2453 I N TH E H I GH COURT OF UTTA RA K H v. Sham im Farzana and ot hers

Nos. 3 t o 6, and t he learned counsel for respondent No. 1. 1

2. The fact s are not in disput e. The fact of t he case is t hat t he applicant along w it h his fat her and brot her const it ut ed a part nership firm know n as ‘M/ s Shabir Ahm ed and Sons” . That in 2009, aft er t he dem ise of his brot her, t here was a reconst it ut ion of t he firm . That during t he reconst it ut ion t he applicant opt ed out of t he reconst it ut ed firm . While reconst it ut ing, t he right s of t he out going part ner was considered and accept ed by t he cont inuing part ners in Paragraph No. 5 of t he reconst it ut ion deed, which reads as under : “ 5. The Asset s & Liabilit ies exist ing on 14.11.2009 as per t he audit ed Balance Sheet shall be t ransferred t o t he new firm . I t has also been decided t hat Capit al t o t he credit of Sri Zakir Hussain shall be credit ed as unsecured loan in t he nam e of legal heirs of Sri Zakir Hussain ( viz –

1. I m ran Hussain 2. I m aad Hussain 3. Ereena Hussain

4. Sm t . Sham im Farzana) . Also t he capit al t o t he credit of Sri Akhlaq Hussain shall be credit ed as unsecured loan, i.e., t he inst ant applicant . THESE CREDI T AMOUNTS WI LL REMAI N TI LL THE PAYMENT DATE OR THE DATE OF ADJUSTMENT AGI ANST ANY SUMS.” 3) The learned counsel for t he applicant would subm it t hat from a bare reading of last sent ence of paragraph no. 5 of t he reconst it ut ion deed, it is apparent t hat no t im e lim it was fixed, as it was a fam ily arrangem ent , nor was any dat e for perform ance of t he covenant was st ipulat ed. 2 That t he m em bers w ho const it ut ed t he earlier part nership and t he m em bers who reconst it ut ed t he firm all being t he m em bers of t he sam e fam ily and t he descendant s of Sri Shabir Ahm ed, and t he reconst it ut ion being on account of t he sad dem ise of one of t he sons of Sri Shabir Ahm ed, t he capit al and t he share of t he out going part ner was t o t reat ed as an unsecured loan wit h no dat e repaym ent being fixed or agreed upon. That t he m em bers of t he reconst it ut ed firm being t he m em bers of t he fam ily of Sri Shabir Ahm ed, t he perform ance or t he int erest of t he out going part ner was secured as an unsecured loan.

4. That despit e t he passage of t im e and despit e t he business having grow n, t here was no effort by t he reconst it ut ed firm t o set t le t he account s of t he out going part ner. Being aggrieved, a not ice dat ed 25.02.2022 cam e t o be issued, and it is pleaded in paragraph Nos. 6, 7 and 8, as under : “ 6. That however, it has been provided t he reconst it ut ion deed t hat t he share of Sri Akldaq Hussain and t he deceased Sri Zakir Hussain shall rem ain t o t he credit of t he firm as unsecur ed debt t ill it is paid. 3

7. That t he am ount s due t o Sri Zakir Hussain have not been paid t o m y client s inspit e of t heir repeat ed dem ands t hey are suffering great hardship due t o non- paym ent of t heir dues. Thus a disput e has arisen wit h respect t o t he part nership business.

8. That bot h t he part nership deeds dat ed 23.12.1981 and 15.11.2009 cont ains a clause t hat in t he event of any disput e arising out of t he part nership, sam e shall be resolved t hrough arbit rat ion.”

5. Per cont ra, t he learned Senior Counsel would cont end t hat t he claim is a st ale claim and is hopelessly barred by lim it at ion, and he would place reliance on t he ruling of t he Hon’ble Apex Court rendered in t he case of Bh a r a t Sa n ch a r N i g a m Lt d . & a n o t h e r Vs M / s N o r t e l N e t w o r k s I n d i a Pv t . Lt d ., ( 2 0 2 1 ) 5 SCC 7 3 8 , and would place reliance on paragraph Nos. 39 and 40.

6. Having heard t he learned counsels and having perused t he ruling of t he Hon’ble Apex Court , a bare reading of t he j udgm ent would reflect t hat t he rat io laid dow n by t he Hon’ble Apex Court is t hat t he t im e barred claim s are a deadwood and cannot be referred t o Arbit rat or. The fact s t herein clearly disclose t hat t he claim by t he applicant w as rej ect ed and in t he final bill cert ain it em s w ere disallowed and t he paym ent was also m ade and t he applicant t herein had accept ed t he 4 paym ent wit hout dem our, and t hereaft er, aft er a lapse of 5½ years t he applicant had m oved t he court for appoint m ent of an Arbit rat or under Sect ion 11 of t he Arbit rat ion and Conciliat ion Act . The Hon’ble Apex Court in paragraph Nos. 40 and 53 of t he Bh a r a t Sa n ch a r N i g a m Lt d . Ca se ( supra) has been pleased t o hold as under : “ 40. The issue of lim it at ion, in essence, goes t o t he m aint ainabilit y or adm issibilit y of t he claim , which is t o be decided by t he arbit ral t ribunal. For inst ance, a challenge t hat a claim is t im e- barred, or prohibit ed unt il som e pre- condit ion is fulfilled, is a challenge t o t he adm issibilit y of t hat claim , and not a challenge t o t he j urisdict ion of t he arbit rat or t o decide t he claim it self. * * * *

53. Co n cl u si o n Accordingly, we hold t hat : lim it at ion The period of ( i) filing an applicat ion under Sect ion 11 would be governed t he by Art icle 137 of Lim it at ion Act , 1963. The period of lim it at ion will begin t o run from t he dat e when t here is failure t o appoint t he arbit rat or; t he First Schedule of I t has been suggest ed t hat t he Parliam ent m ay consider am ending Sect ion 11 of t he 1996 Act t o filing an provide a period of t his provision, which applicat ion under consonance wit h t he obj ect or expedit ious disposal of arbit rat ion proceedings; lim it at ion ( ii) I n rare and except ional cases, where t he claim s are ex m anifest t hat t here is no subsist ing disput e, t he Court m ay refuse t o m ake t he reference.” t im e- barred, and 5

7. Learned Senior Counsel appearing on behalf of respondent Nos. 3 t o 6 would furt her place reliance on t he ruling of t he Hon’ble Apex Court rendered in t he case of A r i f A zi m Co m p a n y Li m i t e d Vs A p t e ch Li m i t e d , ( 2 0 2 4 ) 5 SCC 3 1 3 . Paragraph Nos. 79 and 80 of t he sam e read as under : “ 79. We are not im pressed wit h t he subm ission canvassed on behalf of t he respondent t hat t he cause of act ion for raising t he claim s arose on 01.11.2017 and t hus t he lim it at ion period for invoking arbit rat ion should com m ence from t he said dat e. The pet it ioner has alleged t hat t he respondent received t he paym ent for t he course from I CCR on 03.10.2017. However, t he perusal of t he com m unicat ion exchanged bet ween t he part ies indicat es t hat it is only on 28.03.2018 t hat t he right of t he pet it ioner t o bring a claim against t he respondent could be said t o have been cryst allised. The posit ion of law is set t led t hat m ere failure t o pay m ay not give rise t o a cause of act ion. However, once t he applicant has assert ed it s claim and t he respondent has eit her denied such claim or failed t o reply t o it , t he cause of act ion will arise aft er such denial or failure.

80. I n B & T AG Vs Union of I ndia, ( 2024) 5 SCC 358, t hree principles of law cam e t o be enunciat ed by t his Court regarding t he m anner in which t he point in t im e when t he cause of act ion arose m ay be det erm ined. First , t hat t he right t o receive t he paym ent ordinarily begins upon com plet ion of t he work. Secondly, a disput e arises only when t here is a claim by one side and it s denial/ repudiat ion by t he 6 ot her and t hirdly, t he accrual of cause of act ion cannot be indefinit ely post poned by repeat edly writ ing let t ers or sending rem inders. I t was furt her em phasised by t his Court t hat it was im port ant t o find out t he “ breaking point ” at which any reasonable part y would have abandoned t he effort s at arriving at a set t lem ent and cont em plat ed referral of t he disput e t o arbit rat ion. Such breaking point would t hen becom e t he dat e on which t he cause of act ion could be said t o have com m enced.”

8. I n t he inst ant case, t here is not even a quant ificat ion of t he am ount t hat is due t o t he applicant . The only indicat or is t hat t he applicant was a 40% shareholder as on 2009. The exercise t hat would be required t o be prelim inarily would be quant ificat ion and valuat ion of t he asset s of t he firm as on t he dat e of reconst it ut ion, and in t he absence of any denial t o pay t he am ount , a quest ion whet her t he claim is t im e barred or not would arise and t he sam e is a m ixed quest ion of fact and law.

9. The det erm inat ion of t he issue would require evidence be adduced t o dem onst rat e t hat t here was no denial of t he liabilit y and apparent ly t he first claim for set t lem ent of t he dues is under t he legal not ice dat ed

25.02.2022, and t ill such t im e t here has been no 7 disput e and t he reading of t he covenant , m ore part icularly, t he last sent ence of paragraph No. 5 would not put t he case in a st raight j acket . Whet her lim it at ion has st art ed running and from what point of t im e is an issue which would be required t o be answered by t he Arbit rat or as it involves let t ing in of evidence and t he appreciat ion of t he evidence t he light of t he provisions of t he Lim it at ion Act , m ore part icularly, Art icle 137 as held by t he Hon’ble Apex Court in t he Bh a r a t Sa n ch a r N i g a m Lt d . case ( supra) .

10. That apart , as held by t he Hon’ble Apex Court in Bh a r a t Sa n ch a r N i g a m Lt d . case ( supra) , in paragraph No. 40, t he issue of lim it at ion, in essence, goes t o t he m aint ainabilit y or adm issibilit y of t he claim , which is t o be decided by t he arbit ral t ribunal. For inst ance, a challenge t hat a claim is t im e- barred, or prohibit ed unt il som e pre- condit ion is fulfilled, is a challenge t o t he adm issibilit y of t hat claim , and not a challenge t o t he j urisdict ion of t he arbit rat or t o decide t he claim it self, m eaning t hereby, t hat t he issue of t he claim being t im e barred or not is an issue t hat would fall for considerat ion of t he arbit ral t ribunal. 8 I n t hat view, and in view of t he fact s narrat ed

11. above, and in view of paragraph No. 5 of reconst it ut ion deed, t he claim requires adj udicat ion by t he arbit ral t ribunal. Accordingly, t he Arbit rat ion Applicat ion allowed.

12. The learned Senior Counsel appearing on behalf of respondent Nos. 3 t o 6 suggest s t he nam e of Mr. D.P. Gairola, Ret d. Dist rict Judge, R/ o 50/ 3/ 2, Bhagirat hi Enclave, Judges Colony, Balbir Road, Dehradun – 248

001. The counsel for t he applicant consent s t o t he sam e. I n view of t he subm issions on bot h sides, Mr. D.P. Gairola, Ret ired Dist rict Judge, is appoint ed as an Arbit rat or t o resolve t he disput es bet ween t he part ies arising out of t he part nership deed.

13. The Arbit rat or shall, in t erm s of Sect ion 11( 8) of t he Act , furnish his disclosure in w rit ing t o t he Court wit hin 15 days from t he dat e of receipt of a cert ified copy of t his order.

14. I t is open for t he part ies t o det erm ine t he rules and procedure of arbit rat ion and t he place of arbit rat ion in consult at ion wit h t he Arbit rat or in t erm s of Sect ions 19 and 20 of t he Act . The Arbit rat or shall, in consult at ion 9 wit h t he part ies, t he rem unerat ion and ot her chargeable fees. The Arbit rat or shall endeavour t o hear and pass an Award w it hin t he t im e provided under t he st at ut e. _______________ G. N A REN D A R, C.J. Dt : 2 ND APRI L, 2025 Negi HIMANS HU NEGI DN: c=IN, o=HIGH COURT OF UTTARAKHAND, ou=HIGH COURT OF UTTARAKHAND, 2.5.4.20=bb3b60774012c1ef1dae20d13aa f116e73351fdaf6878326386908a7f90d575 7, postalCode=263001, st=UTTARAKHAND, serialNumber=75BD9D0FB7F4A80990FC5 1A722A6BC552D470EB4FD2F88DDF7C18 DB2A1524A4D, cn=HIMANSHU NEGI 10