2006 (4) TMI 463 - SC - Companies Law

Key Ruling: Right to Apply under Arbitration Act, Family Settlements, and Appointment of Arbitrator

The Supreme Court held that the right to apply under Section 20 of the Arbitration Act accrued when the last communication occurred, within the limitation ... Whether appellants' application under Section 20 of the Arbitration Act, 1940 is being barred by the law of limitation? Held that:- Already the matter is pending adjudication from 1987 onwards, respondent Nos. 1-9 are admittedly in possession and enjoyment of the valuable immovable properties depriving the valuable rights of the appellants the other respondent Nos. 10-20. We should not, therefore, allow respondent Nos.1-9 to drag the proceedings any further. Parties have to settle their disputes one day or the other. In our opinion, the time has now come to nominate a single Arbitrator as provided under clause 13 of the agreement. It was argued that in case this Court allows the appeal, the matter may be remitted to the High Court for appointment of a single Arbitrator and in case the parties are unable to agree upon a single Arbitrator a panel of three Arbitrators shall be appointed as provided in the said agreement. We feel that such a course, if adopted, would only enable the contesting respondent Nos.1-9 to squat on the property and enjoy the benefits, income etc. arising therefrom. We, therefore, appoint Hon'ble Mr. Justice S.N. Variava, a retired Judge of this Court as a single Arbitrator and decide the dispute between the parties within 6 months from the date of entering upon the reference Issues Involved:1. When the right to file the application under Section 20 of the Arbitration Act accrued and when it becomes time-barred.2. Whether in the context of Section 20 of the Arbitration Act, 1940, a difference or dispute can be said to have arisen between the parties without there being any denial or repudiation of a claim by a party.Detailed Analysis:1. Accrual of Right to File Application and Limitation Period:The core issue was determining when the right to apply under Section 20 of the Arbitration Act, 1940 accrued, and consequently, when the limitation period began. The appellants argued that the right to apply accrued on the date of the last communication between the parties (29th September 1989), thus making their application filed on 8th May 1992 within the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963. The respondents, however, contended that disputes arose before 31st May 1987, and the application was time-barred. The Supreme Court held that the right to apply accrued when the last communication was made, as the parties were still in dialogue and attempting to resolve their differences amicably. Therefore, the application was within the limitation period, and the High Court erred in its interpretation of Article 137.2. Existence of Dispute Without Denial or Repudiation:The second issue was whether a dispute or difference could be said to have arisen without a clear denial or repudiation of a claim. The Court examined the correspondence between the parties and concluded that the letters exchanged did not indicate any outright denial or hostility but rather an ongoing effort to amicably resolve the issues. It was only after the last communication on 29th September 1989 that it could be said a dispute had arisen, thereby starting the limitation period. The Court emphasized that mere failure or inaction to pay does not constitute a dispute; there must be a positive assertion and denial.Family Settlement and Arbitration:The Court highlighted the special equity principle governing family settlements, which aims to ensure peace and goodwill among family members. The Court noted that technicalities should not undermine the implementation of such settlements, which are intended to avoid prolonged litigation and maintain family harmony. The Court criticized the respondents for dragging the proceedings and enjoying the assets without resolving the disputes.Appointment of Arbitrator:Given the prolonged nature of the dispute and the failure of conciliation efforts, the Court appointed Hon'ble Mr. Justice S.N. Variava as the sole Arbitrator to resolve the disputes within six months. The Arbitrator was given the liberty to extend the time if necessary and to decide the place of arbitration in consultation with the parties.Conclusion:The Supreme Court allowed the appeal, set aside the orders of the High Court, and directed the parties to bear their own costs. The Court advised the parties to focus on their business and settle their disputes amicably to maintain peace and harmony in the family. The parties were directed to appear before the Arbitrator on 3rd May 2006, and the interim order by the High Court was to be honored until the matter was resolved by the Arbitrator.