9911796707
TMI Blog2024 (11) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... Scope and applicability of Order 23 Rule 1 of the CPC to proceedings other than suits ................................................................................... 23 II. ISSUE NO. 2 ................................................................................................ 44 a. Application under Section 11(6) of the Act, 1996 is not for the same relief as an application under Section 9 of the IBC ........................... 57 III. ISSUE NO. 3 ................................................................................................ 67 F. CONCLUSION ................................................................................... 78 1. Leave granted. 2. This appeal arises from the final judgment and order dated 31.01.2024 ("impugned order") passed by the High Court of Judicature at Bombay in Commercial Arbitration Petition No. 1 of 2023, wherein the High Court allowed the petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, "the Act, 1996") at the instance of the M/s Shahaji Bhanudas Bhad ("the respondent") and appointed Justice (Retd.) Dilip Bhosale as the sole arbitrator to adjudicate the disputes and differences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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. 10. On 16.02.2018, the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factual position as per the stand of Corporate Debtor on various issues. As per this provisional statement, the total purchase order value has been shown as Rs. 3818.72 lakhs. There have been several deductions including for services provided by Corporate Debtor to the Operational Creditor in the execution of the contract, entry tax, TDS, WCD, payment to parties/ payment to Operational Creditor by the Corporate Debtor / sub-vendors and subcontractors/ vendors of the Operational Creditor. These are normal deductions as per business practice and terms of contract. However, it is noteworthy that Liquidated Damage @ 5% amounting to Rs. 190.94 lakhs, Performance Bank Guarantee to the tune of 673.6 lakhs, work claim of Rs. 352.00 lakhs for boiler house extension P.O. finalisation and additional work 71 lakh have also been considered. The net effect has been worked out by Corporate Debtor as Rs. 500 lakhs receivable from the Operational Creditor. If the boiler house extension and additional work are ignored, the amount recoverable from the Operational Creditor gets reduced to 63.13 lakhs. Further, if the amount retained for Performance Bank Guarantee is taken into consideration, then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "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 'Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the appeal filed on behalf of HBL. It is not for this Court to adjudicate the disputes between the parties and determine whether, in fact, any amount was due from the appellant to the HPCL/HBL or vice-versa. The question is, whether the application of the Operational Creditor under Section 9 of the IBC, should have been admitted by the Adjudicating Authority. The answer to the aforesaid question has to be in the negative. The Adjudicating Authority (NCLT) clearly fell in error in admitting the application. 31. The NCLT, exercising powers under Section 7 or Section 9 of IBC, is not a debt collection forum. The IBC tackles and/or deals with insolvency and bankruptcy. It is not the object of the IBC that CIRP should be initiated to penalize solvent companies for non-payment of disputed dues claimed by an operational creditor. 32. There are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading 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 payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof, 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. It is, thus, imperatively clear that the Petitioner was prosecuting the IBC proceedings before the NCLT or NCLAT, which was a completely wrong forum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u to the arbitration proceedings, yet the principle underlying Order 23 Rule 1(3) which imposes a bar on the institution of subsequent proceedings against the same defendant for the same cause of action where liberty to institute fresh proceedings is not granted by the court, can be extended to it in view of the expeditious and time-bound nature of arbitration proceedings. 23. He submitted that the respondent is not entitled to avail the benefit available under Section 14 of the Limitation Act, 1963 (for short "the Limitation Act") as the said provision would not be applicable to the present case. He argued that Section 14 of the Limitation Act provides for exclusion of time spent in prosecuting proceedings in a non-jurisdictional court, where the earlier and later proceedings relate to the same matter in issue or are for seeking the same relief. However, he submitted, that the 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of this Court to submit that the phrase "other cause of like nature" used Page 18 of 79 in Section 14 of the Limitation Act should be given a wide and liberal interpretation: i. Consolidated Engg. Enterprises & Ors. v. Principal Secy. Irrigation Department & Ors. reported in (2008) 7 SCC 169 ii. J. Kumaradasan Nair v. Iric Sohan reported in 2009 (12) SCC 175 iii. Union of India v. West Coast Paper Mills Ltd. reported in 2004 (3) SCC 458 iv. Maharashtra State Farming Corporation Ltd. v. Belapur Sugar & Allied Industries Ltd. reported in 2004 (3) MHLF 414 29. He submitted that the second application under Section 11(6) of the Act, 1996 was maintainable as the first application was withdrawn without any adjudication on merits and even before any formal notice could be issued by the High Court. By placing reliance on the decision of this 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. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han those in respect of which the decision of any person is, by the contract, expressed to be final and binding) shall, after written notice by either party to the agreement to the other of them and to the Appointing Authority hereinafter mentioned, be referred for adjudication to the Sole Arbitrator to be appointed as hereinafter provided. 14.2 The appointing authority shall either himself act as the Sole Arbitrator or nominate some officer/retired officer of HBL/Hindustan Petroleum Corporation Limited (referred to as owner or HBL) or any other Government Company, or any retired officer of the Central Government not below the rank of a Director, to act as the Sole Arbitrator to adjudicate the disputes and differences between the parties. The contractor/vendor shall not be entitled to raise any 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the aforesaid categories had led to confusion and thus amended the rule to avoid such confusion. 37. Order 23 Rule 1 of the CPC as it stands now post the amendment is reproduced hereinbelow: "Withdrawal of suit or abandonment of part of claim.- (1) At any time after the institution of a suit, the plaintiff may as against all or any of the defendants abandon his suit or abandon a part of his claim: Provided that where the plaintiff is a minor or other person to whom the provisions contained in rules 1 to 14 of Order XXXII extend, neither the suit nor any part of the claim shall be abandoned without the leave of the Court. (2) An application for leave under the proviso to sub-rule (1) shall be 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 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 als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief claimed was the conversion of joint possession into separate possession. In the present suit the plaintiff is seeking possession of the suit properties from a trespasser. In the first case his cause of action arose on the day he got separated from his family. In the present suit the cause of action, namely, the series of transactions which formed the basis of his title to the suit properties, arose on the death of his adoptive father and mother. It is true that both in the previous suit as well as in the present suit the factum and validity of adoption of Dr Madan Lal came up for decision. But that adoption was not the cause of action in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle underlying Order 23 Rule 1 of CPC, extended them to writ petitions under Articles 226 and 227. Relevant observations from the said decision are as follows: "7. [...] The principle underlying Rule 1 of Order XXIII of the Code is that when a plaintiff once institutes a suit in a court and thereby avails of a remedy given to him under law, he cannot be permitted to institute a fresh suit in respect of the same subjectmatter again after abandoning the earlier suit or by withdrawing it without the permission of the court to file fresh suit. Invito beneficium non datur - the law confers upon a man no rights 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 Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was observed by the bench thus: 11. [...] It is not a permissible practice to challenge the same order over again after withdrawing the special leave petition without obtaining permission of the court for withdrawing it with liberty to move for special leave again subsequently. xxx xxx xxx 13. The aforesaid ban for filing a fresh suit is based on public policy. This Court has made the said rule of public policy applicable to jurisdiction under Article 226 of the Constitution (Sarguja Transport Service v. STAT [(1987) 1 SCC 5). The reasoning for adopting it in writ 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 fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived 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 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-judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations under Section 11(6) of the Act, 1996 were filed seeking adjudication of the dispute which arose on 02.02.2014 upon refusal of the appellant to pay the dues of the respondent. The first application under Section 11(6) was filed on 16.02.2018 and was subsequently withdrawn unconditionally on 01.10.2018. After a gap of more than four years, the respondent filed a subsequent application under Section 11(6) before the High Court on 09.12.2022 which came to be allowed by the impugned order. 56. The High Court was of the 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve error of law by admitting the application of the respondent even though there was a pre-existing dispute between the parties. Placing reliance on the decision of this Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited reported in (2018) 1 SCC 353, this Court held that upon the occurrence of a preexisting dispute regarding the alleged claims of the respondent against the appellant, the Section 9 application of the respondent as an 'Operational 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 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; 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 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 disputes arising between the parties out of a private contract. As soon as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isage 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: - "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 insolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 Arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 : "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 applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 124. The legislative intent of expeditious dispute resolution under the Act, 1996 must also be kep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 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 withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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