The Hon'ble Bombay High Court in a recent ruling has held that it would not be appropriate for the court to foist unwarranted arbitration when clearly on facts, the cause is a deadwood and in such a case, the Application seeking appointment of an arbitrator is liable to be quashed.

Facts :-

1. An Application was filed in the year 2020 u/s 11 (6) of the Arbitration and Conciliation Act, 1996 before the Hon’ble Bombay High Court for the appointment of an arbitrator to adjudicate the disputes and differences between the parties that had arisen under a Share Subscription and Shareholders Agreement dated 31st May 2010.
2. It was the case of the Applicant that there was a breach on the part of the Respondent on the basis of certain transactions entered into by the Respondent and that the documents constituting the transaction were in the knowledge of the Applicant in the year 2015. The Applicant issued an Arbitration Invocation Notice on 1st July 2019.
3. The Respondent opposed the Application on the basis that the Application was a deadwood and espoused a cause of action which had accrued to the Applicants in the year 2015. Admittedly Invocation of arbitration is itself of the year 2019 i.e. more than 3 years for the cause of action accruing. Hence, the cause of action which was being pursued by the Applicants was itself time barred.
4. The Hon’ble Bombay High Court agreed with the submission of the Respondent that the proceedings were in fact espousing a deadwood. The High Court found that from several averments made in the Application, the entire cause of action was alleged to have accrued on the basis of a document dated 28th September 2015 which, as per the Application was in the knowledge of the Applicant in the year 2015. While deciding the matter, the Hon’ble Bombay High Court placed reliance upon the ruling of the Hon’ble Supreme Court in Bharat Sanchar Nigam Limited v/s Nortel networks India Pvt limited (2021) 5 SCC 738 where the Supreme Court had held that it would not be appropriate for the court to foist unwarranted arbitration when clearly on facts, a cause is a deadwood. The Hon’ble Court also placed reliance upon the ruling of the Hon’ble Supreme Court in Vaidya Drolia and others v/s Durga Trading Corporation (2021) 2 SCC 1 where it was held that at the referral stage the court can refuse to interfere only when it is manifest that the claims are ex-facie time barred or dead or there is no subsisting dispute. The Hon’ble Bombay High Court therefore rejected the Arbitration Application holding the claim which was that was being espoused by the applicant as barred by limitation¹.

By - Chaitanyaa Bhandarkar