Limitation Period For Specific Performance Starts From Date Of Refusal If No Fixed Date Stipulated In Agreement: Karnataka High Court

"Once the view taken by the Arbitrator is a plausible view, founded on evidence available on record, this Court cannot substitute its view merely because another view is possible," High Court of Karnataka, in a significant ruling, held that when a development agreement does not prescribe a fixed date for the execution of sale deeds, the limitation period for seeking specific performance is governed by the second limb of Article 54 of the Limitation Act, 1963.

A division bench comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha observed that in such cases, the limitation commences only when the plaintiff has notice that performance has been refused.

The court further emphasized that the scope of interference under Section 37 of the Arbitration and Conciliation Act, 1996 (A&C Act) is extremely narrow, especially when a Commercial Court has already declined to set aside an award under Section 34. The bench noted that an appellate court cannot undertake an independent assessment of the merits or re-appreciate evidence if the Arbitrator’s view is a plausible one.

The appellant, along with other landowners, entered into a development agreement in 2010 with the Ashritha House Building Co-operative Society for the formation of a residential layout in Mysore. While the Society developed the layout in phases and paid nearly ₹13.83 crores as consideration, the appellant refused to execute the final batch of sale deeds for 37 sites, alleging delayed performance and demanding higher compensation. The Society invoked arbitration, resulting in an award that directed the landowners to execute the sale deeds, which was later upheld by the Commercial Court.

The primary question before the court was whether the Society's claim for the execution of sale deeds was barred by limitation under Article 54 of the Limitation Act. The court was also called upon to determine whether the Arbitral Tribunal’s findings regarding the Society’s readiness and willingness to perform its contractual obligations warranted interference under the limited scope of Section 37 of the A&C Act.

Narrow Scope of Interference Under Section 37 A&C Act

The Court began by outlining the restrictive nature of appellate jurisdiction under the A&C Act. Citing the Supreme Court’s decision in MMTC Limited Vs. Vedanta Limited, the bench observed that an appellate court exercising jurisdiction under Section 37 cannot travel beyond the restrictions imposed under Section 34. The court held that the enquiry is strictly confined to examining whether the lower court acted within the parameters prescribed by the statute while refusing to set aside the award.

The bench noted that when an arbitral award has been upheld under Section 34, the appellate court must be "extremely cautious and slow in disturbing such findings." It reiterated that the Arbitrator is the ultimate arbiter of facts and is entitled to take into account contemporaneous correspondence and surrounding circumstances while rendering an award.

Interpretation Of Article 54 Of The Limitation Act - Limitation Triggers Only Upon Refusal If No Date Is Fixed

The principal contention of the appellant was that the claim was time-barred as the layout sites were released in phases starting from 2012, yet the Society issued its first demand notice only in 2019. The High Court rejected this argument, pointing out that the development agreement (Ex.P1) did not specify any fixed date for the execution of the remaining sale deeds. Consequently, the court held that the second limb of Article 54 of the Limitation Act, 1963, became applicable.

The bench observed that under this provision, the limitation period of three years commences only when the plaintiff notices that performance is refused. In this case, the court found that the Society had been continuously performing its obligations, including securing statutory approvals from the Mysore Urban Development Authority (MUDA). The final batch of sites was released only in November 2017, and the appellant’s unequivocal refusal to perform arose only through a reply notice dated February 23, 2019.

Arbitrator’s Finding on Substantial Performance - Society Demonstrated Continuous Readiness And Willingness

The Court highlighted the Arbitrator’s finding that the Society had substantially performed its obligations by developing the layout and paying substantial consideration. The bench noted that the execution of sale deeds for 84 sites prior to the dispute was inconsistent with any contention that the Society had abandoned its rights under the agreement. The delay in executing the remaining deeds was not attributable to the Society but to the phased release of sites by MUDA.

The Court held that the Arbitrator's conclusion regarding the Society's readiness and willingness was a plausible view founded on the evidence. The bench stated that the Commercial Court was correct in not re-appreciating the evidence, as a different interpretation of the same material is impermissible under the scheme of the A&C Act.

Patent Illegality and Public Policy - Erroneous Application Of Law Not A Ground For Interference

Referencing Ssangyong Engineering and Construction Company Limited Vs. NHAI, the High Court clarified that "patent illegality" must go to the root of the matter and cannot be invoked over a mere erroneous application of law. The bench observed that the appellant’s grievances regarding the apportionment of consideration were inter se disputes between landowners and did not affect the contractual rights of the Society.

The Court concluded that the findings recorded by the Arbitrator did not suffer from any perversity or violation of public policy. It affirmed that once a view taken by the Arbitral Tribunal is found to be plausible, the court cannot substitute its own view merely because it finds another interpretation possible.

The High Court dismissed the commercial appeal, upholding the order of the Commercial Court and the underlying arbitral award. The bench concluded that the claim was not barred by limitation and that no grounds for interference had been established under Section 37 of the A&C Act.

Date of Decision: 29th June 2026