Mr. H.L. Narula, Mr. Bhupesh Narula, Mrs. Rinku Narula, Mrs. Poonam Nagpal, Mr. Anugrah v. AIRPORT AUTHORITY OF INDIA

Judgment

1. This petition is filed on behalf of the Petitioner under Section 11(6) of the Arbitration and Conciliation Act, 1996 (1996 Act) for appointment of sole Arbitrator to adjudicate the inter se disputes between the parties. 2. To the extent relevant, the case set out by the Petitioner is that Petitioner is a proprietor of M/s Bakhtawar Ahmad Rather, a firm registered with various Government Departments as Class-1 contractor firm and engaged in the business of construction works in India. Respondent invited tenders for work of ‘Construction of 2 No’s of Rotunda on Airside at CA, Srinagar’ through its Senior Manager, AAI, Srinagar. Petitioner submitted his bid after considering all factors including the fact that time was essence of the contract and the quoted rates were applicable only for the stipulated Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025 period. Petitioner’s bid was accepted and Letter of Acceptance was issued on 24.04.2017 requiring the Petitioner to deposit Performance Guarantee towards security @ 5% of the bid amount, followed by execution of a formal Agreement dated 01.05.2017. Stipulated dates of start and completion of work were 04.05.2017 and 03.11.2017, respectively. 3. It is averred by the Petitioner that at the time of issuing the Letter of Acceptance, Respondent had issued specific directions to contact the Manager (Engg.-Civil) for taking possession of the site for starting the work, which the Petitioner did, but only a small part of the site was handed over and that too was encumbered due to security reasons at the running Airport. Subsequently also Petitioner faced several hindrances and obstructions at the site such as non-availability of working drawings, lack of decisions etc. and despite the completion date being 03.11.2017, complete structural drawings were provided only on 30.11.2018 i.e. after a delay of 18 months in a contract of six months and complete site was made available only on 11.09.2018. Thus there were fundamental breaches of the contract by the Respondent. 4. It is averred in the petition that due to the breaches by the Respondent, the work spilled over extra time and Petitioner was compelled to maintain resources and work force at site, incurring unwarranted and uncontemplated expenses. While there was a continuous rise in prices of material and labour, which was unanticipated, there was no escalation clause under the contract and Petitioner was constrained to complete the contract at the quoted rates. Accordingly, Petitioner re-calculated the rates and made an offer to the Department on 06.12.2017 to close the contract and pay the final bill but to no avail. Instead of understanding the genuine Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025 issues raised by the Petitioner, Respondent issued show cause notice dated

23.01.2018 under Clause 3 of the Agreement threatening to rescind the contract and forfeit the security money. Respondent also extended the contract and keeping its business interest in mind, Petitioner sent a letter on

10.12.2018 informing the Respondent that in case it desired to get further work executed, Petitioner shall charge 40% over the quoted rates and that if the said offer was not acceptable, the contract be closed. Petitioner also demanded legitimate payments that had been withheld under Clause 10C/10CA etc. with interest and damages. As per the Petitioner, this letter was in fact a notice under Sections 19, 55, 67 and 73 of the Indian Contract Act, 1872. 5.

It is further averred that disputes having arisen between the parties, Petitioner sent a demand notice dated 10.12.2018, followed by letters dated

11.02.2019, 01.04.2019 and 05.04.2019 informing the Respondent of the hindrances at the site but no remedial action was taken. Legal notice was also sent on 26.02.2019. By e-mail dated 06.05.2019, Respondent provided revised structural drawings to the Petitioner, however, hindrances continued at the work site due to ongoing expansion of the terminal building. Instead of addressing the grievances raised by the Petitioner, Respondent sent a show cause notice on 11.04.2019, to which a reply was sent on 12.04.2019 refuting the allegations made in the show cause notice. 6. It is stated that vide letter dated 01.05.2019, Respondent constituted a Dispute Resolution Committee (DRC) for redressal of the disputes raised by the Petitioner. DRC meetings did not yield any result and Petitioner invoked the arbitration clause in the Agreement and sent a notice dated

21.09.2024, seeking appointment of an Arbitrator. Respondent rejected the Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025 request for arbitration vide letter dated 24.12.2024 and Petitioner filed the present petition. 7. Learned counsel for the Petitioner submitted that the Agreement dated 01.05.2017 between the parties contains Disputes Settlement clause as per which parties agreed that all differences or disputes arising from the Agreement shall be decided by process of settlement and arbitration in accordance with Clause No. 25 of General Conditions of Contract (‘GCC’) and provisions of 1996 Act. Disputes having arisen between the parties and Respondent having failed to appoint the Arbitrator even after receipt of invocation notice, there is no impediment in the appointment of the Sole Arbitrator by this Court. It was urged that the existence of arbitration agreement is undisputed and this is the limited enquiry that a Referral Court can enter into in exercise of jurisdiction under Section 11(6) of 1996 Act. 8. Reply has been filed on behalf of the Respondent and relying on the same, learned counsel for the Respondent raised two objections to the maintainability of this petition. First objection was that the claims of the Petitioner are ex-facie time barred and cannot be referred to arbitration inasmuch as the cause of action, if any, arose in favour of the Petitioner in 2019, when it sought reference of the disputes to DRC for adjudication vide notice dated 26.02.2019. DRC was constituted by the Competent Authority of the Respondent vide letter dated 01.05.2019. Meeting of DRC was convened on 02.03.2020, wherein it was recorded that after receiving reply of the Respondent, Claimant wanted to file a rejoinder. However, there was no response from the Petitioner and no rejoinder was filed and thus no decision was taken by DRC under the impression that Petitioner had abandoned his claims. Moreover, Petitioner continued to execute the work Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025 even thereafter and completed the same on 05.10.2020. 9. The second objection was that after the Petitioner completed the work on 05.10.2020, payment was released by the Respondent against the final bill on 12.11.2020 and Petitioner accepted the amount without any protest or demur. Having accepted the full and final payment, Petitioner has waived his right to raise any claim and cannot seek reference to arbitration for the said claims. This petition is only a tool to revive dead claims, post a complete accord and satisfaction and discharge of the Respondent from all its liabilities. Learned counsel placed heavy reliance on paragraph 40 of the judgment of Supreme Court in Aslam Ismail Khan Deshmukh v. ASAP Fluids Private Limited and Another, (2025) 1 SCC 502, wherein the Supreme Court has referred to an earlier judgment of the Supreme Court in Arif Azim Company Limited v. Aptech Limited, (2024) 5 SCC 313, holding that although limitation is an admissibility issue, yet it is the duty of the Courts to prima facie examine and reject non-arbitrable or dead claims, so as to protect the other party from being drawn into a time consuming and costly arbitration process. 10. Arguing in rejoinder, learned counsel for the Petitioner refuted that the claims of the Petitioner are time barred or that having accepted the payment under the final bill, Petitioner was precluded from taking recourse to arbitration on ground of ‘accord and satisfaction’. It was explained that there is no delay in filing the present petition as Petitioner had taken recourse to approaching the DRC, before resorting to the remedy of arbitration, in consonance with the dispute settlement clause and was awaiting its decision, which has not been rendered till date. Since no decision was forthcoming, Petitioner sent an invocation notice on Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025

21.09.2024 and on failure of Respondent to act in terms thereof, present petition was filed. Without prejudice to these submissions, it was argued that even otherwise determination on both issues raised by the Respondent i.e., claims being time barred/dead wood and/or there being ‘accord and satisfaction’ is within the domain and jurisdiction of the Arbitral Tribunal and cannot be raised before this Court to question the maintainability of this petition under Section 11(6) of 1996 Act. 11. Heard learned counsels for the parties and examined their rival submissions. 12. Broadly understood, Respondent has raised twofold objections opposing reference of disputes to arbitration: (a) claims of the Petitioner are ex facie time barred; and (b) there is ‘accord and satisfaction’ of the claims since Petitioner accepted payment under the final bill and cannot now take recourse to arbitration. 13. In my considered view, both the objections raised by the Respondent only deserve to be rejected for the reasons that follow. Coming to the objection of the claims being ex facie time barred, the Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754, has held that the referral Courts, at the stage of deciding an application for appointment of Arbitrator, must not conduct an intricate evidentiary enquiry into the question whether the claims raised by the applicant are time barred and should leave that question for determination by the Arbitrator. Earlier in Arif Azim (supra), the Supreme Court had framed and decided two questions: (a) whether Limitation Act, 1963 (‘1963 Act’) is applicable to application for appointment of Arbitrator under Section 11(6) of 1996 Act; and (b) whether Court may decline to make Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025 reference under Section 11 of 1996 Act, where claims are ex facie and hopelessly time barred. On the first question, the Supreme Court observed that 1963 Act was applicable to applications filed under Section 11(6) of 1996 Act and in fact it was the duty of referral Court to examine whether the application was time barred or not under Article 137 of 1963 Act i.e., three years from the date when the right to apply accrues. It was further held that limitation period for filing a petition under Section 11(6) can only commence once a valid notice invoking arbitration has been sent by the applicant to the other party and there has been a failure or refusal by the other party in compliance with the requirements of the notice. In Krish Spinning (supra), the Supreme Court held that as far as the first issue was concerned with regard to applicability of 1963 Act and the requirement of examining if the petition under Section 11 was within three years from the date when the right to apply accrues, the observations made in Arif Azim (supra) did not require any clarification and should be construed as explained. 14. However, on the second question with regard to the remit of a referral Court to examine if the claims were arbitrable or dead claims, the Supreme Court observed that paragraph 89 of the judgment in Arif Azim (supra), was based on earlier decisions, more particularly, in Vidya Drolia and Others v. Durga Trading Corporation, (2021) 2 SCC 1 and NTPC Limited v. SPML Infra Limited, (2023) 9 SCC 385, and clarified that after the judgment of the seven-Judge Bench of the Supreme Court in Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In Re, (2024) 6 SCC 1, the referral Court under Section 11(6) of 1996 Act should only examine whether the petition has Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025 been filed within three years from the date the right to apply accrued and must not conduct an intricate enquiry into whether the claims are time barred. The question whether the claims are time barred must be left for determination by the Arbitrator as such an approach will give true meaning to the legislative intention underlying Section 11(6-A) of 1996 Act. Relevant paragraph from the judgment is as follows:- “136. Thus, we clarify that while determining the issue of limitation in exercise of the powers under Section 11(6) of the 1996 Act, the referral Court should limit its enquiry to examining whether Section 11(6) application has been filed within the period of limitation of three years or not. The date of commencement of limitation period for this purpose shall have to be construed as per the decision in Arif Azim [Arif Azim Co. Ltd. v. Aptech Ltd., (2024) 5 SCC 313 : (2024) 3 SCC (Civ) 358] . As a natural corollary, it is further clarified that the referral Courts, at the stage of deciding an application for appointment of arbitrator, must not conduct an intricate evidentiary enquiry into the question whether the claims raised by the applicant are time-barred and should leave that question for determination by the arbitrator. Such an approach gives true meaning to the legislative intention underlying Section 11(6-A) of the Act, and also to the view taken in Interplay between Arbitration Agreements under A&C Act, 1996 & Stamp Act, 1899, In re [Interplay between Arbitration Agreements under A&C Act, 1996 & Stamp Act, 1899, In re, (2024) 6 SCC 1 : 2023 INSC 1066].”

15. This position of law was reiterated by the Supreme Court in Aslam Ismail (supra). The decision arose out of two petitions filed under Section 11(6) of 1996 Act before the Supreme Court seeking appointment of an Arbitrator for adjudication of disputes in terms of Clause 13.10 of Shareholder’s Agreement dated 25.07.2011 entered into between the Petitioner and the Respondents. Petitioner urged that there existed an arbitration clause in the agreement and the same was not disputed by the parties. Respondents raised two broad contentions, one on the merits of the dispute and second that the claims raised in the petitions were barred by Signature Not Verified Digitally Signed By:KAMAL KUMAR Signing Date:14.08.2025 19:10:19 ARB.P. 596/2025 limitation. On the question whether reference was to be declined by examining whether the substantive claims of the Petitioner were ex facie and hopelessly time barred, the Supreme Court held as follows:- “33. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the short question that falls for our consideration is whether we should decline to make a reference under Section 11(6) of the 1996 Act, by examining whether the substantive claims of the petitioner are ex facie and hopelessly time- barred?

34. A three-Judge Bench of this Court in Vidya Drolia v. Durga Trading Corpn. [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] while dealing with the scope of powers of the referral Court under Sections 8 and 11, respectively, endorsed the prima facie test and opined that courts at the referral stage can interfere only in rare cases where it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. Such a restricted and limited review was considered necessary to check and protect parties from being forced to arbitrate when the matter is demonstrably “non-arbitrable” and to cut off the deadwood.