TaxTMI 
TaxTMI 
TaxTMI 
2007 (3) TMI 673
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....rbitral Tribunal had commenced its proceedings. Presently the proceedings before the Arbitral Tribunal are stayed. 4. It has, therefore, to be decided as to whether the order passed under Section 11(6) of the Act appointing the Arbitrators is good order in law particularly in the wake of the above two objections. 5. Following undisputed facts would have to be borne in mind before approaching the questions raised. 6. The appellant is a company incorporated under the Companies Act, 1956, so also the respondent. The appellant company became a sick industrial unit sometime in the year 1987 under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA"). It was ordered to be wound up in the year 1994 and on approaching the Board For Industrial and Financial Reconstruction (BIFR) a rehabilitation scheme was worked out whereby IDBI was appointed as an operating agency under the scheme. The Asset Sale Committee approved the sale of 1.20 lakh sq.ft. FSI owned by the appellant company to the respondent for a total sale consideration of Rs.21.60 crores and accordingly an agreement came to be executed in between the parties on 27.4.1994. This was a....
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....pondent herein had filed a petition under Section 9 of the Act seeking injunction and appointment of Receiver in respect of 2500 sq.mtrs. of land. However, that was dismissed by the High Court on the ground that the area was covered under the agreement dated 18.7.1994 and it was cancelled by an agreement dated 22.6.1996 and, therefore, the application was not maintainable. The appeal against this order also failed vide order dated 3.6.2002. 12. On 12.9.2001 respondent and one Santosh Singh Bagla who was the Promoter of the respondent company, filed application before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) contending therein that the promoters of the petitioner company were guilty of misfeasance and hence those acts were liable to be inquired into. It was secondly prayed that the Board of Directors of the appellant company should be superseded. It was thirdly prayed that the injunction be issued restraining the appellant from selling or transferring the lands. This application was dismissed by AAIFR leaving the parties to get the disputes adjudicated before an appropriate forum. It is to be noted here that a specific statement was made before th....
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....or appointing Shri S.C. Agarwal as the Sole Arbitrator. It is this application which was disposed of by the learned Judge on 11.8.2006 which is the subject matter of the present proceedings before us at the instance of the appellant. 20. As has been stated earlier, the learned Senior Counsel Shri Salve basically raised two points, they being (i) that there was no live issue left in between the parties and controversy had become dead; and (ii) that the claim, if any, of the respondent had become barred by limitation. In support of his arguments the learned counsel painstakingly took us through the whole record. 21. Shortly stated the argument of the learned counsel is that there is no live issue remaining between the parties particularly in respect of 1.20 lakh sq.ft. of FSI. Learned counsel points out firstly that the subject of 1.20 lakh sq.ft. of FSI being made available under the agreement dated 27.4.1994 was finally given a decent burial by the parties by the MoU dated 19.1.2005 whereunder the respondent had specifically agreed to restrict his claim only to 86725 sq.ft. of FSI covered under the agreement dated 27.4.1994. He points out that in pursuance of that MoU not only di....
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....llenge the order under Section 11(6) of the Act. 24. Shri Venugopal, the learned Senior Counsel appearing on behalf of the respondent, however, pointed out that the controversy regarding the liability of the appellant to make available 1.20 lakh sq.ft. of FSI was never dead as otherwise there was no question of the respondent executing the MoU as late as on 19.1.2005. He points out that the appellant had given an undertaking in respect of that property before the Delhi High Court in a writ petition which writ petition is still pending before the Delhi High Court and the appellant is facing contempt proceedings on account of the breach of the undertaking. Learned counsel further points out that firstly there was no necessity on the part of the appellant to extend the agreement dated 27.4.1994 by agreeing to handover the rest of the FSI beyond 86725 sq.ft. by an agreement dated 18.7.1994. It was only on account of the fact that the appellant also felt bound by the agreement dated 27.4.1994 to transfer 1.20 lakh sq.ft. FSI under the agreement dated 27.4.1994 for which he had received full consideration of Rs.21.60 crores. Learned counsel was at pains to point out further that in fact....
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....t since the Designate Judge has already given findings regarding the existence of live claim as also the limitation, it would be for this Court to test the correctness of the findings. As against this it was argued by the respondent that such issues regarding the live claim as also the limitation are decided by the Chief Justice or his Designate not finally but for the purpose of making appointment of the Arbitrators under Section 11(6) of the Act. In our opinion what the Chief Justice or his Designate does is to put the arbitration proceedings in motion by appointing an Arbitrator and it is for that purpose that the finding is given in respect of the existence of the arbitration clause, the territorial jurisdiction, live issue and the limitation. It cannot be disputed that unless there is a finding given on these issues, there would be no question of proceeding with the arbitration. Shri Salve as well as Shri Venugopal invited our attention to the observations made in para 39 in SBP & CO. vs. Patel Engineering Ltd. & Anr. [(2005) 8 SCC 618] which are as under: "It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is ....
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....ir satisfaction regarding the financial claims. In examining this if the parties have recorded their satisfaction regarding the financial claims, there will be no question of any issue remaining. It is in this sense that the Chief Justice has to examine as to whether their remains anything to be decided between the parties in respect of the agreement and whether the parties are still at issue on any such matter. If the Chief Justice does not, in the strict sense, decide the issue, in that event it is for him to locate such issue and record his satisfaction that such issue exists between the parties. It is only in that sense that the finding on a live issue is given. Even at the cost of repetition we must state that it is only for the purpose of finding out whether the arbitral procedure has to be started that the Chief Justice has to record satisfaction that their remains a live issue in between the parties. The same thing is about the limitation which is always a mixed question of law and fact. The Chief Justice only has to record his satisfaction that prima facie the issue has not become dead by the lapse of time or that any party to the agreement has not slept over its rights be....
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....n 4.5.2001 in respect of 2500 sq.mtrs. of land obviously to safeguard their interest regarding the 1,20,000 sq.ft. of FSI. It is obvious that this FSI was linked with the aforementioned land measuring 2500 sq.mtrs.. Though the respondents failed in their attempt to get an injunction under Section 9 of the Act, they did not leave the things at that and brought in the such issue firstly by serving the notice dated 11.6.2002 invoking the arbitration clause and secondly by including this issue in their writ petition filed before the Delhi High Court wherein the appellants were made to give an undertaking that they will not sell the property which was covered under the agreement dated 27.4.1994 which obviously included the 1,20,000 sq.ft. of FSI. Now this undertaking is still continuing. It is not for us to go into the correctness or otherwise of the order passed by the Delhi High Court regarding the undertaking because that is not the question pending before us, however, it only shows that the parties had not closed the question regarding 1,20,000 sq.ft. of FSI. As if all this was not sufficient, lastly the parties agreed on 19.1.2005 for a MoU where this precise question came up. Ther....
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.... of any dispute or difference arising under a contract and that dispute or difference is amicably settled by way of a final settlement by and between the parties, unless that settlement set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and proceed to invoke the arbitration clause. If this is permitted the sanctity of contract, the settlement also being a contract would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside" Though the observations at the first blush appear to be in favour of the appellants, on the closer look they are not so. This was a case where in a contract the parties had amicably settled their disputes and the parties also did not dispute that the they have arrived at such a settlement. It is under those circumstances that the observations were made. However, we do not think that the facts in the present case suggest that there was a full and final settlement in between the parties in respect of the issue regarding 1,20,000 sq.ft. of ....
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....ng. This Court observed: "Where a settlement with or without conciliation is not possible, then comes the stage of adjudication by way of arbitration. Article 137 as construed in this sense, then as long as parties are in dialogue and even the differences would have surfaced it cannot be asserted that a limitation under Article 137 has commenced. Such an interpretation will compel the parties to resort to litigation/ arbitration even where there is serious hope of the parties themselves resolving the issues. The learned Judges of the High Court, in our view have erred in dismissing the appellants' appeal and affirming the findings of the learned Single Judge to the effect that the application made by the appellants under Section 20 of the Act, 1940 asking for a reference was beyond time under Article 137 of the Limitation Act.. As already noticed, the correspondence between the parties in fact, bears out that every attempt was being made to comply with and carry out the reciprocal obligations spelt out in the agreement between the parties. These observations would clearly suggest that where the negotiations were still on, there would be no question of starting of the limitation p....