SUPER PUBLICITY PVT. LTD v. JAMMU MUNICIPAL CORPORATION

executed on 10.11.2012 between the parties, whereunder the respondent- corporation was to provide 21000 Sq. ft. area to the petitioner for display of advertisement, each year, for a period of four (4) years, in connection whereof, the respondent directed the petitioner to deposit a sum of Rs.98,00,426/- as license fee for the 4th year, failing to pay the same, the petitioner was warned vide letter dated 23.02.2016 that the advertisement structures installed by the petitioner would be removed.

04. Being aggrieved by such a demand of the respondent-corporation, the petitioner challenged the said act by preferring a writ petition being OWP No.362 of 2016 along-with MP No.01/2016, and in-terms of an interim order passed by the Writ Court on 14.03.2016, the petitioner deposited an amount of Rs.89,00,426/- before the Registrar (Judicial) of this Court, which was wrongly recorded as Rs.98,00,426/- in the notice issued by the respondent-corporation, on payment of which, the Court directed that the operation of the impugned communication dated 23.02.2016 issued by respondent No.2 shall remain in abeyance by which the respondent- corporation had threatened to remove the advertising structures.

05. According to the petitioner, in spite of deposit of aforesaid amount Rs.89,00,426/- in terms of order dated 14.03.2016 passed by the Writ Court, the respondent authorities removed and demolished the advertising structures erected by the petitioner on the sites allocated in terms of P a g e | 3 agreement between the parties. The said petition, however, was dismissed for default on account of failure of the counsel for the petitioner to be present in the Court, which led to the filing of an appeal being registered as LPAOW No.17/2018. In the said LPAOW No.17/2018, the Division Bench on 09-03-2018 passed the order to the effect that in the meantime, the amount which had earlier been deposited by the petitioner before the Registrar (Judicial) of this Court pursuant to the order dated 19.02.2018 passed by the learned Single Bench shall be kept separately and available to await further directions of the Court. Subsequently, the said appeal was disposed of with the following directions on 07.12.2018: - “i. The challenge to order dated 19th February, 2018 passed in OWP No.362/2016 is hereby dismissed. ii. It shall be open to the appellant to invoke such remedy as provided under the Jammu and Kashmir Arbitration and Conciliation Act, 1997 for reference of the disputes to the arbitration. iii. Interim order dated 9th March, 2018 shall continue for a period of three moths from today. iv. So far as the payment of interest on the amount, if any, payable to the appellant is concerned, the same shall abide by directions in this regard in the award which may be passed in arbitration proceedings, if any. v. It shall be open to the appellant to seek revival of contempt proceedings and/or perjury proceedings, which have been disposed of vide order dated 19th February, 2018. In case application(s) in this regard is/are made, the same shall be considered by the learned Single Judge P a g e | 4 in accordance with law. vi. Nothing herein contained shall be considered an expression of opinion on the merits of contentions.”

06. The basic grievance of the petitioner is that though it was agreed between the parties that the respondent-corporation was to provide 21000 Sq. ft to the petitioner for a period of four (4) years, the respondent was yet to provide the entire area for display of advertisement for the period 03.12.2012 to 02.12.2016 while demanding the license fee for the 4th last year of the contract, which was duly deposited by the petitioner with the Registry in terms of the interim order passed by the Writ Court on 14.03.2016. However, in spite of directions of the Writ Court not to act upon the notice of respondent corporation dated 23.02.2016 for removal of the hoardings of the petitioner by order dated 14.03.2016 passed by the Writ Court, the respondent-corporation removed the same and as such a dispute had arisen between the parties. As a consequence thereof, the petitioner filed an application under Section 9 of the Jammu and Kashmir Arbitration and Conciliation Act 1997, before the 2nd Additional District Judge, J&K, Jammu seeking interim protection of the amount deposited by the petitioner and the learned 2nd Additional District Judge, J&K, Jammu was pleased to pass an order to the effect that the respondent- corporation shall not utilize the amount of Rs.89,00,426/- deposited by the petitioner till next date of hearing.

07. It has been submitted at the Bar that the contract agreement entered into between the parties 10.11.2012 contains an Arbitration Clause which P a g e | 5 provides for arbitration to the effect that “in the event of dispute relation to the interpretation of rights and liabilities arising out of this agreement, the same shall, at first instance, be amicably settled between the parties. If any dispute is not settled amicably, the same shall be referred to the sole arbitrator i.e., the Commissioner, Municipal Corporation, Jammu who shall conduct the proceedings in accordance with the provisions of the J&K Arbitration and Conciliation Act, 1997 and the rules made there under. The award given by the arbitrator shall be final and binding on the parties”.

08. It has been submitted that all the attempts/endeavors of the petitioner to get the matter settled amicably yielded no results. In fact, the respondent authorities have constantly opposed all the claims made by the petitioner, and since, in terms of the amendment in the Arbitration and Conciliation Act, 1996, under Section 12 (5) of the Arbitration and Conciliation Act, 1996, an employee of the respondent-Corporation cannot act as an arbitrator, it has to be an independent arbitrator to be appointed by this Court.

09. This application, however, has been resisted by the respondents, primarily on the ground, that the claim is time barred and as such, no arbitration would lie to settle the dispute.

10. It has been submitted on behalf of Mr. Rajnish Raina, learned counsel appearing for the respondents that the letter of demand dated 07.12.2015 was issued by the respondent corporation to the petitioner to provide all the details of the disputed sites so that the matter could be resolved at the earliest but was never responded to by the petitioner. In fact, if the P a g e | 6 petitioner felt that such demand of the respondent-corporation through their letter dated 07.12.2015 was considered not be in accordance with the agreement, the petitioner could have challenged the same which he did not do. Subsequently, another letter was issued by the respondent- corporation on 23.02.2016 directing the petitioner to deposit a sum of Rs.98,00,426/- as license fee for the 4th year which he failed to deposit in time relating to payment of interest of 10% with the warning that in failing to pay the said amount with interest, the structures installed by the petitioner shall be removed at his own risk and cost.

11. According to the respondents, the petitioner has filed this present petition for appointment of an arbitrator on 22.03.2019 which is clearly time barred, inasmuch as, the cause of action arose when the letter was issued on 07.12.2015 directing the petitioner to provide the complete details of the disputed sites so that the dispute can be resolved at the earliest and certainly, after the demand notice was issued on 23.02.2016 directing the petitioner to deposit an amount of Rs.98,00,426/- failing which, the respondents threatened to remove the structures installed by the petitioner. The limitation period of three (3) years thus would lapse on 22.02.2019. However, the application was filed only on 22.03.2019. As such, the same is time barred. In this regard learned counsel for the respondents has relied upon the following decisions in support of his submission. a. Grasim Industries Ltd. Versus State of Kerala, (2018) 14 SCC 265. b. Commissioner M.P.Housing Board and others Versus M/s. Mohanlal and Company AIR 2016 SC P a g e | 7

12. It has been also submitted that the Writ Petition, bearing OWP No.362/2016 and other related connected matters were disposed of with the observation that since the contract contains an arbitration clause, the petitioner has an alternative efficacious remedy and accordingly, did not entertain the writ petition. However, the said order was challenged by the petitioner before the Division Bench in LPAOW No.17/2018 by contending that in spite of a valid alternative efficacious remedy available there is no bar on the maintainability of the writ petition.

13. It has been further submitted by the respondents that no notice was given by the petitioner before invoking the Arbitration Clause.

14. Mr. Aditya Grover, learned counsel appearing for the petitioner however, submits that as regards the issue of limitation, it has been submitted that the contract was to be in force for a period of 4 years with effect from 03.12.2012 and thus, would lapse on 02.12.2016. The contract was valid from 03.12.2012 to 02.12.2016. If that is so, the period of limitation will lapse only on 02.12.2019 i.e., 3 (three) years after the last valid date of contract and the petitioner had filed the petition in March 2019. Accordingly, it has been submitted that since the limitation will be counted from the date of expiry of the agreement i.e., 01.12.2019, the petition is within time. This submission, however, is contested by Mr. Rajnish Raina, learned counsel for the respondent- corporation contending that is what is relevant is the actual accrual of the cause of action, and the cause of action arose on 07.12.2015 when the letter was issued by the respondent-corporation asking the petitioner P a g e | 8 to provide the complete details of disputes sites so that the matter can be resolved at an earliest.

15. As regards the issue of requirement of notice to be served under Section 11(4) of the Jammu and Kashmir Arbitration Act, 1977, which is similar to Section 11(4) of the Arbitration and Conciliation Act, 1996, before invoking to arbitration clause, Mr. Grover, learned counsel for the petitioner submits that no such notice will be required since both the parties were heard in writ proceedings in OWP No.236/2016 as well as in the connected LPAOW No.17/2018 and in fact the Division Bench in LPA had ordered that it shall be open to the petitioner to invoke the remedy under Jammu and Kashmir Arbitration and Conciliation Act, 1977 for reference of the dispute to arbitration and since all the parties were heard, issuing of any notice would be a futile exercise as there was full throttled contestation where the respondent had shown no desire to settle the dispute amicably.

16. Heard learned counsel for the parties and perused the material on record.

17. From the above, it is evident that application for appointment of arbitrator has been contested by the respondents on two counts, firstly, on limitation and secondly that no notice was issued for invoking the arbitration clause.

18. As regards the issue of limitation, though the dispute appears to have arisen after the respondent-corporation issued the demand notice on

07.12.2015 seeking details of the disputed sites as well as from the letter dated 23.02.2016 directing petitioner to deposit the license fee, P a g e | 9 the fact remains that the dispute arose after the contract was executed on 10.11.2012. In terms of aforesaid agreement, it has been provided in para 1 that the contract shall be in force for a period of 04 years with effect from 03.12.2012 including the grace period of 21 days for erection of hoarding structures for the period of 4 years provided the Annual License Fee for the 1st year is deposited on or before 03.12.2012 and for the subsequent three years of contract is deposited at least two months prior to the commencement of the contract of that particular year. Thus, it appears that the validity of contract will be with effect from 03.12.2012 to 02.12.2016. Though it also appears that the dispute arose relating to the payment of license fees, yet it would not detract from the fact that the dispute arose relating to the license fees for the subsequent three years of contract. If the said license is paid, the contract would be valid for another three years and hence the valid period would be upto 02.02.2019. Since the application was filed for appointment of arbitrator in March, 2019, it appears that the application is not time barred.

19. The scope of the power of the High Court pertaining to appointment of arbitrator under the Arbitration and Conciliation Act, 1996 before its amendment in 2015 was considered in extenso by a Constitution Bench of the Hon’ble Supreme Court in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618. As regards the issue of limitation, the Hon’ble Supreme Court in the aforesaid case observed that the scope of examination by the Chief Justice while exercising the power under Section 11 of the Act is a limited one though it includes deciding P a g e | 10 whether the claim was a dead one, or a long-barred claim that was sought to be resurrected. It was observed that it may not be possible at that referral stage, to decide whether a claim made is live one which comes within the purview of the arbitration clause. In such a situation, it will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. It was thus, held in the aforesaid case as follows: “39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal.” (emphasis added)

20. After the amendment of the Act in 2015 by the Arbitration and Conciliation (Amendment) Act, 2015, significant changes were brought P a g e | 11 in the Act. The Hon’ble Supreme Court had the occasion to deal with many aspects including arbitrability of disputes and requirement to weed out stale claims in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC

1. As regards the issue relating to time barred claim and how the Court has to deal with such issue while considering appointment of arbitrator under Section 11 of the Act, it was observed in Vidya Drolia(supra) as follows: “148. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to court proceedings. Sub-section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the Arbitral Tribunal for decision on merits. Similar would be the position in case of disputed “no-claim certificate” or defence on the plea of novation and “accord and satisfaction”. As observed in Premium Nafta Products Ltd.64, it is not to be expected that commercial men while entering transactions inter se would knowingly create a system which would require that the court should first decide whether the contract should be rectified or avoided or rescinded, as the case may be, and then if the contract is held to be valid, it would require the arbitrator to resolve the issues that have arisen. 64: Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL) (emphasis added)

21. What we can thus, understand is that “The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the Arbitral Tribunal for decision on merits”.

22. The aforesaid observation is an echo of the observations made in SBP & Co. v. Patel Engg. Ltd. (supra) wherein it was held that “It may not be P a g e | 12 possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration.”

23. What is discernible from the aforesaid observation is that unless the claim is ex-facie time barred, or “hopelessly time barred” to quote the expression used in Secunderabad Cantonment Board v. B. Ramachandraiah & Sons, (2021) 5 SCC 705, the Court at the time exercising power under Section 11 of the Act for appointment of arbitrator should desist from rejecting any application for appointment of an arbitrator at the threshold unless

24. The word ex-facie has been defined in Black’s Law Dictionary (Seventh Edition) as “apparently, evidently, facially” and in legal parlance it means “on the face of it”. This means any matter which appears to be true or valid outwardly on its surface which understanding, or appreciation may not involve undertaking any detail analysis of the subject. A hopelessly time barred claim is obviously a claim which is barred due to prolonged delay.

25. The inference that can be drawn from the aforesaid decisions in SBP & Co. v. Patel Engg. Ltd.(supra) and Vidya Drolia(supra) is that if the claim cannot be determined as ex-facie time barred, and if such conclusion of the claim being time barred is to be arrived at after a detail discussion and appreciation of evidence, it cannot be said to be ex-facie time barred, in which event, it should be left to the arbitral tribunal to consider such an aspect. Further, if there is the slightest doubt about the P a g e | 13 issue of arbitrability on account of the claim being time barred, it should be left to the arbitrator to decide.

26. In this regard, it may be appropriate to reproduce the observations in BSNL v. Nortel Networks (India) (supra) as follows: “45. In a recent judgment delivered by a three-Judge Bench in Vidya Drolia v. Durga Trading Corpn., on the scope of power under Sections 8 and 11, it has been held that the Court must undertake a primary first review to weed out “manifestly ex facie non-existent and invalid arbitration agreements, or non-arbitrable disputes”. The prima facie review at the reference stage is to cut the deadwood, where dismissal is barefaced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is certain that no valid arbitration agreement exists, or that the subject-matter is not arbitrable, that reference may be refused. 46. …………………………….. 47. It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal.”

27. In my view the rationale behind such a view is simple, that is, if the Court while exercising jurisdiction under Section 11 of the Act has to embark upon the task of ascertaining limitation period by undertaking an elaborate exercise involving production of evidence and appreciating evidence, the Court will be usurping the role of the arbitral tribunal as also observed by the Hon’ble Supreme Court in the above referred case of BSNL v. Nortel Networks (India) (supra).

28. The irresistible conclusion is that only when the claim appears on the face of the record to be hopelessly time barred without the Court requiring to undertake an exhaustive and elaborate exercise, the Court P a g e | 14 can refuse to exercise jurisdiction under Section 11 of the Act, to weed out such dead wood claims.

29. There is yet another related issue. Section 43 (1) of the Arbitration and Conciliation Act, 1996 provides that the Limitation Act, 1963 shall apply to arbitrations as it applies to proceedings in Court. If that is so, provisions of Section 5 of the Limitation Act will also certainly apply to proceedings before the Court while exercising jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996, just as provisions of Section 137 of the Limitation Act apply, as held in the above referred cases. If provisions of Section 5 of the Limitation Act apply, nothing prevents the Court to condone delay in certain cases while exercising jurisdiction under Section 11 of the Arbitration and Conciliation Act. But is the Court at the referral stage expected to exercise this power under Section 5 of the Limitation Act to condone the delay in respect of any belated claim if there are sufficient causes for condoning the same? In my view, the said course of action is not contemplated in view of the decisions of the larger Bench of the Hon’ble Supreme Court in SBP & Co. v. Patel Engg. Ltd.(supra) and Vidya Drolia(supra), that it would be more appropriate to leave that question to be decided by the arbitral tribunal on taking evidence.

30. The upshot of this discussion is that the Court at the referral stage can reject the claim only when it is manifestly, ex-facie and hopelessly time barred and not otherwise. There can be situations where a belated claim could be entertained if the claimant is able to show sufficient causes for not making the application within the limitation period as provided P a g e | 15 under Section 5 of the Limitation Act, which should be examined by the arbitral tribunal and not by the Court at the referral stage.

31. Coming to the other issue as to whether notice was required to be served by the petitioner as required under Section 11 (4) of the Arbitration and Conciliation Act, 1996, this Court is of the view that service of notice will be a mere formality inasmuch as, parties were already put to notice about the dispute in the light of the various litigations pending before them relating to the dispute which had arisen between the parties and also the stiff resistance by the respondent- corporation about the claim of the petitioner in all the proceedings before the Court. Thus, the requirement of serving a notice for settling the matter amicably between the parties would be merely an empty formality.

32. In view of the above, this Court is satisfied that it is a fit case where this Court may proceed to appoint an arbitrator to resolve the dispute between the parties in connection with the contract in question.

33. Accordingly, this Court appoints Hon’ble Mr. Justice A. M. Magray, (Retd. Chief Justice of Jammu and Kashmir & Ladakh High Court) to act as an Arbitrator and to resolve the dispute which has arisen between the parties. The parties shall be at liberty to raise all the preliminary objections including the issue of limitation etc., which learned Arbitrator will decide in accordance with law. The Arbitrator shall proceed with the matter in accordance with law after charging the prescribed fees along with incidental expenses to be shared by the parties. P a g e | 16

34. Registry to inform the Ld. Arbitrator.

35. Arbitration petition stands closed. (N. KOTISWAR SINGH) CHIEF JUSTICE SRINAGAR 01-11-2023 Shameem H. Whether approved for reporting? Yes/No