Decision On Date Of Reckoning Requires Investigation, Madras High Court Applies Nortel Principle, Appoints Retd Justice Chandru As Arbitrator

The respondent Cook India Medical Devices Pvt Ltd entered into an agreement with the petitioner company Radha Meditech for the distribution of its equipment. Thereafter arbitrable disputes emerged between the two which led to termination of contract by Cook on 7^th June 2016. Thereafter, Radha returned the unsold products to Cook on 27^th October 2017.

Owing to the arbitrable disputes, Radha invoked the arbitration clause and sent notice to Cook on 6^th October 2021. Cook responded to this notice by reply dated 21^st October 2021 and denied arbitral disputes on merit and called upon withdrawal of invocation notice.

Justice M Sundar noted that in the present case, the primary consideration was whether the case was “ex-facie barred by limitation”. For this, the reckoning date had to be looked into. However, the reckoning date was debatable as the unsold items were not immediately returned after termination of the contract. Even after return, these items were found to be in a bad condition and were returned to Radha. Though Radha claimed that it was a post termination obligation, the court noted that the same was a mixed question of law and fact.

The court noted that since Article 137 and Article 55 of the Limitation Act does not talk about the date of “first accrual” or “first breach”, some investigation had to be conducted to decide the reckoning date for deciding whether the claim was barred by limitation.

The court then applied the Nortel principle and noted that since there were doubts with respect to the date of reckoning which needed serious consideration, the proper thing was to refer the matter to arbitration.

This Court therefore deems it fit and proper to come to the conclusion that this is a case where the question of limitation should also be left open to be raised and decided by Hon'ble Arbitral Tribunal to be appointed (infra) in the case on hand.

The court also followed the decision of the Supreme Court in Vidya Drolia & Ors. v. Durga Trading Corporation wherein a three-judge bench of the Apex Court had held that whenever there is a doubt, a Section 11 reference should follow.

This Court also reminds itself about Vidya Drolia case i.e., Vidya Drolia & Ors. Vs. Durga Trading Corporation reported in (2020) SCC OnLine SC 1018, for the limited purpose of saying that a three Member Bench of Hon'ble Supreme Court has made it clear that as regards reference qua arbitration when in doubt, a Section 11 Court would refer. Therefore, Vidya Drolia case also persuades this Court to make a reference. 

Since the parties had not followed the procedure agreed for appointing an arbitrator, the court appointed Justice K Chandru, former Judge of Madras High Court as the sole arbitrator and requested him to enter upon reference and adjudicate upon the disputes between the parties.

Case Title: M/s. Radha Meditech v. M/s Cook India Medical Devices Pvt Ltd

Citation: 2023 LiveLaw (Mad) 6

Case No: Arb O.P.(Com. Div.) No.299 of 2021