PARSVNATH DEVELOPERS LTD. V. FUTURE RETAIL LTD

Author: Aswathy P S, I year of B.B.A.,LL.B.(Hons.) from Government Law College, Thrissur

TITLE: Prasvnath Developers ltd. V. Future Retail Ltd.

DATE OF ORDER: 12th April, 2022

CITATION: Arb. P. 14/2020

COURT: The High Court of Delhi at New Delhi

BENCH: Hon'ble Mr Justice VibhuBakhu

ADVOCATES WHO APPEARED:

For the Petitioner : Mr Rahul Malhotra and Mr Rishu Kant Sharma

For the Respondent : Mr Sudhir K. Makkar, Ms Saumya Gupta, Ms Veera Mathai

and Ms YogitaRathore

FACTS OF THE CASE

Petitioner and respondent are companies incorporated under the Companies Act, 1956. Thepetitioner is engaged in developing land and constructing residential and commercial projects and respondent has the business of large format stores like 'Big Bazaar'. On 06/09/2005 petitioner and Delhi Metro Rail Corporation Ltd. entered into an agreement which allocated a specific area in Inderlok Metro Railway Station with right to sub-license to the petitioner. On 29/06/2005 petitioner sub-licensed the specific area to the respondent for 'Big Bazaar'. In 2007 the licensing of premise was included in taxable services by virtue of the Finance Act, 2007 with effect from 01/06/2012.

ISSUES RAISED

1. Whether the petition for appointment of an arbitrator is required to be rejected on the ground that the main agreement is insufficiently stamped.

2. Whether the claims are barred by limitation.

RATIONALE

ARGUMENTS OF THE PETITIONER

• Contract was in nature of leave and license agreement and sufficiently stamped.

• Petitioner has filed a writ petition ( W,P.(C) 9047/2015 ) impugning the decision of the Stamping Authority to suomotu consider such agreements as leases or as instruments creating any interest in the licensed premises.

• Validity of an agreement falls within the jurisdiction of the Arbitral Tribunal and Section 11 of the Arbitration and Conciliation Act, 1996 is now limited by Section 11(6A) of the Arbitration and Conciliation Act, 1996.[i]

• The license in the case had continued till 19/06/2017. Cause of action demanding reimbursement of service tax paid during the last three years, prior to 19/06/2017, would arise only once petitioner had paid the same. So it is live claim.

ARGUMENTS OF THE RESPONDENT

• The contract cannot be looked as it is insufficiently stamped and is unregistered. Hence, arbitration clause which is a part of above mentioned contract is currently unavailable[ii].

• Disputes raised by petitioner are, ex facia, barred by the Limitation Act,1963 as petitionerhad not taken any steps to refer the disputes to arbitration within the period of 3 years from 07/01/2012 when the respondent denied liability to pay service tax.[iii]

HOLDING

The petition allowed.

ORDER

Petitioner and respondent had nominated Mr. S.C Jain, Retired Additional District Judge and Mr. Laxmi Kant Gaur, Retired District Judge as their Arbitrators respectively. Both arbitrators shall appoint third arbitrator. This is subject to the learned Arbitrators making the necessary disclosure as required under Section 12(1) of the Arbitration and Conciliation Act, 1996 and not being ineligible under clause of section 12 of the Arbitration and Conciliation Act, 1996.

JUDGEMENT

1)Whether the petition for appointment of an arbitrator is required to be rejected on the ground that the main agreement is insufficiently stamped.

• No dispute that the parties had entered into a contract and the same includes Arbitration Agreement.

• The main contract did not invalidate due to non-payment or deficiency of stamp duty.[iv]

• An arbitration agreement embodied in a main agreement is a separate agreement and invalidation of main agreement not necessarily invalidate arbitration agreement. Arbitration agreement not required compulsory registration. The Doctrine of severability is applicable.

• The courts may decline to refer the parties to arbitration, if it is found that the principal agreement is plainly invalid and unenforceable, orthe disputes ex facie are not arbitrable.[v]

• By virtue of Sub-section (6A) of Section 11 of the A&C Act, the scope of examination underSection 11 of the Arbitration and Conciliation Act, 1996 is confined to the existence of an Arbitration Agreement and do not extend to adjudicating any contentious disputes between the parties.[vi]

• The courts may decline to refer the parties to arbitration, when there is no vestige of doubt that the claims are not arbitrable or the agreement is invalid.[vii]

2) Whether the claims are barred by limitation.

• This mixed question of fact and law has to be examined by Arbitral Tribunal.

• Claim of petitioner for service tax paid during the three years prior to the invocation of theDispute resolution mechanism would not be barred by limitation.[viii]

[i]Bhupender Singh Bhalla v. Neelu Bhalla & Neelam Singh: (2013) SCC OnLine Del 4356 [ii]Associated Hotels of India Ltd. V. R.N. Kapoor: AIR 1959 SC 1262, Pradeep Oil Corporation v. Municipal Corporation of Delhi and Anr.: (2011) 5 SCC 270,and Vidya Drolia and Ors. V. Durga Trading Corporation and Ors.:(2021) 2 SCC 1 [iii]Geo Miller & Co. Pvt. Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd.: (2020) 14 SCC 643, Bharat Sanchar Nigam Ltd. and Anr. v. Nortel Networks India Pvt. Ltd.: (2021) 5 SCC 738, Secunderabad Cantonment Board v. B. Ramachandraiah & Sons: (2021) 5 SCC 705, and Golden Chariot Recreations Pvt. Ltd. v. Mukesh Panika & Anr.: (2018) SCC OnLine Del 10050. [iv]N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Limited & Ors.: (2021) 4 SCC 379, and Garware Wall Ropes Limited v. Coastal Marine Constructions & Engineering Limited: (2019) 9 SCC 209 [v]Vidya Drolia and Ors. v. Durga Trading Corporation and Ors.:(2021) 2 SCC 1 [vi]Duro Felguera, S.A. v. Gangavaram Port Limited: (2017) 9 SCC 729, Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman: (2019) 8 SCC 714, and Bharat Sanchar Nigam Limited and Ors. v. Nortel Networks India Pvt. Ltd.: (2021) 5SCC 738 [vii]NCC Limited v. Indian Oil Corporation Limited: (2019) SCC OnLine Del 6964, and Vidya Drolia and Ors. V. Durga Trading Corporation and Ors.:(2021) 2 SCC 1 [viii]Uttarakhand Purv Sainik Kalyan Nigam Ltd. V. Northern Coal Field Ltd.: (2020) 2 SCC 455