Chief Justice Or Their Designate Cannot Adjudicate Merits Of Dispute Under Section 11 Of Arbitration Act: Calcutta High Court

It held that all jurisdictional issues, including limitation, are to be decided by the Arbitrator. The bench held that even if there is a shade of doubt as to the issue of limitation, the Court sitting under Section 11 cannot decide the same conclusively and the matter has to be relegated to the Arbitrator.

Section 11 outlines the procedure for the appointment of arbitrators and the role of the Chief Justice or his designate in such appointments.

Brief Facts:

B.B.M. Enterprises (Petitioner) completed certain work for the government authorities. A completion certificate confirmed the completion and payment for the work up to the second Running Account (R/A) Bill, totalling Rs. 1,30,97,481. However, under Clause 7 of the agreement, the final bill was to be submitted within a month from the completion date, otherwise, the Engineer-in-Charge's certificate of measurement and the total payable amount would be final and binding.

The Respondents paid a substantial portion of the final work value, amounting to Rs. 1,59,78,404. Nevertheless, the remaining balance of Rs. 24,21,596 and a security deposit refund of Rs. 11,44,205 were not paid to the Petitioner. The Petitioner argued that in M.L. Dalmiya & Co. vs. Union of India (AIR 1963 Cal 277) it was held that the cause of action for payment does not arise until the contractor receives a certificate of completion. The Petitioner argued that without such a certificate from the Engineer-in-Charge, the cause of action was not matured until when the payment request was denied.

The Petitioner issued a notice under Section 21 of the Arbitration and Conciliation Act, 1996, initiating the arbitration process. Since the Respondents did not agree to refer the matter to arbitration, the Petitioner approached the High Court under Section 11 for the appointment of an arbitrator.

The Respondents challenged the application on the grounds of misjoinder and non-joinder of parties. They argued that only the State and the Superintending Engineer, National Highway Circle-I, were relevant parties to the agreement, while the Chief Engineer, P.W.D., and the Executive Engineer, National Highway Division No. I was not pertinent to the dispute.

Moreover, the Respondents highlighted the significant delay by the Petitioner, claiming that the relevant documents were no longer available due to the Petitioner's inaction over approximately 20 years. They contended that the claim was time-barred.

Observations by the High Court:

The High Court noted that it was not admitted by the Petitioner, nor substantiated by the Respondents, that any such certificate was issued by the concerned engineer regarding the total amount payable for the work, as required by Clause 7. The Petitioner's claim that a part of the final value of the work was paid may or may not be linked to a final bill being raised and satisfied.

The High Court held that it would be premature for the sitting in jurisdiction under Section 11 of the Arbitration Act to conclusively determine this issue. The entire objection regarding limitation hinged on this matter. It noted that the Petitioner could argue that until a certification was made by the concerned engineer for the final bill, the cause of action for their claim would not arise. If this view was ultimately established, the High Court noted that the limitation bar would be effaced.

Therefore, the High Court noted that it was beyond the domain of the Chief Justice or their designate, under Section 11 jurisdiction, to adjudicate even prima facie on the merits of this arguable issue, which falls within the Arbitrator's domain. It held that all jurisdictional issues, including limitations, are to be decided by the Arbitrator. If there is any doubt regarding the issue of limitation, it held that the court under Section 11 cannot decide conclusively, and the matter must be relegated to the Arbitrator.

Therefore, the High Court held that the objection regarding limitation cannot be conclusively decided based on the materials and pleadings available.

Consequently, the High Court appointed Om Narayan Rai as the sole Arbitrator to resolve the disputes between the parties.

Case Title: M/S. B.B.M. Enterprises Vs State Of West Bengal And Ors.

Case Number: AP/535/2022

Advocate for the Petitioner: Mr. Sakya Sen, Adv. Ms. Nilanjana Adhya, Adv.

Advocate for the Respondent: Mr. Dhruba Ghosh, Sr. Adv. Mr. Priyankar Saha, Adv. Mr. Arindam Mandal, Adv. Mr. Paritosh Sinha, Adv. Ms. Ajeyaa Choudhury, Adv. Ms. P. Ghosh, Adv.

Date of Judgment: 27th June, 2024

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