay Petkar.
