2025:UHC:2453 IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL HON’BLE THE CHIEF JUSTICE MR. G. NARENDAR ARBITRATION APPLICATION NO. 04 OF 2023 2ND APRIL, 2025 Akhlakh Hussain …… Applicant/Petitioner Versus Shamim Farzana and others …… Respondents Counsel for the applicant : Mr. Saurabh Kumar Pandey, learned counsel Counsel for the respondents : Mr. Suryakant Maithani, learned counsel holding brief of Mr. Shubhang Dobhal, learned counsel for respondent No. 1 : Mr. T.A. Khan, learned Senior Counsel assisted by Mr. Mohd. Shafy, learned counsel for respondent Nos. 3 to 6 The Court made the following: JUDGMENT: Heard the learned counsel for the applicant, the learned Senior Counsel appearing on behalf of respondent Nos. 3 to 6, and the learned counsel for respondent No. 1. 1 2025:UHC:2453 2. The facts are not in dispute. The fact of the case is that the applicant along with his father and brother constituted a partnership firm known as ‘M/s Shabir Ahmed and Sons”. That in 2009, after the demise of his brother, there was a reconstitution of the firm. That during the reconstitution the applicant opted out of the reconstituted firm. While reconstituting, the rights of the outgoing partner was considered and accepted by the continuing partners in Paragraph No. 5 of the reconstitution deed, which reads as under : “5. The Assets & Liabilities existing on 14.11.2009 as per the audited Balance Sheet shall be transferred to the new firm. It has also been decided that Capital to the credit of Sri Zakir Hussain shall be credited as unsecured loan in the name of legal heirs of Sri Zakir Hussain (viz – 1. Imran Hussain 2. Imaad Hussain 3. Ereena Hussain 4. Smt. Shamim Farzana). Also the capital to the credit of Sri Akhlaq Hussain shall be credited as unsecured loan, i.e., the instant applicant. THESE CREDIT AMOUNTS WILL REMAIN TILL THE PAYMENT DATE OR THE DATE OF ADJUSTMENT AGIANST ANY SUMS.” 3) The learned counsel for the applicant would submit that from a bare reading of last sentence of paragraph no. 5 of the reconstitution deed, it is apparent that no time limit was fixed, as it was a family arrangement, nor was any date for performance of the covenant was stipulated. 2 2025:UHC:2453 That the members who constituted the earlier partnership and the members who reconstituted the firm all being the members of the same family and the descendants of Sri Shabir Ahmed, and the reconstitution being on account of the sad demise of one of the sons of Sri Shabir Ahmed, the capital and the share of the outgoing partner was to be treated as an unsecured loan with no date for repayment being fixed or agreed upon. That the members of the reconstituted firm being the members of the family of Sri Shabir Ahmed, the performance or the interest of the outgoing partner was secured as an unsecured loan. 4. That despite the passage of time and despite the business having grown, there was no effort by the reconstituted firm to settle the accounts of the outgoing partner. Being aggrieved, a notice dated 25.02.2022 came to be issued, and it is pleaded in paragraph Nos. 6, 7 and 8, as under : “6. That however, it has been provided in the reconstitution deed that the share of Sri Akldaq Hussain and the deceased Sri Zakir Hussain shall remain to the credit of the firm as unsecured debt till it is paid. 3 2025:UHC:2453 7. That the amounts due to Sri Zakir Hussain have not been paid to my clients inspite of their repeated demands and they are suffering great hardship due to non- payment of their dues. Thus a dispute has arisen with respect to the partnership business. 8. That both the partnership deeds dated 23.12.1981 and 15.11.2009 contains a clause that in the event of any dispute arising out of the partnership, same shall be resolved through arbitration.” 5. Per contra, the learned Senior Counsel would contend that the claim is a stale claim and is hopelessly barred by limitation, and he would place reliance on the ruling of the Hon’ble Apex Court rendered in the case of Bharat Sanchar Nigam Ltd. & another Vs M/s Nortel Networks India Pvt. Ltd., (2021) 5 SCC 738, and would place reliance on paragraph Nos. 39 and 40. 6. Having heard the learned counsels and having perused the ruling of the Hon’ble Apex Court, a bare reading of the judgment would reflect that the ratio laid down by the Hon’ble Apex Court is that the time barred claims are a deadwood and cannot be referred to Arbitrator. The facts therein clearly disclose that the claim by the applicant was rejected and in the final bill certain items were disallowed and the payment was also made and the applicant therein had accepted the 4 2025:UHC:2453 payment without demour, and thereafter, after a lapse of 5½ years the applicant had moved the court for appointment of an Arbitrator under Section 11 of the Arbitration and Conciliation Act. The Hon’ble Apex Court in paragraph Nos. 40 and 53 of the Bharat Sanchar Nigam Ltd. Case (supra) has been pleased to hold as under : “40. The issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be decided by the arbitral tribunal. For instance, a challenge that a claim is time-barred, or prohibited until some pre-condition is fulfilled, is a challenge to the admissibility of that claim, and not a challenge to the jurisdiction of the arbitrator to decide the claim itself. **** 53. Conclusion Accordingly, we hold that : (i) The period of limitation for filing an application under Section 11 would be governed by Article 137 of the First Schedule of the Limitation Act, 1963. The period of limitation will begin to run from the date when there is failure to appoint the arbitrator; It has been suggested that the Parliament may consider amending Section 11 of the 1996 Act to provide a period of limitation for filing an application under this provision, which is in consonance with the object or expeditious disposal of arbitration proceedings; (ii) In rare and exceptional cases, where the claims are ex facie time-barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference.” 5 2025:UHC:2453 7. Learned Senior Counsel appearing on behalf of respondent Nos. 3 to 6 would further place reliance on the ruling of the Hon’ble Apex Court rendered in the case of Arif Azim Company Limited Vs Aptech Limited, (2024) 5 SCC 313. Paragraph Nos. 79 and 80 of the same read as under : “79. We are not impressed with the submission canvassed on behalf of the respondent that the cause of action for raising the claims arose on 01.11.2017 and thus the limitation period for invoking arbitration should commence from the said date. The petitioner has alleged that the respondent received the payment for the course from ICCR on 03.10.2017. However, the perusal of the communication exchanged between the parties indicates that it is only on 28.03.2018 that the right of the petitioner to bring a claim against the respondent could be said to have been crystallised. The position of law is settled that mere failure to pay may not give rise to a cause of action. However, once the applicant has asserted its claim and the respondent has either denied such claim or failed to reply to it, the cause of action will arise after such denial or failure. 80. In B & T AG Vs Union of India, (2024) 5 SCC 358, three principles of law came to be enunciated by this Court regarding the manner in which the point in time when the cause of action arose may be determined. First, that the right to receive the payment ordinarily begins upon completion of the work. Secondly, a dispute arises only when there is a claim by one side and its denial/repudiation by the 6 2025:UHC:2453 other and thirdly, the accrual of cause of action cannot be indefinitely postponed by repeatedly writing letters or sending reminders. It was further emphasised by this Court that it was important to find out the “breaking point” at which any reasonable party would have abandoned the efforts at arriving at a settlement and contemplated referral of the dispute to arbitration. Such breaking point would then become the date on which the cause of action could be said to have commenced.” 8. In the instant case, there is not even a quantification of the amount that is due to the applicant. The only indicator is that the applicant was a 40% shareholder as on 2009. The exercise that would be required to be preliminarily would be quantification and valuation of the assets of the firm as on the date of reconstitution, and in the absence of any denial to pay the amount, a question whether the claim is time barred or not would arise and the same is a mixed question of fact and law. 9. The determination of the issue would require evidence be adduced to demonstrate that there was no denial of the liability and apparently the first claim for settlement of the dues is under the legal notice dated 25.02.2022, and till such time there has been no 7 2025:UHC:2453 dispute and the reading of the covenant, more particularly, the last sentence of paragraph No. 5 would not put the case in a straightjacket. Whether limitation has started running and from what point of time is an issue which would be required to be answered by the Arbitrator as it involves letting in of evidence and the appreciation of the evidence in the light of the provisions of the Limitation Act, more particularly, Article 137 as held by the Hon’ble Apex Court in the Bharat Sanchar Nigam Ltd. case (supra). 10. That apart, as held by the Hon’ble Apex Court in Bharat Sanchar Nigam Ltd. case (supra), in paragraph No. 40, the issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be decided by the arbitral tribunal. For instance, a challenge that a claim is time-barred, or prohibited until some pre-condition is fulfilled, is a challenge to the admissibility of that claim, and not a challenge to the jurisdiction of the arbitrator to decide the claim itself, meaning thereby, that the issue of the claim being time barred or not is an issue that would fall for consideration of the arbitral tribunal. 8 2025:UHC:2453 11. In that view, and in view of the facts narrated above, and in view of paragraph No. 5 of reconstitution deed, the claim requires adjudication by the arbitral tribunal. Accordingly, the Arbitration Application is allowed. 12. The learned Senior Counsel appearing on behalf of respondent Nos. 3 to 6 suggests the name of Mr. D.P. Gairola, Retd. District Judge, R/o 50/3/2, Bhagirathi Enclave, Judges Colony, Balbir Road, Dehradun – 248 001. The counsel for the applicant consents to the same. In view of the submissions on both sides, Mr. D.P. Gairola, Retired District Judge, is appointed as an Arbitrator to resolve the disputes between the parties arising out of the partnership deed. 13. The Arbitrator shall, in terms of Section 11(8) of the Act, furnish his disclosure in writing to the Court within 15 days from the date of receipt of a certified copy of this order. 14. It is open for the parties to determine the rules and procedure of arbitration and the place of arbitration in consultation with the Arbitrator in terms of Sections 19 and 20 of the Act. The Arbitrator shall, in consultation 9 2025:UHC:2453 10 with the parties, fix the remuneration and other chargeable fees. The Arbitrator shall endeavour to hear and pass an Award within the time provided under the statute. _______________ G. NARENDAR, C.J. Dt: 2ND APRIL, 2025 Negi HIMANS HU NEGI Digitally signed by HIMANSHU 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 Date: 2025.04.05 16:16:15 +05'30'