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CASE NO.: Appeal (civil)  1523 of 2007

PETITIONER: M/s.Shree Ram Mills Ltd

RESPONDENT: M/s.Utility Premises (P) Ltd

DATE OF JUDGMENT: 21/03/2007

BENCH: H.K. Sema & V.S. Sirpurkar

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No.15656 of 2006)

V.S. SIRPURKAR, J.

1.      Leave granted. 2.      An order under Section 11(6) of the Arbitration and Conciliation  Act, 1996 (hereinafter called as "the Act" for short) appointing  Arbitrators, passed by the Designate Judge of the Bombay High  Court is questioned in this appeal at the instance of Shree Ram Mills  Ltd. (hereinafter called "the petitioner").   3.      The said order is assailed mainly on two grounds, firstly, that  there was no live issue in existence in between the parties and the  learned Judge erred in holding that there was a live issue in between  the parties and secondly that the claim had become barred by  limitation between the parties.  As against this the respondents  M/s.Utility Premises (P) Ltd., supported the order and pointed out that  in pursuance of the order passed not only had the Arbitrator been  appointed but they had also chosen the third Arbitrator to preside  over the Arbitral Tribunal and the Arbitral Tribunal had commenced its  proceedings.  Presently the proceedings before the Arbitral Tribunal  are stayed. 4.      It has, therefore, to be decided as to whether the order passed  under Section 11(6) of the Act appointing the Arbitrators is good order  in law particularly in the wake of the above two objections. 5.      Following undisputed facts would have to be borne in mind  before approaching the questions raised. 6.      The appellant is a company incorporated under the Companies  Act, 1956, so also the respondent.  The appellant company became a  sick industrial unit sometime in the year 1987 under the Sick  Industrial Companies (Special Provisions) Act, 1985 (hereinafter  referred to as "the SICA").  It was ordered to be wound up in the year  1994 and on approaching the Board For Industrial and Financial  Reconstruction (BIFR) a rehabilitation scheme was worked out  whereby IDBI was appointed as an operating agency under the  scheme.  The Asset Sale Committee approved the sale of 1.20 lakh  sq.ft. FSI owned by the appellant company to the respondent for a  total sale consideration of Rs.21.60 crores and accordingly an  agreement came to be executed in between the parties on 27.4.1994.   This was a Joint Development Agreement between the parties in  respect of the land owned by the appellant. By Clause 1 of the  agreement, the area mentioned for development was between 86,000  sq.ft to 1.20 lakh sq.ft. Clause 15 of the said agreement provides that  the land owner, the appellant herein, shall not create any  encumbrance or third party rights.  By Clause 19 the appellant had  undertaken to add additional FSI. By Clause 22 the period was fixed  for utilization of the full FSI covered under the agreement. Clause 24  was the Arbitration Clause to resolve the disputes, if any, between

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the parties. The property covered was described in the Third  Schedule of the said agreement which mentions 1.20 lakh sq.ft. FSI. 7.      After this agreement a second agreement came to be executed  in between the parties on 18.7.1994.  This was necessitated because  the appellant herein could make available only 86,725 sq.ft. FSI.   Under this second agreement it was agreed to by the appellant herein  that the further land admeasuring 2500 sq.mtrs. would be allowed to  be developed by the respondent.  The said 2500 sq.mtrs. land was  reserved by Bombay Municipal Corporation for Municipal Primary  School and playground.  However, the appellant herein undertook to  shift the said reservation to some other property of the appellant at  the cost of the respondent.  There was an arbitration clause vide  Clause No.10 in this agreement also.   8.      On 9.11.1994 there was a Tripartite Agreement between the  appellant and respondent herein along with one Bhupendra Capital  and Finance Limited whereby 50% of the appellant’s entire interest  under the Agreement dated 27.4.1994 and 18.7.1994  was agreed to  be transferred.   9.      On 22.6.1996 the agreement dated 18.7.1994 was cancelled by  mutual consent as the parties were unable to agree on the cost of  shifting the reservation which was agreed to in the agreement dated  18.7.1994. It was, therefore, agreed vide clause 5 that the respondent  and the third party brought in, i.e., Bhupendra Capital and Finance  Ltd., would have no right or claim in respect of the said property  belonging to the appellant and more particularly described in the First  Schedule, save and except, the 86725 sq.ft. FSI. 10.     On 28.6.1996 the respondent herein entered into an  Assignment Agreement with Ansal Housing and Construction to build  flats on the area with FSI of 86725 sq.ft.   11.     On 4.5.2001 the respondent herein had filed a petition under  Section 9 of the Act seeking injunction and appointment of Receiver  in respect of 2500 sq.mtrs. of land.  However, that was dismissed by  the High Court on the ground that the area was covered under the  agreement dated 18.7.1994 and it was cancelled by an agreement  dated 22.6.1996 and, therefore, the application was not maintainable.   The appeal against this order also failed vide order dated 3.6.2002.   12.     On 12.9.2001 respondent and one Santosh Singh Bagla who  was the Promoter of the respondent company, filed application before  the Appellate Authority for Industrial and Financial Reconstruction  (AAIFR) contending therein that the promoters of the petitioner  company were guilty of misfeasance and hence those acts were  liable to be inquired into.  It was secondly prayed that the Board of  Directors of the appellant company should be superseded.  It was  thirdly prayed that the injunction be issued restraining the appellant  from selling or transferring the lands.  This application was dismissed  by AAIFR leaving the parties to get the disputes adjudicated before  an appropriate forum.  It is to be noted here that a specific statement  was made before the AAIFR by the respondent herein that the sale of  1.20 lakh sq.ft. was not the subject matter of the application as the  separate proceedings were being contemplated before the  appropriate forum. 13.     On 11.6.2002 the respondent served a notice invoking the  arbitration clause under agreements dated 27.4.1994 and 18.7.1994  on the ground that the petitioner had denied its liability to transfer the  FSI beyond 86725 sq.ft. though it was bound to make available FSI of  1.20 lakh sq.ft. to the respondents. 14.     The respondent and Shri Santosh Singh Bagla filed a writ  petition in the Delhi High Court on 26.7.2004 whereby they  challenged the order passed by the AAIFR dated 12.9.2001. Though  the respondents had, in their appeal before AAIFR, claimed that the  sale of 1.20 lakh sq.ft. of FSI was not the subject matter of that  application, it was all the same prayed before the High Court in the  writ petition that the appellant should be restrained from transferring  the additional FSI left with them.  Thereupon an undertaking was  given by the counsel for the appellant that the appellant would not sell

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the property which was covered in the agreement dated 27.4.1994.   15.     On 6.8.2004 the appellant agreed to mortgage the property  covered by the agreement dated 27.4.1994 in favour of IL&FS for  Rs.50 crores. 16.     On 15.10.2004 the appellant company was released from SICA  as it became viable. 17.     At this juncture on 19.1.2005 a Memorandum of Understanding  (MoU) was signed between the parties to settle all disputes between  them which naturally included the issue regarding the transfer of 1.20  lakh sq.ft. of FSI.  The respondent under the same agreed to accept  1.20 crores out of which a payment of Rs.10 lakhs was already made  by the appellant to the respondent.  The appellant also agreed to  execute the necessary conveyance deed as per agreement dated  27.4.1994 and 22.6.1996 thereby seeking to confine the claim of the  respondent to 86725 sq.ft. of FSI. 18.     This MoU was cancelled by the respondent on 8.3.2005 and  the respondent returned the amount of Rs.10 lakhs. 19.     The respondent invoked the Arbitration Clause under the  Agreements dated 27.4.1994 and 18.7.1994 by a notice dated  24.5.2005.  The said notice was replied to by the appellant vide its  reply dated 21.6.2005 denying its liability and as a result an  Arbitration Petition under Section 11(6) of the Act was filed on  1.7.2005 for appointing Shri S.C. Agarwal as the Sole Arbitrator.  It is  this application which was disposed of by the learned Judge on  11.8.2006 which is the subject matter of the present proceedings  before us at the instance of the appellant. 20.     As has been stated earlier, the learned Senior Counsel Shri  Salve basically raised two points, they being (i) that there was no live  issue left in between the parties and controversy had become dead;  and (ii) that the claim, if any, of the respondent had become barred by  limitation.  In support of his arguments the learned counsel  painstakingly took us through the whole record. 21.     Shortly stated the argument of the learned counsel is that there  is no live issue remaining between the parties particularly in respect  of 1.20 lakh sq.ft. of FSI.  Learned counsel points out firstly that the  subject of 1.20 lakh sq.ft. of FSI being made available under the  agreement dated 27.4.1994 was finally given a decent burial by the  parties by the MoU dated 19.1.2005 whereunder the respondent had  specifically agreed to restrict his claim only to 86725 sq.ft. of FSI  covered under the agreement dated 27.4.1994.  He points out that in  pursuance of that MoU not only did the respondent accept the draft of  Rs.10 lakhs out of the total agreed amount of Rs.1.20 crores but also  proceeded to encash the same.  Learned counsel points out that on a  second thought the respondent proceeded to cancel the said  agreement and thereupon proceeded to serve an arbitration notice on  24.5.2005.  Learned counsel, therefore, points out that firstly it cannot  be said that respondents had any right under the agreement dated  27.4.1994 left with it and if at all there were any such rights, they  were crystallized vide the MoU dated 19.1.2005 wherein it had  specifically agreed to give up the rest of the claim barring the claim of  86725 sq.ft. FSI and the appellant would have no qualms about the  claim of 86725 sq.ft. FSI and it would always be prepared to convey  the same in terms of the agreement dated 27.4.1994.  Learned  counsel argues that having a second thought regarding the MoU  dated 19.1.2005 the respondent cannot be allowed to wriggle out of  its liabilities and fall back upon the agreement dated 27.4.1994 which  had become an antiquated agreement.  If at all it has any rights,  those rights would be in terms of the MoU dated 19.1.2005. It is,  therefore, pointed out that there is no live issue left between the  parties, more particularly in respect of 1.20 lakh sq.ft. FSI out of  which 86725 sq.ft. FSI has already been given in possession of the  respondent.   22.     Learned counsel further argues that even if there are any rights  left, the claim of the respondent has become hopelessly barred by  time.  Learned counsel contends that the Arbitral Tribunal would now

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have to go back to the agreement dated 27.4.1994 and interpret the  same to decide the rights between the parties which is not possible  under the law of limitation.  The learned counsel suggests a simple  test that a suit for specific performance of the agreement dated  27.4.1994 would obviously be time barred and, therefore, the  respondent cannot have an arbitration as regards that agreement.  23.     Learned counsel lastly states that while passing the order under  Section 11(6) of the Act, the issues regarding the limitation and the  jurisdiction could be left open to be decided by the Arbitral Tribunal,  however, since the learned Designated Judge has decided those  issues, there will be no question of the Arbitral Tribunal deciding  these questions and it is, therefore, that the appellant is required to  challenge the order under Section 11(6) of the Act. 24.     Shri Venugopal, the learned Senior Counsel appearing on  behalf of the respondent, however, pointed out that the controversy  regarding the liability of the appellant to make available 1.20 lakh  sq.ft. of FSI was never dead as otherwise there was no question of  the respondent executing the MoU as late as on 19.1.2005. He points  out that the appellant had given an undertaking in respect of that  property before the Delhi High Court in a writ petition which writ  petition is still pending before the Delhi High Court and the appellant  is facing contempt proceedings on account of the breach of the  undertaking.  Learned counsel further points out that firstly there was  no necessity on the part of the appellant to extend the agreement  dated 27.4.1994 by agreeing to handover the rest of the FSI beyond  86725 sq.ft. by an agreement dated 18.7.1994.  It was only on  account of the fact that the appellant also felt bound by the  agreement dated 27.4.1994 to transfer 1.20 lakh sq.ft. FSI under the  agreement dated 27.4.1994 for which he had received full  consideration of Rs.21.60 crores.  Learned counsel was at pains to  point out further that in fact it was an admitted position that the  appellant got approximately Rs.4 crores more as the respondent had  paid a sum of Rs.25 crores approximately on behalf of the appellant  company which was its financial liability.  Learned counsel points out  that issue regarding 1.20 lakh sq.ft. FSI was never closed and was  always alive between the parties which prompted the parties  ultimately to execute the MoU dated 19.1.2005.  Learned counsel  then points out that the respondent had cancelled the MoU later on  realizing that the entire property stood mortgaged by the appellant on  6.8.2004 which also included the land measuring 4848.10 sq.ft. which  was the subject matter of the agreement dated 27.4.1994. He,  therefore, points out that the parties were continuously negotiating in  respect of the liability on the part of the appellant to transfer 1.20 lakh  sq.ft. FSI and there was no resolution of that issue.  Learned counsel  points out that the moment the MoU was cancelled, the parties  reverted back to their rights under the agreement dated 27.4.1994  and, therefore, it cannot be said that the claim of the respondent  stood satisfied.   25.     Learned counsel further points out that since liabilities under  the agreement dated 27.4.1994 were constantly being negotiated and  re-negotiated in so many proceedings, it cannot be said that firstly the  issue between the parties was dead and secondly the application  under Section 11(6) was barred by time.  Learned counsel in that  behalf relied on the reported decision of this Court in Hari Shankar  Singhania & Ors. Vs. Gaur Hari Singhania & Ors. [(2006) 4 SCC  658].  It was lastly suggested by the learned counsel that the issue as  to whether there was any live issue or not and the issue of limitation  could be decided by the Arbitral Tribunal under Section 16 of the Act  and it cannot be said that those issues were finally decided by the  learned Judge while passing the order under Section 11(6) of the Act.   He points out that it is only for the purpose of appointing the Arbitrator  that the learned Designated Judge has referred the live issue and the  issue of limitation. 26.     On these rival contentions it has to be seen as to whether the  learned Judge was right in passing the order.

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27.     We shall take up the last contention raised by the appellant  regarding the scope of the order passed by the Chief Justice or his  Designate Judge.  It was contended that since the Designate Judge  has already given findings regarding the existence of live claim as  also the limitation, it would be for this Court to test the correctness of  the findings.  As against this it was argued by the respondent that  such issues regarding the live claim as also the limitation are decided  by the Chief Justice or his Designate not finally but for the purpose of  making appointment of the Arbitrators under Section 11(6) of the Act.   In our opinion what the Chief Justice or his Designate does is to put  the arbitration proceedings in motion by appointing an Arbitrator and  it is for that purpose that the finding is given in respect of the  existence of the arbitration clause, the territorial jurisdiction, live issue  and the limitation.  It cannot be disputed that unless there is a finding  given on these issues, there would be no question of proceeding with  the arbitration.  Shri Salve as well as Shri Venugopal invited our  attention to the observations made in para 39 in SBP & CO. vs. Patel  Engineering Ltd. & Anr. [(2005) 8 SCC 618] which are as under: "It is necessary to define what exactly the Chief Justice,  approached with an application under Section 11 of the  Act, is to decide at that stage. Obviously, he has to decide  his own jurisdiction in the sense whether the party making  the motion has approached the right High Court.  He has  to decide whether there is an arbitration agreement, as  defined in the Act and whether the person who has made  the request before him, is a party to such an agreement.   It is necessary to indicate that he can also decide the  question whether the claim was a dead one; or a long- barred claim that was sought to be resurrected and  whether the parties have concluded the transaction by  recording satisfaction of their mutual rights and  obligations or by receiving the final payment without  objection.  It may not be possible at that stage, to decide  whether a live claim made, is one which comes within the  purview of the arbitration clause.  It will be appropriate to  leave that question to be decided by the Arbitral Tribunal  on taking evidence, along with the merits of the claims  involved in the arbitration.  The Chief Justice has to  decide whether the applicant has satisfied the conditions  for appointing an arbitrator under Section 11(6) of the Act.   For the purpose of taking a decision on these aspects, the  Chief Justice can either proceed or get such evidence  recorded, as may be necessary.  We think that adoption  of this procedure in the context of the Act would best  serve the purpose sought to  be achieved by the Act of  expediting the process of arbitration, without too many  approaches to the court at various stages of the  proceedings before the Arbitral Tribunal."

A glance on this para would suggest the scope of order under Section  11 to be passed by the Chief Justice or his Designate.  In so far as  the issues regarding territorial jurisdiction and the existence of the  arbitration agreement are concerned, the Chief Justice or his  Designate has to decide those issues because otherwise the  arbitration can never proceed.  Thus the Chief Justice has to decide  about the territorial jurisdiction and also whether there exists an  arbitration agreement between the parties and whether such party  has approached the court for appointment of the Arbitrator.  The  Chief Justice has to examine as to whether the claim is a dead one or  in the sense whether the parties have already concluded the  transaction and have recorded satisfaction of their mutual rights and  obligations or whether the parties concerned have recorded their  satisfaction regarding the financial claims.  In examining this if the  parties have recorded their satisfaction regarding the financial claims,

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there will be no question of any issue remaining.  It is in this sense  that the Chief Justice has to examine as to whether their remains  anything to be decided between the parties in respect of the  agreement and whether the parties are still at issue on any such  matter.  If the Chief Justice does not, in the strict sense, decide the  issue, in that event it is for him to locate such issue and record his  satisfaction that such issue exists between the parties.  It is only in  that sense that the finding on a live issue is given.  Even at the cost of  repetition we must state that it is only for the purpose of finding out  whether the arbitral procedure has to be started that the Chief Justice  has to record satisfaction that their remains a live issue in between  the parties.  The same thing is about the limitation which is always a  mixed question of law and fact.  The Chief Justice only has to record  his satisfaction that prima facie the issue has not become dead by the  lapse of time or that any party to the agreement has not slept over its  rights beyond the time permitted by law to agitate those issues  covered by the agreement.  It is for this reason that it was pointed out  in the above para that it would be appropriate sometimes to leave the  question regarding the live claim to be decided by the Arbitral  Tribunal.  All that he has to do is to record his satisfaction that the  parties have not closed their rights and the matter has not been  barred by limitation.  Thus, where the Chief Justice comes to a finding  that there exists a live issue, then naturally this finding would include  a finding that the respective claims of the parties have not become  barred by limitation. 28.     Applying these principles to the present case, it will be seen  that the Designate Judge has clearly recorded his satisfaction that the  parties had not concluded their claims.  We must, at this stage, note  that after the first agreement which clearly covers the issue regarding  1,20,000 sq.ft. of FSI, the said issue kept haunting the parties time  and again.  We have already referred to the agreements and their  cancellations.  The first agreement was on 27.4.1994  which is the  basic agreement.  The parties then entered into a second agreement  dated 18.7.1994 which was necessitated on account of the fact that  then the appellant could make available only 86725 sq.ft. of FSI.  It  was under this agreement that the appellant agreed that the further  land measuring 2500 sq.mtrs. would be allowed to be developed by  the respondents which land was reserved by Bombay Municipal  Corporation for Municipal Primary School and playground.  By that  agreement, the appellant undertook to shift the said reservation to  some other property.  This agreement was followed by a Tripartite  Agreement dated 9.11.1994 where a third party, namely, Bhupendra  Capital & Finance Limited joined.  On 22.6.1996 the agreement dated  18.7.1994 was cancelled by the mutual consent as the parties were  unable to agree regarding the cost of shifting the reservation further,  thereby the third party, namely, Bhupendra Capital & Finance Limited  was excluded.  If the things had remained at this stage, there was no  question of the issue regarding the 1,20,000 sq.ft. of FSI  remaining  alive.  However, it is clear from the developments thereafter that this  issue remained burning in between the parties which is evident from  the fact that the respondents moved an application under Section 9 of  the Act on 4.5.2001 in respect of 2500 sq.mtrs. of land obviously to  safeguard their interest regarding the 1,20,000 sq.ft. of FSI.  It is  obvious that this FSI was linked with the aforementioned land  measuring 2500 sq.mtrs..  Though the respondents failed in their  attempt to get an injunction under Section 9 of the Act, they did not  leave the things at that and brought in the such issue firstly by serving  the notice dated 11.6.2002 invoking the arbitration clause and  secondly by including this issue in their writ petition filed before the  Delhi High Court wherein the appellants were made to give an  undertaking that they will not sell the property which was covered  under the agreement dated 27.4.1994 which obviously included the  1,20,000 sq.ft. of FSI.  Now this undertaking is still continuing.  It is  not for us to go into the correctness or otherwise of the order passed  by the Delhi High Court regarding the undertaking because that is not

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the question pending before us, however, it only shows that the  parties had not closed the question regarding 1,20,000 sq.ft. of FSI.   As if all this was not sufficient, lastly the parties agreed on 19.1.2005  for a MoU where this precise question came up.  There, it seems the  respondent had agreed to leave their claim regarding the 1,20,000  sq.ft. of FSI.  It, however, seems that the respondent wriggled out of  the MoU and cancelled it and chose to serve the arbitration notice for  appointment of the arbitrators.   29.     Learned counsel Shri Salve points out that this was not  possible as the respondent could not wriggle out of the commitment  made in the MoU and could not have unilaterally cancelled the MoU  as the respondent had accepted to give up their claim for a  consideration of Rs.1.20 crores and had accepted part payment of  Rs.10 lakhs out of the same.  We must state here that it will not be for  us to decide as to whether the respondents were within their rights to  repudiate the MoU and serve the notice of arbitration.  What would be  the rights of the parties on account of entering into a MoU dated  19.1.2005 would not be for us to decide sitting in this jurisdiction.  We  have only to adjudge as to whether the parties were still at  loggerheads as regards the present issue.  The very necessity felt on  their part for a MoU would suggest that the issue was not closed.   Shri Salve argues that the respondents could not be allowed now to  revert back on the agreement dated 27.4.1994 once it had chosen to  close the issue by entering into the MoU dated 19.1.2005.  Learned  Senior Counsel sought our finding on that.  We have already clarified  that it will not be for us to give that finding.  In our opinion the very  fact that the parties chose to create the MoU dated 19.1.2005  suggests that the order regarding 1,20,000 sq.ft. of FSI was never  closed or atleast was never treated to have closed and in that sense  it was still a live issue.  Learned counsel Shri Savle relied upon the  decision in Nathani Steels Ltd. vs. Associated Constructions  [(1995) Supp. (3) SCC 324].  Our attention was drawn particularly to  contents of paragraph 3 which are as under: "\005once there is a full and final settlement in respect any  particular dispute or difference in relation to a matter  covered under the Arbitration clause in the contract and  that dispute or difference is finally settled by and between  the parties, such a dispute or difference does not remain  to be an arbitrable dispute and the Arbitration clause  cannot be invoked even though for certain other matters,  the contract may be in subsistence.  Once the parties  have arrived at a settlement in respect of any dispute or  difference arising under a contract and that dispute or  difference is amicably settled by way of a final settlement  by and between the parties, unless that settlement set  aside in proper proceedings, it cannot lie in the mouth of  one of the parties to the settlement to spurn it on the  ground that it was a mistake and proceed to invoke the  arbitration clause.  If this is permitted the sanctity of  contract, the settlement also being a contract would be  wholly lost and it would be open to one party to take the  benefit under the settlement and then to question the  same on the ground of mistake without having the  settlement set aside"

Though the observations at the first blush appear to be in favour of  the appellants, on the closer look they are not so.  This was a case  where in a contract the parties had amicably settled their disputes  and the parties also did not dispute that the they have arrived at such  a settlement.  It is under those circumstances that the observations  were made.  However, we do not think that the facts in the present  case suggest that there was a full and final settlement in between the  parties in respect of the issue regarding 1,20,000 sq.ft. of FSI and  that a MoU was signed wherein the respondent and Bhupendra

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Capital & Finance Limited who was the party to the third agreement,  acknowledged that they were left with rights limited to 86,725 sq.ft. of  FSI.  It must be seen that there is no reference whatsoever to any  consideration as regards the 1,20,000 sq.ft. of FSI, much less to the  figure of Rs.1.20 crores in this MoU.  As to what would be the effect  of this MoU on the rights of the respondent herein would not be for us  to go into but it is certain that the issue had not been settled  completely.  In Nathani’s case (supra) the issue was admittedly  settled and that was not disputed by the parties thereto.  Here the  parties and more particularly the respondents are seriously disputing  that the issue regarding 1,20,000 sq.ft. of FSI was finally settled in  between the parties.  It would be only for the Arbitral Tribunal to  decide the effect of the respondent having signed the MoU.  We have  pointed out earlier that this MoU cannot be said to be in the nature of  a contract.  In Nathani’s case the settlement was viewed as a  contract and it was, therefore, reiterated that if the parties are allowed  to wriggle out of their obligation from the contract, no sanctity would  be left to the settlement which are in the nature of a contract.  It is for  this reason that, in our opinion, the decision in Nathani’s case is not  applicable to the present facts.  We also reiterate at this juncture that  the cloud on 2500 sq.mtrs. of land which is inexplicably connected  with the FSI of 1,20,000 sq.ft. created by the undertaking given  before the Delhi High Court still remains looming large and remained   so even on the date of the MoU.  It is for this reason also that we are  of the clear opinion that there was no final settlement of the issue  regarding 1,20,000 sq.ft. of FSI even by the MoU dated 19.1.2005.  If  that was so, it is clear that there was live issue in between the parties  and the parties were at loggerheads on that issue. 30.     Once we have come to the conclusion that the learned  Designate Judge was right in holding that there was a live issue, the  question of limitation automatically gets resolved. This Court in Hari  Shanker Singhania’s case (supra) held that till such time as the  settlement talks are going on directly or by way of correspondence no  issue arises and with the result the clock of limitation does not start  ticking.  This Court observed: "Where a settlement with or without conciliation is not  possible, then comes the stage of adjudication by way of  arbitration.  Article 137 as construed in this sense, then as  long as parties are in dialogue and even the differences  would have surfaced it cannot be asserted that a  limitation under Article 137 has commenced.  Such an  interpretation will compel the parties to resort to litigation/  arbitration even where there is serious hope of the parties  themselves resolving the issues.  The learned Judges of  the High Court, in our view have erred in dismissing the  appellants’ appeal and affirming the findings of the  learned Single Judge to the effect that the application  made by the appellants under Section 20 of the Act, 1940  asking for a reference was beyond time under Article 137  of the Limitation Act\005.. As already noticed, the  correspondence between the parties in fact, bears out  that every attempt was being made to comply with and  carry out the reciprocal obligations spelt out in the  agreement between the parties.   

These observations would clearly suggest that where the negotiations  were still on, there would be no question of starting of the limitation  period.   31.     According to Shri Salve, learned counsel appearing on behalf of  the appellants the clock had started ticking against the respondents in  relation to the agreement dated 27.4.1994 and they could have had  only three years period for filing a suit as per Article 137 of the  Limitation Act and as such the claim made with reference to that  agreement cannot be arbitrable now in the year 2005.  We do not

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agree.  It is for this reason alone that we have given the complete  history of the negotiations in between the parties.  The things do not  seem to have settled even by 19.1.2005 but that would be for the  Arbitral Tribunal to decide.  We only observe, at this stage, that the  claim of the respondent cannot be said to have become dead firstly  because of the settlement or because of lapse of limitation.  What is  the effect of MoU dated 19.1.2005; was the respondent justified in  repudiating the said MoU; and what is the effect of repudiation thereof  on the earlier agreement dated 27.4.1994 would be for the Arbitral  Tribunal to decide.  In Groupe Chimique Tunisien SA vs. Southern  Petrochemicals Industries Corpn. Ltd. [(2006) 5 SCC 275] this  Court had clearly held in para 10 that the Arbitral Tribunal can also go  into the question of limitation for the claims in between the parties.   We have discussed this subject only to hold that since the issue in  between the parties is still alive, there would be no question of stifling  the arbitration proceedings by holding that the issue has become  dead by limitation.  We leave the question of limitation also upon the  Arbitral Tribunal to decide. 32.     In view of the foregoing discussion we are of the clear opinion  that the learned Designate Judge was right in appointing the  Arbitrator under Section 11(6) of the Act,  We, therefore, proceed to  dismiss the Civil Appeal with no order as to costs.