Urban Infrastructure Real Estate Fund vs Neelkanth Realty Private Limited 2025 INSC 1255 - Arbitration - Plea Of Demurrer - Limitation

Plea of demurrer -The plea of demurrer is an act of objecting or taking exception or a protest. It is a pleading made by one party which “assumes” the truth of the matter as alleged by the opposite party, but sets up that it is insufficient in law to sustain the claim, or that there is some other defect in the pleadings which constitutes a legal reason as to why the suit must not be allowed to proceed further- Even assuming those facts as pleaded are true, the court does not have jurisdiction as a matter of law. The party raising the plea challenges legal sufficiency of a complaint/plaint/action rather than its factual accuracy - A decision on demurrer has to be determined ex-facie the plaint -At the stage of demurrer, it is only the statement of claim which is to be looked into to decide whether the matter must be thrown out at the threshold or not - Only certain objections are capable of being decided by way of demurrer. Only those objections which do not involve questions of facts nor the adducing of any further evidence, could be decided by way of demurrer- The rule that when a mixed question of law and fact is decided on the basis of a demurrer, the issue would not be permanently foreclosed - Since a plea of demurrer is akin to an application made under Order VII Rule 11(d), the same principles must apply. (Para 94,134)

Arbitration and Conciliation Act 1996- Section 19 ; Limitation Act 1963 - Section 3-The elasticity of the doctrine of party autonomy cannot be tested and pushed to the extent that it has the consequence of being at loggerheads with the duty of the Arbitral Tribunal which is manifest in Section 3 of the Act, 1963. (Para 116)

Arbitration and Conciliation Act 1996- Section 19,43- The doctrine of party autonomy is not limitless - When the exercise of party autonomy is in teeth with any mandatory provision of the Act, 1996, the same could not be said to be proper.  (Para 108) - When parties wish to adopt procedures which strike at the root of very adjudication of the dispute and have the potential to upend any established principle of fairness which our legal system has created and nurtured over the years, one has to see whether such an exercise of party autonomy is within the confines of the Act, 1996 and within the confines of the doctrine of party autonomy envisaged by the Act, 1996- (Para 112) Any procedure agreed upon by parties cannot and must not have the consequence of the matter being decided in ignorance of settled principles of law, which includes the principles of limitation, or have the effect of the matter being decided in an unfair and lopsided manner. One must be able to distinguish between instances when party autonomy is used to dispense with mere technicalities in the pursuit of a fair and speedy resolution of the dispute, and instances when the doctrine is being disguised to shorthand fairness and justice itself. (Para 114) There are certain non-derogable provisions within the scheme of the Act, 1996 itself, which the parties cannot ignore or attempt to bypass, even by agreement. Parties have the autonomy to decide their own procedure including the modalities of the arbitration but within the confines of the provisions of Part I of the Arbitration Act, 1996. This, by extension, would also mean that the chosen procedure must align with the underlying principles of limitation law owing to the mandate reflected in Section 43 of the Act, 1996. (Para 119)

Arbitration and Conciliation Act 1996- Section 34- The phrase “public policy of India” must be construed narrowly and an undue expansion of the grounds of “fundamental policy of Indian law” and “most basic notions of justice or morality” respectively, cannot be countenanced. (Para 124) The nonadoption of a “judicial approach” cannot form a valid ground for the purpose of justifying an interference to the present interim award under Section 34 of the Act, 1996. (Para 126) “most basic notions of justice” is, substantively and procedurally, some fundamental principle of justice which has been breached, and which shocks the conscience of the Court.” - This ground can only be attracted under very exceptional circumstances where the conscience of the court is shocked by the infraction of the most fundamental notions or principles of justice. (Para 127)

Arbitration and Conciliation Act 1996- Section 34 - When undertaking the exercise of severing an award, it must be ascertained whether the illegality is such that it affects the award as a whole. If not, then that portion of the award which does not suffer from any infirmity could be upheld. While severing, the courts must be vigilant to ensure that the good or viable part(s) of the award is not rendered vulnerable or unsustainable as a direct consequence of the severing. Therefore, while employing the doctrine of severance, one must walk the tight rope of not dislodging the good part of the award.  (Para 131)

Code of Civil Procedure 1908 -Order VII Rule 11(d) - Disputed questions cannot, as a matter of rule, be decided while considering an application filed under Order VII Rule 11(d). What has to be decided is whether on the face of it, the averments made in the plaint, without any doubt or dispute, show that the suit is or is not barred by limitation or any other law in force. (Para 119 -vi)

Limitation Act 1963 - Section 3- The issue of limitation is a mixed question of law and fact, and goes to the root of any claim that a party may put forward. It is incumbent upon any Court or Tribunal having jurisdiction over any dispute to, first, adjudicate the question of limitation and dismiss the claim if found to be barred by limitation, even if limitation is not set up as a defence-There exists a positive duty upon any forum adjudicating any dispute to ensure that the claim is within limitation. This duty must be reasonably and properly discharged in a manner which is tailored to the facts and circumstances of each case- If the peculiar facts of the matter are such that, the issue of limitation cannot be decided sans further evidence, then the mandate of Section 3 of the Act, 1963, must be understood to also empower the court or tribunal to require further evidence in order to adjudicate the issue. (Para 100-101)

Arbitration and Conciliation Act 1996 - Section 43 ; Limitation Act 1963 - Section 3- Arbitral Tribunal would also be bound by the statutory mandate underlying Section 3 of the Act, 1963 which requires the arbitrator to decide the issue of limitation in a proper and reasonable manner. (Para 102)

Arbitration and Conciliation Act 1996 - Arbitral Tribunal is neither required to conduct arbitration proceedings strictly like a civil court nor that the provisions of the CPC and Evidence Act respectively do not apply stricto sensu to arbitral proceedings. However, it cannot be denied that any procedure adopted in the arbitral proceedings must subscribe to and not be at variance with the underlying principles of justice. (Para 135)

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