SALARPURIA HI-RISE PVT. LTD v. SHRI. B. P. KUMAR BABU

background, the parties herein entered into a Memorandum of Understanding on 14.02.2011 (hereinafter referred to as the ‘MoU’, for short), whereby the respondent agreed to assist the petitioner-Company to procure 5 acres 13¼ guntas in Sy.No.22/4 and in the event the petitioner is unable to procure the same for whatsoever reasons, the respondent would be responsible for procuring and providing a 60 ft. approach to the entire property beyond Sy.No.22/4.

4. The parties agreed in the MoU that both will actively participate in the arrangement by pooling the resources, -4- monetary and otherwise, so as to ensure full and final compliance with the obligations set out in the MoU. In terms of the MoU, the petitioner agreed to pay the respondent Rupees Fifty Nine Crores and Fourteen Lakhs as interest free refundable deposit. In terms of the MoU, the petitioner is entitled for 39% and 61% respectively in the saleable area, in the plotted/villa development or 30% and 70% respectively of the saleable area, if the development were to be residential multistoried development or a combination of both with proportionate share in the parking and common areas. In terms of clause X(2) of the MoU, the respondent agreed to complete the process of securing the schedule property in his name; complete the conversion of the lands; secure a combined khata from the local authority (BBMP); provide a 60 ft. wide road from Whitefield-Varthur main road to the schedule properties, within a period of four months from the date of the MoU. Accordingly, under the MoU, the petitioner paid the respondent Rupees Eleven Crores and Twenty Lakhs in advance.

5. It is contended by the petitioner-Company that despite the petitioner being ready and willing to perform its -5- obligations, the respondent however failed to comply with his obligations. The respondent kept on assuring the petitioner that he will comply with the obligations. The respondent, however requested the petitioner to carry out verification/due diligence of the lands to be procured while contending that it would help hasten the process. It is contended that from the year 2013 several meetings were held between the parties. The last of the meeting was held in February 2018. The respondent repeatedly assured the petitioner that all obligations under the MoU were being attended to and that he would perform his obligations within short timelines. However, the relationship between the Directors of the petitioner- Company and the respondent was strained, and as a consequence of which, arbitration proceedings were initiated against the petitioner and another Company who had jointly entered into an agreement with M/s.Tata Consultancy Services Pvt. Ltd., seeking for relief of specific performance.

6. In view of the events and circumstances mentioned hereinabove, the petitioner got issued a notice dated

13.11.2019 to the respondent, calling upon the respondent to specifically perform and complete all obligations under the -6- MoU, failing which the respondent was called upon to refund Rupees Eleven Crores Twenty Lakhs along with 18% interest per annum. It was also indicated in the notice that if the respondent fails to meet the demands, the petitioner will be constrained to invoke the arbitration clause. In fact, it was clarified that in the notice dated 13.11.2019 at Annexure ‘C’, the petitioner nominated a retired Judge of this Court as sole arbitrator. The respondent failed to respond to the notice.

7. Learned Senior Counsel Sri. Dhyan Chinnappa, appearing for the respondent raised serious objections regarding the maintainability of the petition under Section 11 of the Act. It was submitted that the petition and the claim of the petitioner-Company is hopelessly barred by limitation and therefore, this Court cannot appoint an Arbitral Tribunal. It was pointed out that the MoU was entered into on 14.02.2011 with a clear stipulation that the respondent herein shall procure the remaining extent of land, get all the lands converted from agricultural to non-agricultural purposes and get the khata amalgamated within a period of four months from the date of execution of the MoU. Therefore, the cause of action the petitioner against respondent -7- commenced immediately after expiry of four months from the date of the MoU. This would mean that the time started ticking from 15.06.2011. Learned Senior Counsel submitted that having regard to the law laid down by the Hon’ble Apex Court, in the case of BSNL and Another Vs. M/s.Nortel Networks India Pvt. Ltd. (2021) 5 SCC 738, there must be a clear notice invoking the arbitration clause, within a period of three years from the date of the cause of action, failing which, the time bar would prevail. It was submitted that this Court has accordingly decided many cases, including Gravity One Living Space Pvt. Ltd. Vs. Naagamma, in CMP No.418/2021 dated 09.02.2023. It was submitted that in BSNL (supra), it was also held that the period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters or mere settlement discussions. It was held that Sections 5 to 20 of the Limitation Act do not exclude the time take on account of settlement discussions. Section 9 of the Limitation Act makes it clear that where once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it. Reliance was also placed on Mahboob Pasha Vs. Syed -8- Zaheeruddin, reported in 1987 SCC OnLine Kar.145 and Urvashi Aggarwal Vs. Kushagr Ansal reported in (2020) 17 SCC 774, to support the contention that a party to a contract cannot claim that the cause for filing the suit has arisen on the date fixed in the contract, on the ground that certain conditions in the contract have not been complied with. Learned Senior Counsel further contended that a detailed statement of objections have been filed on behalf of the respondent and specific grounds have been raised that the claim of the petitioner is ex facie time barred and therefore, the petition ought to be dismissed. It is contended that if a party to a contract is debarred from filing a suit, on the ground of limitation, he cannot seek specific performance of the agreement owing to the delay in terms of Article 54 of the Limitation Act, then, such a party is also debarred from seeking arbitration of the dispute.

8. On the other hand, learned Senior Counsel Sri.G.L.Vishwanath, appearing for the petitioner contended that this Court, in Smt.Saraswathamma Vs. H.Sharad Srikhande and Others reported in 2005 SCC OnLine Kar. 221, had held that the extension of time -9- performance of the agreement though cannot be made unilaterally by the promisee, it could be the result of the consensus as reflected in the transaction between the parties. The extension of time need not also be given in writing, but may be proved even by leading oral evidence. The judgment in Saraswathamma (supra) has been confirmed by the Hon’ble Apex Court in S.Brahmanand and Others Vs. K.R.Muthugopal and Others reported in (2005) 12 SCC 764, where it was held that there is nothing strange in, time for performance being extended, even though originally the agreement had a fixed time. The learned Senior Counsel further contended that in a more recent decision, the Apex Court, in the case of Arif Azim Co. Limited Vs. Aptech Limited reported in 2024 SCC OnLine SC 215, has explained and answered the question, “when does the cause of action arise?” It was held that the position of law is well settled that mere failure to pay may not give rise to a cause of action. However, once a party has asserted his claim and the other has either denied such claim or failed to reply to it, the cause of action will arise after such denial or failure, as the case may be. The Apex Court also noticed the judgments -10- in BSNL (supra) and Brahmanand (supra), where three principles of law came to be enunciated regarding the manner in which the point of time when the cause of action arose may be determined. It was further emphasized that it was important to find the “breaking point” at which any reasonable party would have abandoned the efforts at arriving at a settlement and contemplated referral of the dispute to arbitration. Such breaking point would then become the date on which the cause of action could be said to have commenced. The learned Senior Counsel would therefore submit that unless the answering party is permitted to lead evidence and demonstrate that the parties mutually agreed to extend the time for completion of the contract, it cannot be decided that the claim is time barred. The question is essentially a mixed question of law and facts and therefore, such question should be left to be decided by the Arbitral Tribunal.

9. Heard the learned Senior Counsel Sri.G.L.Vishwanath for the petitioner-Company and learned Senior Counsel Sri.Dhyan Chinnappa for the respondent and perused the petition papers. -11-

10. Having regard to the line of decisions cited at the Bar, this Court is required to consider whether the claim of the petitioner-Company is hopelessly time barred and whether it can be held as a deadwood. This Court is also conscious of the fact that the golden principle derived from the judgments of the Hon’ble Apex Court while dealing with such question is – ‘when in doubt, refer for arbitration’.

11. However, having regard to the material available on record, it is clear that the petitioner-Company is guilty of waiting for an unreasonably long time to initiate action against the respondent. Not a scrap of paper is available on record to show that the parties herein have mutually agreed to extend the time for completion of the contract. In a series of decisions of the Apex Court, as noticed in BSNL (supra), it has been held that the period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters or by mere discussions. There is no ambiguity in the contract regarding the time given to the respondent to procure the remaining extent of land. Four months were granted to the respondent to procure the lands and get the scheduled lands converted from agricultural to non- -12- agricultural purposes. After lapse of the four months, no efforts were made by the petitioner-Company to seek repayment of the advance amount or to extend the time period. This Court is therefore of the considered opinion that the present matter does not warrant reference at the hands of the Arbitral Tribunal. The delay accounts to more than 8 years. The claim of the petitioner-Company is a clear deadwood.

12. Consequently, the Civil Miscellaneous Petition is accordingly dismissed.

13. Pending I.As., if any, stand disposed of. Sd/- (R.DEVDAS) JUDGE JT/DL CT: JL