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TMI Blog2024 (11) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 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. In the case of Vanna Claire Kaura v. Gauri Anil Indulkar Ors. [ 2009 (7) TMI 1401 - SUPREME COURT] 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - 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 timebarred. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The appeal filed by the appellant is allowed and the impugned order passed by the High Court of Bombay is hereby set aside. - CJI. ( Dr. Dhananjaya Y. Chandrachud ) And Justice ( J. B. Pardiwala ) JUDGMENT 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 ............... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween 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/-. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 preexisting dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It has been time and again held that it is enough that a 'dispute exists' between the parties. 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication 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 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, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HE RESPONDENT IS ENTITLED TO 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 abso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 23 Rule 1(3) CPC is founded on public policy to prevent institution of suit again and again on the same cause of action. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, 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 13. The aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced 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 subjectmatter are not stretched for unduly long periods by allowing a party to reagitate the same issue over and over again, which also leads to uncertainty for the responding parties. Arbitration as a dispute resolution method, too, seeks to curtail the time spent by disputing parties in pursuing legal proceedings. This is evident from the various provisions of the Act, 1996 which provide a timeline for compliance with various procedural requirements under the said Act. An application for appointment of arbitrator under Section 11(6) of the Act, 1996 is required to be filed when there is failure on the part of the parties or their nominated arbitrators to commence the arbitration proceedings as per the agreed upon procedure. This Court, being conscious of the temporally sensitive nature of proceedings under Section 11(6), has issued various directions from time to time to ensure that applications for appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute 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. 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 responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent 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 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 again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 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 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 bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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- -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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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- -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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, 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 (202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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: - 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 sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 condo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condoned. Thus, unlike Section 14 of the Limitation Act, where the applicant can seek the exclusion of time period as a matter of right upon fulfilment of the mandatory conditions, Section 5 of the Limitation Act leaves the ultimate decision of extending the benefit of condonation of delay to the court before which the application for such condonation is made. 115. In a recent pronouncement in Pathapati Subba Reddy (Died) by LRs and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 he ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took a conscious decision to abandon its first Section 11(6) application with a view to pursue proceedings under Section 9 of the IBC. The respondent made such choice despite a specific objection raised by the appellant in its reply to the statutory demand notice that there were preexisting disputes between the 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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