TaxTMI 
TaxTMI 
2024 (11) TMI 352
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............................................... 23 a. Scope and applicability of Order 23 Rule 1 of the CPC to proceedings other than suits ................................................................................... 23 II. ISSUE NO. 2 ................................................................................................ 44 a. Application under Section 11(6) of the Act, 1996 is not for the same relief as an application under Section 9 of the IBC ........................... 57 III. ISSUE NO. 3 ................................................................................................ 67 F. CONCLUSION ................................................................................... 78 1. Leave granted. 2. This appeal arises from the final judgment and order dated 31.01.2024 ("impugned order") passed by the High Court of Judicature at Bombay in Commercial Arbitration Petition No. 1 of 2023, wherein the High Court allowed the petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, "the Act, 1996") at the instance of the M/s Shahaji Bhanudas Bhad ("the respondent") and appointed Justice (Retd.) Dilip Bhosale a....
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.... of Rs. 18,12,21,452/- remained outstanding. The discussions between the parties undertaken between October 2013 and January 2014 did not yield any fruits as the issues relating to payment and deficiency in services rendered could not be resolved. In this regard, the respondent vide an e-mail dated 02.02.2014 made a request to release the balance amount at the earliest, so as to enable it to complete the balance work. The appellant vide an e-mail dated 04.02.2014 responded to the said email and reiterated that the performance of the respondent was unsatisfactory and it had failed in fulfilling its obligations in accordance with the terms of the purchase orders. In such circumstances, the appellant refused to clear the outstanding dues of the respondent. 9. On 09.07.2016, the respondent issued a legal notice to the appellant, seeking release of the alleged outstanding payment amounting to Rs. 18,12,21,452/- along with interest. The respondent also specified in the said notice that in the event of failure of the appellant to settle the outstanding amount, the notice shall be construed as the notice for invocation of arbitration in terms of Clause 14 of the tender. The appellant, h....
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....ne 25, 2014 copy of which has been placed at Page 1779 of Vol. 10 of the paper book to find as to what is the factual position as per the stand of Corporate Debtor on various issues. As per this provisional statement, the total purchase order value has been shown as Rs. 3818.72 lakhs. There have been several deductions including for services provided by Corporate Debtor to the Operational Creditor in the execution of the contract, entry tax, TDS, WCD, payment to parties/ payment to Operational Creditor by the Corporate Debtor / sub-vendors and subcontractors/ vendors of the Operational Creditor. These are normal deductions as per business practice and terms of contract. However, it is noteworthy that Liquidated Damage @ 5% amounting to Rs. 190.94 lakhs, Performance Bank Guarantee to the tune of 673.6 lakhs, work claim of Rs. 352.00 lakhs for boiler house extension P.O. finalisation and additional work 71 lakh have also been considered. The net effect has been worked out by Corporate Debtor as Rs. 500 lakhs receivable from the Operational Creditor. If the boiler house extension and additional work are ignored, the amount recoverable from the Operational Creditor gets reduced to 63.1....
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....vide order dated 10.01.2022. The NCLAT, on the aspect of preexisting disputes between the parties, observed thus: "18. It is clear from Section 8(2)(a) that 'Existence of a Dispute', (if any, or) record of the pendency of the Suit or Arbitration Proceeding filed before the receipt of such Notice or invoice in relation to such dispute should be brought to the notice of the 'Operational Creditor' within 10 days of receipt of the Demand Notice. In this case, the Demand Notice under Section 8 of the Code claiming a sum of Rs.13.69 Crores was issued on 25.07.2018. On 07.08.2018, the 'Corporate Debtor' responded to the Demand Notice referring to various communications, Minutes of the Meeting and submitted that there was a 'Pre- Existing Dispute'. Though we are conscious of the fact that the 'Corporate Debtor' responded to the Demand Notice belatedly, the fact remains that the Appellant raised the issue of Existence of a Dispute' in their Reply filed before the Adjudicating Authority with all the supporting documents. 19. It is pertinent to note that on 09.07.2016, 'prior to the issuance of the Demand Notice under Section 8 of ....
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....his Court finds that there was a pre-existing dispute with regard to the alleged claim of the appellant against HPCL or its subsidiary HBL. The NCLAT rightly allowed the appeal filed on behalf of HBL. It is not for this Court to adjudicate the disputes between the parties and determine whether, in fact, any amount was due from the appellant to the HPCL/HBL or vice-versa. The question is, whether the application of the Operational Creditor under Section 9 of the IBC, should have been admitted by the Adjudicating Authority. The answer to the aforesaid question has to be in the negative. The Adjudicating Authority (NCLT) clearly fell in error in admitting the application. 31. The NCLT, exercising powers under Section 7 or Section 9 of IBC, is not a debt collection forum. The IBC tackles and/or deals with insolvency and bankruptcy. It is not the object of the IBC that CIRP should be initiated to penalize solvent companies for non-payment of disputed dues claimed by an operational creditor. 32. There are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading o....
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....o be maintainable and even the Apex Court upheld the said order by recording that an Operational Creditor can only trigger the CIRP process when there is an undisputed debt and default in payment thereof, but if the debt is disputed, then the Application of the Operational Creditor for initiation of CIRP must be declined. Be that as it may be, while dismissing the Appeal, being conscious of the position that the dues of the Petitioner/Appellant are yet to be realized, liberty was conferred to avail such remedies in accordance with law which shall include the remedy of arbitration. With this clear indication, by the Highest Court of the country, I am not persuaded to accept the submission of Mr. Paranjape that an Application under Section 11 of the Act seeking appointment of an Arbitrator is not maintainable. 9. The Petitioner by his invocation notice had triggered the arbitration and accordingly approached the Court seeking appointment of an Arbitrator as the Respondent failed to agree to the appointment of Arbitrator within the period stipulated under Section 11, but instead of prosecuting the said remedy, he chose to adopt the path of initiating the pro....
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....unal, but claim is hopelessly barred or a deadwood, in that case, the Court exercising the power under Section 11 may not deem it expedient to refer an exfacie time barred and dead claim to the Arbitrator. [...] xxx xxx xxx 13. I do not agree with the learned counsel that the claim of Petitioner is ex facie time-barred as a deadwood, as all the while the claim was kept alive, though it was being agitated before a wrong forum, but ultimately when the Petition was turned down by the Apex Court, he was granted liberty to stake his claim by availing such remedies as may be available to him, in accordance with law, including the remedy of Arbitration. Since the remedy of Arbitration cannot be denied to him, merely on the ground that he had at earlier point of time, before knocking the doors of NCLT withdrew the Petition filed for appointment of Arbitrator, on validly invoking arbitration. Since I do not find that the claim is ex facie time-barred for it was being prosecuted though before a wrong forum, the objection cannot be sustained. 14. In the wake of existence of an arbitration agreement between the parties, the dispute must be referred to an Arb....
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....d BSNL v. Nortel Networks (India) (P) Ltd. reported in (2021) 5 SCC 738. 22. By placing reliance on the decision of this Court in Sarguja Transport Service v. S.T.A.T reported in (1987) 1 SCC 5, he argued that although the Code of Civil Procedure, 1908 (for short "CPC") may not apply stricto sensu to the arbitration proceedings, yet the principle underlying Order 23 Rule 1(3) which imposes a bar on the institution of subsequent proceedings against the same defendant for the same cause of action where liberty to institute fresh proceedings is not granted by the court, can be extended to it in view of the expeditious and time-bound nature of arbitration proceedings. 23. He submitted that the respondent is not entitled to avail the benefit available under Section 14 of the Limitation Act, 1963 (for short "the Limitation Act") as the said provision would not be applicable to the present case. He argued that Section 14 of the Limitation Act provides for exclusion of time spent in prosecuting proceedings in a non-jurisdictional court, where the earlier and later proceedings relate to the same matter in issue or are for seeking the same relief. However, he submitted, that the insolv....
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.... the purpose of filing a fresh application under Section 11(6) of the Act, 1996. 28. He submitted that the aforesaid period is liable to be excluded under Section 14 of the Limitation Act as the respondent was pursuing the IBC proceedings diligently and in a bonafide manner. He relied on the following decisions of this Court to submit that the phrase "other cause of like nature" used Page 18 of 79 in Section 14 of the Limitation Act should be given a wide and liberal interpretation: i. Consolidated Engg. Enterprises & Ors. v. Principal Secy. Irrigation Department & Ors. reported in (2008) 7 SCC 169 ii. J. Kumaradasan Nair v. Iric Sohan reported in 2009 (12) SCC 175 iii. Union of India v. West Coast Paper Mills Ltd. reported in 2004 (3) SCC 458 iv. Maharashtra State Farming Corporation Ltd. v. Belapur Sugar & Allied Industries Ltd. reported in 2004 (3) MHLF 414 29. He submitted that the second application under Section 11(6) of the Act, 1996 was maintainable as the first application was withdrawn without any adjudication on merits and even before any formal notice could be issued by the High Court. By placing reliance on the decision of this....
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....ing or which shall at any time arise between the parties hereto touching or concerning the agreement, meaning, operation or effect thereof or to the rights and liabilities of the parties or arising out of or in relation thereto whether during or after completion of the contract or whether before after determination, foreclosure, termination or breach of the agreement (other than those in respect of which the decision of any person is, by the contract, expressed to be final and binding) shall, after written notice by either party to the agreement to the other of them and to the Appointing Authority hereinafter mentioned, be referred for adjudication to the Sole Arbitrator to be appointed as hereinafter provided. 14.2 The appointing authority shall either himself act as the Sole Arbitrator or nominate some officer/retired officer of HBL/Hindustan Petroleum Corporation Limited (referred to as owner or HBL) or any other Government Company, or any retired officer of the Central Government not below the rank of a Director, to act as the Sole Arbitrator to adjudicate the disputes and differences between the parties. The contractor/vendor shall not be entitled to raise any objecti....
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.....e. 25% on acceptance, 25% on completion of pleadings/ documentation, 25% on completion of arguments and balance on receipt of award by the parties. 14.9 Subject to the aforesaid, the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the rules made thereunder, shall apply to the Arbitration proceedings under this Clause. 14.10 The Contract shall be governed by and constructed according to the laws in force in India. The parties hereby submit to the exclusive jurisdiction of the Courts situated at Mumbai for all purposes. The Arbitration shall be held at Mumbai and conducted in English language. 14.11 The Appointing Authority is the Functional Director of Hindustan Petroleum Corporation Limited." 33. Neither the existence nor the validity of the arbitration agreement has been disputed by the appellant. However, the appellant has challenged the allowing of the application for appointment of arbitrator by the High Court on two grounds - (i) the application before the High Court was not maintainable as it was filed for the second time having been withdrawn previously without seeking any liber....
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....im. Sub-rule (3) of the former Order 23 Rule 1 of the CPC provided that where the plaintiff withdrew from a suit or abandoned a part of a claim without the permission referred to in sub-rule (2), he would be liable to such costs as the court may award and would also be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim. The legislature felt that the use of the word "withdrawal" in relation to both the aforesaid categories had led to confusion and thus amended the rule to avoid such confusion. 37. Order 23 Rule 1 of the CPC as it stands now post the amendment is reproduced hereinbelow: "Withdrawal of suit or abandonment of part of claim.- (1) At any time after the institution of a suit, the plaintiff may as against all or any of the defendants abandon his suit or abandon a part of his claim: Provided that where the plaintiff is a minor or other person to whom the provisions contained in rules 1 to 14 of Order XXXII extend, neither the suit nor any part of the claim shall be abandoned without the leave of the Court. (2) An application for leave under the proviso to sub-rule (1) shall be accompan....
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.... abandons any suit or part of claim under sub-rule (1) or withdraws from a suit or part of a claim without the permission referred to in sub-rule (3), he would be liable for such costs as the court may award and would also be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim. 39. Order 23 Rule 1, as it now stands post the amendment, makes a distinction between "abandonment" of a suit and "withdrawal" from a suit with permission to file a fresh suit and provides for - first, abandonment of suit or a part of claim; and secondly, withdrawal from suit or part of claim with the leave of the court. Abandonment of suit or a part of claim against all or any of the defendants is an absolute and unqualified right of a plaintiff and the court has no power to preclude the plaintiff from abandoning the suit or direct him to proceed with it. Sub-rule (1) of Order 23 Rule 1 embodies this principle. However, if the plaintiff abandons the suit or part of claim, then he is precluded from instituting a fresh suit in respect of such subject-matter or such part of claim. Upon abandoning the suit or part of claim, the plaintiff also becomes liable t....
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....lief claimed in the second suit are the same as in the first suit, it cannot be said, that the subject-matter of the second suit is the same as that in the previous suit. Now coming to the case before us in the first suit Dr Madan Lal was seeking to enforce his right to partition and separate possession. In the present suit he seeks to get possession of the suit properties from a trespasser on the basis of his title. In the first suit the cause of action was the division of status between Dr Madan Lal and his adoptive father and the relief claimed was the conversion of joint possession into separate possession. In the present suit the plaintiff is seeking possession of the suit properties from a trespasser. In the first case his cause of action arose on the day he got separated from his family. In the present suit the cause of action, namely, the series of transactions which formed the basis of his title to the suit properties, arose on the death of his adoptive father and mother. It is true that both in the previous suit as well as in the present suit the factum and validity of adoption of Dr Madan Lal came up for decision. But that adoption was not the cause of action in the firs....
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....ame cause of action. Though, liberty may lie with the plaintiff in a suit to withdraw the suit at any time after the institution of suit on establishing the "formal defect" or "sufficient grounds", such right cannot be considered to be so absolute as to permit or encourage abuse of process of court. The fact that the plaintiff is entitled to abandon or withdraw the suit or part of the claim by itself, is no licence to the plaintiff to claim or to do so to the detriment of legitimate right of the defendant. When an application is filed under Order 23 Rule 1(3) CPC, the Court must be satisfied about the "formal defect" or "sufficient grounds". "Formal defect" is a defect of form prescribed by the rules of procedure such as, want of notice under Section 80 CPC, improper valuation of the suit, insufficient court fee, confusion regarding identification of the suit property, misjoinder of parties, failure to disclose a cause of action, etc. "Formal defect" must be given a liberal meaning which connotes various kinds of defects not affecting the merits of the plea raised by either of the parties. 11. In terms of Order 23 Rule 1(3)(b) where the court is satisfied that there are su....
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....is Court has extended the principle underlying Order 23 Rule 1 to proceedings other than suits on the ground of public policy underlying the said rule. The appellant has submitted that in view of the aforesaid decisions, there is no reason why the principles of Order 23 Rule 1 should not be extended to an application for appointment of arbitrator under Section 11(6) of the Act, 1996. 47. A two-Judge Bench of this Court in Sarguja Transport Service v. State Transport Appellate Tribunal, M.P., Gwalior and Others reported in (1987) 1 SCC 5 while elaborating upon the principle underlying Order 23 Rule 1 of CPC, extended them to writ petitions under Articles 226 and 227. Relevant observations from the said decision are as follows: "7. [...] The principle underlying Rule 1 of Order XXIII of the Code is that when a plaintiff once institutes a suit in a court and thereby avails of a remedy given to him under law, he cannot be permitted to institute a fresh suit in respect of the same subjectmatter again after abandoning the earlier suit or by withdrawing it without the permission of the court to file fresh suit. Invito beneficium non datur - the law confers upon a man no rights....
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....to permit the withdrawal of the petition. It is plain that when once a writ petition filed in a High Court is withdrawn by the petitioner himself he is precluded from filing an appeal against the order passed in the writ petition because he cannot be considered as a party aggrieved by the order passed by the High Court." ( Emphasis supplied ) 48. The principles enunciated in Sarguja Transport (supra) were extended to Special Leave Petitions filed before this Court by a two-Judge Bench of this Court in Upadhyay & Co. v. State of U.P. and Others reported in (1999) 1 SCC 81. It was observed by the bench thus: 11. [...] It is not a permissible practice to challenge the same order over again after withdrawing the special leave petition without obtaining permission of the court for withdrawing it with liberty to move for special leave again subsequently. xxx xxx xxx 13. The aforesaid ban for filing a fresh suit is based on public policy. This Court has made the said rule of public policy applicable to jurisdiction under Article 226 of the Constitution (Sarguja Transport Service v. STAT [(1987) 1 SCC 5). The reasoning for adopting it in writ jurisdic....
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....laced by the appellant therein upon the decision of this Court in Sarguja Transport (supra). However, this Court distinguished the decision in Sarguja Transport (supra) on the ground that the objective in the said decision was to prevent such situations where the petitioner withdraws a case to file it before a more convenient Bench or for some other mala fide purpose. The relevant observations from the said decision are reproduced hereinbelow: "19. In the present case, we are satisfied that the application for withdrawal of the first petition under Section 25-O(1) was made bona fide because the respondent Company had received a letter from the Deputy Labour Commissioner on 5-4-2007 calling for a meeting of the parties so that an effort could be made for an amicable settlement. In fact, the respondent Company could have waited for the expiry of 60 days from the date of filing of its application under Section 25-O(1), on the expiry of which the application would have deemed to have been allowed under Section 25-O(3). The fact that it did not do so, and instead applied for withdrawal of its application under Section 25-O(1), shows its bona fide. The respondent Company was try....
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.... scheme of Order 23 Rule 1 is the legislative intent that legal proceedings in respect of a subjectmatter are not stretched for unduly long periods by allowing a party to reagitate the same issue over and over again, which also leads to uncertainty for the responding parties. Arbitration as a dispute resolution method, too, seeks to curtail the time spent by disputing parties in pursuing legal proceedings. This is evident from the various provisions of the Act, 1996 which provide a timeline for compliance with various procedural requirements under the said Act. An application for appointment of arbitrator under Section 11(6) of the Act, 1996 is required to be filed when there is failure on the part of the parties or their nominated arbitrators to commence the arbitration proceedings as per the agreed upon procedure. This Court, being conscious of the temporally sensitive nature of proceedings under Section 11(6), has issued various directions from time to time to ensure that applications for appointment of arbitrators are decided in an expeditious manner. Keeping in view the approach of this Court and the nature of applications under Section 11(6) of the Act, 1996, we find no reaso....
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....lication for appointment would only lie before the Chief Justice of India. Accordingly, the applicant withdrew the Section 11 application and filed a Section 11(6) application before this Court. The subsequent application was opposed inter alia on the ground that arbitration was invoked by notice dated 14.03.2006 and was thereafter abandoned with the withdrawal of the petition from the High Court. Hence, the second application without the leave of the High Court would not be maintainable. However, this Court, negatived the objections against the application and proceeded to appoint the arbitrator. 55. Coming to the facts of the case at hand, both the applications under Section 11(6) of the Act, 1996 were filed seeking adjudication of the dispute which arose on 02.02.2014 upon refusal of the appellant to pay the dues of the respondent. The first application under Section 11(6) was filed on 16.02.2018 and was subsequently withdrawn unconditionally on 01.10.2018. After a gap of more than four years, the respondent filed a subsequent application under Section 11(6) before the High Court on 09.12.2022 which came to be allowed by the impugned order. 56. The High Court was of the vi....
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....tence of a pre-existing dispute was brought to the notice of the respondent by the appellant much prior to the withdrawal of the arbitration application in reply to the demand notice issued by the respondent under Section 8 of the IBC. Thus, it can be said without any doubt that the respondent took a calculated risk of abandoning the arbitration proceedings to maximise the chances of succeeding in the IBC proceedings. 59. The respondent was within its right to abandon the arbitration proceedings in favour of IBC proceedings. However, having done so, it would no longer be open to it to file a fresh application for appointment of arbitrator without having obtained the liberty of the court to file a fresh application at the time of the withdrawal. We say so particularly because the withdrawal of the first arbitration application was not with a view to cure some formal defect or any other sufficient ground. The application was withdrawn with the hope that the application filed by the respondent under Section 9 of the IBC may succeed, as the pendency of the arbitration application would have proven to be an indicator of existence of a pre-existing dispute between the parties, and thu....
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.... a legal or deeming fiction. It is a notional commencement and not a factual or actual commencement of arbitration. However, the factual or actual arbitration proceeding commences only once an arbitrator is appointed either by the High Court under Section 11 or by consent of parties. 65. Hence, a petition under Section 11(6) of the Act, 1996 is not a proceeding merely seeking the appointment of an arbitrator. It is in reality a proceeding for appointing an arbitrator and for commencing the actual or real arbitration proceedings. 66. If that is so, the unconditional withdrawal of a Section 11(6) petition amounts to abandoning not only the formal prayer for appointing an arbitrator but also the substantive prayer for commencing the actual arbitration proceedings. It amounts to abandoning the arbitration itself. It results in abandonment of the notional 'arbitration proceeding' that had commenced by virtue of Section 21 and thus amounts to an abandonment of a significant nature. Therefore, it is all the more important to import and apply the principles underlying Order 23 Rule 1 of the CPC to abandonment of applications under Section 11(6). ii. Issue No. 2 67. It was submi....
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.... response to the said notice by the appellant, the respondent filed an application for appointment of arbitrator before the High Court under Section 11(6) of the Act, 1996 on 16.02.2018. Subsequently, it abandoned the application to pursue proceedings under the IBC. 72. On 15.10.2018, the respondent filed an application under Section 9 of the IBC for initiation of Corporate Insolvency Resolution Process against the appellant. The IBC proceedings initiated by the respondent under Section 9 were ultimately dismissed by this Court vide order dated 15.07.2022 by way of which the order of the NCLAT was upheld and the order of the NCLT was set-aside. This Court took the view that the NCLT had committed a grave error of law by admitting the application of the respondent even though there was a pre-existing dispute between the parties. Placing reliance on the decision of this Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited reported in (2018) 1 SCC 353, this Court held that upon the occurrence of a preexisting dispute regarding the alleged claims of the respondent against the appellant, the Section 9 application of the respondent as an 'Operational Credito....
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.... or other cause of a like nature, is unable to entertain it. (2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it. (3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order, where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. Explanation.-For the purposes of this section,- (a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted; ....
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....applicable to an application submitted under Section 34 of the Act, 1996 for setting aside the award made by the arbitrator. The Court enumerated the conditions for the applicability of Section 14(1) as follows: "21. Section 14 of the Limitation Act deals with exclusion of time of proceeding bona fide in a court without jurisdiction. On analysis of the said section, it becomes evident that the following conditions must be satisfied before Section 14 can be pressed into service: (1) Both the prior and subsequent proceedings are civil proceedings prosecuted by the same party; (2) The prior proceeding had been prosecuted with due diligence and in good faith; (3) The failure of the prior proceeding was due to defect of jurisdiction or other cause of like nature; (4) The earlier proceeding and the latter proceeding must relate to the same matter in issue and; (5) Both the proceedings are in a court." 80. Section 2 of the Limitation Act provides certain definitions. Some of them which are pertinent to the present discussion are reproduced hereinbelow: "In this Act, unless the context otherwise requires,-- (a) "app....
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.... v. The earlier proceedings must have been prosecuted in good faith and with due-diligence; and vi. Both the earlier and the subsequent proceedings are before a court. 84. With every other ingredient remaining the same, the key difference between sub-sections (1) and (2) of Section 14 respectively is two-fold: i. First, the benefit of Section 14(1) can be availed of where the subsequent proceeding is a suit, whereas the benefit of Section 14(2) can be availed of where the subsequent proceeding is an application. ii. Secondly, Section 14(1) applies if both the earlier and the subsequent proceedings have the same matter in issue, whereas Section 14(2) applies when both the earlier and the subsequent proceedings are filed for seeking the same relief. 85. Clearly, the scope of the expression "same matter in issue" appearing in Section 14(1) is much wider than that of the expression "for the same relief" appearing in Section 14(2) of the Limitation Act. This is evident on account of the difference between the nature of a suit vis-à-vis an application. In a suit, a party generally seeks relief in the nature of the cause of action which is es....
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....e importance. That apart, the prosecution of the prior proceeding should also show due diligence and good faith. ( Emphasis supplied ) 89. Undoubtedly, this Court over a period of time has taken a consistent view that the expression "other cause of a like nature" appearing in Section 14 should be given a wide interpretation. However, while considering the applicability of Section 14 of the Limitation Act, one must not lose sight of the fact that the applicability of the provision is contingent upon not just the reason for the failure of the earlier proceedings, but is also dependent on several other factors as explained in the preceding paragraphs. It is only when all the ingredients required for the applicability of Section 14 are fulfilled that the benefit would become available. In this context the appellant has submitted that as the proceedings undertaken by the respondent before the IBC and the proceedings for the appointment of arbitrator before the High Court are not for the "same relief", hence the benefit of Section 14 of the Limitation Act will not be available to the respondent. To address this contention of the appellant, it is important to understand the pu....
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....ted when one or both parties are not able to resolve their disputes amicably and seek to have the matter resolved by an independent arbitrator. 96. The High Court in the impugned order thought fit to exclude the timeperiod spent by the respondent before the NCLT, Kolkata under the IBC since it was of the view that the respondent was availing remedy for recovery of dues before a wrong forum and was thus squarely covered by Section 14(2) of the Limitation Act. The High Court took the view that since the proceedings for initiating corporate insolvency resolution process ("CIRP") under IBC as well as the proceeding sought to be initiated by way of arbitration were ultimately for the recovery of debts, both proceedings could be said to be for the same relief, and thus entitled the respondent for the benefit under Section 14(2) of the Limitation Act. The relevant observations read as under: - "10. [...] Worth it to note that initially when he approached the NCLT, Kolkata, under Section 8 and 9 of the IBC for institution of CIRP process against the Respondent, his claim was entertained and it is only the Respondents, who approached the Appellate Tribunal, the order passed by t....
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....resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends." ( Emphasis supplied ) 100. Similarly, in Pioneer Urban Land & Infrastructure Ltd. & Anr. v. Union of India & Ors. reported in (2019) 8 SCC 416, this Court reiterated that IBC is not a debt recovery mechanism. It observed that when CIRP is initiated the aspect of recovery of debt is completely outside the control of the creditor and there is no guarantee of recovery or refund of the entire amount in default. A creditor initiates insolvency under the Code not for the relief of recovery of debt but rather for rehabilitating the corporate debtor and for a new management to take over. The relevant observations read as under: "It is also important to remember that the Code is not meant to be a debt recovery mechanism (see para 28 of Swiss Ribbons). It is a proceeding ....
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....the case of "Swiss Ribbons"), this Court traversed through the historical background and scheme of the Code in the wake of challenge to the constitutional validity of various provisions therein. One part of such challenge had been founded on the ground that the classification between "financial creditor" and "operational creditor" was discriminatory and violative of Article 14 of the Constitution of India. This ground as also several other grounds pertaining to various provisions of the Code were rejected by this Court after elaborate dilation on the vast variety of rival contentions. In the course, this Court took note, inter alia, of the pre-existing state of law as also the objects and reasons for enactment of the Code. While observing that focus of the Code was to ensure revival and continuation of the corporate debtor, where liquidation would be the last resort, this Court pointed out that on its scheme and framework, the Code was a beneficial legislation to put the corporate debtor on its feet, and not a mere recovery legislation for the creditors." ( Emphasis supplied ) 103. What can be discerned from aforesaid decisions is that insolvency proceedings are fundame....
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....ed through a new management as soon as possible before it becomes unviable with no prospect of any meaningful recovery of its dues in the near future. 106. Thus, by no stretch of imagination can insolvency proceedings be construed as being for the same relief as any ordinary recovery proceedings, and therefore no case is made out for exclusion of time under Section 14(2) of the Limitation Act, 1963. 107. As the relief sought in an application under Section 11(6) of the Act, 1996 is not the same as the relief sought in an application under Section 9 of the IBC, the benefit of Section 14(2) cannot be given to the respondent in the present case. 108. In Yeshwant Deorao Deshmukh v. Walchand Ramchand Kothari reported in (1950) 1 SCR 852 this Court held that the relief sought under insolvency is completely different from the relief sought under an execution application for a decree for recovery of money. In the former, the estate of the insolvent is apportioned or realised for the benefit of all creditors whereas in the latter the money due is sought to be realised only for the benefit of the decree-holder alone. Although both proceedings envisage an aspect of recovery of debt, yet....
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....he relief envisaged under Section 14 of the Limitation Act. However, in the present case, the respondent had initially approached the High Court with an application under Section 11(6). However, for reasons best known to it, the respondent abandoned the said proceedings for appointment of arbitrator and approached the NCLT, Kolkata with an application under Section 9 of the IBC. The respondent was fully aware of the objection of a pre-existing dispute raised by the appellant in response to its second statutory demand notice issued under Section 8 of the IBC. Despite having preferred an application under 11(6) of the Act, 1996 before the jurisdictional court, and also being fully aware of the infirmities in the Section 9 application filed under the IBC, the respondent took a conscious decision to abandon the right course of proceedings. The conduct of the respondent cannot be termed to be a mistake in any manner. Having taken a conscious decision to opt for specific remedy under the IBC which is not for the same relief as an application under Section 11(6) of the Act, 1996, the respondent cannot be now allowed to take the plea of ignorance or mistake and must bear the consequences o....
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....e admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period. Explanation.-The fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section." 114. The use of the expression "may be admitted" in the aforesaid provision indicates that the nature of relief that can be granted under Section 5 is discretionary and not mandatory in nature. The applicant or the appellant, even upon showing sufficient cause, cannot assert as a matter of right that the delay be condoned. Thus, unlike Section 14 of the Limitation Act, where the applicant can seek the exclusion of time period as a matter of right upon fulfilment of the mandatory conditions, Section 5 of the Limitation Act leaves the ultimate decision of extending the benefit of condonation of delay to the court before which the application for such condonation is made. 115. In a recent pronouncement in Pathapati Subba Reddy (Died) by LRs and O....
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.... of the party or its bona fides may fall for consideration; but the scope of the enquiry while exercising the discretionary power after sufficient cause is shown would naturally be limited only to such facts as the court may regard as relevant. It cannot justify an enquiry as to why the party was sitting idle during all the time available to it. In this connection we may point out that considerations of bona fides or due diligence are always material and relevant when the court is dealing with applications made under Section 14 of the Limitation Act. In dealing with such applications the court is called upon to consider the effect of the combined provisions of Sections 5 and 14. Therefore, in our opinion, considerations which have been expressly made material and relevant by the provisions of Section 14 cannot to the same extent and in the same manner be invoked in dealing with applications which fall to be decided only under Section 5 without reference to Section 14." ( Emphasis supplied ) 117. As discussed in the foregoing parts of this judgment, the period of limitation to file an application under Section 11(6) of the Act, 1996 is governed as provided in Article 137....
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.... respondent. It is not the respondent's case that he did not receive the communication dated 10.4.2002 sent by the petitioner and since it was sent by registered post (as appears from the postal receipt filed on record along with the said communication), it can be safely presumed that the communication was received by the respondent within a matter of few days. Consequently, the arbitral proceedings stood commenced sometime in middle of April, 2002. The application under Section 11(5) of the Act is an application or a petition in relation to arbitral proceedings which have commenced with the issuance of a request for the reference of disputes to arbitration (Section 2(b) of the Limitation Act). Since Limitation Act, 1963 specifically applies to arbitrations, Section 5 of the Limitation Act would also apply to an application/petition under Section 11 (5) of the Limitation Act. Any application (other than under the provisions of Order 21 of CPC) may be admitted after the prescribed period, if the applicant satisfies the Court that he had sufficient cause for not preferring or making the application within such period. In my view, therefore, Section 5 of the Limitation Act would a....
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....sufficient cause for not preferring the appeal or making the application within such period." ( Emphasis supplied ) 121. The position of law that emerges from the aforesaid discussion is that the benefit under Section 5 of the Limitation Act is available in respect of the applications filed for appointment of arbitrator under Section 11(6) of the Act, 1996. Further, the requirement of filing an application under Section 5 of the Limitation Act is not a mandatory prerequisite for a court to exercise its discretion under the said provision and condone the delay in institution of an application or appeal. Thus, the only question that remains to be considered is whether in the facts of the present case, the respondent could be said to have made out a case for condonation of delay in instituting the fresh Section 11(6) application. 122. As discussed, the respondent took a conscious decision to abandon its first Section 11(6) application with a view to pursue proceedings under Section 9 of the IBC. The respondent made such choice despite a specific objection raised by the appellant in its reply to the statutory demand notice that there were preexisting disputes between the....
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....ns were merely clarificatory and not intended to confer upon the respondent a special right or privilege to file a proceeding which is not otherwise permissible under law. The intention cannot be said to have been to help the respondent come out of its action of unconditionally withdrawing the first Arbitration Petition or to deprive the appellant of defences available to it under law. Such intention cannot be attributed to this Court, particularly in the absence of any discussion on this point. 127. Further, the said paragraph only gives liberty to the respondent to avail such other remedies "as may be available" "in accordance with law". Hence, it cannot be construed as giving the respondent the liberty to file a proceeding that is not available or that is not in accordance with law. 128. The reliance placed by the petitioner upon the paragraph 35 referred to above is nothing but a completely incorrect reading of the said paragraph. In BSNL v. Telephone Cables Limited reported in 2010 5 SCC 213, this Court observed thus: "41. Instances abound where observations of the court reserving liberty to a litigant to further litigate have been misused by litigants to pursue....