Demurrer, Limitation and Party Autonomy in Arbitration:
Commentary on Urban Infrastructure Real Estate Fund v. Neelkanth Realty Pvt Ltd, 2025 INSC 1255

1. Introduction

The Supreme Court’s decision in Urban Infrastructure Real Estate Fund v. Neelkanth Realty Pvt Ltd & Ors (2025 INSC 1255) is a significant authority on three interlinked questions in arbitration law:

• How far can an arbitral tribunal decide a preliminary issue of limitation “on demurrer” and treat that decision as finally foreclosing the issue?
• What are the limits of party autonomy under Section 19 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) vis‑à‑vis the mandatory duty under Section 3 of the Limitation Act, 1963?
• In an international commercial arbitration, when and how can courts partially set aside an arbitral award under Section 34 on the ground of “public policy of India”, especially “most basic notions of justice”?

The case arose from a foreign investor’s claim: Urban Infrastructure Real Estate Fund (“UIREF”), a Mauritius-based private equity fund, had invested Rs. 25 crores in Neelkanth Realty Pvt Ltd (“NRPL”) for a large township project in Maharashtra under a Share Subscription Agreement (SSA) and a Shareholders’ Agreement (SHA), both dated 23.07.2008. Clause 5.3 of the SSA provided that if specified “Conditions Precedent” were not fulfilled within 90 days (or an extended period agreed by the investor), the investor could demand refund with 18% interest.

When disputes arose, they were referred to a sole arbitrator (in an international commercial arbitration seated in Mumbai). The tribunal framed Issue No. 1 as:

“Whether all or any of the claims made by the Claimant are barred by the law of limitation.”

At the insistence of the respondents (NRPL and its directors), the tribunal agreed to decide this as a preliminary issue and, crucially, on the basis of “demurrer” – i.e., assuming the facts in the Statement of Claim to be true and deciding only a pure question of law, without evidence. The tribunal then held the claims to be within limitation and further declared that this finding would be final and could not be revisited even after evidence.

The Bombay High Court (Single Judge under Section 34, affirmed by Division Bench under Section 37) held that such foreclosure was impermissible: a decision on limitation taken “on demurrer” cannot bar the tribunal from re‑examining limitation on evidence, because limitation is a mixed question of law and fact.

UIREF’s Special Leave Petitions were dismissed in limine, but the Supreme Court (Pardiwala, J. & Viswanathan, J.) issued a detailed, reportable judgment explaining why no interference was warranted. This commentary explores that reasoning and the new clarifications it brings.

2. Summary of the Judgment

2.1 Procedural History

• UIREF invested Rs. 25 crores in NRPL under the SSA/SHA. Conditions Precedent were to be fulfilled within 90 days (extendable) failing which UIREF could demand refund with interest (Clause 5.3).
• Disputes over non-fulfilment, non-allotment of equity, and exits led to correspondence in 2009 and unsuccessful settlement talks up to 2011 and 2016.
• On 11.01.2017 UIREF invoked arbitration. A Section 11 petition resulted in the appointment of Justice S.N. Variava (Retd.) as sole arbitrator on 15.01.2018.
• On 27.08.2019, the arbitrator delivered an “interim award” holding:
  • Issue of limitation would be decided on “demurrer” (Statement of Claim and annexed documents assumed true; no evidence from respondents);
  • On that basis, the claims were within limitation; and
  • This finding on limitation would be final and could not be reopened later.
• NRPL and certain directors challenged the interim award under Section 34 before a Single Judge of the Bombay High Court, who held:
  • The finding that the claims were within limitation (on demurrer) could stand as a preliminary view;
  • But the tribunal could not foreclose the issue of limitation – it remained open to be revisited on evidence if warranted.
• The Division Bench, in appeals under Section 37, affirmed, holding that:
  • Limitation is generally a mixed question of law and fact;
  • It may be tried as a preliminary issue only where no evidence is required; and
  • In this case, the arbitrator had himself indicated that evidence might have led to a different result, so treating the demurrer decision as final reflected a failure to adopt a proper “judicial approach”, amounting to a violation of the “fundamental policy of Indian law”.
• UIREF filed SLPs before the Supreme Court. After hearing the petitioner, the Court dismissed the SLPs, reserving reasons. The present judgment supplies those reasons.

2.2 Core Holdings

The Supreme Court framed three legal questions (para 26) and answered them broadly as follows:

1. Whether the preliminary limitation issue decided on demurrer could be permanently foreclosed?
   Held: No. A decision on limitation “on demurrer” – i.e., assuming the claimant’s averments to be correct and without allowing the respondent to lead evidence – cannot finally foreclose the limitation issue, especially when limitation is a mixed question of law and fact. The tribunal misapplied the concept of demurrer and imported Anglo–American consequences inconsistent with Indian law.
2. Whether party autonomy can be used to adopt a procedure infringing Section 3 of the Limitation Act?
   Held: No. Section 19(2) of the Arbitration Act (party autonomy in procedure) is expressly made “subject to this Part”, which includes Section 43 (making the Limitation Act applicable) and through it, Section 3 of the Limitation Act (mandatory bar of limitation). Party autonomy cannot be stretched to undermine mandatory limitation rules or permit a superficial or unfair handling of limitation.
3. Whether the interim award warranted interference under Section 34?
   Held: Yes, but only partially, and under a narrow head of public policy. Post‑amendment (2015) “judicial approach” and “patent illegality” are not grounds for setting aside an award in an international commercial arbitration. However, the tribunal’s declaration that the limitation finding on demurrer was final and non‑revisitable violated the “most basic notions of justice” (Section 34(2)(b)(ii) as interpreted in Ssangyong and Associate Builders). Applying the doctrine of severability (as clarified in Gayatri Balasamy), only this “finality/foreclosure” portion was rightly set aside; the substantive conclusion that, on the assumed facts, the claim was in time was left undisturbed.

Thus, the Supreme Court upheld the Bombay High Court’s modification: the arbitrator’s preliminary finding that the claims were within limitation (on demurrer) stands as a tentative determination, but the tribunal remains free to revisit limitation on the basis of evidence and further material “if tendered and if so warranted”.

3. Analysis of the Judgment

3.1 Factual and Procedural Matrix (in brief)

The factual narrative matters mainly for understanding the limitation controversy:

• UIREF invested Rs. 25 crores in 2008 under the SSA/SHA. Conditions Precedent had to be fulfilled within 90 business days (till 22.10.2008), or within any extended period agreed by UIREF, failing which refund with interest could be demanded (Clause 5.3).
• UIREF’s advisor, Urban Infrastructure Venture Capital Ltd (UIVCL), wrote in January and February 2009 complaining that no equity had been allotted and seeking refund.
• NRPL replied in February 2009 referring to “without prejudice” settlement discussions.
• UIREF claims that time for performance under the SSA was extended in 2011 while mediation was explored; further negotiations took place in 2016, with a formal invocation of arbitration in January 2017.
• In the Statement of Claim, UIREF specifically pleaded (para 21) that, at NRPL’s request, it agreed to “extend time for compliance of the terms of the SSA in accordance with Clause 5.3” and to “desist from exercising its remedies” while settlement was explored.

The limitation question turned on whether this alleged extension of time gave rise to a fresh cause of action (and so a later limitation starting point), or whether limitation began running in 2009 with the first demand for refund. NRPL wanted this decided up front, as a pure point of law on the footing that the Statement of Claim was taken at face value.

Crucially, the arbitrator himself recorded (para 37 of the interim award) that had all evidence been recorded he might have been inclined to accept some submissions of the respondents, and that their contention might have been possible if UIREF’s witness was cross‑examined and if there was evidence from the respondents. Yet he still declared the demurrer decision final and irreversible. That tension is central to the Supreme Court’s criticism.

3.2 Demurrer: Comparative and Indian Law

3.2.1 The Concept of “Demurrer”

The Court begins with a careful exposition of “demurrer” (paras 27–38): derived from Latin “demorari” (to delay/stop), it is a pleading by which a party:

• assumes, for the purpose of argument, that the opponent’s factual allegations are true; but
• contends that, even so, they do not disclose a legally sustainable claim, or are barred by law.

Demurrer is, therefore, a filter for purely legal objections to the sufficiency of the pleading; it is not a mechanism for resolving factual disputes.

3.2.2 Demurrer in U.S. Practice (and Why It Cannot Be Simply Imported)

A substantial part of the judgment surveys U.S. practice on demurrers (paras 39–62), distinguishing:

• Demurrers to pleadings/declarations, studied in Aurora City v. West, 74 U.S. 82; Gould v. Evansville & C.R. Co., 91 U.S. 526; Alley v. Nott, 111 U.S. 472; Bissell v. Spring Valley Township, 124 U.S. 225; Nalle v. Oyster, 230 U.S. 165;
• Demurrers to evidence, in Fowle v. Common Council of Alexandria, 24 U.S. 320 and Slocum v. New York Life Insurance Co., 228 U.S. 364.

Key features in U.S. law:

• Demurrer is a codified mode of pleading. Statutes govern when and how it can be used (e.g., California Code of Civil Procedure; Virginia Code).
• Demurrer to evidence requires a “joinder in demurrer”: both parties must accept that only a point of law remains and that all relevant facts are admitted. If facts are disputed or indeterminate, the court must refuse to proceed on demurrer and order a trial.
• Once a demurrer on a pure legal issue is overruled, the court may sometimes allow the demurring party to plead over; if not, the judgment may operate as res judicata on the admitted facts.

The Supreme Court stresses that this intricate procedural background does not exist in India. There is no statutory provision in the Code of Civil Procedure, 1908 (“CPC”) for demurrers. Indian courts have only used the term descriptively, to analogise to applications such as those under Order VII Rule 11(d) or preliminary objections on jurisdiction.

Thus, Indian courts cannot mechanically import the U.S./English law consequences (e.g., finality, estoppel on facts) that follow from demurrer.

3.2.3 Demurrer in Indian Jurisprudence

The Court then synthesises Indian case law where “demurrer” has been mentioned:

• O.N. Bhatnagar v. Rukibai Narsindas (1982) 2 SCC 244: jurisdictional objection was raised “in the nature of a demurrer”, so the court looked only at the plaintiff’s statement of claim (and the licence agreement). But once proceedings continued and evidence was led, the defendant had to prove his plea (tenant status), and failure to discharge that burden was decisive. The judgment illustrates that:
  • A demurrer‑type objection does not permanently fix the factual matrix; and
  • An unsuccessful demurrer does not bar the defendant from later contesting facts at trial.
• Exphar SA v. Eupharma Laboratories Ltd (2004) 3 SCC 688: when a jurisdictional objection is raised by way of demurrer, the court must proceed on the basis that the facts in the plaint are true; for the objection to succeed, those facts must themselves disclose want of jurisdiction.
• Man Roland Druckimachinen AG v. Multicolour Offset Ltd (2004) 7 SCC 447: crucial distinction:
  • One objection to MRTP Commission’s jurisdiction turned purely on a contract clause – capable of being decided on demurrer, without evidence;
  • Another objection (whether the foreign seller “carried on business” in India and whether the alleged unfair practice occurred in India) involved factual disputes and had to be tried on evidence – not on demurrer.
• Indian Mineral & Chemical Co. v. Deutsche Bank (2004) 12 SCC 376: revocation of Clause 12 Letters Patent leave must be decided “on demurrer”: only plaint averments are to be assumed true. But the Court expressly left jurisdiction open to be revisited at trial because it was mixed question of law and fact (e.g., actual role of UCO Bank).
• State of Haryana v. State of Punjab (2004) 12 SCC 673: rejection of plaint under Order VII Rule 11 must be decided “on demurrer”; only allegations in the plaint are relevant.
• J.P. Srivastava & Sons (P) Ltd. v. Gwalior Sugar Co. Ltd (2005) 1 SCC 172: if maintainability is challenged “by way of demurrer”, the Company Law Board must proceed on petition averments alone; but if the Board considers facts outside the petition, the petitioner must be allowed to lead evidence – the issue is then not foreclosed.
• Ramesh B. Desai v. Bipin Vadilal Mehta (2006) 5 SCC 638: the leading Indian authority on demurrer and limitation:
  • Demurrer is “a pleading that assumes the truth” of the other side’s averments but contends they are legally insufficient.
  • The principle underlying demurrer is analogous to Order VII Rule 11(d) CPC: rejection of plaint where “from the statement in the plaint” the suit appears barred by any law.
  • A plea of limitation is a mixed question of law and fact; it “cannot be decided as an abstract principle of law divorced from facts” because the starting point of limitation is a factual question.
  • Therefore, unless it is apparent on the face of the plaint that the suit is time-barred, rejection under Order VII Rule 11(d) is improper.
• Pawan Kumar v. Babulal (2019) 4 SCC 367: reconfirms that disputed limitation questions cannot be decided at the Order VII Rule 11 stage; if the plaint does not clearly show a bar, the suit must proceed to trial, where limitation is determined on evidence.

Two further authorities are central:

• Privy Council in Kanhaya Lal v. National Bank of India Ltd (1913): held in clear terms that where a preliminary objection that the plaint discloses no cause of action is taken, “essentially a demurrer”, it must be decided assuming plaintiff’s allegations to be true; but:

  “… in asking the Court to decide an issue like the present … the Defendants must be taken to admit for the sake of argument that the allegations … are true … In so doing they reserve to themselves the right to show that these allegations are wholly or partially false in the further stages of the action, should the preliminary point be overruled …” (emphasis added)

  i.e., an unsuccessful demurrer does not foreclose factual contest later.
• Calcutta High Court in Angelo Brothers Ltd v. Bennett Coleman & Co. Ltd (2017 SCC OnLine Cal 7682): after reviewing Supreme Court precedent, it held that:
  • An application “in the nature of demurrer” in India is effectively akin to an Order VII Rule 11 motion and does not amount to a final admission of facts or forfeiture of the right to contest later.
  • The U.S./English law of demurrer has not been adopted wholesale in India; the “demurrer” label in Indian practice denotes a preliminary legality/maintainability motion, not a full waiver of factual contest.

3.2.4 Supreme Court’s Synthesis

The Court distils the Indian position (paras 94–99) into key propositions:

• A plea “on demurrer” assumes the truth of the opponent’s averments only for deciding a pure question of law (e.g., jurisdiction, maintainability, limitation when purely legal).
• It does not amount to a permanent admission of facts, nor does it bar the party from subsequently challenging those facts through evidence if the preliminary objection is overruled.
• Demurrer in Indian practice is functionally akin to Order VII Rule 11(d): the court examines only the plaint/claim; if there are disputed facts or if limitation turns on facts, the demurrer must fail and the issue must be tried on evidence.
• Because the respondent has no burden to lead evidence at the demurrer stage (and any such evidence would ordinarily be ignored), it would be unjust to treat a finding against him on demurrer as finally foreclosing his right to prove contrary facts later.

Against this background, the arbitrator’s declaration that the limitation issue, once decided on demurrer, “will not be open to be reagitated” was fundamentally flawed.

3.3 Limitation, Party Autonomy, and Section 3 of the Limitation Act

3.3.1 Limitation as a Mandatory Mixed Question

Section 3(1) of the Limitation Act reads:

“Every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence.”

Key implications (paras 100–102):

• There is a positive, mandatory duty on any adjudicatory forum (including arbitrators, via Section 43 of the Arbitration Act) to examine limitation and dismiss time-barred claims, even suo motu.
• This duty is substantive, not merely procedural. It requires a proper adjudication of limitation, tailored to the facts of the case.
• Because limitation ordinarily involves factual questions (when the cause of action accrued, effect of extensions, acknowledgements, fraud, etc.), the duty to examine limitation may entail allowing evidence where the pleadings reveal disputes of fact.

Section 43(1) of the Arbitration Act makes the Limitation Act applicable to arbitrations “as it applies to proceedings in court”. So arbitrators are equally bound by Section 3’s command.

3.3.2 Party Autonomy Under Section 19: Its Boundaries

Section 19 of the Arbitration Act provides:

“(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.”

The Court emphasises the opening words “Subject to this Part” (paras 103–119):

• Party autonomy in procedure is wide but not absolute. It is circumscribed by other provisions in Part I of the Act, including Section 43 (and thereby Section 3 of the Limitation Act).
• Thus, parties cannot, even by consent, adopt a procedure that undermines:
  • mandatory statutory duties (like diligent scrutiny of limitation); or
  • core fairness requirements of the arbitral process.

The Court relies on prior case law on party autonomy and its limits:

• Centrotrade Minerals & Metal Inc. v. HCL (2017) 2 SCC 228: party autonomy allows even a two‑tier arbitration (first instance and appellate arbitration), but:
  • only because it does not contravene any mandatory provision of the Arbitration Act; and
  • because Section 34 review remains available against the final award.
• Voestalpine Schienen GmbH v. DMRC (2017) 4 SCC 665 & Law Commission’s 246th Report: stressed that party autonomy cannot justify arbitral appointments that undermine neutrality or independence:

  “There are certain minimum levels of independence and impartiality that should be required of the arbitral process regardless of the parties’ apparent agreement. … The concept of party autonomy cannot be stretched to a point where it negates the very basis of having impartial and independent adjudicators …”

• Lombardi Engineering Ltd v. Uttarakhand Jal Vidyut Nigam Ltd (2024) 4 SCC 341: a pre‑deposit clause for invoking arbitration was challengeable under Article 14; party autonomy cannot validate contractual terms that offend fundamental rights.

Drawing from these, the Court concludes:

• Just as party autonomy cannot override fundamental rights or basic neutrality, it cannot undercut mandatory limitation norms.
• Procedural agreements that may sensibly dispense with technical formalities (strict CPC/Evidence Act application) are acceptable; but agreements that effectively allow stale claims to be smuggled in or that superficially “dispose of” limitation despite unresolved fact disputes are not.

Therefore, the respondents’ “consent” on 27.08.2019 to have limitation decided finally, on demurrer and without evidence, could not relieve the arbitrator of his statutory duty to properly examine limitation, including factual controversies, under Section 3 read with Section 43.

3.4 Section 34, Public Policy and Partial Setting Aside

3.4.1 Narrowed Public Policy Standard After the 2015 Amendment

The Court meticulously re‑states the post‑amendment position (paras 121–127, relying on Ssangyong Engineering v. NHAI (2019) 15 SCC 131 and Associate Builders v. DDA (2015) 3 SCC 49):

• Patent illegality is no longer part of “public policy of India” under Section 34(2)(b)(ii). It is now a separate ground under Section 34(2A), and is not available for awards in international commercial arbitration.
• The expression “public policy of India” is constricted to:
  • contravention of the “fundamental policy of Indian law” (in the narrow sense used in Renusagar); and
  • conflict with the “most basic notions of morality or justice”.
• The “judicial approach” test and the broader expansions in ONGC v. Western Geco and Saw Pipes have been legislatively effaced for Section 34 challenges.

So, while the High Court had used the phrase “judicial approach” and “fundamental policy of Indian law”, the Supreme Court clarifies that this vocabulary is now inappropriate for Section 34(2)(b)(ii) in international commercial arbitration. The real ground, in substance, is that the award portion foreclosing limitation offended “most basic notions of justice”.

3.4.2 “Most Basic Notions of Justice” and the Present Case

Following Associate Builders (paras 36–39) and Ssangyong, an award is contrary to the “most basic notions of justice” when:

• it shocks the conscience of the court; and
• there is a substantive and/or procedural breach of fundamental fairness.

The Court identifies the offensive feature here (paras 134–137):

• The arbitrator:
  • decided limitation on demurrer, with the respondents barred from leading evidence; and simultaneously
  • declared that this finding would be final and could not be revisited, despite acknowledging that, with evidence, he “might have been inclined” to accept the respondents’ contention.
• Given that limitation is a mixed question of law and fact and that there was a live factual dispute (what exactly was extended – time for Conditions Precedent or time for refund?), the procedure effectively:
  • deprived the respondents of any real opportunity to contest the claimant’s version of those facts; and
  • created a serious risk of admitting or enforcing a time-barred claim solely because of an early, incomplete legal determination.

This, the Court holds, “shocks the conscience” because it:

• misconstrues and misapplies demurrer doctrine in Indian law;
• undermines Section 3’s mandatory policy of barring stale claims; and
• prejudices the respondent by turning a hypothetical assumption of facts (for demurrer) into an unchallengeable factual finding.

Therefore, even without resort to “patent illegality” or “judicial approach”, the narrow “most basic notions of justice” limb of public policy justified limited interference.

3.4.3 Severability and Partial Setting Aside of the Interim Award

A further conceptual contribution of the judgment is its reliance on the Constitutional Bench decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd (2025) 7 SCC 1 on the doctrine of severability in Section 34 proceedings.

Both the majority and dissent in Gayatri Balasamy held that:

• Courts under Section 34 can partially set aside an arbitral award where the offending portion is:
  • legally separable from the rest, and
  • not so intertwined with the valid parts that severance would destabilise the whole.
• This is both:
  • expressly recognised in the proviso to Section 34(2)(a)(iv) (decisions on matters beyond submission can be severed); and
  • an implicit aspect of the broader “power to set aside” (omne majus continet minus – the greater includes the lesser).

Applying that doctrine here (paras 129–133):

• The interim award on limitation had two distinct components:
  1. a legal holding that, assuming UIREF’s pleaded facts to be true, its claims were within limitation; and
  2. a procedural pronouncement that this holding would be final and unrevisitable, even if evidence later showed otherwise.
• These two parts were capable of being separated:
  • the first is a tentatively correct legal conclusion “on demurrer”;
  • the second is an impermissible foreclosure device.

Therefore:

• The portion declaring finality/foreclosure of the limitation issue was rightly set aside as contrary to the most basic notions of justice.
• The preliminary conclusion that, on the assumed facts of the Statement of Claim, the claims were within limitation stands unaffected – subject to being revisited on evidence if warranted.

This is an important practical signal: Section 34 courts can “surgically” excise only the objectionable aspects of an award, even interim or partial awards, while preserving the remainder.

4. Impact and Doctrinal Significance

4.1 For Arbitration Practice (Tribunals and Counsel)

The decision carries several concrete implications:

1. Use of Demurrer‑Type Procedures in Arbitration
   Tribunals may:
   • decide preliminary issues (including limitation) on a demurrer‑like basis only where:
     • no material facts are in dispute, and
     • the issue truly turns on pure law.
   • treat such determinations as preliminary and not as finally barring reconsideration if further facts or evidence emerge.
   Parties (especially respondents) should be cautious in “electing” demurrer procedures, and tribunals should:
   • record explicitly that a demurrer decision will not prevent factual contest later; and
   • avoid “locking in” finality unless the issue is indisputably one of law alone.
2. Drafting and Conduct of Preliminary Issues
   When framing preliminary issues or minutes of hearing:
   • Describe clearly whether the issue is:
     • (a) a purely legal preliminary issue (e.g. jurisdiction based on the arbitration clause); or
     • (b) a mixed question requiring evidence (e.g. limitation where accrual date or extension is disputed).
   • Where a mixed issue is being split off as a preliminary matter, tribunals should allow evidence confined to that issue rather than treating it as a demurrer.
3. Limitation Cannot Be Contracted Around by Procedure
   Even with explicit party consent:
   • Tribunals cannot adopt a procedure that effectively neutralises Section 3 of the Limitation Act (applied via Section 43 of the Arbitration Act).
   • Agreements that “we will treat limitation as finally decided on a bare reading of the claim and never revisit it” are unenforceable insofar as they prevent a proper examination of limitation where factual disputes exist.
4. International Commercial Arbitrations: Section 34 Strategy
   Since patent illegality is not a ground and “judicial approach” is off the table:
   • Challenges must be carefully tailored to:
     • contravention of the fundamental policy of Indian law (in the narrow Renusagar sense – e.g., FERA/foreign exchange violations, disregard of binding superior court orders); or
     • breach of the most basic notions of justice or morality, i.e. truly conscience‑shocking unfairness.
   • This case shows that a procedural irregularity – if grave enough and touching core fairness (e.g., foreclosing limitation on assumed facts) – can ground relief under the “basic notions of justice” limb, but courts will confine relief to the minimal necessary interference.
5. Interim Awards and Partial Challenges
   The judgment affirms that:
   • Interim or partial awards on preliminary issues (like limitation) are susceptible to challenge under Section 34.
   • However, Section 34 courts will increasingly:
     • use severability to excise only objectionable portions; and
     • decline to re‑appreciate evidence or “correct” errors of fact or ordinary law, especially in ICA cases.

4.2 For the Law of Demurrer and Order VII Rule 11

The judgment consolidates and clarifies a line of reasoning that had developed across cases:

• “Demurrer” in India is a shorthand for preliminary objections decided on the face of the plaint/petition – akin to Order VII Rule 11 – rather than a technical pleading with U.S./English consequences.
• A decision that a plaint/claim survives a demurrer does not bar the defendant from later:
  • disputing facts; or
  • re‑urging the limitation/maintainability defence on evidence.
• When courts or tribunals stray beyond the four corners of the claim (by considering disputed factual material) while still purporting to decide “on demurrer”, they must then:
  • allow both sides to lead evidence; and
  • treat the issue as one to be finally determined at trial, not as closed at the preliminary stage.

This is particularly important for commercial disputes, where limitation objections are often raised early via demurrer-type applications.

4.3 For the Doctrine of Party Autonomy

The decision refines the contours of party autonomy in Indian arbitration law:

• Party autonomy is “the brooding and guiding spirit” of arbitration but is never unbounded.
• Section 19(2) expressly subordinates procedural autonomy to the rest of Part I (including Section 43 and thereby the Limitation Act).
• The Court’s approach is consistent across contexts:
  • Voestalpine – party autonomy does not allow unilateral, biased arbitrator appointment where neutrality is compromised;
  • Lombardi – party autonomy cannot validate terms violating Article 14;
  • UIREF v. Neelkanth – party autonomy cannot be used to nullify mandatory limitation rules or fair adjudication of limitation.

For transactional lawyers and arbitral institutions, this underscores that:

• while arbitration clauses may creatively shape procedure (e.g., fast-track proceedings, limited oral hearings, documentary‑only arbitration),
• they cannot stipulate away:
  • basic fairness (opportunity to present case on genuinely disputed issues),
  • neutral adjudication, or
  • compliance with non‑derogable statutory norms such as limitation.

5. Complex Concepts Simplified

5.1 What Is a “Demurrer” in Simple Terms?

Think of a demurrer as saying:

“Even if everything you say is true, you still have no legal case.”

In Indian practice:

• Courts (and tribunals) look only at the claimant’s pleading and attached documents.
• They assume all those facts to be true, for the sake of argument.
• They then ask: “On these facts, is the case obviously barred by law (for example, clearly time‑barred or beyond jurisdiction)?”
• If yes, they can dismiss it at the threshold. If not, the case goes on to trial, and the defendant is free to dispute the claimant’s facts with evidence.

5.2 Why Is Limitation a “Mixed Question of Law and Fact”?

Limitation law sets time limits (the legal part) but those limits start running from a factual trigger:

• When did the breach occur?
• Was time extended by agreement?
• Was any payment made that acknowledges liability?
• Was the claimant prevented from suing earlier due to fraud or concealment?

Therefore, courts (and arbitrators) usually cannot decide limitation merely by reading the pleading; they often need evidence to fix the date of accrual and any extensions. That is why the Supreme Court repeatedly calls limitation a mixed question of law and fact.

5.3 Party Autonomy vs Mandatory Rules

“Party autonomy” means:

• the parties can choose:
  • the law governing their contract and arbitration,
  • the arbitral seat and institution, and
  • many aspects of procedure (e.g. document‑only arbitration, number of hearings, timetable).

But this freedom has limits:

• They cannot agree to violate:
  • fundamental rights (e.g. discriminatory terms),
  • basic impartiality (e.g. arbitrator who is a party), or
  • mandatory statutes (e.g. limitation periods, prohibition on contravening foreign exchange law).

Section 19(2)’s “Subject to this Part” captures this idea for arbitration procedure: party‑agreed procedures must respect the basic architecture and mandatory norms within Part I, including limitation.

5.4 Public Policy and “Most Basic Notions of Justice”

Under Section 34, an award can be set aside if it conflicts with the “public policy of India”. Since 2015, this is narrowly defined. One limb is “most basic notions of morality or justice”, which means:

• not simply that the judge thinks the result is unfair or that the arbitrator erred in law; rather,
• there is something so fundamentally wrong in the procedure or outcome that it shocks the court’s conscience:
  • for example, an award giving more than what was ever claimed, with no explanation; or
  • deciding a crucial mixed question (like limitation) in a way that permanently prevents one party from ever contesting the facts.

In this case, it was not the preliminary assessment of limitation itself, but the attempt to make it irrevocably final at a stage when the respondents had no realistic chance to contest the facts that crossed this threshold.

5.5 Severability / Partial Setting Aside of Awards

Severability means the court can:

• “cut out” just the invalid part of an award,
• leaving the rest intact,
• provided the valid and invalid parts are not so intertwined that cutting one destroys the other.

For example:

• If an award grants relief on two separate claims, and one is tainted by illegality (beyond the tribunal’s jurisdiction), while the other is flawless, the court can set aside the tainted part and enforce the rest.
• Here, the Court “cut out” only the arbitrator’s declaration that the limitation finding on demurrer was final, while retaining the substantive conclusion that on the assumed facts, the claim was in time.

6. Conclusion

The Supreme Court’s decision in Urban Infrastructure Real Estate Fund v. Neelkanth Realty Pvt Ltd sets out, in a structured and principled way, three important legal propositions:

1. Demurrer in Indian arbitration and civil procedure has a limited function.
   A decision on a preliminary issue “on demurrer” – including limitation – assumes the claimant’s facts as correct only for arguing a pure legal point. An unsuccessful demurrer does not estop the respondent from later contesting those facts on evidence. Mixed questions (like limitation where accrual or extension is disputed) cannot be finally foreclosed on demurrer.
2. Party autonomy, under Section 19 of the Arbitration Act, is powerful but not omnipotent.
   It is expressly “subject to” Part I, including Section 43 and, through it, the mandatory bar of limitation in Section 3 of the Limitation Act. Parties cannot, by consent, adopt a procedure that results in superficial or unfair treatment of limitation or allows potentially time-barred claims to be adjudicated without a proper factual inquiry where needed.
3. Section 34 courts retain a narrow but potent fairness check, even in international commercial arbitration.
   Although “judicial approach” and “patent illegality” are not grounds for setting aside such awards, the “most basic notions of justice” limb of public policy remains. It can be invoked – as here – where an arbitral procedure converts a hypothetical assumption (for demurrer) into an irreversible factual conclusion on a core mixed issue like limitation. Yet, consistent with minimal intervention, relief is confined to partially setting aside only that aspect of the award which crosses the threshold of conscience-shocking unfairness.

In sum, the judgment reinforces a balanced arbitration jurisprudence: it respects the autonomy and finality of arbitral processes, particularly in international commerce, while insisting that core safeguards – proper treatment of limitation, fairness of procedure, and fidelity to mandatory statutory norms – cannot be bargained away.