Calcutta High Court: Courts U/s 11 Of Arbitration Act Can Refuse Reference Only When Manifest That Claims Are Time Barred Or Dispute Is Not Subsisting
The Calcutta High Court was dealing with an Application for an Arbitrator's appointment in terms of the Work Order issued to the predecessor-in-interest of a company.
The Calcutta High Court in an arbitration case, held that the Courts, at the referral stage, can interfere only when the claims are time-barred or when there are no subsisting disputes.
The Court was dealing with an Application for the appointment of an Arbitrator in terms of the Work Order issued to the predecessor-in-interest of a company.
A Single Bench of Justice Shampa Sarkar observed, “… at this stage, it would not be proper for the referral court to indulge in an intricate evidentiary enquiry into the question of whether the claims raised by the petitioner were time barred or not. Such determination should be left to the arbitrator. Courts, at the referral stage, can interfere only when it is manifest that the claims are expressly time barred and dead or when there are no subsisting disputes. In all other cases, the matter should be referred to the arbitral tribunal for decision on merits.”
The Bench referred to the Judgment in the case of Aslam Isamil Khan Deshmukh v. ASAP Fluids Private Limited and Anr. (2024 INSC 849) in which the Supreme Court clarified that the Referral Court must only conduct a limited enquiry for the purpose of examining whether the Application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act) had been filed within the period of three years or not.
Advocate Pritha Bhaumik appeared on behalf of the Petitioner while Advocate Aniruddha Bhattacharya appeared on behalf of the Respondent.
Facts of the Case
The predecessor-in-interest of the Petitioner-company along with Simplex Projects Limited (SPL) formed a consortium and participated in the tender floated by the Respondent i.e., Bharat Heavy Electricals Limited (BHEL). Subsequently, the Petitioner amalgamated with the predecessor company and the work was continued by the Petitioner in consortium with SPL. The Petitioner submitted a bill in July 2020 which remained unpaid and it raised certain disputes. The Petitioner was asked by the Respondent to appear before the concerned authority for an amicable settlement.
The counsel for the Petitioner contended that although an amicable settlement was attempted, no further progress was made and accordingly, the Petitioner invoked arbitration by issuing a notice under Section 21 of the A&C Act. On the other hand, the counsel for the Respondent raised two objections. First objection was that the claim as also the Application before the High Court are barred by limitation and the second objection was that, although the predecessor of the Petitioner participated in the tender, SPL has not been completed as a Respondent in the proceeding.
Reasoning
The High Court in the above regard, noted, “The limitation period for filing an application seeking appointment of an arbitrator was held to commence only after a valid notice invoking arbitration had been issued by one of the parties to the other party and there had been either a failure or refusal on the part of the other party to comply with the requirements of the said notice. Under such circumstances, my prima facie view is that the claim is not a deadwood. The notice invoking arbitration was issued on October 27, 2023.”
The Court was of the view that the issue of limitation can be raised before the Arbitrator at an appropriate stage. Furthermore, it took note of the position of law that, the scope of enquiry at the stage of appointment of an Arbitrator is limited to the scrutiny of, prima facie, existence of an arbitration agreement and nothing else.
“By referring the disputes to arbitration, the referral court upholds and gives effect to the original understanding of the contracting parties that, all disputes and differences shall be resolved by arbitration. The Court also holds that the procedure prescribed under the dispute resolution clause with regard to appointment of an arbitrator by the officer of BHEL is no longer good law”, it added.
The Court observed that the Petitioner rightly applied before the High Court for appointment of an Arbitrator. It, therefore appointed Justice Bhaskar Bhattacharya, former Chief Justice of the Gujarat High Court, as Arbitrator upon disputes between the parties in this case.
Accordingly, the High Court disposed of the Application.
Cause Title- Kalpataru Projects International Limited v. Bharat Heavy Electricals Limited (BHEL) (Case Number: AP-COM/94/2025)
Appearance:
Petitioner: Advocates Pritha Bhaumik and Amit Kumar Nag.
Respondent: Advocates Aniruddha Bhattacharya and Arnab Roy.
