Hpcl Bio-Fuels Ltd vs Shahaji Bhanudas Bhad

2024 INSC 851 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 12233 OF 2024 (ARISING OUT OF SLP (C) NO. 5589 OF 2024)

M/S HPCL BIO-FUELS LTD. …APPELLANT

VERSUS

M/S SHAHAJI BHANUDAS BHAD …RESPONDENT

JUDGMENT

Signature Not Verified Digitally signed by SANJAY KUMAR Date: 2024.11.07 17:00:12 IST Reason: J. B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided into the following

parts:

A. FACTUAL MATRIX............................................................................ 2

I. PROCEEDINGS UNDER THE IBC .................................................................... 5 II. PROCEEDINGS BEFORE THE HIGH COURT.................................................... 10

B. SUBMISSIONS ON BEHALF OF THE APPELLANT ................. 14

C. SUBMISSIONS ON BEHALF OF THE RESPONDENT .............. 17

D. ISSUES FOR DETERMINATION ................................................... 19

E. ANALYSIS .......................................................................................... 20

I. ISSUE NO. 1 ................................................................................................ 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

Page 1 of 79

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 as the sole

arbitrator to adjudicate the disputes and differences between HPCL Biofuels Ltd.

(“the appellant”) and the respondent.

A. FACTUAL MATRIX

3. The appellant is a Government company within the meaning of Section

4(35) of the Companies Act, 2013 and is engaged inter alia in the business of

manufacturing bio-fuels. The appellant is a wholly-owned subsidiary of

Hindustan Petroleum Corporation Ltd.

4. The respondent is engaged in the business of manufacture, supply and

erection of the equipment and machinery required for the setting up of sugar

factories and allied products in the name of M/s S.S. Engineer, as a sole

proprietor.

Page 2 of 79

5. Between 27.06.2012 and 30.08.2012, the appellant floated tenders for

enhancing the capacity of various process stations and Boiling House at Lauriya

(West Champaran) and Sugauli (East Champaran). The respondent participated

in the bidding process and was declared as the successful bidder. Subsequently,

in accordance with the terms and conditions of the tender, the appellant in October

and November of 2012 issued purchase orders in favour of the respondent for

enhancing the capacity of the concerned Boiling House on a turn-key basis.

Between 21.11.2012 and 25.03.2014, the respondent supplied various equipment

under the purchase orders and raised invoices for the same.

6. While the work was in progress, the appellant expressed its concerns about

the slow progress of work, quality of materials supplied and non-adherence to

timelines by the respondent and attempts were made to resolve the same through

mutual discussions between the parties.

7. On 13.06.2013, the appellant floated two more tenders for the purpose of

completion of certain work and supplies at the Sugauli and Lauriya plants

respectively. In August 2013, the appellant issued purchase orders in favour of

the respondent, for completing various works including supplies on a lump-sum

turnkey basis. The respondent raised invoices between 29.03.2013 & 25.03.2014

for the service portion of the turn-key contract. Accordingly, as per the

respondent, the total sum payable to it under the various purchase orders

aggregated to Rs. 38,18,71,026/-.

Page 3 of 79

8. Between 18.12.2012 and 07.11.2013, the appellant made an aggregate

payment of Rs. 19.02 crore to the respondent, with the last payment being made

on 07.11.2013. As per the case of the respondent, the balance amount 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, however, did not respond to the aforesaid

notice.

Page 4 of 79

10. On 16.02.2018, the respondent filed Arbitration Petition (ST) No. 5095 of

2018 before the High Court of Judicature at Bombay seeking appointment of an

arbitrator in terms of Section 11 of the Act, 1996. However, prior to filing the

Section 11 application, the respondent also sent a demand notice dated

30.08.2017 under Section 8 of the Insolvency & Bankruptcy Code, 2016 (for

short “the IBC”) to the appellant, claiming the alleged outstanding amount along

with interest.

11. On 01.10.2018, upon the request made by the respondent, the Arbitration

Petition (ST) No. 5095 of 2018 was disposed of as withdrawn. The relevant

portions of the order dated 01.10.2018 are reproduced below: -

“1. Not on board. Upon mentioning, taken on board.

2. The Learned Advocate appearing for the Petitioner on instructions seeks to withdraw the above Arbitration Petition. In view thereof, the above Arbitration Petition is disposed of as withdrawn.”

i. Proceedings under the IBC

12. After withdrawing the Section 11(6) application from the High Court, the

respondent, on 15.10.2018, filed CP(IB) No. 1422/KB/2018 under Section 9 of

the IBC before the National Company Law Tribunal, Kolkata (“NCLT,

Kolkata”) seeking initiation of the corporate insolvency resolution process of the

appellant. The appellant opposed the application, inter alia, on the ground that

there were disputes between the parties even prior to the issuance of demand

Page 5 of 79 notice under Section 8 of IBC. The appellant also relied on the notice invoking

the arbitration clause in support of its contention.

13. The NCLT, Kolkata vide order dated 12.02.2020, admitted the application

of the respondent and appointed an Interim Resolution Professional (IRP). On

the aspect of existence of disputes between the parties, the following observations

were made:

“17. As regards the pre-existing dispute, we have gone through all the facts stated by the Corporate Debtor but having regard to the quantum of claim in respect of supplies order, in our considered view, the amount of disputed claim due and payable will be more than Rs. One lakh in any case. Hence, such claims do not help the case of Corporate Debtor in substantial manner. Having said so, we would further refer to the provisional statement attached with the letter of the Corporate Debtor dated June 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 sub- contractors/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 63.13 lakhs. Further, if the amount retained for Performance Bank Guarantee is taken into consideration, then the amount payable to Operational Creditor Page 6 of 79 works out at Rs. 610.23 lakhs (i.e., 673-63.13). As noted earlier, L.D. is applicable @ 5% amounting to Rs. 190.94 lakhs has already been deducted. Further, amount of Rs. 400.55 lakhs in respect of Purchase Orders issued at the risk and cost of the vendor have also been deducted. Thus, all recoveries for non- performance / default has been considered and therefore, amount of Performance Bank Guarantee minus recovery i.e., 610.23 lakhs at least becomes payable by Corporate Debtor to the Operational Creditor. As an adjudicating authority in the proceedings, we are not supposed to do this kind of working, but to find out the genuineness of the claim of pre-existing dispute, and amount of outstanding debt, it was necessary in the facts and circumstances of the case, hence, it has been so analysed on the basis of the provisional statement prepared and filed by the Corporate Debtor itself. At the cost of repetition, we again state that this statement takes into consideration all these disputes raised by the Corporate Debtor, hence, the amount payable by the Corporate Debtor remains in positive which is more than one lakh ultimately that too when we have considered the project as a whole against the claim of Operational Creditor of undisputed dues of supply portion only. We have also gone through the emails which have been taken into consideration while preparing this provisional statement. Hence, on the basis of material on record, it cannot be said that any other dispute remains to be considered. Apart from this, the fact which is crucial to note is that the Corporate Debtor has awarded new work orders to the Operational Creditor subsequently which means that all the disputes relating to this contract had been considered / resolved and this fact has remained undisputed. Further, Form "C"s have been issued as late as up to March 2018. We further make it clear that we have analysed the provisional statement with limited objective of admissibility of this application and this analysis cannot be considered as expression of opinion on the amount of claim in any manner which may be actually due and payable.”

(Emphasis supplied)

14. The order of the NCLT, Kolkata was subsequently set aside by the NCLAT,

New Delhi vide order dated 10.01.2022. The NCLAT, on the aspect of pre-

existing disputes between the parties, observed thus:

Page 7 of 79

“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 the Code', the 'Operational Creditor' invoked Arbitration pursuant to the 8 project orders issued by the 'Corporate Debtor', which itself substantiates the 'Existence of a Dispute'. In the 'Notice' invoking Arbitration, the 'Operational Creditor' has stated that there is an outstanding of Rs. 18,12,21,452/- and has further stated that they are ready to settle the disputes through Arbitration. A brief perusal of the documents on record evidence that the 'Operational Creditor' admitted that the contract was on lumpsum turnkey basis and stated in the Arbitration 'Notice' that the 'Corporate Debtor' had raised issues relating to non- adherence of the terms of the contract.

xxx xxx xxx

21. The facts of the present case are being examined in the light of the law laid down by the Hon'ble Supreme Court, though the Learned Counsel for the 'Operational Creditor' has strenuously contended that the issuance of further work orders and the Notice issued by the Operational Creditor invoking Arbitration does not amount to Existence of a Dispute', the nature of communication on record with rival contentions clarify the 'Existence of a Dispute' between the parties prior to issuance of the Demand Notice. It has been time and again held that it is enough that a 'dispute exists' between the parties.

Page 8 of 79

22. The communication between the parties as noted in para 10 read together with the Arbitration invoked by the 'Operational Creditor', we are of the considered view that there is an Existence of a Dispute between the parties which is a genuine dispute and not a spurious, patently feeble legal argument or an assertion of fact unsupported by evidence. Therefore, we are of the opinion that the ratio laid down by the Hon'ble Apex Court in the aforenoted 'Mobilox Innovations (P) Ltd.' (Supra) and 'K. Kishan' (Supra) is squarely applicable to the facts of this case.”

(Emphasis supplied)

15. The respondent challenged the aforesaid order of the NCLAT before this

Court by filing the Civil Appeal No. 4583 of 2022. The appeal ultimately came

to be dismissed by a two-Judge Bench vide judgment dated 15.07.2022 wherein

the order of the NCLAT was upheld. The relevant observations made by this

Court are reproduced below:

“30. This 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

Page 9 of 79 initiation of CIRP by an operational creditor. On a reading of Sections 8 and 9 of the IBC, it is patently clear that an Operational Creditor can only trigger the CIRP process, when there is an undisputed debt and a default in payment thereof. If the claim of an operational creditor is undisputed and the operational debt remains unpaid, CIRP must commence, for IBC does not countenance dishonesty or deliberate failure to repay the dues of an Operational Creditor. However, if the debt is disputed, the application of the Operational Creditor for initiation of CIRP must be dismissed.

33. We find no grounds to interfere with the judgment and order of the NCLAT impugned in this appeal.

34. The appeal is dismissed.

35. Needles to mention that the appellant may avail such other remedies as may be available in accordance with law including arbitration to realise its dues, if any.”

ii. Proceedings before the High Court

16. Consequent to the dismissal of the insolvency proceedings, the respondent,

on 09.12.2022, filed a fresh petition under the Section 11(6) of the Act, 1996

before the High Court of Bombay seeking appointment of an arbitrator in terms

of clause 14 of the tender. The appellant opposed the petition, inter-alia on the

ground that the same was barred by limitation and that the claim sought to be

referred to arbitration was also a deadwood.

17. The High Court vide the impugned order allowed the application of the

respondent and proceeded to appoint an arbitrator. The High Court took the view

that the fresh Section 11 petition filed by the respondent, after withdrawal of the

Page 10 of 79 first, was not time-barred and neither the claim was a deadwood. The relevant

observations of the High Court are reproduced below:

“8. As regards the first submission of Mr. Paranjape, that once the Section 11 Petition is withdrawn no second Petition shall lie, I do not find any provision in the Act imposing such a restrain.

It is not the case, where the appointment of Arbitrator was prayed before the Court and the Application was turned down on merits, holding that no arbitrator deserves to be appointed in absence on an Arbitration Agreement. The Petitioner chose to withdraw the Petition and as it is categorically stated in the Petition that he was under advise to do so and pursuant thereto he approached NCLT under the IBC but did not succeed in the endeavour as the NCLT did not find such proceedings to 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 proceedings under the IBC, but unfortunately, remained unsuccessful.

Page 11 of 79 It is, thus, imperatively clear that the Petitioner was prosecuting the IBC proceedings before the NCLT or NCLAT, which was a completely wrong forum for him for redressal of his grievance, he was ultimately turned away by the Apex Court on 15.07.2022 by declaring that since the debt which he claims is disputed, he cannot initiate the CIRP.

10. Since he was availing a wrong remedy, he was turned down on 15.07.2022, by availing the liberty conferred, he has filed the Arbitration Petition.

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 the NCLT in favour of the Applicant came to be reversed. Therefore, it cannot be said that the Petitioner was sitting idle and not taking any steps for recovery of his dues, but it is a case where he was availing remedy for recovery of his dues before a wrong forum and he is entitled to take benefit of Section 14 of the Limitation Act, 1963.

In fact, the NCLT by its order dated 28.02.2020, admitted the Application under Section 8 and 9 of the IBC and even declared the said moratorium public announcement and in accordance with Section 13 and 14 of the IBC and Moratorium under Section 14 of the IBC was also imposed.

11. Another point raised by Mr. Paranjape in respect of time barred claim being prosecuted by the Petitioner must also meet the same fate.

The learned counsel would place reliance upon the decision in case of Bharat Sanchar Nigam Limited and Another vs. Nortel Networks India Private Limited (2021) 5 SCC 738, where it is held that since there is no provision in the 1996 Act specifying the period of limitation for filing an application under Section 11, recourse must be held to the Limitation Act as per Section 43 of the 1996 Act and since none of the Articles in the schedule to Limitation Act provide time for filing such Application, it would be governed by residual provision in Article 137.

Page 12 of 79 A reading of the said decision would also disclose that, it has been held that limitation is normally mixed question of fact and law and would lie within the domain of Arbitral Tribunal, 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 Arbitrator, though I leave it open to the Respondent to agitate the point of limitation before the Arbitrator.

15. In the wake of the above, Mr. Justice Dilip Bhosale (retired Chief Justice of Allahabad High Court) is appointed as Sole Arbitrator to adjudicate the disputes and differences that have arisen between the applicant and the respondent in the two applications.

The Arbitrator shall, within a period of 15 days before entering the arbitration reference forward a statement of disclosure as contemplated u/s.11(8) r/w Section 12 of the Arbitration and Conciliation Act, 1996, to the Prothonotary and Senior Master of this Court to be placed on record. […]”

Page 13 of 79

18. Aggrieved by the aforesaid order appointing an arbitrator for adjudicating

the disputes between the parties, the appellant has come up before this Court with

the present appeal.

B. SUBMISSIONS ON BEHALF OF THE APPELLANT

19. Mr. Tushar Mehta, the learned Solicitor General of India, appearing for the

appellant submitted that the Section 11(6) petition filed by the respondent before

the High Court as well as the claims sought to be referred to arbitration were time-

barred.

20. He submitted that the cause of action in the present case arose on

04.02.2014, i.e., on the date when the claim of the respondent was denied by the

appellant. The respondent invoked arbitration vide the notice dated 09.07.2016

and filed a Section 11 petition on 16.02.2018 before unconditionally withdrawing

the same. The period of limitation as per Article 137 of the First Schedule to the

Limitation Act, 1963 (“the Limitation Act”) for filing a Section 11 petition is

three years. In the present case, the limitation period for filing an application

under Section 11(6) of the Act, 1996 came to an end on 07.08.2019. Therefore,

the subsequent Section 11 application filed before the High Court on 09.12.2022

was clearly time-barred.

Page 14 of 79

21. He further submitted that in addition to the limitation period for filing the

Section 11 application having expired, the underlying claim sought to be referred

to arbitration also became time barred on 04.02.2017, that is, after the expiry of

three years from the date when the cause of action first arose. To buttress his

submissions on the aspect of limitation, he placed reliance on the decisions of this

Court in Arif Azim Co. Ltd. v. Aptech Ltd. reported in 2024 SCC OnLine SC

215 and 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

Page 15 of 79 proceedings relate to the same matter in issue or are for seeking the same relief.

However, he submitted, that the insolvency and arbitral proceedings are distinct

proceedings and are not for seeking the same relief. The remedy in arbitral

proceedings is in personam whereas the remedy in insolvency proceedings is in

rem. He submitted that the High Court failed to appreciate this distinction and

erroneously allowed the arbitration petition filed by the respondent by extending

to it the benefit under Section 14 of the Limitation Act.

24. He further submitted that the IBC was enacted to consolidate and amend

the laws relating to the reorganisation and insolvency resolution of corporate

persons in a time-bound manner for maximising the value of assets and balance

the interests of all the stakeholders. On the other hand, arbitration proceedings

are for the purpose of adjudication of disputes. Therefore, the objective, relief that

may be granted and the procedure governing IBC and arbitration proceedings are

widely divergent.

25. He argued that the period spent by the respondent pursuing insolvency

proceedings instead of arbitration does not entitle them to the benefit of Section

14 of the Limitation Act, more particularly having unconditionally withdrawn the

first Section 11 petition. In this regard reliance was placed by him on the decisions

of this Court in Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari

reported in 1950 SCR 852 and Natesan Agencies (Plantations) v. State reported

in (2019) 15 SCC 70.

Page 16 of 79

26. In the last, he submitted that this Court while dismissing the appeal filed

by the respondent against the order of the NCLAT, had only granted conditional

liberty to the respondent to pursue arbitration, which would be permitted only if

it is available in law. However, in the present case, since the Section 11

application as well as the claims are time-barred, the remedy of pursuing

arbitration cannot be available to the respondent in law.

C. SUBMISSIONS ON BEHALF OF THE RESPONDENT

27. Mr. Jay Savla, the learned Senior Counsel appearing on behalf of the

respondent submitted that the High Court rightly excluded the time taken by the

respondent in pursuing the IBC proceedings, that is, the period between the date

of filing of the Section 9 application before the NCLT and the date of the order of

this Court concluding the IBC proceedings by disposing of the appeal filed by the

respondent against the order of the NCLAT, while calculating the limitation

period for 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 17 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 Court in Sarva Shramik

Sanghatana v. State of Maharashtra reported in 2008 1 SCC 494, he argued that

the withdrawal of an application under Section 11(6) of the Act, 1996 is not the

same as withdrawal of a suit or a claim, and thus the principles enshrined under

Order 23 Rule 1 of the CPC will have no application to the present case.

30. It was submitted that Section 32 of the Act, 1996 provides for termination

of arbitration proceedings and is the only provision that relates to termination of

arbitration proceedings upon their commencement under Section 21. In the

Page 18 of 79 present case, arbitration was invoked by the respondent vide notice dated

09.07.2016, and there has been no termination of such arbitration proceedings as

per Section 32 of the Act, 1996. Hence, in the absence of any express bar on filing

of more than one 11(6) application under the provisions of the Act, 1996, the

second 11(6) application filed by the respondent cannot be said to be not

maintainable.

D. ISSUES FOR DETERMINATION

31. Having heard the learned counsel appearing for the parties and having

gone through the materials on record, the following questions fall for our

consideration:

i. WHETHER A FRESH APPLICATION UNDER SECTION 11(6) OF THE ACT,

1996 FILED BY THE RESPONDENT COULD BE SAID TO BE MAINTAINABLE

MORE PARTICULARLY WHEN NO LIBERTY TO FILE A FRESH APPLICATION

WAS GRANTED BY THE HIGH COURT AT THE TIME OF WITHDRAWAL OF

THE FIRST APPLICATION UNDER SECTION 11(6) OF THE ACT, 1996?

ii. WHETHER THE FRESH APPLICATION UNDER SECTION 11(6) OF THE ACT,

1996 FILED BY THE RESPONDENT ON 09.12.2022 COULD BE SAID TO BE

TIME-BARRED? IF YES, WHETHER THE RESPONDENT IS ENTITLED TO

Page 19 of 79 THE BENEFIT OF SECTION 14 OF THE LIMITATION ACT? IN OTHER

WORDS, WHETHER THE PERIOD SPENT BY THE RESPONDENT IN

PURSUING PROCEEDINGS UNDER THE IBC IS LIABLE TO BE EXCLUDED

WHILE COMPUTING THE LIMITATION PERIOD FOR FILING THE

APPLICATION UNDER SECTION 11(6)?

iii. WHETHER THE DELAY CAUSED BY THE RESPONDENT IN FILING THE

FRESH ARBITRATION APPLICATION UNDER SECTION 11(6) OF THE ACT,

1996 CAN BE CONDONED UNDER SECTION 5 OF THE LIMITATION ACT?

E. ANALYSIS

32. Clause 14 of the General Terms and Conditions of the tender document

contained the arbitration clause and is reproduced hereinbelow:

“14. ARBITRATION 14.1 All disputes and differences of whatsoever nature, whether existing 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.

Page 20 of 79 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 objection to the appointment of such person as the Sole Arbitrator on the ground that the said person is/was an officer and/or shareholder of the owner, another Govt. Company or the Central Government or that he/she has to deal or had dealt with the matter to which the contract relates or that in the course of his/her duties, he/she has/had expressed views on all or any of the matters in dispute or difference. 14.3 In the event of the Arbitrator to whom the matter is referred to, does not accept the appointment, or is unable or unwilling to act or resigns or vacates his office for any reasons whatsoever, the Appointing Authority aforesaid, shall nominate another person as aforesaid, to act as the Sole Arbitrator.

14.4 Such another person nominated as the Sole Arbitrator shall be entitled to proceed with the arbitration from the stage at which it was left by his predecessor. It is expressly agreed between the parties that no person other than the Appointing Authority or a person nominated by the Appointing Authority as aforesaid, shall act as an Arbitrator.

The failure on the part of the Appointing Authority to make an appointment on time shall only give rise to a right to a Contractor to get such an appointment made and not to have any other person appointed as the Sole Arbitrator.

14.5 The Award of the Sole Arbitrator shall be final and binding on the parties to the Agreement.

14.6 The work under the Contract shall, however, continue during the Arbitration proceedings and no payment due or payable to the concerned party shall be withheld (except to the extent disputed) on account of initiation, commencement or pendency of such proceedings.

Page 21 of 79 14.7 The Arbitrator may give a composite or separate Award(s) in respect of each dispute or difference referred to him and may also make interim award(s) if necessary.

14.8 The fees of the Arbitrator and expenses of arbitration, if any, shall be borne equally by the parties unless the Sole Arbitrator otherwise directs in his award with reasons. The lumpsum fees of the Arbitrator shall be Rs 60,000/- per case and if the sole Arbitrator completes the arbitration including his award within 5 months of accepting his appointment, he shall be paid Rs.10,000/- additionally as bonus. Reasonable actual expenses for stenographer, etc. will be reimbursed. Fees shall be paid stage wise i.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 liberty to

file afresh; and (ii) the application is time-barred for being beyond the time period

Page 22 of 79 of three years prescribed under Article 137 of the Limitation Act. We shall address

both these contentions in seriatim as they are pivotal to the fate of the present

appeal.

i. Issue No. 1

34. Section 11 of the Act, 1996 lays down the procedure for appointment of

arbitrators through the intervention of the High Court or the Supreme Court, as

the case may be. A reading of the said provision indicates that there is nothing

therein which prevents a party from filing more than one application seeking the

appointment of arbitrator for adjudicating disputes arising from the same contract.

35. However, the appellant has contended that in lieu of the principles

contained in Order 23 Rule 1 of the CPC, the respondent could not have filed a

subsequent application under Section 11(6) for adjudication of the same disputes,

having previously withdrawn unconditionally an application filed for the same

purpose. To address the contention of the appellant, we need to determine whether

the principles contained in Order 23 Rule 1 of the CPC will apply to an

application under Section 11(6) of the Act, 1996.

a. Scope and applicability of Order 23 Rule 1 of the CPC to proceedings other than suits

36. Prior to its amendment by the Code of Civil Procedure (Amendment) Act,

1976, Order 23 Rule 1 of the CPC provided for two kinds of withdrawal of a suit,

Page 23 of 79 namely absolute withdrawal and withdrawal with the permission of the court to

institute a fresh suit on the same cause of action. The first category of withdrawal

was governed by sub-rule (1) thereof, as it stood then, which provided that at any

time after the institution of a suit, the plaintiff may, as against all or any of the

defendants withdraw his suit or abandon a part of his claim. The second category

was governed by sub-rule (2) thereof which provided that where the court was

satisfied (a) that a suit must fail by reason of some formal defect, or (b) that there

were sufficient grounds for allowing the plaintiff to institute a fresh suit for the

subject-matter of a suit or part of a claim, it may, on such terms as it thought fit,

grant the plaintiff permission to withdraw from such suit or abandon a part of a

claim with liberty to institute a fresh suit in respect of the subject-matter of such

suit or such part of the claim. 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:

Page 24 of 79

“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 accompanied by an affidavit of the next friend and also, if the minor or such other person is represented by a pleader, by a certificate of the pleader to the effect that the abandonment proposed is, in his opinion, for the benefit of the minor or such other person.

(3) Where the Court is satisfied,—

(a) that a suit must fail by reason of some formal defect, or

(b) that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject matter of suit or part of a claim, It may, on such terms as it thinks fit grant the plaintiff permission to withdraw from such suit or such part of the claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of the claim.

(4) Where the plaintiff—

(a) abandons any suit or part of claim under sub-rule (1), or

(b) withdraws from a suit or part of a claim without the permission referred to in sub-rule (3),

he shall be liable for such costs as the Court may award and shall be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim.

(5) Nothing in this rule shall be deemed to authorise the Court to permit one of several plaintiffs to abandon a suit or part of a

Page 25 of 79 claim under sub-rule (1), or to withdraw, under sub-rule (3), any suit or part of a claim, without the consent of the other plaintiff”

38. The key difference between Order 23 Rule 1 as it stood prior to the

amendment and as it stands now is that while in sub-rule (1) of the former Order

23 Rule 1, the expression “withdraw his suit” had been used, whereas in sub-rule

(1) of the amended Order 23 Rule 1, the expression “abandon his suit” has been

used. The new sub-rule (1) is applicable to a case where the court declines to

accord permission to withdraw from a suit or such part of the claim with liberty

to institute a fresh suit in respect of the subject-matter of such suit or such part of

the claim. In the new sub-rule (3) which corresponds to the former sub-rule (2),

practically no change is made. Under sub-rule (3), the court is empowered to

grant, subject to the conditions mentioned therein, permission to withdraw from

a suit with liberty to institute a fresh suit in respect of the subject-matter of such

suit. Sub-rule (4) of the amended Order 23 Rule 1 provides that where the plaintiff

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

Page 26 of 79 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 to pay such costs as may be imposed by

the Court. This is specified under sub-rule (4) of Order 23 Rule 1.

40. However, if the plaintiff desires to withdraw from a suit or part of a claim

with liberty to file a fresh suit on the same subject matter or part of the claim,

then he must obtain the permission of the court under sub-rule (3) of Order 23

Rule 1. The failure to obtain such permission would preclude the plaintiff from

instituting any fresh suit in respect of such subject-matter or such part of the

claim, and also to any costs that may be imposed by the court.

41. The court granting liberty under sub-rule (3) of Order 23 Rule 1 may do so

only upon being satisfied of one of the following two conditions– first, that the

suit suffers from some formal defect and would fail by reason of such defect; and

second, that there are sufficient grounds for allowing the plaintiff to institute a

fresh suit for the same subject-matter or part of the claim. The court may grant

Page 27 of 79 liberty on such terms as it deems fit. It is also apparent from the text of the

provision that the liberty under sub-rule (3) can only be granted by the court trying

the earlier suit and not by the court before which the subsequent suit is instituted.

42. On meaning of the phrase ‘subject-matter’ appearing in Order 23 Rule 1,

this Court in Vallabh Das v. Madan Lal (Dr) reported in (1970) 1 SCC 761 held

thus:

“5. Rule 1 of the Order 23, Code of Civil Procedure empowers the courts to permit a plaintiff to withdraw from the suit brought by him with liberty to institute a fresh suit in respect of the subject-matter of that suit on such terms as it thinks fit. The term imposed on the plaintiff in the previous suit was that before bringing a fresh suit on the same cause of action, he must pay the costs of the defendants. Therefore we have to see whether that condition governs the institution of the present suit. For deciding that question we have to see whether the suit from which this appeal arises is in respect of the same subject-matter that was in litigation in the previous suit. The expression “subject-matter” is not defined in the Civil Procedure Code. It does not mean property. That expression has a reference to a right in the property which the plaintiff seeks to enforce. That expression includes the cause of action and the relief claimed. Unless the cause of action and the relief 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 Page 28 of 79 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 first nor is it the cause of action in the present suit. It was merely an antecedent event which conferred certain rights on him. Mere identity of some of the issues in the two suits do not bring about an identity of the subject-matter in the two suits. As observed in Rukhma Bai v. Mahadeo Narayan, [ILR 42 Bom 155] the expression “subject-matter” in Order 23 of the Rule 1, Code of Civil Procedure means the series of acts or transactions alleged to exist giving rise to the relief claimed. In other words “subject-matter” means the bundle of facts which have to be proved in order to entile the plaintiff to the relief claimed by him. We accept as correct the observations of Wallis, C.J., in Singa Reddi v. Subba Reddi [ILR 39 Mad 987] that where the cause of action and the relief claimed in the second suit are not the same as the cause of action and the relief claimed in the first suit, the second suit cannot be considered to have been brought in respect of the same subject-matter as the first suit.” (Emphasis supplied)

43. Discussing on the meaning of the phrases ‘formal defect’ and ‘sufficient

grounds’, a two-Judge Bench of this Court in V. Rajendran v. Annasamy

Pandian reported in (2017) 5 SCC 63 observed thus:

“9. […] As per Order 23 Rule 1(3) CPC, suit may only be withdrawn with permission to bring a fresh suit when the Court is satisfied that the suit must fail for reason of some formal defect or that there are other sufficient grounds for allowing the plaintiff to institute a fresh suit. The power to allow withdrawal of a suit is discretionary. In the application, the plaintiff must make out a case in terms of Order 23 Rules 1(3)(a) or (b) CPC and must ask for leave. The Court can allow the application filed under Order 23 Rule 1(3) CPC for withdrawal of the suit with liberty to bring a fresh suit only if the condition in either of the clauses (a) or (b), that is, existence of a “formal defect” or “sufficient grounds”.

The principle under Order 23 Rule 1(3) CPC is founded on public policy to prevent institution of suit again and again on the same cause of action.

Page 29 of 79

10. In K.S. Bhoopathy v. Kokila [(2000) 5 SCC 458], it has been held that it is the duty of the Court to be satisfied about the existence of “formal defect” or “sufficient grounds” before granting permission to withdraw the suit with liberty to file a fresh suit under the same 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 sufficient grounds for allowing the plaintiff to institute a fresh suit, the Court may permit the plaintiff to withdraw the suit. In interpretation of the words “sufficient grounds”, there are two views : one view is that these grounds in clause (b) must be “ejusdem generis” with those in clause (a), that is, it must be of the same nature as the ground in clause (a), that is, formal defect or at least analogous to them; and the other view was that the words “other sufficient grounds” in clause (b) should be read independent of the words a “formal defect” and clause (a). Court has been given a wider discretion to allow withdrawal from suit in the interest of justice in cases where such a prayer is not covered by clause (a). Since in the present case, we are only concerned with “formal defect” envisaged under clause (a) of Rule 1 sub-rule (3), we choose not to elaborate any further on the ground contemplated under clause (b), that is, “sufficient grounds”.” (Emphasis supplied)

Page 30 of 79

44. The main purpose of permitting the withdrawal of a suit and its re-filing is

to ensure that justice is not thwarted due to technicalities. Where permission

under Order 23 Rule 1 is granted, the principle of estoppel does not operate and

the principle of res judicate would also not apply. However, Order 23 Rule 1 is

not intended to enable the plaintiff to get a chance to commence litigation afresh

in order to avoid the results of his previous suit, or to engage in multiple

proceedings with the motive of bench-hunting.

45. Order 23 Rule 2 stipulates that any fresh suit instituted on permission

granted under Order 23 Rule 1 shall be governed by the law of limitation in the

same manner as if the first suit had not been instituted. The object underlying this

Rule is to prevent a party from misusing the liberty of filing a fresh suit for

evading the limitation period governing the said suit. The said rule is reproduced

hereinbelow:

“2. Limitation law not affected by first suit.—In any fresh suit instituted on permission granted under the last preceding rule, the plaintiff shall be bound by the law of limitation in the same manner as if the first suit had not been instituted.”

46. Undoubtedly, an application under Section 11(6) of the Act, 1996 is not a

suit and hence will not be governed stricto-sensu by Order 23 Rule 1 of the CPC.

However, in a number of decisions, this 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

Page 31 of 79 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 subject- matter 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 or benefits which he does not desire. Whoever waives, abandons or disclaims a right will loose it. In order to prevent a litigant from abusing the process of the court by instituting suits again and again on the same cause of action without any good reason the Code insists that he should obtain the permission of the court to file a fresh suit after establishing either of the two grounds mentioned in sub-rule (3) of Rule 1 of Order XXIII. The principle underlying the above rule is founded on public policy, but it is not the same as the rule of res judicata contained in Section 11 of the Code which provides that no court shall try any suit or issue in which the matter directly or substantially in issue has been directly or substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such court. The rule of res judicata applies to a case where the suit or an issue has already been heard and finally decided by a court. In the case of abandonment or withdrawal of a suit without Page 32 of 79 the permission of the court to file a fresh suit, there is no prior adjudication of a suit or an issue is involved, yet the Code provides, as stated earlier, that a second suit will not lie in sub- rule (4) of Rule 1 of Order XXIII of the Code when the first suit is withdrawn without the permission referred to in sub-rule (3) in order to prevent the abuse of the process of the court.

8. The question for our consideration is whether it would or would not advance the cause of justice if the principle underlying Rule 1 of Order XXIII of the Code is adopted in respect of writ petitions filed under Articles 226/227 of the Constitution of India also. It is common knowledge that very often after a writ petition is heard for some time when the petitioner or his counsel finds that the court is not likely to pass an order admitting the petition, request is made by the petitioner or by his counsel to permit the petitioner to withdraw from the writ petition without seeking permission to institute a fresh writ petition. A court which is unwilling to admit the petition would not ordinarily grant liberty to file a fresh petition while it may just agree 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

Page 33 of 79

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 jurisdiction is that very often it happens, when the petitioner or his counsel finds that the court is not likely to pass an order admitting the writ petition after it is heard for some time, that a request is made by the petitioner or his counsel to permit him to withdraw it without seeking permission to institute a fresh writ petition. A court which is unwilling to admit the petition would not ordinarily grant liberty to file a fresh petition while it may just agree to permit withdrawal of the petition. When once a writ petition filed in a High Court is withdrawn by the party concerned, 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. If so, he cannot file a fresh petition for the same cause once again. […] xxx xxx xxx

15. We have no doubt that the above rule of public policy, for the very same reasoning, should apply to special leave petitions filed under Article 136 of the Constitution also. […]” (Emphasis supplied)

49. The respondent has relied upon the decision of this Court in Sarva Shramik

Sanghatana (supra) to contend that the principles underlying Order 23 Rule 1 of

the CPC cannot be applied as a matter of fact in every legal proceeding. In the

said case, an application seeking permission for closure under Section 25-O(1) of

the Industrial Disputes Act, 1947 had been filed by the respondent Company

therein. However, before the application could be decided, the Company received

a letter from the Deputy Commissioner of Labour, Mumbai inviting it to a

meeting for exploring the possibility of an amicable settlement. The Company

Page 34 of 79 withdrew its application in lieu of the invite and Section 25-O(3) which provides

that an application made under Section 25-O(1) will be deemed to have been

allowed if it is not decided within a period of 60 days from the date of filing.

However, after the attempts for an amicable settlement failed, the Company

moved a fresh application under Section 25-O(1). The application was opposed

by the appellant therein, inter-alia, on the ground that since the first application

was withdrawn by the Company without obtaining liberty to file a fresh

application, the same would not be maintainable as per the principles underlying

Order 23 Rule 1 of the CPC. In this regard, reliance was placed 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 trying for an

Page 35 of 79 amicable settlement, and this was clearly bona fide, and it was not a case of Bench-hunting when it found that an adverse order was likely to be passed against it. Hence, Sarguja Transport case [(1987) 1 SCC 5 : 1987 SCC (Cri) 19 : AIR 1987 SC 88] is clearly distinguishable, and will only apply where the first petition was withdrawn in order to do Bench-hunting or for some other mala fide purpose.

20. We agree with the learned counsel for the appellant that although the Code of Civil Procedure does not strictly apply to proceedings under Section 25-O(1) of the Industrial Disputes Act, or other judicial or quasi-judicial proceedings under any other Act, some of the general principles in CPC may be applicable. For instance, even if Section 11 CPC does not in terms strictly apply because both the proceedings may not be suits, the general principle of res judicata may apply vide Pondicherry Khadi & Village Industries Board v. P. Kulothangan [(2004) 1 SCC 68 : 2004 SCC (L&S) 32] . However, this does not mean that all provisions in CPC will strictly apply to proceedings which are not suits.

22. No doubt, Order 23 Rule 1(4) CPC states that where the plaintiff withdraws a suit without permission of the court, he is precluded from instituting any fresh suit in respect of the same subject-matter. However, in our opinion, this provision will apply only to suits. An application under Section 25-O(1) is not a suit, and hence, the said provision will not apply to such an application.” (Emphasis supplied)

50. While we agree with the decision in the aforesaid case to the extent that it

declined to apply the principles of Order 23 Rule 1 and refused to dismiss a

bonafide subsequent application filed after the earlier one was withdrawn in good

faith to attempt conciliation, we are of the view that it cannot be declared as a

general rule that merely because a legal proceeding is not a ‘suit’, it would be

completely exempted from the application of principles underlying Order 23 Rule

Page 36 of 79

1. These principles, being in the nature of public policy, bring efficiency and

certainty to the administration of justice by any court and should be invoked and

enforced unless they are expressly prohibited by statute or appear to counter serve

the interest of justice, rather than advancing it.

51. One important policy consideration which permeates the scheme of Order

23 Rule 1 is the legislative intent that legal proceedings in respect of a subject-

matter 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 reason to not extend

the principles of Order 23 Rule 1 to such proceedings, when the very same

Page 37 of 79 principles have been extended to writ proceedings before High Courts under

Articles 226 & 227 and SLPs before this Court under Article 136.

52. One important aspect that needs to be kept in mind while applying the

principles of Order 23 Rule 1 to applications under Section 11(6) of the Act, 1996

is that it will act as a bar to only those applications which are filed subsequent to

the withdrawal of a previous Section 11(6) application filed on the basis of the

same cause of action. The extension of the aforesaid principle cannot be construed

to mean that it bars invocation of the same arbitration clause on more than one

occasion. It is possible that certain claims or disputes may arise between the

parties after a tribunal has already been appointed in furtherance of an application

under Section 11(6). In such a scenario, a party cannot be precluded from

invoking the arbitration clause only on the ground that it had previously invoked

the same arbitration clause. If the cause of action for invoking subsequent

arbitration has arisen after the invocation of the first arbitration, then the

application for appointment of arbitrator cannot be rejected on the ground of

multiplicity alone.

53. The principles of Order 23 Rule 1 are extended to proceedings other than

suits with a view to bring in certainty, expediency and efficiency in legal

proceedings. However, at the same time, it must also be kept in mind while

extending the principles to legal proceedings other than suits that the principles

are not applied in a rigid or hyper-technical manner. While the nature of the

Page 38 of 79 proceedings, that is, whether such proceeding is a suit or otherwise, should not

be a consideration in deciding whether the principles of Order 23 Rule 1 should

be extended to such proceedings or not, the bonafide conduct of a party in the

unique facts of a case must be considered before precluding such a party from

moving ahead with the proceedings.

54. In the case of Vanna Claire Kaura v. Gauri Anil Indulkar & Ors. reported

in (2009) 7 SCC 541 the applicant filed a Section 11(6) application before the

High Court of Bombay. A dispute was raised that the application was not

maintainable as the agreements were in the nature of international commercial

arbitration agreement under the Act, 1996 and the application 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.

Page 39 of 79 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 view that the respondent chose to withdraw the

petition under legal advice and thereafter approached NCLT under the IBC but

did not succeed in its endeavor. Further, the High Court observed that while

dismissing the appeal, this Court vide Order dated 15.07.2022 granted liberty to

the respondent to avail such remedies in accordance with law, which shall include

the remedy of arbitration. Accepting the explanation given by the respondent as

bonafide and relying on the order dated 15.07.2022 of this Court, the High Court

held the fresh petition under Section 11(6) to be maintainable.

57. A perusal of paragraph 18 of the order dated 10.01.2022 passed by the

NCLAT setting aside the order of the NCLT reveals that after invoking the

arbitration clause by the notice dated 09.07.2016, the respondent issued a

statutory demand notice to the appellant under Section 8 of the IBC on

30.08.2017. When no reply was sent by the appellant to the said demand notice,

the respondent, rather than filing an application under Section 9 of the IBC, filed

an application for the appointment of arbitrator on 16.02.2018. During the

pendency of the application under Section 11(6) of the Act, 1996 before the High

Page 40 of 79 Court, the respondent issued a second statutory demand notice under Section 8 of

the IBC to the appellant on 25.07.2018. The appellant filed a reply to the said

demand notice on 07.08.2018, wherein, inter alia, it took the defence that there

was a pre-existing dispute between the parties, which was evidenced by the

existence of the pending arbitration proceedings. Subsequently, the respondent

withdrew the arbitration application on 01.10.2018 and thereafter proceeded to

file an application before the NCLT, Kolkata on 05.10.2018.

58. The chronology of events as discussed above clearly indicates that the

respondent did not withdraw the first arbitration application because of some

defect which would have led to its dismissal. It is also clear from the order dated

01.10.2018 of the High Court permitting the respondent to withdraw the

application that neither any liberty was sought by the respondent nor the court

had granted any liberty to file a fresh arbitration application. It appears to us that

the only reason the respondent withdrew the arbitration application was to get his

application under Section 9 of the IBC any how admitted by the NCLT. It is also

evident that the existence 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.

Page 41 of 79

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 thus fatal to the IBC proceedings.

60. As we are of the view that the principles underlying Order 23 Rule 1 can

be extended to applications for appointment of arbitrator, the only recourse to the

respondent to defend the second application as maintainable despite it having

been withdrawn earlier without liberty was to show bona fides on its part. From

the conduct of the respondent, it is evident that it thought fit to initiate insolvency

proceedings perhaps thinking that the issues existing between the parties may not

get resolved through arbitration. Further, no document has been placed on record

to substantiate the so called incorrect legal advice the respondent claims to have

received. Therefore, the failure on the part of the respondent to withdraw the first

Section 11 application without seeking any liberty cannot be condoned in the facts

of the present case.

Page 42 of 79

61. In light of the aforesaid discussion, we are of the view that in the absence

of any liberty sought by the respondents from the High Court at the time of

withdrawal of the first arbitration application, the fresh Section 11 petition arising

out of the same cause of action cannot be said to be maintainable.

62. Another way of looking at the abandonment of Section 11(6) application is

by understanding the importance of such an application in view of Sections 21

and 43(2) of the Act, 1996 respectively. By virtue of Section 21, the arbitral

proceedings commence on the date on which the respondent receives the

petitioner’s notice invoking arbitration. The said provision is reproduced below:

“21. Commencement of arbitral proceedings.—Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”

63. Section 43(2) of the Act, 1996 provides that for the purposes of limitation,

an arbitration shall be ‘deemed’ to have commenced on the date referred to in

Section 21. Section 43(2) is reproduced below:

“(2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred to in section 21.”

64. As is clear from the word “deemed” used in Section 43(2), the

commencement of arbitration proceedings, as contemplated in Section 21, is in

the nature of a legal or deeming fiction. It is a notional commencement and not a

Page 43 of 79 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 submitted by the appellant that the fresh application filed by the

respondent under Section 11(6) of the Act, 1996 before the High Court was

Page 44 of 79 beyond the period of limitation prescribed for filing of such an application and

was not maintainable. The appellant also contended that the substantive claims

raised by the respondent are also ex-facie time-barred and thus the High Court

ought to have dismissed the fresh arbitration application filed by the respondent

on this ground as well.

68. The basic premise behind the statutes providing for a limitation period is

encapsulated by the maxim “Vigilantibus non dormientibus jura subveniunt”

which means that the law assists those who are vigilant and not those who sleep

over their rights. The object behind having a prescribed limitation period is to

ensure that there is certainty and finality to the litigation and assurance to the

opposite party that it will not be subject to an indefinite period of liability. Another

object achieved by a fixed limitation period is that only those claims which are

initiated before the deterioration of evidence takes place are allowed to be

litigated. The law of limitation does not act to extinguish the right but only bars

the remedy.

69. The limitation period governing applications under Section 11(6) of the

Act, 1996 has recently been explained by a three-Judge Bench of this Court, to

which My Lord, the Chief Justice of India and myself were a part, in M/s Arif

Azim Co. Ltd. v. M/s Aptech Ltd. reported in 2024 INSC 155. The said decision

has referred to Article 137 of the Limitation Act, 1963 to hold that the limitation

Page 45 of 79 period for making an application under Section 11(6) of the Act, 1996 is three

years from the date when the right to apply accrues.

70. On the aspect of when the limitation period for filing an application seeking

appointment of arbitrator would commence, the aforesaid decision has held that

it is only after a valid notice invoking arbitration has been issued by one of the

parties to the other party and there has been either a failure or refusal on part of

the other party to make an appointment as per the appointment procedure agreed

upon between the parties, that the clock would start ticking for the purpose of the

limitation of three years.

71. In the case at hand, the respondent invoked the arbitration clause vide a

notice dated 09.07.2016. Since there was no 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

Page 46 of 79 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 pre-

existing dispute regarding the alleged claims of the respondent against the

appellant, the Section 9 application of the respondent as an ‘Operational Creditor’

could not have been entertained.

73. Upon rejection of the Section 9 application by this Court, the respondent

filed a fresh application under Section 11(6) on 09.12.2022 before the High Court.

The High Court allowed the application and proceeded to appoint the arbitrator

vide the impugned order.

74. An overview of the facts as discussed above indicates that the first

application under Section 11(6) filed on 16.02.2018 was well within the

prescribed limitation period of three years for filing such applications. However,

even assuming that the second application under Section 11(6) is not barred by

the principles underlying Order 23 Rule 1, the same was required to be filed

within a period of three years from the expiry of one month from the date of

receipt of the notice invoking arbitration by the appellant. This period of three

years came to an end in August, 2019. The second application under Section 11(6)

came to be filed by the respondent much later on 12.12.2022 and is clearly time-

barred.

Page 47 of 79

75. However, to save the second Section 11(6) application from being

dismissed on account of being time-barred, the respondent has contended that it

is entitled to invoke the benefit under Section 14 of the Limitation Act, 1963 to

seek exclusion of the period spent by it in pursuing the proceedings under Section

9 of the IBC. The respondent has further submitted that even otherwise, this Court

in exercise of its discretion available under Section 5 of the Limitation Act may

condone the delay in filing the second 11(6) application before the High Court,

as it was pursuing the insolvency proceedings in a bona fide manner and would

be left remediless if the appointment of arbitrator by the High Court is set aside

by this Court.

76. Section 14 of the Limitation Act provides for exclusion of time of

proceeding bona fide in court without jurisdiction and is reproduced below: -

“14. Exclusion of time of proceeding bona fide in court without jurisdiction.—

(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and 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.

(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

Page 48 of 79 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;

(b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding;

(c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction.”

77. There is a body of decisions of this Court taking the view that by virtue of

Section 43 of the Act, 1996, the Limitation Act is applicable to applications for

appointment of arbitrator filed under Section 11(6) of the said Act. It thus follows

that the benefit under Section 14 of the Limitation Act can be availed by an

applicant subject to the fulfilment of the conditions specified therein. However, a

bare perusal of the aforesaid provision indicates that sub-sections (1) and (2)

respectively of Section 14 are materially different from each other. Thus, it is

important to ascertain as to which provision would be applicable to an application

for appointment of arbitrator under Section 11(6) of the Act, 1996.

Page 49 of 79

78. Under Section 14(1), in computing the period of limitation for any suit, the

time during which the plaintiff has been prosecuting with due diligence another

civil proceeding, whether in a court of first instance or of appeal or revision,

against the defendant shall be excluded, where the proceeding relates to the same

matter in issue and 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. Thus, the

following ingredients need to be fulfilled for the applicability of Section 14(1):

i. The subsequent proceeding must be a suit;

ii. Both the earlier and the subsequent proceeding must be civil

proceedings;

iii. Both the earlier and subsequent proceedings must be between the same

parties;

iv. The earlier and subsequent proceeding must have the same matter in

issue;

v. The earlier proceeding must have failed owing to a defect of jurisdiction

of the earlier court or any other cause of a like nature;

vi. The earlier proceedings must have been prosecuted in good faith and

with due-diligence; and

vii. Both the earlier and the subsequent proceedings must be before a court.

Page 50 of 79

79. A three-Judge Bench of this Court in Consolidated Engg. Enterprises v.

Irrigation Deptt. reported in (2008) 7 SCC 169, dealt with the question as to

whether Section 14 of the Limitation Act would be 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) “applicant” includes—

(i) a petitioner;

(ii) any person from or through whom an applicant derives his right to apply;

(iii) any person whose estate is represented by the applicant as executor, administrator or other representative;

Page 51 of 79 xxx xxx xxx

(b) "application” includes a petition;

xxx xxx xxx

(h) “good faith” - nothing shall be deemed to be done in good faith which is not done with due care and attention;

xxx xxx xxx

(j) “period of limitation” means the period of limitation prescribed for any suit, appeal or application by the Schedule, and "prescribed period" means the period of limitation computed in accordance with the provisions of this Act;

xxx xxx xxx

(l) “suit” does not include an appeal or an application;

81. Section 2(l) as reproduced above clearly provides for a distinction between

a ‘suit’ and an ‘application’ under the Limitation Act. Thus, the clear intention of

the legislature was that they are not to be considered as the same for the purpose

of Limitation Act.

82. In Section 11(6) of the Act, 1996, the words ‘the appointment shall be

made, on an application of the party’ are used, thereby signifying that a Section

11 petition is in the nature of an ‘application’ and cannot be considered to be a

‘suit’ for the purposes of the Limitation Act. Even otherwise, ‘application’ under

Page 52 of 79 the Limitation Act includes a ‘petition’, thereby leaving no room for any doubt

that a Section 11(6) petition is to be treated as an application.

83. As a petition under Section 11(6) of the Act, 1996 is not a suit, hence it

would not be governed by sub-section (1) of Section 14 of the Limitation Act.

Instead, it would be governed by sub-section (2) of Section 14 of the Limitation

Act. Some of the conditions required to be fulfilled for seeking the benefit of

exclusion under Section 14(2) are materially different from those required under

Section 14(1) and are as follows:

i. Both the earlier and the subsequent proceeding must be civil

proceedings;

ii. Both the earlier and subsequent proceedings must be between the same

parties;

iii. The earlier and subsequent proceeding must be for the same relief;

iv. The earlier proceeding must have failed owing to a defect of jurisdiction

of the earlier court or any other cause of a like nature;

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.

Page 53 of 79 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

established on the basis of oral and documentary evidence and arguments.

Whereas, an application is made under a particular provision of a statute and if it

appears to the court that such provision of the statute is not applicable, then the

application as a whole cannot be sustained. Thus, an application is made for a

specific purpose as provided by the statutory provision under which it is made

unlike a suit which is instituted based on a cause of action and is for seeking

remedies falling in a wider conspectus.

Page 54 of 79

86. Sub-section (3) of Section 14 stipulates that where liberty to withdraw any

suit is granted under sub-rule (3) of Order 23 Rule 1 on the ground of defect of

jurisdiction or other cause of a like nature, then, the exclusion of limitation period

as provided by Section 14(1) will be available to the plaintiff to institute any fresh

suit on the same subject-matter.

87. The respondent has contended that the expression “other cause of a like

nature” used in Section 14 of the Limitation Act should be given a wide

interpretation as Section 14 is meant to advance the cause of the justice and not

thwart it by procedural impediments. In view of liberal interpretation of Section

14, the respondent submitted that the case at hand is one fit for the grant of relief

under Section 14 of the Limitation Act.

88. This Court in M.P. Housing Board v. Mohanlal & Co. reported in (2016)

14 SCC 199 observed thus on the liberal interpretation of Section 14 of the

Limitation Act:

“16. From the aforesaid passage, it is clear as noonday that there has to be a liberal interpretation to advance the cause of justice. However, it has also been laid down that it would be applicable in cases of mistaken remedy or selection of a wrong forum. As per the conditions enumerated, the earlier proceeding and the latter proceeding must relate to the same matter in issue. It is worthy to mention here that the words “matter in issue” are used under Section 11 of the Code of Civil Procedure, 1908. As has been held in Ramadhar Shrivas v. Bhagwandas [(2005) 13 SCC 1], the said expression connotes the matter which is directly and substantially in issue. We have only referred to the said authority to highlight

Page 55 of 79 that despite liberal interpretation placed under Section 14 of the Act, the matter in issue in the earlier proceeding and the latter proceeding has to be conferred requisite 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 purpose of IBC proceedings vis-à-vis proceedings under Section

11(6) of the Act, 1996.

Page 56 of 79 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

90. In the introduction to the Treatise on the Insolvency and Bankruptcy Code,

2016 by Dr. Dilip K. Sheth, the author has opined that IBC was enacted on the

basis of recommendations of various committees and suggestions received from

various stakeholders to address the infirmities of the erstwhile insolvency regime

and fulfil the following objectives:

i. To balance the interest of stakeholders and creditors by reviewing and

restructuring insolvent businesses having potential for a turn-around.

ii. To provide robust mechanism for earlier resolution of insolvency in

time-bound manner.

91. A reading of the Preamble to the IBC reveals the following avowed objects

behind its enactment:

i. To consolidate and amend the laws relating to reorganisation and

insolvency resolution of corporate persons, partnership firms and

individuals in a timebound manner for maximization of value of assets

of such persons;

ii. To promote entrepreneurship and availability of credit;

iii. To balance the interests of all the stakeholders including alteration in

the order of priority of payment of Government dues; and

iv. To establish the Insolvency and Bankruptcy Board of India.

Page 57 of 79 92. One of the cardinal objectives of the IBC is to protect and preserve the

life of the corporate debtor “as a going concern” by providing for the

resolution of its insolvency through restructuring and keeping liquidation only as

a measure of last resort.

93. One of the essential ingredients of an application filed under Section 9 of

the IBC is that there is an existence of a default. The term ‘default’ is defined

under Section 3(12) of the IBC to mean non-payment of debt when whole or any

part or instalment of the amount of debt has become due and payable and is not

paid by the debtor.

94. ‘Debt’ is defined under Section 3(11) of the IBC to mean a liability or

obligation in respect of a claim which is due from any person and includes a

financial debt and operational debt.

95. On the other hand, arbitration is a consent-based private dispute resolution

method for the expeditious adjudication of disputes. Arbitration is initiated 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 time-

period 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

Page 58 of 79 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 the NCLT in favour of the Applicant came to be reversed. Therefore, it cannot be said that the Petitioner was sitting idle and not taking any steps for recovery of his dues, but it is a case where he was availing remedy for recovery of his dues before a wrong forum and he is entitled to take benefit of Section 14 of the Limitation Act, 1963.”

97. We are of the view that the High Court fell in error in holding that an

application under Section 9 of the IBC and an application under Section 11(6) of

the Act, 1996 are filed for seeking the same relief. While the relief sought in the

former is the initiation of the CIRP of the corporate debtor, the relief sought in

the latter is the appointment of an arbitrator for the adjudication of disputes

arising out of a contract.

98. The object of initiation of insolvency proceedings under the IBC is to seek

rehabilitation of the corporate debtor by appointment of a new management,

whereas the objective behind the appointment of an arbitrator is to resolve the

Page 59 of 79 disputes arising between the parties out of a private contract. As soon as the CIRP

of a corporate debtor is initiated, it becomes a proceeding in rem. On the contrary,

arbitration being concerned with private disputes is not an in-rem proceeding.

99. In Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors. reported in

(2019) 4 SCC 17 this Court, speaking through R.F Nariman J., held that IBC was

not a mere recovery legislation for the creditors but rather a beneficial legislation

intended to revive and rehabilitate the corporate debtor. The relevant observations

read as under:

“28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the 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)

Page 60 of 79

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 in rem which, after being triggered, goes completely outside the control of the allottee who triggers it. Thus, any allottee/home buyer who prefers an application under Section 7 of the Code takes the risk of his flat/apartment not being completed in the near future, in the event of there being a breach on the part of the developer. Under the Code, he may never get a refund of the entire principal, let alone interest. […]” (Emphasis supplied)

101. In yet another decision of this Court in Hindustan Construction Company

Ltd. & Anr. v. Union of India reported in (2020) 17 SCC 324 it was held that

IBC is not meant to be a recovery mechanism as it is an economic legislation

meant for the resolution of stressed assets. The relevant observations read as

under: -

“79. Dr Singhvi then argued that under Section 5(9) of the Insolvency Code, “financial position” is defined, which is only

Page 61 of 79 taken into account after a resolution professional is appointed, and is not taken into account when adjudicating “default” under Section 3(12) of the Insolvency Code. This does not in any manner lead to the position that such provision is manifestly arbitrary. As has been held by our judgment in Pioneer Urban Land & Infrastructure Ltd. v. Union of India, IBC is not meant to be a recovery mechanism (see para 41 thereof)—the idea of the Insolvency Code being a mechanism which is triggered in order that resolution of stressed assets then takes place. For this purpose, the definitions of “dispute” under Section 5(6), “claim” under Section 3(6), “debt” under Section 3(11), and “default” under Section 3(12), have all to be read together. Also, IBC, belonging to the realm of economic legislation, raises a higher threshold of challenge, leaving Parliament a free play in the joints, as has been held in Swiss Ribbons (P) Ltd. v. Union of India [...]” (Emphasis supplied)

102. Similarly, in Jaypee Kensington Boulevard Apartments Welfare Assn. v.

NBCC (India) Ltd., reported in (2022) 1 SCC 401 this Court held that the focus

of IBC was more on ensuring the revival and continuation of the corporate debtor

rather than mere recovery of the debt owed by the corporate debtor to its creditors.

The relevant observations read as under: -

“88.2. In the judgment delivered on 25-1-2019 in Swiss Ribbons (P) Ltd. v. Union of India82 (hereinafter also referred to as 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

Page 62 of 79 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 fundamentally different from proceedings for recovery of debt

such as a suit for recovery of money, execution of decree or claims for amount

due under arbitration, etc. The first distinguishing feature that sets apart ordinary

recovery proceedings from insolvency proceedings is that under the former the

primary relief is the recovery of dues whereas under the latter the primary concern

is the revival and rehabilitation of the corporate debtor. No doubt both

proceedings contemplate an aspect of recovery of debt, however in insolvency

proceedings, the recovery is only a consequence of the rehabilitation/resolution

of the corporate debtor and not the main relief.

104. The second distinguishing feature is that although both proceedings entail

recovery of debt to a certain extent, however they are different inasmuch as when

it comes to recovery proceedings it is the individual creditor’s debt which is

sought to be recovered, whereas in insolvency proceedings it is the entire debt of

Page 63 of 79 the company which is sought to be resolved. The former is only for the benefit of

the individual creditor who initiates the recovery proceedings whereas the latter

is for the benefit of all creditors irrespective of who initiates insolvency.

105. The last distinguishing feature is that, a recovery proceeding be it a suit or

arbitration is initiated by a creditor where an amount is due and is unpaid by a

debtor, in other words the intention behind initiating a recovery proceeding is

simpliciter for the full recovery of amount which is unpaid to it. However, in an

insolvency proceeding there is no guarantee of recovery of the entire debt. A

creditor opts for insolvency where an amount of such threshold is unpaid, that the

creditor has an apprehension that the debtor in its current state and under the

existing management in all likelihood will be unable to repay that debt in the

future i.e., there is no likely prospect of any recovery, and thus it would be

beneficial to take the risk of initiating insolvency which even though does not

guarantee full recovery, in order for a new management to take over the corporate

debtor and to recover at least some amount of debt before it is too late. Thus, the

underlying intention behind initiating insolvency is not with the intention of

recovering the amount owed to it, but rather with the intention that the corporate

debtor is resolved / rehabilitated 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.

Page 64 of 79

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 in

insolvency, the recovery is a mere consequence and not the ultimate relief. Thus,

insolvency proceedings are not one for recovery of debt and cannot be equated

with execution proceedings as both proceedings are different in nature and for

different reliefs and as such no benefit can be given under Section 14(2) of the

Limitation Act which stipulates the requirement of “same relief”. The relevant

observations read as under: -

Page 65 of 79

“5. [...] There could be no exclusion for the time occupied by the insolvency proceedings which clearly was not for the purpose of obtaining the same relief. The relief sought in insolvency is obviously different from the relief sought in the execution of application. In the former, an adjudication of the debtors as insolvency is sought as preliminary to the vesting of all his estate and the administration of it by the Official Receive or the Official Assignee, as the case may be, for the benefit of all the creditors; but in the latter the money due is sought to be realised for the benefit of the decree-holder alone, by processes like attachment of property and arrest of person. It may that ultimately in the insolvency proceedings the decree-holder may be able to realise his debt wholly or in part, but this is a mere consequence or result. Not only is the relief of a different nature in the two proceedings but the procedure is also widely divergent.” (Emphasis supplied)

109. This Court in Commissioner, Madhya Pradesh Housing Board & Ors. v.

Mohanlal and Company reported in (2016) 14 SCC 199 considered whether

benefit of Section 14 of the Limitation Act would be available when a party

instead of challenging an arbitral award under Section 34, filed a Section 11

application for appointment of arbitrator. This Court while setting aside the

appointment, observed that the proceedings for appointment of an arbitrator are

entirely different from the proceedings for challenging an award. Therefore, even

after adopting a liberal interpretation, it would not be appropriate to grant benefit

of exclusion of time-period under Section 14.

110. Even otherwise, the respondent couldn’t be said to have had been

prosecuting the IBC proceedings in good faith and in a bonafide manner. It was

observed by this Court in Consolidated Engg. Enterprises (supra) and M.P. Page 66 of 79 Housing Board (supra) that an element of mistake is inherent in the 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

of its decisions.

iii. Issue No. 3

111. It was submitted on behalf of the respondent that in the event the benefit

under Section 14(2) of the Limitation Act is not extended to it, then in such

circumstance, this Court may consider to condone the delay in filing the second

Page 67 of 79 arbitration petition by exercising its discretion under Section 5 of the Limitation

Act. In response to the said submission, the appellant contended that the benefit

of condonation of delay under Section 5 of the Limitation Act cannot be extended

to a petition for the appointment of an arbitrator under Section 11(6) of the Act,

1996. The appellant also submitted that assuming without conceding that delay

can be condoned in exercise of powers under Section 5 of the Limitation Act, the

facts do not warrant exercise of discretionary powers as no application for the

condonation of delay has been filed by the respondent. It was further contended

that the nature of relief sought for under Section 5 of the Limitation Act being

discretionary in nature, the conduct of the respondent disentitles him to grant of

such relief.

112. The following three questions fall for our consideration on the basis of the

aforesaid submissions –

i. Whether the benefit of condonation of delay under Section 5 of the

Limitation Act is available in respect of an application for appointment

of arbitrator under Section 11(6) of the Act, 1996?

ii. Whether it is permissible for the courts to condone delay under Section

5 of the Limitation Act in the absence of any application seeking such

condonation?

Page 68 of 79 iii. Whether the facts of the present case warrant the exercise of discretion

in favour of the respondent to condone the delay in filing the second

arbitration application?

113. Section 5 of the Limitation Act provides that any appeal or application

other than an application under the provisions of Order 21 of the CPC may be

admitted after the prescribed period of limitation if the appellant or the applicant

satisfies the court that he had sufficient cause for not preferring the appeal or

making the application within the prescribed period. The provision is extracted

hereinbelow:

“5. Extension of prescribed period in certain cases.—Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be 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

Page 69 of 79 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

Others v. The Special Deputy Collector (LA) reported in (2024) 4 SCR 241 this

Court observed thus:

“12. In view of the above provision, the appeal which is preferred after the expiry of the limitation is liable to be dismissed. The use of the word ‘shall’ in the aforesaid provision connotes that the dismissal is mandatory subject to the exceptions. Section 3 of the Act is peremptory and had to be given effect to even though no objection regarding limitation is taken by the other side or referred to in the pleadings. In other words, it casts an obligation upon the court to dismiss an appeal which is presented beyond limitation. This is the general law of limitation. The exceptions are carved out under Sections 4 to 24 (inclusive) of the Limitation Act but we are concerned only with the exception contained in Section 5 which empowers the courts to admit an appeal even if it is preferred after the prescribed period provided the proposed appellant gives ‘sufficient cause’ for not preferring the appeal within the period prescribed. In other words, the courts are conferred with discretionary powers to admit an appeal even after the expiry of the prescribed period provided the proposed appellant is able to establish ‘sufficient cause’ for not filing it within time. The said power to condone the delay or to admit the appeal preferred after the expiry of time is discretionary in nature and may not be exercised even if sufficient cause is shown based upon host of other factors such as negligence, failure to exercise due diligence etc.” (Emphasis supplied)

116. This Court in Ramlal v. Rewa Coalfields Ltd., 1961 SCC OnLine SC 39

observed as follows:

Page 70 of 79

“12. It is, however, necessary to emphasise that even after sufficient cause has been shown a party is not entitled to the condonation of delay in question as a matter of right. The proof of a sufficient cause is a condition precedent for the exercise of the discretionary jurisdiction vested in the court by Section 5. If sufficient cause is not proved nothing further has to be done; the application for condoning delay has to be dismissed on that ground alone. If sufficient cause is shown then the court has to enquire whether in its discretion it should condone the delay. This aspect of the matter naturally introduces the consideration of all relevant facts and it is at this stage that diligence 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 of the Schedule to the Limitation Act, that is, three

years. We have observed that the benefit available under Section 14 of the

Limitation Act will also be available in respect of applications made under

Section 11(6) of the Act, 1996. Thus, in the absence of any specific statutory

exclusion, there is no good reason to hold that the benefit under Section 5 of the

Limitation Act cannot be availed for the purpose of condonation of delay caused

in filing a Section 11(6) application.

Page 71 of 79

118. In Deepdharshan Builders Pvt. Ltd. v. Saroj, Widow of Satish Sunderrao

Trasikar reported in 2018 SCC OnLine Bom 4885, the Bombay High Court held

that Section 5 of the Limitation Act would apply to an application filed under

Section 11(6) of the Act, 1996. The relevant observations from the said decision

are extracted hereinbelow:

“42. In my view, since the proceedings under Section 11(6) of the Arbitration Act are required to be filed before the High Court, Article 137 of the Schedule to the Limitation Act, 1963 would apply to such application filed under Section 11(6) of the Arbitration Act. In my view, since Article 137 of the Schedule to the Limitation Act, 1963 would apply to the arbitration application under Section 11(6) of the Arbitration Act, Section 5 of the Limitation Act, 1963 would also apply to the arbitration application filed under Section 11(6) of Arbitration Act.”

119. Similarly, the Delhi High Court in Yogesh Kumar Gupta v. Anuradha

Rangarajan reported in 2007 SCC OnLine Del 287 had observed that in view

of Section 43 of the Act, 1996, Section 5 of the Limitation Act would be

applicable to applications filed under Section 11(6) of the Act, 1996. Relevant

observations from the said decision are extracted hereinbelow:

“30. There is yet another alternative route which leads to some conclusion. Section 21 of the Act states that unless otherwise agreed by the parties (there is no agreement of the parties on this aspect), the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Consequently, when the petitioner issued the notice dated 10.4.2002 raising the dispute regarding rendition of accounts of the partnership business, the arbitral proceedings commenced as soon as the communication dated 10.4.2002 was received by the respondent. It is not the respondent's case that he did not receive the communication dated

Page 72 of 79 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 apply to, and be available to the petitioner filing an application/petition under Section 11 (5) of the Act.” (Emphasis supplied)

120. The necessary pre-condition for availing the remedy under Section 5 of

the Limitation Act is that the applicant must satisfy the court that there was a

sufficient cause which prevented him from instituting the application within the

prescribed time period. Although it is a general practice that a formal application

under Section 5 of the Limitation Act has to be filed by the applicant, yet no such

requirement can be gathered from a bare reading of the statute. Thus, even in the

absence of a formal application, a court or tribunal may consider exercising its

discretion under Section 5 of the Limitation Act subject to the applicant assigning

sufficient cause for condoning the delay. A similar view was taken by this Court

in Sesh Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd. reported in

(2021) 7 SCC 313 wherein it was observed thus:

Page 73 of 79

“63. Section 5 of the Limitation Act, 1963 does not speak of any application. The Section enables the Court to admit an application or appeal if the applicant or the appellant, as the case may be, satisfies the Court that he had sufficient cause for not making the application and/or preferring the appeal, within the time prescribed. Although, it is the general practice to make a formal application under Section 5 of the Limitation Act, 1963, in order to enable the Court or Tribunal to weigh the sufficiency of the cause for the inability of the appellant/applicant to approach the Court/Tribunal within the time prescribed by limitation, there is no bar to exercise by the Court/Tribunal of its discretion to condone delay, in the absence of a formal application.

64. A plain reading of Section 5 of the Limitation Act makes it amply clear that, it is not mandatory to file an application in writing before relief can be granted under the said section. Had such an application been mandatory, Section 5 of the Limitation Act would have expressly provided so. Section 5 would then have read that the Court might condone delay beyond the time prescribed by limitation for filing an application or appeal, if on consideration of the application of the appellant or the applicant, as the case may be, for condonation of delay, the Court is satisfied that the appellant/applicant had 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.

Page 74 of 79

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 pre-

existing disputes between the parties. In view of this, maximisation of the chances

of getting the application under Section 9 of the IBC admitted by the NCLT seems

to have been the only reason for the abandonment of the first Section 11(6)

application by the respondent. In light of such conduct on the part of the

respondent, we are of the view that the present case does not warrant the exercise

of our discretion under Section 5 of the Limitation Act.

123. The primary intent behind Section 5 of the Limitation Act is not to permit

litigants to exploit procedural loopholes and continue with the legal proceedings

in multiple forums. Rather, it aims to provide a safeguard for genuinely deserving

applicants who might have missed a deadline due to unavoidable circumstances.

This provision reflects the intent of the legislature to balance the principles of

justice and fairness, ensuring that procedural delays do not hinder the pursuit of

substantive justice. Section 5 of the Limitation Act embodies the principle that

genuine delay should not be a bar access to justice, thus allowing flexibility in the

interest of equity, while simultaneously deterring abuse of this leniency to

prolong litigation unnecessarily.

Page 75 of 79

124. The legislative intent of expeditious dispute resolution under the Act, 1996

must also be kept in mind by the courts while considering an application for

condonation of delay in the filing of an application for appointment of arbitrator

under Section 11(6). Thus, the court should exercise its discretion under Section

5 of the Limitation Act only in exceptional cases where a very strong case is made

by the applicant for the condonation of delay in filing a Section 11(6) application.

125. Before we part with the matter, we would like to address the submission of

the respondent that this Court, while dismissing its appeal against the order of the

NCLAT, had granted it liberty to avail such remedies, including arbitration, as

may be available to it in law, to realise its dues from the appellant. The relevant

paragraph is reproduced hereinbelow:

“35. Needless to mention that the appellant may avail such other remedies as may be available in accordance with law including arbitration to realise its dues, if any.”

126. The liberty granted by this Court to the respondent has been prefixed by

the words “Needless to mention…”. Hence, it is amply clear that the observations

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 Page 76 of 79 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 remedies which were wholly barred by time or to revive stale claims or create rights or remedies where there were none. It is needless to say that courts should take care to ensure that reservation of liberty is made only where it is necessary, such reservation should always be subject to a remedy being available in law, and subject to remedy being sought in accordance with law.” (Emphasis supplied)

129. The liberty to avail remedies available in law does not confer a right to

avail such remedies. Seen from the perspective of Hohfeld's analysis of jural

relations, liberties (or privileges) do not entail corresponding duties on others.

Thus, having the freedom to seek a remedy does not imply an enforceable claim

Page 77 of 79 to it. This distinction underscores the fine difference between what one is free to

do and what one is entitled to demand.

130. Hence, we are of the view that paragraph 35 as extracted above does not

help the respondent as the fresh Section 11 petition could be said to be hit by the

principles analogous to Order 23 Rule 1 and is also barred by limitation for being

beyond the prescribed period of 3 years.

F. CONCLUSION

131. In view of the aforesaid discussion, we have reached to the following

conclusion:

(i) In the absence of any liberty being granted at the time of withdrawal

of the first application under Section 11(6) of the Act, 1996, the fresh

application filed by the respondent under the same provision was not

maintainable;

(ii) The fresh application filed by the respondent under Section 11(6) of

the Act, 1996 was time-barred;

(iii) The respondent is not entitled to the benefit of Section 14(2) of the

Limitation Act; and

(iv) The respondent is also not entitled to the benefit of condonation of

delay under Section 5 of the Limitation Act.

Page 78 of 79 132. As a result, the appeal filed by the appellant is allowed and the impugned

order passed by the High Court of Bombay is hereby set aside.

133. Pending application(s), if any, shall stand disposed of.

134. The parties shall bear their own costs.

…...……..….………….……………CJI.

(Dr. Dhananjaya Y. Chandrachud)

…….…..….…….…..…………………J. (J.B. Pardiwala)

New Delhi;

7th November, 2024.

Page 79 of 79