Calcutta High Court: Chief Justice Cannot Adjudicate Dispute Merits Under Section 11 Of A&C Act

Calcutta High Court: Chief Justice Cannot Adjudicate Dispute Merits Under Section 11 Of A&C Act

The Calcutta High Court bench, presided over by Justice Sabyasachi Bhattacharyya, ruled that Chief Justices and their designates, acting under Section 11 of the Arbitration and Conciliation Act, 1996, lack authority to adjudicate on the merits of any arguable issue in a case.

The court emphasized that all jurisdictional matters, including questions of limitation, fall squarely within the arbitrator's purview. The court stated that even in cases where doubts exist regarding limitation, such issues must be left for the arbitrator to resolve rather than being conclusively decided by the court under Section 11.

B.B.M. Enterprises (the Petitioner) completed designated work for government authorities, confirmed by a completion certificate up to the second Running Account (R/A) Bill, totaling ₹ 1,30,97,481. According to Clause 7 of the agreement, the final bill was required within a month of completion, with the engineer-in-charge's certificate of measurement and total payable amount deemed final thereafter.

Although the respondents paid ₹ 1,59,78,404, a substantial portion of the final work value, they withheld ₹ 24,21,596 and a security deposit refund of ₹ 11,44,205. The petitioner cited M.L. Dalmiya & Co. v. Union of India, arguing that the cause of action for payment hinges on receiving a completion certificate from the engineer-in-charge. Without this certificate, they contended, the cause of action did not mature until the denial of the payment request.

Initiating arbitration under Section 21 of the Arbitration and Conciliation Act, 1996, the petitioner sought resolution after the respondents refused arbitration. Consequently, the petitioner approached the High Court under Section 11 to appoint an arbitrator.

Challenging the application, the respondents cited misjoinder and non-joinder of parties, asserting that only the state and the supervising engineer, National Highway Circle-I, were pertinent to the agreement. They argued against the relevance of the Chief Engineer, P.W.D., and the Executive Engineer, National Highway Division No. I, in the dispute.

Moreover, the respondents emphasized the petitioner's substantial delay, claiming that pertinent documents had become unavailable due to the petitioner's inaction over approximately 20 years. They contended that the claim was time-barred.

The High Court observed that neither the petitioner nor the respondents had provided evidence that the concerned engineer issued the required certification regarding the total amount payable for the work, as stipulated in Clause 7 of the agreement. The assertion by the petitioner that part of the final work value was paid may or may not be tied to the issuance and satisfaction of a final bill.

Deciding under Section 11 of the Arbitration Act, the High Court deemed it premature to conclusively determine this issue. The entire objection regarding limitation hinged on whether the certification by the engineer for the final bill had been issued. The Court acknowledged that the petitioner could argue that without this certification, the cause of action for their claim would not arise, potentially nullifying the limitation period.

Therefore, the High Court ruled that it was not within the purview of the Chief Justice or their designate, acting under Section 11 jurisdiction, to adjudicate even prima facie on the merits of this arguable issue, which falls within the arbitrator's authority. It affirmed that all jurisdictional matters, including limitations, must be resolved by the arbitrator. If any doubts persist regarding the issue of limitation, the High Court emphasized that it cannot definitively decide and must defer to the arbitrator.

Consequently, the High Court concluded that the objection regarding limitation could not be conclusively determined based on the current materials and pleadings available. As a result, Om Narayan Rai was appointed as the sole arbitrator to adjudicate the disputes between the parties.