Prime Services vs. Sanjay Gandhi Memorial Hospital & Anr.
Original PDF →Facts
The petitioner, Prime Services, was awarded a Work Order on 13.10.2008 for Nursing Orderlies at Sanjay Gandhi Memorial Hospital, followed by an Agreement for Class IV/Nursing Orderly Services on 15.10.2008. The Agreement contained an arbitration clause. The respondents withheld Rs. 1,00,41,232/- from the petitioner's billed amount based on instructions from the Assistant Commissioner, Service Tax. The respondents sought clarification from the Commissioner (CGST) regarding this objection. The petitioner invoked arbitration on 01.08.2025 due to disputes and subsequently filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator.
Held
The Court held that the question of whether the petitioner's claims are stale or constitute a continuing cause of action is a mixed question of fact and law that can only be decided by the Arbitrator after recording evidence and examining the factual matrix. The referral Court's role is limited to forming a prima facie opinion that subsisting disputes exist. The Court found that the withholding of payment pursuant to the Assistant Commissioner's letter indicated a subsisting dispute. The Court also noted that the cause of action continuing to arise daily while the amount remains unpaid is a plausible argument for the Arbitrator to consider. Consequently, the Court allowed the petition and appointed Ms. Vrinda Kapoor Dev as the Sole Arbitrator, leaving all rights, contentions, arbitrability, preliminary objections like limitation, and the merits of claims/counter-claims open for the Arbitrator's adjudication.
Key Issues
1. Whether the Court has jurisdiction to appoint an arbitrator when the respondents contend that the petitioner's claims are barred by limitation and are stale claims, which is a mixed question of fact and law? (Section 11(6) of the Arbitration and Conciliation Act, 1996). The petitioner argued that the withheld amount constitutes a subsisting dispute and that the cause of action may be continuing. The respondents argued that the claims are barred by limitation and are stale claims.
Sections Cited
Section 11(6)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
O R D E R % 04.12.2025
This is a petition filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator for adjudication of disputes between the parties.
The brief facts of the case are that the petitioner participated in a tender process and being a successful bidder was issued a Work Order dated 13.10.2008 for Nursing Orderlies in the premises of Sanjay Gandhi Memorial Hospital, Mangolpuri by the respondents. Thereafter, the parties entered into an Agreement for Class IV/ Nursing Orderly Services dated 15.10.2008. 3. The said Agreement contained an arbitration clause being Clause No. 19 which reads as under: “In case of any dispute or difference, the award of the Arbitrator by the Lt. Governor of GNCT of Delhi will be final and binding on the parties to the contract and the court of Delhi/New Delhi shall only have the juri iction over the same. ” This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 10/12/2025 at 11:55:42
The respondents withheld a sum of Rs. 1,00,41,232/- out of the billed amount on instructions from the Assistant Commissioner, Service Tax.
The respondents sought information from Commissioner (CGST) vide letter dated 07.09.2022 regarding objection with regard to release of the payment to the petitioner.
The letter of 07.09.2022 reads as under: This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 10/12/2025 at 11:55:42
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 10/12/2025 at 11:55:42
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 10/12/2025 at 11:55:42
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 10/12/2025 at 11:55:42
Since there were disputes between the parties, the petitioner invoked arbitration vide legal notice dated 01.08.2025 and thereafter filed the present petition.
Mr. Gupta, learned counsel appears for the respondents and has addressed oral arguments. He states that the claims of the petitioner are barred by limitation and are stale claims.
In the present case, a perusal of the letter dated 07.09.2022 shows that the amount was withheld by the respondents pursuant to a letter written by the Assistant Commissioner, Service Tax Department.
The fact whether the claims of the petitioner are stale or it is a continuing cause of action, is a mixed question of fact and law which the Arbitrator can only decide after recording evidence and seeing the factual matrix in detail.
The referral Court is only to form prima facie opinion that there are subsisting disputes between the parties. The fact that the cause of action continues to arise on each day when the amount has not been paid, prima facie may be plausible.
For the said reasons, the petition is allowed and the following directions are issued:- i) Ms. Vrinda Kapoor Dev (Advocate) (Mob. No. 9899029387) is appointed as a Sole Arbitrator to adjudicate the disputes between the parties. ii) The arbitration will be held under the aegis and rules of the Delhi International Arbitration Centre, Delhi High Court, Sher Shah This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 10/12/2025 at 11:55:42
Road, New Delhi (hereinafter, referred to as the ‘DIAC’). iii) The remuneration of the learned Arbitrator shall be in terms of DIAC (Administrative Cost and Arbitrators’ Fees) Rules, 2018. iv) The learned Arbitrator is requested to furnish a declaration in terms of Section 12 of the Act prior to entering into the reference. v) It is made clear that all the rights and contentions of the parties, including as to the arbitrability of any of the claim, any other preliminary objection such as limitation, as well as claims/counter- claims and merits of the dispute of either of the parties, are left open for adjudication by the learned arbitrator. vi) The parties shall approach the learned Arbitrator within two weeks from today.
The present petition is disposed of in the aforesaid terms. JASMEET SINGH, J DECEMBER 4, 2025/AS This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 10/12/2025 at 11:55:42
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.