Petition Allowed to Refer Dispute on Specific Performance and Refund to Arbitrator Under Limitation Rules

The HC allowed the petitioner's application, holding that the question of entitlement to specific performance or refund of the advance payment, as promised by the respondents, must be decided by the learned Arbitrator. The court found that the dispute was not ex facie time barred or "dead wood," noting that the parties had allegedly extended the performance timeline and the cause of action arose only upon respondents' refusal in December 2020. The court emphasized that limitation and arbitrability issues should be examined by the arbitrator, including whether the claims are barred by limitation. The HC declined to dismiss the application solely on the ground of an earlier alleged default date and granted the petitioner an opportunity to prove the claims.

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1. ISSUES:

1. Whether the disputes arising out of the agreement containing an arbitration clause fall within the scope of arbitration under the Arbitration and Conciliation Act, 1996.

2. Whether the claim for specific performance and refund under the agreement is barred by limitation.

3. Whether the extension of time for performance of the contract can be inferred from the conduct of the parties and subsequent communications.

4. Whether the court should refer an ex facie time-barred or 'dead wood' claim to arbitration.

5. The extent of judicial inquiry at the stage of appointment of arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996, particularly regarding limitation and arbitrability.

2. RULINGS / HOLDINGS:

1. The arbitration clause in the agreement is a binding arbitration agreement covering disputes relating to or arising out of the agreement, and the present disputes fall within its scope.

2. The claim is not ex facie barred by limitation as the letter dated December 15, 2020, prima facie gives rise to a fresh cause of action or an extension of time for performance, and thus the dispute is not 'dead wood'.

3. Extension of time for performance of a contract may be inferred from the conduct and attending circumstances of the parties, including subsequent negotiations and communications.

4. An ex facie time-barred claim or a claim that is 'dead wood' should not be referred to arbitration; however, this determination requires a prima facie examination and is primarily within the jurisdiction of the arbitrator.

5. At the stage of appointment of an arbitrator under section 11(6), the court's inquiry into limitation and arbitrability is limited to a prima facie satisfaction and should not involve detailed evidentiary examination; such issues are to be decided by the arbitral tribunal.

3. RATIONALE:

The court applied the Arbitration and Conciliation Act, 1996, particularly section 11(6), and the Limitation Act, 1963, including Article 54 relating to suits for specific performance. The court relied on precedents establishing that extension of time may be inferred from parties' conduct and that limitation issues at the stage of appointment of arbitrator require only a prima facie examination. The court referred to decisions emphasizing that ex facie time-barred or non-arbitrable claims should not be referred to arbitration but that the arbitrator is the appropriate forum to decide such issues. The judgment cited authoritative rulings clarifying the limited scope of judicial interference at the referral stage and the possibility of subsequent judicial review of arbitral awards. The court distinguished the present facts from cases where claims were manifestly 'dead wood' and emphasized that the letter dated December 15, 2020, indicates ongoing negotiations and an alive agreement, justifying referral to arbitration. The court appointed a sole arbitrator to adjudicate the disputes, including limitation and arbitrability as preliminary issues.

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