Holding

The fresh Section 11(6) application is not maintainable, is time‑barred, and the respondent is not entitled to the benefits of either Section 14 or Section 5 of the Limitation Act.

Summary

The appellant, HPCL Bio‑Fuels Ltd., entered into turnkey contracts with the respondent, Shahaji Bhanudas Bhad, for equipment supply. After a dispute over unpaid dues arose in 2014, the respondent invoked the arbitration clause and filed a Section 11(6) application in the Bombay High Court in February 2018, which he unconditionally withdrew in October 2018 to pursue insolvency proceedings under the IBC. After the IBC application was ultimately dismissed, the respondent filed a fresh Section 11(6) petition in December 2022. The High Court allowed the fresh petition, but the Supreme Court held that, because no liberty to re‑file was obtained at the time of withdrawal, the fresh application was not maintainable, was time‑barred, and could not rely on the benefit of Section 14 or Section 5 of the Limitation Act. Consequently, the appeal was allowed and the High Court order set aside.

Issues considered

Whether a fresh application under Section 11(6) of the Arbitration and Conciliation Act, 1996 is maintainable when the earlier application was withdrawn without court‑granted liberty to re‑file.
Whether the fresh Section 11(6) application filed on 09‑12‑2022 is time‑barred and, if so, whether the respondent is entitled to the benefit of Section 14 of the Limitation Act by excluding the period spent in IBC proceedings.
Whether the delay in filing the fresh Section 11(6) application can be condoned under Section 5 of the Limitation Act.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 21, s. 32, s. 43
Code of Civil Procedure, 1908s. Order 23 Rule 1
Companies Act, 2013
Insolvency & Bankruptcy Code, 2016s. 8, s. 9
Limitation Act, 1963s. 14, s. 43, s. 5, s. Article 137

Subjects

Section 11(6)ArbitrationLimitation ActOrder 23 Rule 1Insolvency & Bankruptcy CodeSection 14Section 5time-barredcondonation of delaypre‑existing disputearbitration vs insolvency

Judgment

[2024] 12 S.C.R. 133 : 2024 INSC 851

M/s HPCL Bio-Fuels Ltd.
v.
M/s Shahaji Bhanudas Bhad
(Civil Appeal No. 12233 of 2024)
07 November 2024
[Dr Dhananjaya Y. Chandrachud, CJI and
J.B. Pardiwala,* JJ.]

Issue for Consideration
(i) Whether a fresh application u/s.11(6) of the Arbitration and
Conciliation Act, 1996 filed by the respondent could be said to
be maintainable more particularly when no liberty to file a fresh
application was granted by the High Court at the time of withdrawal
of the first application u/s.11(6) of the Act, 1996; (ii) whether the
fresh application u/s.11(6) of the Act, 1996 filed by the respondent
on 09.12.2022 could be said to be time-barred. If yes, whether the
respondent is entitled to 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 u/s.11(6);
(iii) whether the delay caused by the respondent in filing the fresh
arbitration application u/s.11(6) of the Act, 1996 can be condoned
u/s.5 of the Limitation Act.

Headnotes†
Arbitration and Conciliation Act, 1996 – s.11(6) – Code of Civil
Procedure, 1908 – Or.23 , R.1 – Insolvency & Bankruptcy Code,
2016 – Whether a fresh application u/s.11(6) of the Arbitration
and Conciliation Act, 1996 filed by the respondent could be said
to be maintainable more particularly when no liberty to file a
fresh application was granted by the High Court at the time of
withdrawal of the first application u/s.11(6) of the Act, 1996 –
The appellant contended that in lieu of the principles contained
in Or.23 R.1 of the CPC, the respondent could not have filed a
subsequent application u/s.11(6) for adjudication of the same
disputes, having previously withdrawn unconditionally an
application filed for the same purpose:
*Author
134 [2024] 12 S.C.R.

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Held: In the instant case, both the applications u/s.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 u/s.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 u/s.11(6) before the High Court on
09.12.2022 which came to be allowed by the impugned order –
The chronology of events clearly indicates that the respondent
did not withdraw the first arbitration application because of some
defect which would have led to its dismissal – It is also clear
from the order dated 01.10.2018 of the High Court permitting
the respondent to withdraw the application that neither any
liberty was sought by the respondent nor the court had granted
any liberty to file a fresh arbitration application – It appears
that the only reason the respondent withdrew the arbitration
application was to get his application u/s.9 of the IBC any how
admitted by the NCLT – 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 – 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 – 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 – The failure
on the part of the respondent to withdraw the first Section 11
application without seeking any liberty cannot be condoned in
the facts of the present case – Therefore, in the absence of any
liberty sought by the respondents from the High Court at the time
of withdrawal of the first arbitration application, the fresh Section 11
petition arising out of the same cause of action cannot be said to
be maintainable. [Paras 51, 52, 55, 58, 59, 61]
[2024] 12 S.C.R. 135

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

Arbitration and Conciliation Act, 1996 – Code of Civil Procedure,
1908 – Insolvency & Bankruptcy Code, 2016 – Limitation Act,
1963 – s.14 – Whether the fresh application u/s.11(6) of the
Act, 1996 filed by the respondent on 09.12.2022 could be said
to be time-barred – If yes, whether the respondent is entitled
to the benefit of s.14 of the Limitation Act:
Held: The first application u/s.11(6) filed on 16.02.2018 was well
within the prescribed limitation period of three years for filing such
applications – The second application u/s.11(6) 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 u/s.11(6) came to be filed by the
respondent much later on 12.12.2022 and is clearly time-barred –
As far as benefit of s.14 of the Limitation Act is concerned, there
is a body of decisions of this Court taking the view that by virtue of
s.43 of the Act, 1996, the Limitation Act is applicable to applications
for appointment of arbitrator filed u/s.11(6) of the said Act – It thus
follows that the benefit u/s.14 of the Limitation Act can be availed
by an applicant subject to the fulfilment of the conditions specified
therein – First, the benefit of s.14(1) can be availed of where the
subsequent proceeding is a suit, whereas the benefit of s.14(2) can
be availed of where the subsequent proceeding is an application –
Secondly, s.14(1) applies if both the earlier and the subsequent
proceedings have the same matter in issue, whereas s.14(2) applies
when both the earlier and the subsequent proceedings are filed for
seeking the same relief – As a petition u/s.11(6) of the Act, 1996
is not a suit, hence it would not be governed by sub-section (1)
of s.14 of the Limitation Act – Instead, it would be governed by
sub-section (2) of s.14 of the Limitation Act – As far as same
relief is concerned, the High Court fell in error in holding that an
application u/s.9 of the IBC and an application u/s.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 – As the relief
sought in an application u/s.11(6) of the Act, 1996 is not the same
as the relief sought in an application u/s.9 of the IBC, the benefit
of s.14(2) cannot be given to the respondent in the present case.
[Paras 74, 77, 83, 107]
136 [2024] 12 S.C.R.

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Arbitration and Conciliation Act, 1996 – Code of Civil Procedure,
1908 – Insolvency & Bankruptcy Code, 2016 – Limitation Act,
1963 – Whether the respondent was prosecuting the IBC
proceedings in good faith and in a bonafide manner.
Held: The respondent couldn’t be said to have had been
prosecuting the IBC proceedings in good faith and in a bonafide
manner – An element of mistake is inherent in the relief envisaged
under Section 14 of the Limitation Act – In the present case,
the respondent had initially approached the High Court with an
application u/s.11(6) – However, for reasons best known to it, the
respondent abandoned the said proceedings for appointment of
arbitrator and approached the NCLT, Kolkata with an application
u/s.9 of the IBC – The respondent was fully aware of the
objection of a pre-existing dispute raised by the appellant in
response to its second statutory demand notice issued u/s.8 of
the IBC – Despite having preferred an application u/s.11(6) of
the Act, 1996 before the jurisdictional court, and also being fully
aware of the infirmities in the s.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 u/s.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.
[Para 110]

Arbitration and Conciliation Act, 1996 – s.11(6) – Code of Civil
Procedure, 1908 – Insolvency & Bankruptcy Code, 2016 –
Limitation Act, 1963 – s.5 – Whether the delay caused by the
respondent in filing the fresh arbitration application u/s.11(6)
of the Act, 1996 can be condoned u/s.5 of the Limitation Act:
Held: The position of law is that the benefit u/s.5 of the
Limitation Act is available in respect of the applications filed for
appointment of arbitrator u/s.11(6) of the Act, 1996 – Further,
the requirement of filing an application u/s.5 of the Limitation
Act is not a mandatory pre-requisite for a court to exercise its
discretion under the said provision and condone the delay in
institution of an application or appeal – The respondent took a
conscious decision to abandon its first s.11(6) application with a
view to pursue proceedings u/s.9 of the IBC – The respondent
[2024] 12 S.C.R. 137

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

made such choice despite a specific objection raised by the
appellant in its reply to the statutory demand notice that there were
pre-existing disputes between the parties – In view of this,
maximisation of the chances of getting the application u/s.9 of the
IBC admitted by the NCLT seems to have been the only reason for
the abandonment of the first s.11(6) application by the respondent –
In light of such conduct on the part of the respondent, this Court
is of the view that the present case does not warrant the exercise
of discretion u/s.5 of the Limitation Act. [Paras 121, 122]

Limitation – Object of having a limitation period:
Held: The basic premise behind the statutes providing for a
limitation period is encapsulated by the maxim “Vigilantibus non
dormientibus jura subveniunt ” which means that the law assists
those who are vigilant and not those who sleep over their rights –
The object behind having a prescribed limitation period is to ensure
that there is certainty and finality to the litigation and assurance to
the opposite party that it will not be subject to an indefinite period
of liability – Another object achieved by a fixed limitation period is
that only those claims which are initiated before the deterioration
of evidence takes place are allowed to be litigated – The law of
limitation does not act to extinguish the right but only bars the
remedy. [Para 68]

Arbitration and Conciliation Act, 1996 – s.11(6) – Limitation
Act, 1963 – When the limitation period for filing an application
seeking appointment of arbitrator would commence:
Held: On the aspect of when the limitation period for filing an
application seeking appointment of arbitrator would commence, it
is only after a valid notice invoking arbitration has been issued by
one of the parties to the other party and there has been either a
failure or refusal on part of the other party to make an appointment
as per the appointment procedure agreed upon between the parties,
that the clock would start ticking for the purpose of the limitation
of three years. [Para 70]

Limitation Act, 1963 – s.14 (1) – Ingredients need to be fulfilled
for the applicability of Section 14(1):
Held: (i) The subsequent proceeding must be a suit; (ii) Both the
earlier and the subsequent proceeding must be civil proceedings;
138 [2024] 12 S.C.R.

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(iii) Both the earlier and subsequent proceedings must be between
the same parties; (iv) The earlier and subsequent proceeding must
have the same matter in issue; (v) The earlier proceeding must
have failed owing to a defect of jurisdiction of the earlier court
or any other cause of a like nature; (vi) The earlier proceedings
must have been prosecuted in good faith and with due-diligence;
and (vii) Both the earlier and the subsequent proceedings must
be before a court. [Para 78]

Limitation Act, 1963 – s.14 (2) – Conditions required to be
fulfilled for seeking the benefit of exclusion u/s.14(2) are as
follows:
Held: (i) Both the earlier and the subsequent proceeding must be
civil proceedings; (ii) Both the earlier and subsequent proceedings
must be between the same parties; (iii) The earlier and subsequent
proceeding must be for the same relief; (iv) The earlier proceeding
must have failed owing to a defect of jurisdiction of the earlier court
or any other cause of a like nature; (v) The earlier proceedings
must have been prosecuted in good faith and with due-diligence;
and (vi) Both the earlier and the subsequent proceedings are
before a court. [Para 83]

Limitation Act, 1963 – s.14(1) and s.14(2) – The key difference
between sub-sections (1) and (2) of Section 14 respectively
is two-fold:
Held: (i) First, the benefit of Section 14(1) can be availed of
where the subsequent proceeding is a suit, whereas the benefit of
Section 14(2) can be availed of where the subsequent proceeding
is an application; (ii) Secondly, Section 14(1) applies if both the
earlier and the subsequent proceedings have the same matter in
issue, whereas Section 14(2) applies when both the earlier and
the subsequent proceedings are filed for seeking the same relief.
[Para 84]

Arbitration and Conciliation Act, 1996 – s.11(6) – Insolvency
& Bankruptcy Code, 2016 – Object of initiation of insolvency
proceedings and the objective behind the appointment of an
arbitrator:
Held: The object of initiation of insolvency proceedings under
the IBC is to seek rehabilitation of the corporate debtor by
[2024] 12 S.C.R. 139

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

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
CIRP of a corporate debtor is initiated, it becomes a proceeding
in rem – On the contrary, arbitration being concerned with private
disputes is not an in-rem proceeding. [Para 98]

Insolvency & Bankruptcy Code, 2016 – Distinguishing feature
that sets apart ordinary recovery proceedings from insolvency
proceedings:
Held: 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 –
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 is for the benefit of all creditors
irrespective of who initiates insolvency – The last distinguishing
feature is that, a recovery proceeding be it a suit or arbitration is
initiated by a creditor where an amount is due and is unpaid by
a debtor, in other words the intention behind initiating a recovery
proceeding is simpliciter for the full recovery of amount which is
unpaid to it – Whereas, the underlying intention behind initiating
insolvency is not with the intention of recovering the amount
owed to it, but rather with the intention that the corporate debtor
is resolved / rehabilitated through a new management as soon
as possible before it becomes unviable with no prospect of any
meaningful recovery of its dues in the near future. [Paras 103,
104, 105]
140 [2024] 12 S.C.R.

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Case Law Cited
Vallabh Das v. Madan Lal (Dr) [1971] 1 SCR 211 : (1970) 1
SCC 761; V. Rajendran v. Annasamy Pandian [2017] 2 SCR
508 : (2017) 5 SCC 63; Sarguja Transport Service v. State
Transport Appellate Tribunal, M.P., Gwalior and Others [1987]
1 SCR 200 : (1987) 1 SCC 5; Upadhyay & Co. v. State of
U.P. and Others [1998] Supp. 3 SCR 234 : (1999) 1 SCC 81;
Commissioner, Madhya Pradesh Housing Board & Ors. v. Mohanlal
and Company [2016] 3 SCR 357 : (2016) 14 SCC 199; Swiss
Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors. [2019] 3 SCR
535 : (2019) 4 SCC 17; Pioneer Urban Land & Infrastructure
Ltd. & Anr. v. Union of India & Ors. [2019] 10 SCR 381 :
(2019) 8 SCC 416; Hindustan Construction Company Ltd. & Anr.
v. Union of India [2019] 17 SCR 331 : (2020) 17 SCC 324; Jaypee
Kensington Boulevard Apartments Welfare Assn. v. NBCC (India)
Ltd. [2021] 12 SCR 603 : (2022) 1 SCC 401; Yeshwant Deorao
Deshmukh v. Walchand Ramchand Kothari [1950] 1 SCR 852;
Pathapati Subba Reddy (Died) by Lrs. and Others v. The Special
Deputy Collector (LA) [2024] 4 SCR 241 : (2024) 4 SCR 241;
Ramlal v. Rewa Coalfields Ltd. [1962] 2 SCR 762 : 1961 SCC
OnLine SC 39 – relied on.
Arif Azim Co. Ltd. v. Aptech Ltd. [2024] 3 SCR 73 : 2024 SCC
OnLine SC 215; BSNL v. Nortel Networks (India) (P) Ltd.
[2021] 2 SCR 644 : (2021) 5 SCC 738; Natesan Agencies
(Plantations) v. State [2019] 11 SCR 508 : (2019) 15 SCC 70;
Consolidated Engg. Enterprises & Ors. v. Principal Secy. Irrigation
Department & Ors. [2008] 5 SCR 1108 : (2008) 7 SCC 169; J.
Kumaradasan Nair v. Iric Sohan [2009] 3 SCR 238 : 2009 (12)
SCC 175; Union of India v. West Coast Paper Mills Ltd. [2004]
2 SCR 642 : (2004) 3 SCC 458; Maharashtra State Farming
Corporation Ltd. v. Belapur Sugar & Allied Industries Ltd., 2004 (3)
MHLF 414; Sarva Shramik Sanghatana v. State of Maharashtra
[2007] 12 SCR 645 : 2008 1 SCC 494; Vanna Claire Kaura v.
Gauri Anil Indulkar & Ors. [2009] 11 SCR 280 : (2009) 7 SCC
541; Mobilox Innovations Private Limited v. Kirusa Software
Private Limited [2017] 10 SCR 1006 : (2018) 1 SCC 353; M.P.
Housing Board v. Mohanlal & Co. [2016] 3 SCR 357 : (2016)
14 SCC 199; Sesh Nath Singh v. Baidyabati Sheoraphuli Coop.
Bank Ltd. [2021] 3 SCR 806 : (2021) 7 SCC 313; BSNL v.
[2024] 12 S.C.R. 141

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

Telephone Cables Limited [2010] 3 SCR 291 : 2010 5 SCC
213 – referred to.
Deepdharshan Builders Pvt. Ltd. v. Saroj, Widow of Satish
Sunderrao Trasikar, 2018 SCC OnLine Bom 4885; Yogesh
Kumar Gupta v. Anuradha Rangarajan, 2007 SCC OnLine
Del 287 – referred to.

Books and Periodicals Cited

Treatise on the Insolvency and Bankruptcy Code, 2016
by Dr. Dilip K. Sheth.

List of Acts

Insolvency & Bankruptcy Code, 2016; Code of Civil Procedure, 1908;
Arbitration and Conciliation Act, 1996; Companies Act, 2013;
Limitation Act, 1963; Code of Civil Procedure (Amendment)
Act, 1976; Industrial Disputes Act, 1947.

List of Keywords
Section 11(6) of the Arbitration and Conciliation Act, 1996;
Section 14 of Limitation Act, 1963; Order 23 Rule 1 of the Code
of Civil Procedure, 1908; Object of having a limitation period;
Recovery Proceedings; Insolvency Proceedings; Appointment
of an arbitrator; Ordinary recovery proceedings; Vigilantibus non
dormientibus jura subveniunt.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12233 of 2024
From the Judgment and Order dated 31.01.2024 of the High Court
of Judicature at Bombay in COMAP No. 1 of 2023

Appearances for Parties

Tushar Mehta, Solicitor General, Sanjay Kapur, Surya Prakash,
Ms. Mahima Kapur, Ms. Divya Singh Pundir, Advs. for the Appellant.

Jay Savla, Sr. Adv., Prakash Shah, Durgaprasad Poojari, Jasdeep
Singh Dhillon, Prabhat Kumar Chaurasia, Anirudh Jamwal, M/s.
Mps Legal, Advs. for the Respondent.
142 [2024] 12 S.C.R.

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Judgment / Order of the Supreme Court
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................................................................ 23*
a. Scope and applicability of Order 23 Rule 1 of
the CPC to proceedings other than suits........ 23*
ii. Issue No. 2.............................................................. 44*
a. Application under Section 11(6) of the Act,
1996 is not for the same relief as an application
under Section 9 of the IBC............................. 57*
iii. Issue No. 3................................................................ 67*
F. CONCLUSION................................................................. 78*

1. Leave granted.
2. This appeal arises from the final judgment and order dated 31.01.2024
(“impugned order”) passed by the High Court of Judicature at
Bombay in Commercial Arbitration Petition No. 1 of 2023, wherein
the High Court allowed the petition filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996 (for short, “the Act, 1996”) at
the instance of the M/s Shahaji Bhanudas Bhad (“the respondent”)
and appointed Justice (Retd.) Dilip Bhosale as the sole arbitrator

* Ed. Note: Pagination as per the original Judgment.
[2024] 12 S.C.R. 143

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

to adjudicate the disputes and differences between HPCL Biofuels
Ltd. (“the appellant”) and the respondent.

A. FACTUAL MATRIX
3. The appellant is a Government company within the meaning of
Section 4(35) of the Companies Act, 2013 and is engaged inter alia
in the business of manufacturing bio-fuels. The appellant is a wholly-
owned subsidiary of Hindustan Petroleum Corporation Ltd.
4. The respondent is engaged in the business of manufacture, supply
and erection of the equipment and machinery required for the setting
up of sugar factories and allied products in the name of M/s S.S.
Engineer, as a sole proprietor.
5. Between 27.06.2012 and 30.08.2012, the appellant floated tenders
for enhancing the capacity of various process stations and Boiling
House at Lauriya (West Champaran) and Sugauli (East Champaran).
The respondent participated in the bidding process and was declared
as the successful bidder. Subsequently, in accordance with the terms
and conditions of the tender, the appellant in October and November
of 2012 issued purchase orders in favour of the respondent for
enhancing the capacity of the concerned Boiling House on a turn-
key basis. Between 21.11.2012 and 25.03.2014, the respondent
supplied various equipment under the purchase orders and raised
invoices for the same.
6. While the work was in progress, the appellant expressed its concerns
about the slow progress of work, quality of materials supplied and
non-adherence to timelines by the respondent and attempts were
made to resolve the same through mutual discussions between the
parties.
7. On 13.06.2013, the appellant floated two more tenders for the
purpose of completion of certain work and supplies at the Sugauli
and Lauriya plants respectively. In August 2013, the appellant
issued purchase orders in favour of the respondent, for completing
various works including supplies on a lump-sum turnkey basis. The
respondent raised invoices between 29.03.2013 & 25.03.2014 for
the service portion of the turn-key contract. Accordingly, as per the
respondent, the total sum payable to it under the various purchase
orders aggregated to Rs. 38,18,71,026/-.
144 [2024] 12 S.C.R.

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8. Between 18.12.2012 and 07.11.2013, the appellant made an aggregate
payment of Rs. 19.02 crore to the respondent, with the last payment
being made on 07.11.2013. As per the case of the respondent, the
balance amount of Rs. 18,12,21,452/- remained outstanding. The
discussions between the parties undertaken between October 2013
and January 2014 did not yield any fruits as the issues relating to
payment and deficiency in services rendered could not be resolved.
In this regard, the respondent vide an e-mail dated 02.02.2014 made
a request to release the balance amount at the earliest, so as to
enable it to complete the balance work. The appellant vide an e-mail
dated 04.02.2014 responded to the said email and reiterated that
the performance of the respondent was unsatisfactory and it had
failed in fulfilling its obligations in accordance with the terms of the
purchase orders. In such circumstances, the appellant refused to
clear the outstanding dues of the respondent.
9. On 09.07.2016, the respondent issued a legal notice to the appellant,
seeking release of the alleged outstanding payment amounting to
Rs. 18,12,21,452/- along with interest. The respondent also specified
in the said notice that in the event of failure of the appellant to settle
the outstanding amount, the notice shall be construed as the notice
for invocation of arbitration in terms of Clause 14 of the tender. The
appellant, however, did not respond to the aforesaid notice.
10. On 16.02.2018, the respondent filed Arbitration Petition (ST) No.
5095 of 2018 before the High Court of Judicature at Bombay seeking
appointment of an arbitrator in terms of Section 11 of the Act, 1996.
However, prior to filing the Section 11 application, the respondent
also sent a demand notice dated 30.08.2017 under Section 8 of
the Insolvency & Bankruptcy Code, 2016 (for short “the IBC”) to
the appellant, claiming the alleged outstanding amount along with
interest.
11. On 01.10.2018, upon the request made by the respondent, the
Arbitration Petition (ST) No. 5095 of 2018 was disposed of as
withdrawn. The relevant portions of the order dated 01.10.2018 are
reproduced below: -
"1. Not on board. Upon mentioning, taken on board.
2. The Learned Advocate appearing for the Petitioner
[2024] 12 S.C.R. 145

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

on instructions seeks to withdraw the above Arbitration
Petition. In view thereof, the above Arbitration Petition is
disposed of as withdrawn.”

i. Proceedings under the IBC
12. After withdrawing the Section 11(6) application from the High Court,
the respondent, on 15.10.2018, filed CP(IB) No. 1422/KB/2018 under
Section 9 of the IBC before the National Company Law Tribunal,
Kolkata (“NCLT, Kolkata”) seeking initiation of the corporate
insolvency resolution process of the appellant. The appellant opposed
the application, inter alia, on the ground that there were disputes
between the parties even prior to the issuance of demand notice
under Section 8 of IBC. The appellant also relied on the notice
invoking the arbitration clause in support of its contention.
13. The NCLT, Kolkata vide order dated 12.02.2020, admitted the
application of the respondent and appointed an Interim Resolution
Professional (IRP). On the aspect of existence of disputes between
the parties, the following observations were made:
"17. As regards the pre-existing dispute, we have gone
through all the facts stated by the Corporate Debtor but
having regard to the quantum of claim in respect of supplies
order, in our considered view, the amount of disputed claim
due and payable will be more than Rs. One lakh in any
case. Hence, such claims do not help the case of Corporate
Debtor in substantial manner. Having said so, we would
further refer to the provisional statement attached with the
letter of the Corporate Debtor dated June 25, 2014 copy
of which has been placed at Page 1779 of Vol. 10 of the
paper book to find as to what is the factual position as
per the stand of Corporate Debtor on various issues. As
per this provisional statement, the total purchase order
value has been shown as Rs. 3818.72 lakhs. There have
been several deductions including for services provided
by Corporate Debtor to the Operational Creditor in the
execution of the contract, entry tax, TDS, WCD, payment to
parties/ payment to Operational Creditor by the Corporate
Debtor / sub-vendors and sub-contractors/vendors of the
Operational Creditor. These are normal deductions as
per business practice and terms of contract. However, it
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is noteworthy that Liquidated Damage @ 5% amounting
to Rs. 190.94 lakhs, Performance Bank Guarantee to
the tune of 673.6 lakhs, work claim of Rs. 352.00 lakhs
for boiler house extension P.O. finalisation and additional
work 71 lakh have also been considered. The net effect
has been worked out by Corporate Debtor as Rs. 500 lakhs
receivable from the Operational Creditor. If the boiler
house extension and additional work are ignored, the
amount recoverable from the Operational Creditor gets
reduced to 63.13 lakhs. Further, if the amount retained for
Performance Bank Guarantee is taken into consideration,
then the amount payable to Operational Creditor works out
at Rs. 610.23 lakhs (i.e., 673-63.13). As noted earlier, L.D.
is applicable @ 5% amounting to Rs. 190.94 lakhs has
already been deducted. Further, amount of Rs. 400.55
lakhs in respect of Purchase Orders issued at the risk
and cost of the vendor have also been deducted. Thus,
all recoveries for non-performance / default has been
considered and therefore, amount of Performance Bank
Guarantee minus recovery i.e., 610.23 lakhs at least
becomes payable by Corporate Debtor to the Operational
Creditor. As an adjudicating authority in the proceedings,
we are not supposed to do this kind of working, but to find
out the genuineness of the claim of pre-existing dispute,
and amount of outstanding debt, it was necessary in the
facts and circumstances of the case, hence, it has been
so analysed on the basis of the provisional statement
prepared and filed by the Corporate Debtor itself. At the
cost of repetition, we again state that this statement takes
into consideration all these disputes raised by the Corporate
Debtor, hence, the amount payable by the Corporate Debtor
remains in positive which is more than one lakh ultimately
that too when we have considered the project as a whole
against the claim of Operational Creditor of undisputed
dues of supply portion only. We have also gone through
the emails which have been taken into consideration while
preparing this provisional statement. Hence, on the basis
of material on record, it cannot be said that any other
dispute remains to be considered. Apart from this, the
fact which is crucial to note is that the Corporate Debtor
[2024] 12 S.C.R. 147

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

has awarded new work orders to the Operational Creditor
subsequently which means that all the disputes relating to
this contract had been considered / resolved and this fact
has remained undisputed. Further, Form “C”s have been
issued as late as up to March 2018. We further make it
clear that we have analysed the provisional statement
with limited objective of admissibility of this application
and this analysis cannot be considered as expression of
opinion on the amount of claim in any manner which may
be actually due and payable.”
(Emphasis supplied)
14. The order of the NCLT, Kolkata was subsequently set aside by the
NCLAT, New Delhi vide order dated 10.01.2022. The NCLAT, on the
aspect of pre-existing disputes between the parties, observed thus:
“18. It is clear from Section 8(2)(a) that ‘Existence of a
Dispute’, (if any, or) record of the pendency of the Suit
or Arbitration Proceeding filed before the receipt of such
Notice or invoice in relation to such dispute should be
brought to the notice of the ‘Operational Creditor’ within
10 days of receipt of the Demand Notice. In this case,
the Demand Notice under Section 8 of the Code claiming
a sum of Rs.13.69 Crores was issued on 25.07.2018.
On 07.08.2018, the ‘Corporate Debtor’ responded to the
Demand Notice referring to various communications,
Minutes of the Meeting and submitted that there was a
‘Pre-Existing Dispute’. Though we are conscious of the
fact that the ‘Corporate Debtor’ responded to the Demand
Notice belatedly, the fact remains that the Appellant raised
the issue of Existence of a Dispute’ in their Reply filed
before the Adjudicating Authority with all the supporting
documents.
19. It is pertinent to note that on 09.07.2016, ‘prior to
the issuance of the Demand Notice under Section 8 of
the Code’, the ‘Operational Creditor’ invoked Arbitration
pursuant to the 8 project orders issued by the ‘Corporate
Debtor’, which itself substantiates the ‘Existence of a
Dispute’. In the ‘Notice’ invoking Arbitration, the ‘Operational
Creditor’ has stated that there is an outstanding of
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Rs. 18,12,21,452/- and has further stated that they are
ready to settle the disputes through Arbitration. A brief
perusal of the documents on record evidence that the
‘Operational Creditor’ admitted that the contract was on
lumpsum turnkey basis and stated in the Arbitration ‘Notice’
that the ‘Corporate Debtor’ had raised issues relating to
non-adherence of the terms of the contract.
xxx xxx xxx
21. The facts of the present case are being examined in the
light of the law laid down by the Hon’ble Supreme Court,
though the Learned Counsel for the ‘Operational Creditor’
has strenuously contended that the issuance of further work
orders and the Notice issued by the Operational Creditor
invoking Arbitration does not amount to Existence of a
Dispute’, the nature of communication on record with rival
contentions clarify the ‘Existence of a Dispute’ between
the parties prior to issuance of the Demand Notice. It has
been time and again held that it is enough that a ‘dispute
exists’ between the parties.
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
[2024] 12 S.C.R. 149

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

HPCL or its subsidiary HBL. The NCLAT rightly allowed
the appeal filed on behalf of HBL. It is not for this Court to
adjudicate the disputes between the parties and determine
whether, in fact, any amount was due from the appellant
to the HPCL/HBL or vice-versa. The question is, whether
the application of the Operational Creditor under Section 9
of the IBC, should have been admitted by the Adjudicating
Authority. The answer to the aforesaid question has to be
in the negative. The Adjudicating Authority (NCLT) clearly
fell in error in admitting the application.
31. The NCLT, exercising powers under Section 7 or
Section 9 of IBC, is not a debt collection forum. The IBC
tackles and/or deals with insolvency and bankruptcy. It is
not the object of the IBC that CIRP should be initiated to
penalize solvent companies for non-payment of disputed
dues claimed by an operational creditor.
32. There are noticeable differences in the IBC between the
procedure of initiation of CIRP by a financial creditor and
initiation of CIRP by an operational creditor. On a reading
of Sections 8 and 9 of the IBC, it is patently clear that an
Operational Creditor can only trigger the CIRP process, when
there is an undisputed debt and a default in payment thereof.
If the claim of an operational creditor is undisputed and the
operational debt remains unpaid, CIRP must commence, for
IBC does not countenance dishonesty or deliberate failure to
repay the dues of an Operational Creditor. However, if the
debt is disputed, the application of the Operational Creditor
for initiation of CIRP must be dismissed.
33. We find no grounds to interfere with the judgment and
order of the NCLAT impugned in this appeal.
34. The appeal is dismissed.
35. Needles to mention that the appellant may avail such
other remedies as may be available in accordance with
law including arbitration to realise its dues, if any.”

ii. Proceedings before the High Court
16. Consequent to the dismissal of the insolvency proceedings,
the respondent, on 09.12.2022, filed a fresh petition under the
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Section 11(6) of the Act, 1996 before the High Court of Bombay
seeking appointment of an arbitrator in terms of clause 14 of the
tender. The appellant opposed the petition, inter-alia on the ground
that the same was barred by limitation and that the claim sought to
be referred to arbitration was also a deadwood.
17. The High Court vide the impugned order allowed the application of
the respondent and proceeded to appoint an arbitrator. The High
Court took the view that the fresh Section 11 petition filed by the
respondent, after withdrawal of the first, was not time-barred and
neither the claim was a deadwood. The relevant observations of the
High Court are reproduced below:
"8. As regards the first submission of Mr. Paranjape, that
once the Section 11 Petition is withdrawn no second Petition
shall lie, I do not find any provision in the Act imposing
such a restrain.
It is not the case, where the appointment of Arbitrator was
prayed before the Court and the Application was turned
down on merits, holding that no arbitrator deserves to
be appointed in absence on an Arbitration Agreement.
The Petitioner chose to withdraw the Petition and as it is
categorically stated in the Petition that he was under advise
to do so and pursuant thereto he approached NCLT under
the IBC but did not succeed in the endeavour as the NCLT
did not find such proceedings to be maintainable and even
the Apex Court upheld the said order by recording that an
Operational Creditor can only trigger the CIRP process
when there is an undisputed debt and default in payment
thereof, but if the debt is disputed, then the Application of the
Operational Creditor for initiation of CIRP must be declined.
Be that as it may be, while dismissing the Appeal, being
conscious of the position that the dues of the Petitioner/
Appellant are yet to be realized, liberty was conferred to
avail such remedies in accordance with law which shall
include the remedy of arbitration.
With this clear indication, by the Highest Court of the
country, I am not persuaded to accept the submission of Mr.
Paranjape that an Application under Section 11 of the Act
seeking appointment of an Arbitrator is not maintainable.
[2024] 12 S.C.R. 151

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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 for him for redressal
of his grievance, he was ultimately turned away by the Apex
Court on 15.07.2022 by declaring that since the debt which
he claims is disputed, he cannot initiate the CIRP.
10. Since he was availing a wrong remedy, he was turned
down on 15.07.2022, by availing the liberty conferred, he
has filed the Arbitration Petition.
Worth it to note that initially when he approached the
NCLT, Kolkata, under Section 8 and 9 of the IBC for
institution of CIRP process against the Respondent, his
claim was entertained and it is only the Respondents, who
approached the Appellate Tribunal, the order passed by
the NCLT in favour of the Applicant came to be reversed.
Therefore, it cannot be said that the Petitioner was sitting
idle and not taking any steps for recovery of his dues, but
it is a case where he was availing remedy for recovery of
his dues before a wrong forum and he is entitled to take
benefit of Section 14 of the Limitation Act, 1963.
In fact, the NCLT by its order dated 28.02.2020, admitted
the Application under Section 8 and 9 of the IBC and
even declared the said moratorium public announcement
and in accordance with Section 13 and 14 of the IBC
and Moratorium under Section 14 of the IBC was also
imposed.
11. Another point raised by Mr. Paranjape in respect of
time barred claim being prosecuted by the Petitioner must
also meet the same fate.
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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 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
[2024] 12 S.C.R. 153

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as Sole Arbitrator to adjudicate the disputes and differences
that have arisen between the applicant and the respondent
in the two applications.
The Arbitrator shall, within a period of 15 days before
entering the arbitration reference forward a statement of
disclosure as contemplated u/s.11(8) r/w Section 12 of the
Arbitration and Conciliation Act, 1996, to the Prothonotary
and Senior Master of this Court to be placed on record. […]”
18. Aggrieved by the aforesaid order appointing an arbitrator for
adjudicating the disputes between the parties, the appellant has
come up before this Court with the present appeal.

B. SUBMISSIONS ON BEHALF OF THE APPELLANT
19. Mr. Tushar Mehta, the learned Solicitor General of India, appearing
for the appellant submitted that the Section 11(6) petition filed by
the respondent before the High Court as well as the claims sought
to be referred to arbitration were time-barred.
20. He submitted that the cause of action in the present case arose
on 04.02.2014, i.e., on the date when the claim of the respondent
was denied by the appellant. The respondent invoked arbitration
vide the notice dated 09.07.2016 and filed a Section 11 petition
on 16.02.2018 before unconditionally withdrawing the same. The
period of limitation as per Article 137 of the First Schedule to the
Limitation Act, 1963 (“the Limitation Act”) for filing a Section 11
petition is three years. In the present case, the limitation period for
filing an application under Section 11(6) of the Act, 1996 came to an
end on 07.08.2019. Therefore, the subsequent Section 11 application
filed before the High Court on 09.12.2022 was clearly time-barred.
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.
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22. By placing reliance on the decision of this Court in Sarguja Transport
Service v. S.T.A.T reported in (1987) 1 SCC 5, he argued that
although the Code of Civil Procedure, 1908 (for short “CPC”) may
not apply stricto sensu to the arbitration proceedings, yet the principle
underlying Order 23 Rule 1(3) which imposes a bar on the institution
of subsequent proceedings against the same defendant for the same
cause of action where liberty to institute fresh proceedings is not
granted by the court, can be extended to it in view of the expeditious
and time-bound nature of arbitration proceedings.
23. He submitted that the respondent is not entitled to avail the benefit
available under Section 14 of the Limitation Act, 1963 (for short “the
Limitation Act”) as the said provision would not be applicable to
the present case. He argued that Section 14 of the Limitation Act
provides for exclusion of time spent in prosecuting proceedings in
a non-jurisdictional court, where the earlier and later proceedings
relate to the same matter in issue or are for seeking the same relief.
However, he submitted, that the insolvency and arbitral proceedings
are distinct proceedings and are not for seeking the same relief. The
remedy in arbitral proceedings is in personam whereas the remedy
in insolvency proceedings is in rem. He submitted that the High
Court failed to appreciate this distinction and erroneously allowed
the arbitration petition filed by the respondent by extending to it the
benefit under Section 14 of the Limitation Act.
24. He further submitted that the IBC was enacted to consolidate
and amend the laws relating to the reorganisation and insolvency
resolution of corporate persons in a time-bound manner for maximising
the value of assets and balance the interests of all the stakeholders.
On the other hand, arbitration proceedings are for the purpose of
adjudication of disputes. Therefore, the objective, relief that may be
granted and the procedure governing IBC and arbitration proceedings
are widely divergent.
25. He argued that the period spent by the respondent pursuing
insolvency proceedings instead of arbitration does not entitle them
to the benefit of Section 14 of the Limitation Act, more particularly
having unconditionally withdrawn the first Section 11 petition. In this
regard reliance was placed by him on the decisions of this Court
in Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari
reported in 1950 SCR 852 and Natesan Agencies (Plantations) v.
State reported in (2019) 15 SCC 70.
[2024] 12 S.C.R. 155

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26. In the last, he submitted that this Court while dismissing the appeal
filed by the respondent against the order of the NCLAT, had only
granted conditional liberty to the respondent to pursue arbitration,
which would be permitted only if it is available in law. However, in
the present case, since the Section 11 application as well as the
claims are time-barred, the remedy of pursuing arbitration cannot
be available to the respondent in law.

C. SUBMISSIONS ON BEHALF OF THE RESPONDENT
27. Mr. Jay Savla, the learned Senior Counsel appearing on behalf of the
respondent submitted that the High Court rightly excluded the time
taken by the respondent in pursuing the IBC proceedings, that is, the
period between the date of filing of the Section 9 application before
the NCLT and the date of the order of this Court concluding the IBC
proceedings by disposing of the appeal filed by the respondent against
the order of the NCLAT, while calculating the limitation period for the
purpose of filing a fresh application under Section 11(6) of the Act, 1996.
28. He submitted that the aforesaid period is liable to be excluded under
Section 14 of the Limitation Act as the respondent was pursuing the
IBC proceedings diligently and in a bonafide manner. He relied on
the following decisions of this Court to submit that the phrase “other
cause of like nature” used 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
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withdrawal of an application under Section 11(6) of the Act, 1996
is not the same as withdrawal of a suit or a claim, and thus the
principles enshrined under Order 23 Rule 1 of the CPC will have
no application to the present case.
30. It was submitted that Section 32 of the Act, 1996 provides for
termination of arbitration proceedings and is the only provision
that relates to termination of arbitration proceedings upon their
commencement under Section 21. In the present case, arbitration
was invoked by the respondent vide notice dated 09.07.2016, and
there has been no termination of such arbitration proceedings as per
Section 32 of the Act, 1996. Hence, in the absence of any express
bar on filing of more than one 11(6) application under the provisions
of the Act, 1996, the second 11(6) application filed by the respondent
cannot be said to be not maintainable.

D. ISSUES FOR DETERMINATION
31. Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the following questions
fall for our consideration:
i. Whether a fresh application under Section 11(6) of the
Act, 1996 filed by the respondent could be said to be
maintainable more particularly when no liberty to file a
fresh application was granted by the High Court at the time
of withdrawal of the first application under Section 11(6)
of the act, 1996?
ii. Whether the fresh application under Section 11(6) of the
Act, 1996 filed by the respondent on 09.12.2022 could be
said to be time-barred? If yes, whether the respondent is
entitled to 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?
[2024] 12 S.C.R. 157

M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad

E. ANALYSIS
32. Clause 14 of the General Terms and Conditions of the tender
document contained the arbitration clause and is reproduced
hereinbelow:
"14. ARBITRATION
14.1 All disputes and differences of whatsoever nature,
whether existing or which shall at any time arise between
the parties hereto touching or concerning the agreement,
meaning, operation or effect thereof or to the rights and
liabilities of the parties or arising out of or in relation thereto
whether during or after completion of the contract or
whether before after determination, foreclosure, termination
or breach of the agreement (other than those in respect
of which the decision of any person is, by the contract,
expressed to be final and binding) shall, after written notice
by either party to the agreement to the other of them and to
the Appointing Authority hereinafter mentioned, be referred
for adjudication to the Sole Arbitrator to be appointed as
hereinafter provided.
14.2 The appointing authority shall either himself act as the
Sole Arbitrator or nominate some officer/retired officer of
HBL/Hindustan Petroleum Corporation Limited (referred to
as owner or HBL) or any other Government Company, or
any retired officer of the Central Government not below the
rank of a Director, to act as the Sole Arbitrator to adjudicate
the disputes and differences between the parties. The
contractor/vendor shall not be entitled to raise any objection
to the appointment of such person as the Sole Arbitrator
on the ground that the said person is/was an officer and/
or shareholder of the owner, another Govt. Company or
the Central Government or that he/she has to deal or had
dealt with the matter to which the contract relates or that
in the course of his/her duties, he/she has/had expressed
views on all or any of the matters in dispute or difference.
14.3 In the event of the Arbitrator to whom the matter is
referred to, does not accept the appointment, or is unable
or unwilling to act or resigns or vacates his office for any
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reasons whatsoever, the Appointing Authority aforesaid,
shall nominate another person as aforesaid, to act as the
Sole Arbitrator.
14.4 Such another person nominated as the Sole Arbitrator
shall be entitled to proceed with the arbitration from the
stage at which it was left by his predecessor. It is expressly
agreed between the parties that no person other than
the Appointing Authority or a person nominated by the
Appointing Authority as aforesaid, shall act as an Arbitrator.
The failure on the part of the Appointing Authority to make
an appointment on time shall only give rise to a right to a
Contractor to get such an appointment made and not to
have any other person appointed as the Sole Arbitrator.
14.5 The Award of the Sole Arbitrator shall be final and
binding on the parties to the Agreement.
14.6 The work under the Contract shall, however, continue
during the Arbitration proceedings and no payment due
or payable to the concerned party shall be withheld
(except to the extent disputed) on account of initiation,
commencement or pendency of such proceedings.
14.7 The Arbitrator may give a composite or separate
Award(s) in respect of each dispute or difference referred
to him and may also make interim award(s) if necessary.
14.8 The fees of the Arbitrator and expenses of arbitration,
if any, shall be borne equally by the parties unless the Sole
Arbitrator otherwise directs in his award with reasons. The
lumpsum fees of the Arbitrator shall be Rs 60,000/- per
case and if the sole Arbitrator completes the arbitration
including his award within 5 months of accepting his
appointment, he shall be paid Rs.10,000/- additionally as
bonus. Reasonable actual expenses for stenographer,
etc. will be reimbursed. Fees shall be paid stage wise
i.e. 25% on acceptance, 25% on completion of pleadings/
documentation, 25% on completion of arguments and
balance on receipt of award by the parties.
14.9 Subject to the aforesaid, the provisions of the
Arbitration and Conciliation Act, 1996 or any statutory
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modification or re-enactment thereof and the rules made
thereunder, shall apply to the Arbitration proceedings
under this Clause.
14.10 The Contract shall be governed by and constructed
according to the laws in force in India. The parties hereby
submit to the exclusive jurisdiction of the Courts situated
at Mumbai for all purposes. The Arbitration shall be held
at Mumbai and conducted in English language.
14.11 The Appointing Authority is the Functional Director
of Hindustan Petroleum Corporation Limited.”
33. Neither the existence nor the validity of the arbitration agreement
has been disputed by the appellant. However, the appellant has
challenged the allowing of the application for appointment of arbitrator
by the High Court on two grounds – (i) the application before the
High Court was not maintainable as it was filed for the second time
having been withdrawn previously without seeking any liberty to
file afresh; and (ii) the application is time-barred for being beyond
the time period of three years prescribed under Article 137 of the
Limitation Act. We shall address both these contentions in seriatim
as they are pivotal to the fate of the present appeal.

i. Issue No. 1
34. Section 11 of the Act, 1996 lays down the procedure for appointment
of arbitrators through the intervention of the High Court or the
Supreme Court, as the case may be. A reading of the said provision
indicates that there is nothing therein which prevents a party from
filing more than one application seeking the appointment of arbitrator
for adjudicating disputes arising from the same contract.
35. However, the appellant has contended that in lieu of the principles
contained in Order 23 Rule 1 of the CPC, the respondent could
not have filed a subsequent application under Section 11(6) for
adjudication of the same disputes, having previously withdrawn
unconditionally an application filed for the same purpose. To address
the contention of the appellant, we need to determine whether the
principles contained in Order 23 Rule 1 of the CPC will apply to an
application under Section 11(6) of the Act, 1996.
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a. Scope and applicability of Order 23 Rule 1 of the CPC to
proceedings other than suits
36. Prior to its amendment by the Code of Civil Procedure (Amendment)
Act, 1976, Order 23 Rule 1 of the CPC provided for two kinds of
withdrawal of a suit, namely absolute withdrawal and withdrawal
with the permission of the court to institute a fresh suit on the same
cause of action. The first category of withdrawal was governed by
sub-rule (1) thereof, as it stood then, which provided that at any
time after the institution of a suit, the plaintiff may, as against all or
any of the defendants withdraw his suit or abandon a part of his
claim. The second category was governed by sub-rule (2) thereof
which provided that where the court was satisfied (a) that a suit
must fail by reason of some formal defect, or (b) that there were
sufficient grounds for allowing the plaintiff to institute a fresh suit
for the subject-matter of a suit or part of a claim, it may, on such
terms as it thought fit, grant the plaintiff permission to withdraw
from such suit or abandon a part of a claim with liberty to institute
a fresh suit in respect of the subject-matter of such suit or such part
of the claim. Sub-rule (3) of the former Order 23 Rule 1 of the CPC
provided that where the plaintiff withdrew from a suit or abandoned
a part of a claim without the permission referred to in sub-rule (2),
he would be liable to such costs as the court may award and would
also be precluded from instituting any fresh suit in respect of such
subject-matter or such part of the claim. The legislature felt that
the use of the word “withdrawal” in relation to both the aforesaid
categories had led to confusion and thus amended the rule to avoid
such confusion.
37. Order 23 Rule 1 of the CPC as it stands now post the amendment
is reproduced hereinbelow:
“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.
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(2) An application for leave under the proviso to sub-rule
(1) shall be accompanied by an affidavit of the next friend
and also, if the minor or such other person is represented
by a pleader, by a certificate of the pleader to the effect
that the abandonment proposed is, in his opinion, for the
benefit of the minor or such other person.
(3) Where the Court is satisfied,—
(a) that a suit must fail by reason of some formal
defect, or
(b) that there are sufficient grounds for allowing the
plaintiff to institute a fresh suit for the subject matter
of suit or part of a claim,
It may, on such terms as it thinks fit grant the plaintiff
permission to withdraw from such suit or such part of the
claim with liberty to institute a fresh suit in respect of the
subject-matter of such suit or such part of the claim.
(4) Where the plaintiff—
(a) abandons any suit or part of claim under sub-rule (1), or
(b) withdraws from a suit or part of a claim without the
permission referred to in sub-rule (3),
he shall be liable for such costs as the Court may award
and shall be precluded from instituting any fresh suit in
respect of such subject-matter or such part of the claim.
(5) Nothing in this rule shall be deemed to authorise the
Court to permit one of several plaintiffs to abandon a
suit or part of a claim under sub-rule (1), or to withdraw,
under sub-rule (3), any suit or part of a claim, without the
consent of the other plaintiff”
38. The key difference between Order 23 Rule 1 as it stood prior to the
amendment and as it stands now is that while in sub-rule (1) of the
former Order 23 Rule 1, the expression “withdraw his suit” had been
used, whereas in sub-rule (1) of the amended Order 23 Rule 1, the
expression “abandon his suit” has been used. The new sub-rule (1) is
applicable to a case where the court declines to accord permission to
withdraw from a suit or such part of the claim with liberty to institute
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a fresh suit in respect of the subject-matter of such suit or such part
of the claim. In the new sub-rule (3) which corresponds to the former
sub-rule (2), practically no change is made. Under sub-rule (3), the
court is empowered to grant, subject to the conditions mentioned
therein, permission to withdraw from a suit with liberty to institute a
fresh suit in respect of the subject-matter of such suit. Sub-rule (4)
of the amended Order 23 Rule 1 provides that where the plaintiff
abandons any suit or part of claim under sub-rule (1) or withdraws
from a suit or part of a claim without the permission referred to in
sub-rule (3), he would be liable for such costs as the court may
award and would also be precluded from instituting any fresh suit
in respect of such subject-matter or such part of the claim.
39. Order 23 Rule 1, as it now stands post the amendment, makes a
distinction between “abandonment” of a suit and “withdrawal” from
a suit with permission to file a fresh suit and provides for – first,
abandonment of suit or a part of claim; and secondly, withdrawal from
suit or part of claim with the leave of the court. Abandonment of suit or
a part of claim against all or any of the defendants is an absolute and
unqualified right of a plaintiff and the court has no power to preclude
the plaintiff from abandoning the suit or direct him to proceed with it.
Sub-rule (1) of Order 23 Rule 1 embodies this principle. However, if
the plaintiff abandons the suit or part of claim, then he is precluded
from instituting a fresh suit in respect of such subject-matter or such
part of claim. Upon abandoning the suit or part of claim, the plaintiff
also becomes liable to pay such costs as may be imposed by the
Court. This is specified under sub-rule (4) of Order 23 Rule 1.
40. However, if the plaintiff desires to withdraw from a suit or part of a
claim with liberty to file a fresh suit on the same subject matter or
part of the claim, then he must obtain the permission of the court
under sub-rule (3) of Order 23 Rule 1. The failure to obtain such
permission would preclude the plaintiff from instituting any fresh suit
in respect of such subject-matter or such part of the claim, and also
to any costs that may be imposed by the court.
41. The court granting liberty under sub-rule (3) of Order 23 Rule 1
may do so only upon being satisfied of one of the following two
conditions– first, that the suit suffers from some formal defect and
would fail by reason of such defect; and second, that there are
sufficient grounds for allowing the plaintiff to institute a fresh suit
[2024] 12 S.C.R. 163

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for the same subject-matter or part of the claim. The court may
grant liberty on such terms as it deems fit. It is also apparent from
the text of the provision that the liberty under sub-rule (3) can only
be granted by the court trying the earlier suit and not by the court
before which the subsequent suit is instituted.
42. On meaning of the phrase ‘subject-matter’ appearing in Order 23
Rule 1, this Court in Vallabh Das v. Madan Lal (Dr) reported in
(1970) 1 SCC 761 held thus:
“5. Rule 1 of the Order 23, Code of Civil Procedure
empowers the courts to permit a plaintiff to withdraw from
the suit brought by him with liberty to institute a fresh suit in
respect of the subject-matter of that suit on such terms as it
thinks fit. The term imposed on the plaintiff in the previous
suit was that before bringing a fresh suit on the same
cause of action, he must pay the costs of the defendants.
Therefore we have to see whether that condition governs
the institution of the present suit. For deciding that question
we have to see whether the suit from which this appeal
arises is in respect of the same subject-matter that was
in litigation in the previous suit. The expression “subject-
matter” is not defined in the Civil Procedure Code. It does
not mean property. That expression has a reference to a
right in the property which the plaintiff seeks to enforce.
That expression includes the cause of action and the relief
claimed. Unless the cause of action and the relief claimed
in the second suit are the same as in the first suit, it cannot
be said, that the subject-matter of the second suit is the
same as that in the previous suit. Now coming to the
case before us in the first suit Dr Madan Lal was seeking
to enforce his right to partition and separate possession.
In the present suit he seeks to get possession of the suit
properties from a trespasser on the basis of his title. In
the first suit the cause of action was the division of status
between Dr Madan Lal and his adoptive father and the
relief claimed was the conversion of joint possession into
separate possession. In the present suit the plaintiff is
seeking possession of the suit properties from a trespasser.
In the first case his cause of action arose on the day he
got separated from his family. In the present suit the cause
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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 of facts which have to be proved in order to
entile the plaintiff to the relief claimed by him. We accept
as correct the observations of Wallis, C.J., in Singa Reddi
v. Subba Reddi [ILR 39 Mad 987] that where the cause
of action and the relief claimed in the second suit are not
the same as the cause of action and the relief claimed
in the first suit, the second suit cannot be considered to
have been brought in respect of the same subject-matter
as the first suit.”
(Emphasis supplied)
43. Discussing on the meaning of the phrases ‘formal defect’ and
‘sufficient grounds’, a two-Judge Bench of this Court in V. Rajendran
v. Annasamy Pandian reported in (2017) 5 SCC 63 observed thus:
“9. […] As per Order 23 Rule 1(3) CPC, suit may only be
withdrawn with permission to bring a fresh suit when the
Court is satisfied that the suit must fail for reason of some
formal defect or that there are other sufficient grounds for
allowing the plaintiff to institute a fresh suit. The power to
allow withdrawal of a suit is discretionary. In the application,
the plaintiff must make out a case in terms of Order 23
Rules 1(3)(a) or (b) CPC and must ask for leave. The Court
can allow the application filed under Order 23 Rule 1(3)
CPC for withdrawal of the suit with liberty to bring a fresh
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suit only if the condition in either of the clauses (a) or (b),
that is, existence of a “formal defect” or “sufficient grounds”.
The principle under Order 23 Rule 1(3) CPC is founded on
public policy to prevent institution of suit again and again
on the same cause of action.
10. In K.S. Bhoopathy v. Kokila [(2000) 5 SCC 458], it has
been held that it is the duty of the Court to be satisfied
about the existence of “formal defect” or “sufficient
grounds” before granting permission to withdraw the suit
with liberty to file a fresh suit under the same cause of
action. Though, liberty may lie with the plaintiff in a suit
to withdraw the suit at any time after the institution of suit
on establishing the “formal defect” or “sufficient grounds”,
such right cannot be considered to be so absolute as to
permit or encourage abuse of process of court. The fact
that the plaintiff is entitled to abandon or withdraw the suit
or part of the claim by itself, is no licence to the plaintiff to
claim or to do so to the detriment of legitimate right of the
defendant. When an application is filed under Order 23
Rule 1(3) CPC, the Court must be satisfied about the
“formal defect” or “sufficient grounds”. “Formal defect”
is a defect of form prescribed by the rules of procedure
such as, want of notice under Section 80 CPC, improper
valuation of the suit, insufficient court fee, confusion
regarding identification of the suit property, misjoinder of
parties, failure to disclose a cause of action, etc. “Formal
defect” must be given a liberal meaning which connotes
various kinds of defects not affecting the merits of the plea
raised by either of the parties.
11. In terms of Order 23 Rule 1(3)(b) where the court is
satisfied that there are sufficient grounds for allowing the
plaintiff to institute a fresh suit, the Court may permit the
plaintiff to withdraw the suit. In interpretation of the words
“sufficient grounds”, there are two views : one view is that
these grounds in clause (b) must be “ejusdem generis”
with those in clause (a), that is, it must be of the same
nature as the ground in clause (a), that is, formal defect
or at least analogous to them; and the other view was that
the words “other sufficient grounds” in clause (b) should
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be read independent of the words a “formal defect” and
clause (a). Court has been given a wider discretion to
allow withdrawal from suit in the interest of justice in cases
where such a prayer is not covered by clause (a). Since
in the present case, we are only concerned with “formal
defect” envisaged under clause (a) of Rule 1 sub-rule (3),
we choose not to elaborate any further on the ground
contemplated under clause (b), that is, “sufficient grounds”.”
(Emphasis supplied)
44. The main purpose of permitting the withdrawal of a suit and its
re-filing is to ensure that justice is not thwarted due to technicalities.
Where permission under Order 23 Rule 1 is granted, the principle
of estoppel does not operate and the principle of res judicate would
also not apply. However, Order 23 Rule 1 is not intended to enable
the plaintiff to get a chance to commence litigation afresh in order
to avoid the results of his previous suit, or to engage in multiple
proceedings with the motive of bench-hunting.
45. Order 23 Rule 2 stipulates that any fresh suit instituted on permission
granted under Order 23 Rule 1 shall be governed by the law of
limitation in the same manner as if the first suit had not been instituted.
The object underlying this Rule is to prevent a party from misusing the
liberty of filing a fresh suit for evading the limitation period governing
the said suit. The said rule is reproduced hereinbelow:
“2. Limitation law not affected by first suit.—In any fresh suit
instituted on permission granted under the last preceding
rule, the plaintiff shall be bound by the law of limitation in
the same manner as if the first suit had not been instituted.”
46. Undoubtedly, an application under Section 11(6) of the Act, 1996 is
not a suit and hence will not be governed stricto-sensu by Order 23
Rule 1 of the CPC. However, in a number of decisions, this Court has
extended the principle underlying Order 23 Rule 1 to proceedings
other than suits on the ground of public policy underlying the said rule.
The appellant has submitted that in view 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
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reported in (1987) 1 SCC 5 while elaborating upon the principle
underlying Order 23 Rule 1 of CPC, extended them to writ petitions
under Articles 226 and 227. Relevant observations from the said
decision are as follows:
“7. […] The principle underlying Rule 1 of Order XXIII of the
Code is that when a plaintiff once institutes a suit in a court
and thereby avails of a remedy given to him under law, he
cannot be permitted to institute a fresh suit in respect of
the same subject-matter again after abandoning the earlier
suit or by withdrawing it without the permission of the court
to file fresh suit. Invito beneficium non datur — the law
confers upon a man no rights or benefits which he does
not desire. Whoever waives, abandons or disclaims a right
will loose it. In order to prevent a litigant from abusing the
process of the court by instituting suits again and again
on the same cause of action without any good reason
the Code insists that he should obtain the permission
of the court to file a fresh suit after establishing either
of the two grounds mentioned in sub-rule (3) of Rule 1
of Order XXIII. The principle underlying the above rule
is founded on public policy, but it is not the same as the
rule of res judicata contained in Section 11 of the Code
which provides that no court shall try any suit or issue in
which the matter directly or substantially in issue has been
directly or substantially in issue in a former suit between
the same parties, or between parties under whom they
or any of them claim, litigating under the same title, in a
court competent to try such subsequent suit or the suit in
which such issue has been subsequently raised, and has
been heard and finally decided by such court. The rule of
res judicata applies to a case where the suit or an issue
has already been heard and finally decided by a court. In
the case of abandonment or withdrawal of a suit without
the permission of the court to file a fresh suit, there is no
prior adjudication of a suit or an issue is involved, yet the
Code provides, as stated earlier, that a second suit will
not lie in sub-rule (4) of Rule 1 of Order XXIII of the Code
when the first suit is withdrawn without the permission
referred to in sub-rule (3) in order to prevent the abuse
of the process of the court.
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8. The question for our consideration is whether it would
or would not advance the cause of justice if the principle
underlying Rule 1 of Order XXIII of the Code is adopted
in respect of writ petitions filed under Articles 226/227 of
the Constitution of India also. It is common knowledge
that very often after a writ petition is heard for some time
when the petitioner or his counsel finds that the court is
not likely to pass an order admitting the petition, request
is made by the petitioner or by his counsel to permit the
petitioner to withdraw from the writ petition without seeking
permission to institute a fresh writ petition. A court which
is unwilling to admit the petition would not ordinarily grant
liberty to file a fresh petition while it may just agree to
permit the withdrawal of the petition. It is plain that when
once a writ petition filed in a High Court is withdrawn by
the petitioner himself he is precluded from filing an appeal
against the order passed in the writ petition because he
cannot be considered as a party aggrieved by the order
passed by the High Court.”
(Emphasis supplied)
48. The principles enunciated in Sarguja Transport (supra) were
extended to Special Leave Petitions filed before this Court by a
two-Judge Bench of this Court in Upadhyay & Co. v. State of U.P.
and Others reported in (1999) 1 SCC 81. It was observed by the
bench thus:
11. […] It is not a permissible practice to challenge the same
order over again after withdrawing the special leave petition
without obtaining permission of the court for withdrawing it
with liberty to move for special leave again subsequently.
xxx xxx xxx
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
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admitting the writ petition after it is heard for some time,
that a request is made by the petitioner or his counsel to
permit him to withdraw it without seeking permission to
institute a fresh writ petition. A court which is unwilling to
admit the petition would not ordinarily grant liberty to file a
fresh petition while it may just agree to permit withdrawal of
the petition. When once a writ petition filed in a High Court
is withdrawn by the party concerned, he is precluded from
filing an appeal against the order passed in the writ petition
because he cannot be considered as a party aggrieved
by the order passed by the High Court. If so, he cannot
file a fresh petition for the same cause once again. […]
xxx xxx xxx
15. We have no doubt that the above rule of public policy,
for the very same reasoning, should apply to special leave
petitions filed under Article 136 of the Constitution also. […]”
(Emphasis supplied)
49. The respondent has relied upon the decision of this Court in
Sarva Shramik Sanghatana (supra) to contend that the principles
underlying Order 23 Rule 1 of the CPC cannot be applied as
a matter of fact in every legal proceeding. In the said case, an
application seeking permission for closure under Section 25-O(1) of
the Industrial Disputes Act, 1947 had been filed by the respondent
Company therein. However, before the application could be decided,
the Company received a letter from the Deputy Commissioner of
Labour, Mumbai inviting it to a meeting for exploring the possibility of
an amicable settlement. The Company withdrew its application in lieu
of the invite and Section 25-O(3) which provides that an application
made under Section 25-O(1) will be deemed to have been allowed
if it is not decided within a period of 60 days from the date of filing.
However, after the attempts for an amicable settlement failed, the
Company moved a fresh application under Section 25-O(1). The
application was opposed by the appellant therein, inter-alia, on the
ground that since the first application was withdrawn by the Company
without obtaining liberty to file a fresh application, the same would
not be maintainable as per the principles underlying Order 23 Rule
1 of the CPC. In this regard, reliance was placed by the appellant
therein upon the decision of this Court in Sarguja Transport (supra).
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However, this Court distinguished the decision in Sarguja Transport
(supra) on the ground that the objective in the said decision was
to prevent such situations where the petitioner withdraws a case
to file it before a more convenient Bench or for some other mala
fide purpose. The relevant observations from the said decision are
reproduced hereinbelow:
“19. In the present case, we are satisfied that the
application for withdrawal of the first petition under Section
25-O(1) was made bona fide because the respondent
Company had received a letter from the Deputy Labour
Commissioner on 5-4-2007 calling for a meeting of the
parties so that an effort could be made for an amicable
settlement. In fact, the respondent Company could have
waited for the expiry of 60 days from the date of filing of its
application under Section 25-O(1), on the expiry of which
the application would have deemed to have been allowed
under Section 25-O(3). The fact that it did not do so, and
instead applied for withdrawal of its application under
Section 25-O(1), shows its bona fide. The respondent
Company was trying for an amicable settlement, and
this was clearly bona fide, and it was not a case of
Bench-hunting when it found that an adverse order was
likely to be passed against it. Hence, Sarguja Transport
case [(1987) 1 SCC 5 : 1987 SCC (Cri) 19 : AIR 1987 SC
88] is clearly distinguishable, and will only apply where the
first petition was withdrawn in order to do Bench-hunting
or for some other mala fide purpose.
20. We agree with the learned counsel for the appellant
that although the Code of Civil Procedure does not strictly
apply to proceedings under Section 25-O(1) of the Industrial
Disputes Act, or other judicial or quasi-judicial proceedings
under any other Act, some of the general principles in
CPC may be applicable. For instance, even if Section 11
CPC does not in terms strictly apply because both the
proceedings may not be suits, the general principle of
res judicata may apply vide Pondicherry Khadi & Village
Industries Board v. P. Kulothangan [(2004) 1 SCC 68 :
2004 SCC (L&S) 32] . However, this does not mean that
all provisions in CPC will strictly apply to proceedings
which are not suits.
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22. No doubt, Order 23 Rule 1(4) CPC states that where
the plaintiff withdraws a suit without permission of the court,
he is precluded from instituting any fresh suit in respect
of the same subject-matter. However, in our opinion, this
provision will apply only to suits. An application under
Section 25-O(1) is not a suit, and hence, the said provision
will not apply to such an application.”
(Emphasis supplied)
50. While we agree with the decision in the aforesaid case to the extent
that it declined to apply the principles of Order 23 Rule 1 and refused
to dismiss a bonafide subsequent application filed after the earlier
one was withdrawn in good faith to attempt conciliation, we are of the
view that it cannot be declared as a general rule that merely because
a legal proceeding is not a ‘suit’, it would be completely exempted
from the application of principles underlying Order 23 Rule 1. These
principles, being in the nature of public policy, bring efficiency and
certainty to the administration of justice by any court and should
be invoked and enforced unless they are expressly prohibited by
statute or appear to counter serve the interest of justice, rather than
advancing it.
51. One important policy consideration which permeates the scheme
of Order 23 Rule 1 is the legislative intent that legal proceedings
in respect of a subject-matter are not stretched for unduly long
periods by allowing a party to reagitate the same issue over and over
again, which also leads to uncertainty for the responding parties.
Arbitration as a dispute resolution method, too, seeks to curtail the
time spent by disputing parties in pursuing legal proceedings. This is
evident from the various provisions of the Act, 1996 which provide a
timeline for compliance with various procedural requirements under
the said Act. An application for appointment of arbitrator under
Section 11(6) of the Act, 1996 is required to be filed when there
is failure on the part of the parties or their nominated arbitrators
to commence the arbitration proceedings as per the agreed
upon procedure. This Court, being conscious of the temporally
sensitive nature of proceedings under Section 11(6), has issued
various directions from time to time to ensure that applications for
appointment of arbitrators are decided in an expeditious manner.
Keeping in view the approach of this Court and the nature of
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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 invocation of the same arbitration clause on more
than one occasion. It is possible that certain claims or disputes may
arise between the parties after a tribunal has already been appointed
in furtherance of an application under Section 11(6). In such a
scenario, a party cannot be precluded from invoking the arbitration
clause only on the ground that it had previously invoked the same
arbitration clause. If the cause of action for invoking subsequent
arbitration has arisen after the invocation of the first arbitration, then
the application for appointment of arbitrator cannot be rejected on
the ground of multiplicity alone.
53. The principles of Order 23 Rule 1 are extended to proceedings other
than suits with a view to bring in certainty, expediency and efficiency
in legal proceedings. However, at the same time, it must also be kept
in mind while extending the principles to legal proceedings other than
suits that the principles are not applied in a rigid or hyper-technical
manner. While the nature of the proceedings, that is, whether such
proceeding is a suit or otherwise, should not be a consideration in
deciding whether the principles of Order 23 Rule 1 should be extended
to such proceedings or not, the bonafide conduct of a party in the
unique facts of a case must be considered before precluding such
a party from moving ahead with the proceedings.
54. In the case of Vanna Claire Kaura v. Gauri Anil Indulkar & Ors.
reported in (2009) 7 SCC 541 the applicant filed a Section 11(6)
application before the High Court of Bombay. A dispute was raised
that the application was not maintainable as the agreements were in
the nature of international commercial arbitration agreement under the
Act, 1996 and the application for appointment would only lie before
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the Chief Justice of India. Accordingly, the applicant withdrew the
Section 11 application and filed a Section 11(6) application before
this Court. The subsequent application was opposed inter alia on
the ground that arbitration was invoked by notice dated 14.03.2006
and was thereafter abandoned with the withdrawal of the petition
from the High Court. Hence, the second application without the leave
of the High Court would not be maintainable. However, this Court,
negatived the objections against the application and proceeded to
appoint the arbitrator.
55. Coming to the facts of the case at hand, both the applications
under Section 11(6) of the Act, 1996 were filed seeking adjudication
of the dispute which arose on 02.02.2014 upon refusal of the
appellant to pay the dues of the respondent. The first application
under Section 11(6) was filed on 16.02.2018 and was subsequently
withdrawn unconditionally on 01.10.2018. After a gap of more than
four years, the respondent filed a subsequent application under
Section 11(6) before the High Court on 09.12.2022 which came to
be allowed by the impugned order.
56. The High Court was of the view that the respondent chose to withdraw
the petition under legal advice and thereafter approached NCLT under
the IBC but did not succeed in its endeavor. Further, the High Court
observed that while dismissing the appeal, this Court vide Order dated
15.07.2022 granted liberty to the respondent to avail such remedies
in accordance with law, which shall include the remedy of arbitration.
Accepting the explanation given by the respondent as bonafide and
relying on the order dated 15.07.2022 of this Court, the High Court
held the fresh petition under Section 11(6) to be maintainable.
57. A perusal of paragraph 18 of the order dated 10.01.2022 passed
by the NCLAT setting aside the order of the NCLT reveals that after
invoking the arbitration clause by the notice dated 09.07.2016, the
respondent issued a statutory demand notice to the appellant under
Section 8 of the IBC on 30.08.2017. When no reply was sent by the
appellant to the said demand notice, the respondent, rather than filing
an application under Section 9 of the IBC, filed an application for
the appointment of arbitrator on 16.02.2018. During the pendency of
the application under Section 11(6) of the Act, 1996 before the High
Court, the respondent issued a second statutory demand notice under
Section 8 of the IBC to the appellant on 25.07.2018. The appellant
filed a reply to the said demand notice on 07.08.2018, wherein, inter
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alia, it took the defence that there was a pre-existing dispute between
the parties, which was evidenced by the existence of the pending
arbitration proceedings. Subsequently, the respondent withdrew the
arbitration application on 01.10.2018 and thereafter proceeded to file
an application before the NCLT, Kolkata on 05.10.2018.
58. The chronology of events as discussed above clearly indicates
that the respondent did not withdraw the first arbitration application
because of some defect which would have led to its dismissal. It
is also clear from the order dated 01.10.2018 of the High Court
permitting the respondent to withdraw the application that neither any
liberty was sought by the respondent nor the court had granted any
liberty to file a fresh arbitration application. It appears to us that the
only reason the respondent withdrew the arbitration application was
to get his application under Section 9 of the IBC any how admitted
by the NCLT. It is also evident that the existence of a pre-existing
dispute was brought to the notice of the respondent by the appellant
much prior to the withdrawal of the arbitration application in reply
to the demand notice issued by the respondent under Section 8 of
the IBC. Thus, it can be said without any doubt that the respondent
took a calculated risk of abandoning the arbitration proceedings to
maximise the chances of succeeding in the IBC proceedings.
59. The respondent was within its right to abandon the arbitration
proceedings in favour of IBC proceedings. However, having done
so, it would no longer be open to it to file a fresh application for
appointment of arbitrator without having obtained the liberty of the
court to file a fresh application at the time of the withdrawal. We
say so particularly because the withdrawal of the first arbitration
application was not with a view to cure some formal defect or any
other sufficient ground. The application was withdrawn with the hope
that the application filed by the respondent under Section 9 of the
IBC may succeed, as the pendency of the arbitration application
would have proven to be an indicator of existence of a pre-existing
dispute between the parties, and thus fatal to the IBC proceedings.
60. As we are of the view that the principles underlying Order 23 Rule 1
can be extended to applications for appointment of arbitrator, the
only recourse to the respondent to defend the second application
as maintainable despite it having been withdrawn earlier without
liberty was to show bona fides on its part. From the conduct of
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the respondent, it is evident that it thought fit to initiate insolvency
proceedings perhaps thinking that the issues existing between the
parties may not get resolved through arbitration. Further, no document
has been placed on record to substantiate the so called incorrect
legal advice the respondent claims to have received. Therefore, the
failure on the part of the respondent to withdraw the first Section 11
application without seeking any liberty cannot be condoned in the
facts of the present case.
61. In light of the aforesaid discussion, we are of the view that in the
absence of any liberty sought by the respondents from the High Court
at the time of withdrawal of the first arbitration application, the fresh
Section 11 petition arising out of the same cause of action cannot
be said to be maintainable.
62. Another way of looking at the abandonment of Section 11(6)
application is by understanding the importance of such an application
in view of Sections 21 and 43(2) of the Act, 1996 respectively. By
virtue of Section 21, the arbitral proceedings commence on the date
on which the respondent receives the petitioner’s notice invoking
arbitration. The said provision is reproduced below:
“21. Commencement of arbitral proceedings.—Unless
otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute commence on the date on
which a request for that dispute to be referred to arbitration
is received by the respondent.”
63. Section 43(2) of the Act, 1996 provides that for the purposes of
limitation, an arbitration shall be ‘deemed’ to have commenced on
the date referred to in Section 21. Section 43(2) is reproduced below:
“(2) For the purposes of this section and the Limitation
Act, 1963 (36 of 1963), an arbitration shall be deemed to
have commenced on the date referred to in section 21.”
64. As is clear from the word “deemed” used in Section 43(2), the
commencement of arbitration proceedings, as contemplated in
Section 21, is in the nature of a legal or deeming fiction. It is a
notional commencement and not a 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.
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65. Hence, a petition under Section 11(6) of the Act, 1996 is not a
proceeding merely seeking the appointment of an arbitrator. It is in
reality a proceeding for appointing an arbitrator and for commencing
the actual or real arbitration proceedings.
66. If that is so, the unconditional withdrawal of a Section 11(6) petition
amounts to abandoning not only the formal prayer for appointing
an arbitrator but also the substantive prayer for commencing
the actual arbitration proceedings. It amounts to abandoning the
arbitration itself. It results in abandonment of the notional ‘arbitration
proceeding’ that had commenced by virtue of Section 21 and thus
amounts to an abandonment of a significant nature. Therefore, it is
all the more important to import and apply the principles underlying
Order 23 Rule 1 of the CPC to abandonment of applications under
Section 11(6).

ii. Issue No. 2
67. It was submitted by the appellant that the fresh application filed
by the respondent under Section 11(6) of the Act, 1996 before the
High Court was beyond the period of limitation prescribed for filing
of such an application and was not maintainable. The appellant also
contended that the substantive claims raised by the respondent are
also ex-facie time-barred and thus the High Court ought to have
dismissed the fresh arbitration application filed by the respondent
on this ground as well.
68. The basic premise behind the statutes providing for a limitation period
is encapsulated by the maxim “Vigilantibus non dormientibus jura
subveniunt” which means that the law assists those who are vigilant
and not those who sleep over their rights. The object behind having
a prescribed limitation period is to ensure that there is certainty and
finality to the litigation and assurance to the opposite party that it
will not be subject to an indefinite period of liability. Another object
achieved by a fixed limitation period is that only those claims which
are initiated before the deterioration of evidence takes place are
allowed to be litigated. The law of limitation does not act to extinguish
the right but only bars the remedy.
69. The limitation period governing applications under Section 11(6) of
the Act, 1996 has recently been explained by a three-Judge Bench
of this Court, to which My Lord, the Chief Justice of India and myself
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were a part, in M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd. reported
in 2024 INSC 155. The said decision has referred to Article 137 of
the Limitation Act, 1963 to hold that the limitation period for making
an application under Section 11(6) of the Act, 1996 is three years
from the date when the right to apply accrues.
70. On the aspect of when the limitation period for filing an application
seeking appointment of arbitrator would commence, the aforesaid
decision has held that it is only after a valid notice invoking arbitration
has been issued by one of the parties to the other party and there
has been either a failure or refusal on part of the other party to
make an appointment as per the appointment procedure agreed
upon between the parties, that the clock would start ticking for the
purpose of the limitation of three years.
71. In the case at hand, the respondent invoked the arbitration clause
vide a notice dated 09.07.2016. Since there was no response to the
said notice by the appellant, the respondent filed an application for
appointment of arbitrator before the High Court under Section 11(6)
of the Act, 1996 on 16.02.2018. Subsequently, it abandoned the
application to pursue proceedings under the IBC.
72. On 15.10.2018, the respondent filed an application under Section 9
of the IBC for initiation of Corporate Insolvency Resolution Process
against the appellant. The IBC proceedings initiated by the respondent
under Section 9 were ultimately dismissed by this Court vide order
dated 15.07.2022 by way of which the order of the NCLAT was upheld
and the order of the NCLT was set-aside. This Court took the view
that the NCLT had committed a grave error of law by admitting the
application of the respondent even though there was a pre-existing
dispute between the parties. Placing reliance on the decision of this
Court in Mobilox Innovations Private Limited v. Kirusa Software
Private Limited reported in (2018) 1 SCC 353, this Court held
that upon the occurrence of a pre-existing dispute regarding the
alleged claims of the respondent against the appellant, the Section 9
application of the respondent as an ‘Operational Creditor’ could not
have been entertained.
73. Upon rejection of the Section 9 application by this Court, the
respondent filed a fresh application under Section 11(6) on 09.12.2022
before the High Court. The High Court allowed the application and
proceeded to appoint the arbitrator vide the impugned order.
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74. An overview of the facts as discussed above indicates that the
first application under Section 11(6) filed on 16.02.2018 was well
within the prescribed limitation period of three years for filing such
applications. However, even assuming that the second application
under Section 11(6) is not barred by the principles underlying Order 23
Rule 1, the same was required to be filed within a period of three
years from the expiry of one month from the date of receipt of the
notice invoking arbitration by the appellant. This period of three
years came to an end in August, 2019. The second application
under Section 11(6) came to be filed by the respondent much later
on 12.12.2022 and is clearly time-barred.
75. However, to save the second Section 11(6) application from being
dismissed on account of being time-barred, the respondent has
contended that it is entitled to invoke the benefit under Section 14
of the Limitation Act, 1963 to seek exclusion of the period spent
by it in pursuing the proceedings under Section 9 of the IBC. The
respondent has further submitted that even otherwise, this Court in
exercise of its discretion available under Section 5 of the Limitation
Act may condone the delay in filing the second 11(6) application
before the High Court, as it was pursuing the insolvency proceedings
in a bona fide manner and would be left remediless if the appointment
of arbitrator by the High Court is set aside by this Court.
76. Section 14 of the Limitation Act provides for exclusion of time of
proceeding bona fide in court without jurisdiction and is reproduced
below: -
“14. Exclusion of time of proceeding bona fide in court
without jurisdiction.—
(1) In computing the period of limitation for any suit the
time during which the plaintiff has been prosecuting with
due diligence another civil proceeding, whether in a court of
first instance or of appeal or revision, against the defendant
shall be excluded, where the proceeding relates to the
same matter in issue and is prosecuted in good faith in a
court which, from defect of jurisdiction or other cause of
a like nature, is unable to entertain it.
(2) In computing the period of limitation for any application,
the time during which the applicant has been prosecuting
with due diligence another civil proceeding, whether in a
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court of first instance or of appeal or revision, against the
same party for the same relief shall be excluded, where
such proceeding is prosecuted in good faith in a court
which, from defect of jurisdiction or other cause of a like
nature, is unable to entertain it.
(3) Notwithstanding anything contained in rule 2 of Order
XXIII of the Code of Civil Procedure, 1908 (5 of 1908),
the provisions of sub-section (1) shall apply in relation to
a fresh suit instituted on permission granted by the court
under rule 1 of that Order, where such permission is granted
on the ground that the first suit must fail by reason of a
defect in the jurisdiction of the court or other cause of a
like nature.
Explanation.—For the purposes of this section,—
(a) in excluding the time during which a former civil
proceeding was pending, the day on which that proceeding
was instituted and the day on which it ended shall both
be counted;
(b) a plaintiff or an applicant resisting an appeal shall be
deemed to be prosecuting a proceeding;
(c) misjoinder of parties or of causes of action shall be
deemed to be a cause of a like nature with defect of
jurisdiction.”
77. There is a body of decisions of this Court taking the view that
by virtue of Section 43 of the Act, 1996, the Limitation Act is
applicable to applications for appointment of arbitrator filed under
Section 11(6) of the said Act. It thus follows that the benefit under
Section 14 of the Limitation Act can be availed by an applicant subject
to the fulfilment of the conditions specified therein. However, a bare
perusal of the aforesaid provision indicates that sub-sections (1)
and (2) respectively of Section 14 are materially different from each
other. Thus, it is important to ascertain as to which provision would
be applicable to an application for appointment of arbitrator under
Section 11(6) of the Act, 1996.
78. Under Section 14(1), in computing the period of limitation for any
suit, the time during which the plaintiff has been prosecuting with
due diligence another civil proceeding, whether in a court of first
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instance or of appeal or revision, against the defendant shall be
excluded, where the proceeding relates to the same matter in issue
and is prosecuted in good faith in a court which, from defect of
jurisdiction or other cause of a like nature, is unable to entertain it.
Thus, the following ingredients need to be fulfilled for the applicability
of Section 14(1):
i. The subsequent proceeding must be a suit;
ii. Both the earlier and the subsequent proceeding must be civil
proceedings;
iii. Both the earlier and subsequent proceedings must be between
the same parties;
iv. The earlier and subsequent proceeding must have the same
matter in issue;
v. The earlier proceeding must have failed owing to a defect of
jurisdiction of the earlier court or any other cause of a like nature;
vi. The earlier proceedings must have been prosecuted in good
faith and with due-diligence; and
vii. Both the earlier and the subsequent proceedings must be
before a court.
79. A three-Judge Bench of this Court in Consolidated Engg.
Enterprises v. Irrigation Deptt. reported in (2008) 7 SCC 169,
dealt with the question as to whether Section 14 of the Limitation Act
would be applicable to an application submitted under Section 34 of
the Act, 1996 for setting aside the award made by the arbitrator. The
Court enumerated the conditions for the applicability of Section 14(1)
as follows:
“21. Section 14 of the Limitation Act deals with exclusion of
time of proceeding bona fide in a court without jurisdiction.
On analysis of the said section, it becomes evident that
the following conditions must be satisfied before Section
14 can be pressed into service:
(1) Both the prior and subsequent proceedings are civil
proceedings prosecuted by the same party;
(2) The prior proceeding had been prosecuted with due
diligence and in good faith;
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(3) The failure of the prior proceeding was due to defect
of jurisdiction or other cause of like nature;
(4) The earlier proceeding and the latter proceeding must
relate to the same matter in issue and;
(5) Both the proceedings are in a court.”
80. Section 2 of the Limitation Act provides certain definitions. Some of
them which are pertinent to the present discussion are reproduced
hereinbelow:
“In this Act, unless the context otherwise requires,—
(a) “applicant” includes—
(i) a petitioner;
(ii) any person from or through whom an applicant derives
his right to apply;
(iii) any person whose estate is represented by the applicant
as executor, administrator or other representative;
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(1) as reproduced above clearly provides for a distinction
between a ‘suit’ and an ‘application’ under the Limitation Act. Thus,
the clear intention of the legislature was that they are not to be
considered as the same for the purpose of Limitation Act.
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82. In Section 11(6) of the Act, 1996, the words ‘the appointment shall be
made, on an application of the party’ are used, thereby signifying that
a Section 11 petition is in the nature of an ‘application’ and cannot be
considered to be a ‘suit’ for the purposes of the Limitation Act. Even
otherwise, ‘application’ under the Limitation Act includes a ‘petition’,
thereby leaving no room for any doubt that a Section 11(6) petition
is to be treated as an application.
83. As a petition under Section 11(6) of the Act, 1996 is not a suit, hence
it would not be governed by sub-section (1) of Section 14 of the
Limitation Act. Instead, it would be governed by sub-section (2) of
Section 14 of the Limitation Act. Some of the conditions required to
be fulfilled for seeking the benefit of exclusion under Section 14(2)
are materially different from those required under Section 14(1) and
are as follows:
i. Both the earlier and the subsequent proceeding must be civil
proceedings;
ii. Both the earlier and subsequent proceedings must be between
the same parties;
iii. The earlier and subsequent proceeding must be for the same
relief;
iv. The earlier proceeding must have failed owing to a defect of
jurisdiction of the earlier court or any other cause of a like nature;
v. The earlier proceedings must have been prosecuted in good
faith and with due-diligence; and
vi. Both the earlier and the subsequent proceedings are before
a court.
84. With every other ingredient remaining the same, the key difference
between sub-sections (1) and (2) of Section 14 respectively is two-fold:
i. First, the benefit of Section 14(1) can be availed of where
the subsequent proceeding is a suit, whereas the benefit
of Section 14(2) can be availed of where the subsequent
proceeding is an application.
ii. Secondly, Section 14(1) applies if both the earlier and the
subsequent proceedings have the same matter in issue, whereas
Section 14(2) applies when both the earlier and the subsequent
proceedings are filed for seeking the same relief.
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85. Clearly, the scope of the expression “same matter in issue” appearing
in Section 14(1) is much wider than that of the expression “for the
same relief” appearing in Section 14(2) of the Limitation Act. This
is evident on account of the difference between the nature of a suit
vis-à-vis an application. In a suit, a party generally seeks relief in
the nature of the cause of action which is established on the basis
of oral and documentary evidence and arguments. Whereas, an
application is made under a particular provision of a statute and
if it appears to the court that such provision of the statute is not
applicable, then the application as a whole cannot be sustained.
Thus, an application is made for a specific purpose as provided by
the statutory provision under which it is made unlike a suit which is
instituted based on a cause of action and is for seeking remedies
falling in a wider conspectus.
86. Sub-section (3) of Section 14 stipulates that where liberty to withdraw
any suit is granted under sub-rule (3) of Order 23 Rule 1 on the
ground of defect of jurisdiction or other cause of a like nature, then,
the exclusion of limitation period as provided by Section 14(1) will
be available to the plaintiff to institute any fresh suit on the same
subject-matter.
87. The respondent has contended that the expression “other cause of a
like nature” used in Section 14 of the Limitation Act should be given
a wide interpretation as Section 14 is meant to advance the cause
of the justice and not thwart it by procedural impediments. In view
of liberal interpretation of Section 14, the respondent submitted that
the case at hand is one fit for the grant of relief under Section 14
of the Limitation Act.
88. This Court in M.P. Housing Board v. Mohanlal & Co. reported in
(2016) 14 SCC 199 observed thus on the liberal interpretation of
Section 14 of the Limitation Act:
“16. From the aforesaid passage, it is clear as noonday
that there has to be a liberal interpretation to advance
the cause of justice. However, it has also been laid
down that it would be applicable in cases of mistaken
remedy or selection of a wrong forum. As per the
conditions enumerated, the earlier proceeding and the
latter proceeding must relate to the same matter in issue.
It is worthy to mention here that the words “matter in
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issue” are used under Section 11 of the Code of Civil
Procedure, 1908. As has been held in Ramadhar Shrivas
v. Bhagwandas [(2005) 13 SCC 1], the said expression
connotes the matter which is directly and substantially
in issue. We have only referred to the said authority to
highlight that despite liberal interpretation placed under
Section 14 of the Act, the matter in issue in the earlier
proceeding and the latter proceeding has to be conferred
requisite importance. That apart, the prosecution of the
prior proceeding should also show due diligence and
good faith.
(Emphasis supplied)
89. Undoubtedly, this Court over a period of time has taken a consistent
view that the expression “other cause of a like nature” appearing
in Section 14 should be given a wide interpretation. However,
while considering the applicability of Section 14 of the Limitation
Act, one must not lose sight of the fact that the applicability of the
provision is contingent upon not just the reason for the failure of
the earlier proceedings, but is also dependent on several other
factors as explained in the preceding paragraphs. It is only when
all the ingredients required for the applicability of Section 14 are
fulfilled that the benefit would become available. In this context the
appellant has submitted that as the proceedings undertaken by the
respondent before the IBC and the proceedings for the appointment
of arbitrator before the High Court are not for the “same relief”, hence
the benefit of Section 14 of the Limitation Act will not be available
to the respondent. To address this contention of the appellant, it is
important to understand the purpose of IBC proceedings vis-à-vis
proceedings under Section 11(6) of the Act, 1996.

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:
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i. To balance the interest of stakeholders and creditors by reviewing
and restructuring insolvent businesses having potential for a
turn-around.
ii. To provide robust mechanism for earlier resolution of insolvency
in time-bound manner.
91. A reading of the Preamble to the IBC reveals the following avowed
objects behind its enactment:
i. To consolidate and amend the laws relating to reorganisation
and insolvency resolution of corporate persons, partnership
firms and individuals in a timebound manner for maximization
of value of assets of such persons;
ii. To promote entrepreneurship and availability of credit;
iii. To balance the interests of all the stakeholders including
alteration in the order of priority of payment of Government
dues; and
iv. To establish the Insolvency and Bankruptcy Board of India.
92. One of the cardinal objectives of the IBC is to protect and preserve
the life of the corporate debtor “as a going concern” by providing
for the resolution of its insolvency through restructuring and keeping
liquidation only as a measure of last resort.
93. One of the essential ingredients of an application filed under Section 9
of the IBC is that there is an existence of a default. The term ‘default’
is defined under Section 3(12) of the IBC to mean non-payment of
debt when whole or any part or instalment of the amount of debt has
become due and payable and is not paid by the debtor.
94. ‘Debt’ is defined under Section 3(11) of the IBC to mean a liability
or obligation in respect of a claim which is due from any person and
includes a financial debt and operational debt.
95. On the other hand, arbitration is a consent-based private dispute
resolution method for the expeditious adjudication of disputes.
Arbitration is initiated when one or both parties are not able to resolve
their disputes amicably and seek to have the matter resolved by an
independent arbitrator.
96. The High Court in the impugned order thought fit to exclude the time-
period spent by the respondent before the NCLT, Kolkata under the
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IBC since it was of the view that the respondent was availing remedy
for recovery of dues before a wrong forum and was thus squarely
covered by Section 14(2) of the Limitation Act. The High Court took
the view that since the proceedings for initiating corporate insolvency
resolution process (“CIRP”) under IBC as well as the proceeding
sought to be initiated by way of arbitration were ultimately for the
recovery of debts, both proceedings could be said to be for the
same relief, and thus entitled the respondent for the benefit under
Section 14(2) of the Limitation Act. The relevant observations read
as under: -
“10. [...] Worth it to note that initially when he approached
the NCLT, Kolkata, under Section 8 and 9 of the IBC for
institution of CIRP process against the Respondent, his
claim was entertained and it is only the Respondents, who
approached the Appellate Tribunal, the order passed by
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 CIRP of a corporate debtor is
initiated, it becomes a proceeding in rem. On the contrary, arbitration
being concerned with private disputes is not an in-rem proceeding.
99. In Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors. reported
in (2019) 4 SCC 17 this Court, speaking through R.F Nariman J.,
held that IBC was not a mere recovery legislation for the creditors
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but rather a beneficial legislation intended to revive and rehabilitate
the corporate debtor. The relevant observations read as under:
“28. It can thus be seen that the primary focus of the
legislation is to ensure revival and continuation of the
corporate debtor by protecting the corporate debtor from
its own management and from a corporate death by
liquidation. The Code is thus a beneficial legislation which
puts the corporate debtor back on its feet, not being a
mere recovery legislation for creditors. The interests of
the corporate debtor have, therefore, been bifurcated
and separated from that of its promoters/those who
are in management. Thus, the resolution process is not
adversarial to the corporate debtor but, in fact, protective of
its interests. The moratorium imposed by Section 14 is in
the interest of the corporate debtor itself, thereby preserving
the assets of the corporate debtor during the resolution
process. The timelines within which the resolution process
is to take place again protects the corporate debtor’s assets
from further dilution, and also protects all its creditors
and workers by seeing that the resolution process goes
through as fast as possible so that another management
can, through its entrepreneurial skills, resuscitate the
corporate debtor to achieve all these ends.”
(Emphasis supplied)
100. Similarly, in Pioneer Urban Land & Infrastructure Ltd. & Anr. v.
Union of India & Ors. reported in (2019) 8 SCC 416, this Court
reiterated that IBC is not a debt recovery mechanism. It observed that
when CIRP is initiated the aspect of recovery of debt is completely
outside the control of the creditor and there is no guarantee of recovery
or refund of the entire amount in default. A creditor initiates insolvency
under the Code not for the relief of recovery of debt but rather for
rehabilitating the corporate debtor and for a new management to
take over. The relevant observations read as under:
“It is also important to remember that the Code is not
meant to be a debt recovery mechanism (see para 28 of
Swiss Ribbons). It is a proceeding in rem which, after
being triggered, goes completely outside the control of
the allottee who triggers it. Thus, any allottee/home buyer
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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 that such provision is manifestly arbitrary. As
has been held by our judgment in Pioneer Urban Land
& Infrastructure Ltd. v. Union of India, IBC is not meant
to be a recovery mechanism (see para 41 thereof)—the
idea of the Insolvency Code being a mechanism which is
triggered in order that resolution of stressed assets then
takes place. For this purpose, the definitions of “dispute”
under Section 5(6), “claim” under Section 3(6), “debt”
under Section 3(11), and “default” under Section 3(12),
have all to be read together. Also, IBC, belonging to the
realm of economic legislation, raises a higher threshold
of challenge, leaving Parliament a free play in the joints,
as has been held in Swiss Ribbons (P) Ltd. v. Union of
India [...]”
(Emphasis supplied)
102. Similarly, in Jaypee Kensington Boulevard Apartments Welfare
Assn. v. NBCC (India) Ltd., reported in (2022) 1 SCC 401 this Court
held that the focus of IBC was more on ensuring the revival and
continuation of the corporate debtor rather than mere recovery of
the debt owed by the corporate debtor to its creditors. The relevant
observations read as under: -
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“88.2. In the judgment delivered on 25-1-2019 in Swiss
Ribbons (P) Ltd. v. Union of India 82 (hereinafter also
referred to as the case of “Swiss Ribbons”), this Court
traversed through the historical background and scheme
of the Code in the wake of challenge to the constitutional
validity of various provisions therein. One part of such
challenge had been founded on the ground that the
classification between “financial creditor” and “operational
creditor” was discriminatory and violative of Article 14
of the Constitution of India. This ground as also several
other grounds pertaining to various provisions of the Code
were rejected by this Court after elaborate dilation on the
vast variety of rival contentions. In the course, this Court
took note, inter alia, of the pre-existing state of law as
also the objects and reasons for enactment of the Code.
While observing that focus of the Code was to ensure
revival and continuation of the corporate debtor, where
liquidation would be the last resort, this Court pointed
out that on its scheme and framework, the Code was a
beneficial legislation to put the corporate debtor on its
feet, and not a mere recovery legislation for the creditors.”
(Emphasis supplied)
103. What can be discerned from aforesaid decisions is that insolvency
proceedings are fundamentally different from proceedings for recovery
of debt such as a suit for recovery of money, execution of decree or
claims for amount due under arbitration, etc. The first distinguishing
feature that sets apart ordinary recovery proceedings from insolvency
proceedings is that under the former the primary relief is the recovery
of dues whereas under the latter the primary concern is the revival
and rehabilitation of the corporate debtor. No doubt both proceedings
contemplate an aspect of recovery of debt, however in insolvency
proceedings, the recovery is only a consequence of the rehabilitation/
resolution of the corporate debtor and not the main relief.
104. The second distinguishing feature is that although both proceedings
entail recovery of debt to a certain extent, however they are different
inasmuch as when it comes to recovery proceedings it is the individual
creditor’s debt which is sought to be recovered, whereas in insolvency
proceedings it is the entire debt of the company which is sought
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to be resolved. The former is only for the benefit of the individual
creditor who initiates the recovery proceedings whereas the latter is
for the benefit of all creditors irrespective of who initiates insolvency.
105. The last distinguishing feature is that, a recovery proceeding be
it a suit or arbitration is initiated by a creditor where an amount is
due and is unpaid by a debtor, in other words the intention behind
initiating a recovery proceeding is simpliciter for the full recovery of
amount which is unpaid to it. However, in an insolvency proceeding
there is no guarantee of recovery of the entire debt. A creditor opts
for insolvency where an amount of such threshold is unpaid, that
the creditor has an apprehension that the debtor in its current state
and under the existing management in all likelihood will be unable
to repay that debt in the future i.e., there is no likely prospect of any
recovery, and thus it would be beneficial to take the risk of initiating
insolvency which even though does not guarantee full recovery, in
order for a new management to take over the corporate debtor and
to recover at least some amount of debt before it is too late. Thus,
the underlying intention behind initiating insolvency is not with the
intention of recovering the amount owed to it, but rather with the
intention that the corporate debtor is resolved / rehabilitated through
a new management as soon as possible before it becomes unviable
with no prospect of any meaningful recovery of its dues in the near
future.
106. Thus, by no stretch of imagination can insolvency proceedings be
construed as being for the same relief as any ordinary recovery
proceedings, and therefore no case is made out for exclusion of
time under Section 14(2) of the Limitation Act, 1963.
107. As the relief sought in an application under Section 11(6) of the Act,
1996 is not the same as the relief sought in an application under
Section 9 of the IBC, the benefit of Section 14(2) cannot be given
to the respondent in the present case.
108. In Yeshwant Deorao Deshmukh v. Walchand Ramchand Kothari
reported in (1950) 1 SCR 852 this Court held that the relief sought
under insolvency is completely different from the relief sought under
an execution application for a decree for recovery of money. In the
former, the estate of the insolvent is apportioned or realised for
the benefit of all creditors whereas in the latter the money due is
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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 sought in
the execution of application. In the former, an adjudication
of the debtors as insolvency is sought as preliminary to
the vesting of all his estate and the administration of it by
the Official Receive or the Official Assignee, as the case
may be, for the benefit of all the creditors; but in the latter
the money due is sought to be realised for the benefit of
the decree-holder alone, by processes like attachment
of property and arrest of person. It may that ultimately
in the insolvency proceedings the decree-holder may be
able to realise his debt wholly or in part, but this is a mere
consequence or result. Not only is the relief of a different
nature in the two proceedings but the procedure is also
widely divergent.”
(Emphasis supplied)
109. This Court in Commissioner, Madhya Pradesh Housing Board
& Ors. v. Mohanlal and Company reported in (2016) 14 SCC 199
considered whether benefit of Section 14 of the Limitation Act would
be available when a party instead of challenging an arbitral award
under Section 34, filed a Section 11 application for appointment
of arbitrator. This Court while setting aside the appointment,
observed that the proceedings for appointment of an arbitrator
are entirely different from the proceedings for challenging an
award. Therefore, even after adopting a liberal interpretation,
it would not be appropriate to grant benefit of exclusion of
time-period under Section 14.
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110. Even otherwise, the respondent couldn’t be said to have had been
prosecuting the IBC proceedings in good faith and in a bonafide manner.
It was observed by this Court in Consolidated Engg. Enterprises
(supra) and M.P. Housing Board (supra) that an element of mistake is
inherent in the relief envisaged under Section 14 of the Limitation Act.
However, in the present case, the respondent had initially approached
the High Court with an application under Section 11(6). However,
for reasons best known to it, the respondent abandoned the said
proceedings for appointment of arbitrator and approached the NCLT,
Kolkata with an application under Section 9 of the IBC. The respondent
was fully aware of the objection of a pre-existing dispute raised by the
appellant in response to its second statutory demand notice issued
under Section 8 of the IBC. Despite having preferred an application
under 11(6) of the Act, 1996 before the jurisdictional court, and also
being fully aware of the infirmities in the Section 9 application filed
under the IBC, the respondent took a conscious decision to abandon
the right course of proceedings. The conduct of the respondent cannot
be termed to be a mistake in any manner. Having taken a conscious
decision to opt for specific remedy under the IBC which is not for the
same relief as an application under Section 11(6) of the Act, 1996,
the respondent cannot be now allowed to take the plea of ignorance
or mistake and must bear the consequences of its decisions.

iii. Issue No. 3
111. It was submitted on behalf of the respondent that in the event the
benefit under Section 14(2) of the Limitation Act is not extended to
it, then in such circumstance, this Court may consider to condone
the delay in filing the second 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.
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112. The following three questions fall for our consideration on the basis
of the aforesaid submissions –
i. Whether the benefit of condonation of delay under Section 5
of the Limitation Act is available in respect of an application for
appointment of arbitrator under Section 11(6) of the Act, 1996?
ii. Whether it is permissible for the courts to condone delay under
Section 5 of the Limitation Act in the absence of any application
seeking such condonation?
iii. Whether the facts of the present case warrant the exercise of
discretion in favour of the respondent to condone the delay in
filing the second arbitration application?
113. Section 5 of the Limitation Act provides that any appeal or application
other than an application under the provisions of Order 21 of the
CPC may be admitted after the prescribed period of limitation if the
appellant or the applicant satisfies the court that he had sufficient
cause for not preferring the appeal or making the application within
the prescribed period. The provision is extracted hereinbelow:
“5. Extension of prescribed period in certain cases.—
Any appeal or any application, other than an application
under any of the provisions of Order XXI of the Code of
Civil Procedure, 1908 (5 of 1908), may be admitted after the
prescribed period if the appellant or the applicant satisfies
the court that he had sufficient cause for not preferring
the appeal or making the application within such period.
Explanation.—The fact that the appellant or the applicant
was misled by any order, practice or judgment of the High
Court in ascertaining or computing the prescribed period
may be sufficient cause within the meaning of this section.”
114. The use of the expression “may be admitted” in the aforesaid provision
indicates that the nature of relief that can be granted under Section 5
is discretionary and not mandatory in nature. The applicant or the
appellant, even upon showing sufficient cause, cannot assert as a
matter of right that the delay be condoned. Thus, unlike Section 14
of the Limitation Act, where the applicant can 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
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of extending the benefit of condonation of delay to the court before
which the application for such condonation is made.
115. In a recent pronouncement in Pathapati Subba Reddy (Died) by
LRs and Others v. The Special Deputy Collector (LA) reported
in (2024) 4 SCR 241 this Court observed thus:
“12. In view of the above provision, the appeal which is
preferred after the expiry of the limitation is liable to be
dismissed. The use of the word ‘shall’ in the aforesaid
provision connotes that the dismissal is mandatory subject
to the exceptions. Section 3 of the Act is peremptory
and had to be given effect to even though no objection
regarding limitation is taken by the other side or referred
to in the pleadings. In other words, it casts an obligation
upon the court to dismiss an appeal which is presented
beyond limitation. This is the general law of limitation. The
exceptions are carved out under Sections 4 to 24 (inclusive)
of the Limitation Act but we are concerned only with the
exception contained in Section 5 which empowers the
courts to admit an appeal even if it is preferred after the
prescribed period provided the proposed appellant gives
‘sufficient cause’ for not preferring the appeal within the
period prescribed. In other words, the courts are conferred
with discretionary powers to admit an appeal even after
the expiry of the prescribed period provided the proposed
appellant is able to establish ‘sufficient cause’ for not filing
it within time. The said power to condone the delay or
to admit the appeal preferred after the expiry of time is
discretionary in nature and may not be exercised even if
sufficient cause is shown based upon host of other factors
such as negligence, failure to exercise due diligence etc.”
(Emphasis supplied)
116. This Court in Ramlal v. Rewa Coalfields Ltd., 1961 SCC OnLine
SC 39 observed as follows:
“12. It is, however, necessary to emphasise that even after
sufficient cause has been shown a party is not entitled to
the condonation of delay in question as a matter of right.
The proof of a sufficient cause is a condition precedent for
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the exercise of the discretionary jurisdiction vested in the
court by Section 5. If sufficient cause is not proved nothing
further has to be done; the application for condoning delay
has to be dismissed on that ground alone. If sufficient
cause is shown then the court has to enquire whether in its
discretion it should condone the delay. This aspect of the
matter naturally introduces the consideration of all relevant
facts and it is at this stage that diligence of the party or
its bona fides may fall for consideration; but the scope
of the enquiry while exercising the discretionary power
after sufficient cause is shown would naturally be limited
only to such facts as the court may regard as relevant. It
cannot justify an enquiry as to why the party was sitting
idle during all the time available to it. In this connection
we may point out that considerations of bona fides or
due diligence are always material and relevant when the
court is dealing with applications made under Section 14
of the Limitation Act. In dealing with such applications the
court is called upon to consider the effect of the combined
provisions of Sections 5 and 14. Therefore, in our opinion,
considerations which have been expressly made material
and relevant by the provisions of Section 14 cannot to
the same extent and in the same manner be invoked in
dealing with applications which fall to be decided only
under Section 5 without reference to Section 14.”
(Emphasis supplied)
117. As discussed in the foregoing parts of this judgment, the period of
limitation to file an application under Section 11(6) of the Act, 1996 is
governed as provided in Article 137 of the Schedule to the Limitation
Act, that is, three years. We have observed that the benefit available
under Section 14 of the Limitation Act will also be available in respect
of applications made under Section 11(6) of the Act, 1996. Thus,
in the absence of any specific statutory exclusion, there is no good
reason to hold that the benefit under Section 5 of the Limitation Act
cannot be availed for the purpose of condonation of delay caused
in filing a Section 11(6) application.
118. In Deepdharshan Builders Pvt. Ltd. v. Saroj, Widow of Satish
Sunderrao Trasikar reported in 2018 SCC OnLine Bom 4885, the
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Bombay High Court held that Section 5 of the Limitation Act would
apply to an application filed under Section 11(6) of the Act, 1996.
The relevant observations from the said decision are extracted
hereinbelow:
“42. In my view, since the proceedings under Section 11(6)
of the Arbitration Act are required to be filed before the
High Court, Article 137 of the Schedule to the Limitation
Act, 1963 would apply to such application filed under
Section 11(6) of the Arbitration Act. In my view, since
Article 137 of the Schedule to the Limitation Act, 1963 would
apply to the arbitration application under Section 11(6) of
the Arbitration Act, Section 5 of the Limitation Act, 1963
would also apply to the arbitration application filed under
Section 11(6) of Arbitration Act.”
119. Similarly, the Delhi High Court in Yogesh Kumar Gupta v. Anuradha
Rangarajan reported in 2007 SCC OnLine Del 287 had observed
that in view of Section 43 of the Act, 1996, Section 5 of the Limitation
Act would be applicable to applications filed under Section 11(6)
of the Act, 1996. Relevant observations from the said decision are
extracted hereinbelow:
“30. There is yet another alternative route which leads to
some conclusion. Section 21 of the Act states that unless
otherwise agreed by the parties (there is no agreement
of the parties on this aspect), the arbitral proceedings in
respect of a particular dispute commence on the date on
which a request for that dispute to be referred to arbitration
is received by the respondent. Consequently, when the
petitioner issued the notice dated 10.4.2002 raising the
dispute regarding rendition of accounts of the partnership
business, the arbitral proceedings commenced as soon
as the communication dated 10.4.2002 was received by
the respondent. It is not the respondent’s case that he
did not receive the communication dated 10.4.2002 sent
by the petitioner and since it was sent by registered post
(as appears from the postal receipt filed on record along
with the said communication), it can be safely presumed
that the communication was received by the respondent
within a matter of few days. Consequently, the arbitral
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proceedings stood commenced sometime in middle of
April, 2002. The application under Section 11(5) of the
Act is an application or a petition in relation to arbitral
proceedings which have commenced with the issuance
of a request for the reference of disputes to arbitration
(Section 2(b) of the Limitation Act). Since Limitation Act,
1963 specifically applies to arbitrations, Section 5 of the
Limitation Act would also apply to an application/petition
under Section 11 (5) of the Limitation Act. Any application
(other than under the provisions of Order 21 of CPC) may
be admitted after the prescribed period, if the applicant
satisfies the Court that he had sufficient cause for not
preferring or making the application within such period.
In my view, therefore, Section 5 of the Limitation Act
would apply to, and be available to the petitioner filing
an application/petition under Section 11 (5) of the Act.”
(Emphasis supplied)
120. The necessary pre-condition for availing the remedy under Section
5 of the Limitation Act is that the applicant must satisfy the court that
there was a sufficient cause which prevented him from instituting the
application within the prescribed time period. Although it is a general
practice that a formal application under Section 5 of the Limitation
Act has to be filed by the applicant, yet no such requirement can
be gathered from a bare reading of the statute. Thus, even in the
absence of a formal application, a court or tribunal may consider
exercising its discretion under Section 5 of the Limitation Act subject
to the applicant assigning sufficient cause for condoning the delay.
A similar view was taken by this Court in Sesh Nath Singh v.
Baidyabati Sheoraphuli Coop. Bank Ltd. reported in (2021) 7
SCC 313 wherein it was observed thus:
“63. Section 5 of the Limitation Act, 1963 does not speak
of any application. The Section enables the Court to admit
an application or appeal if the applicant or the appellant, as
the case may be, satisfies the Court that he had sufficient
cause for not making the application and/or preferring
the appeal, within the time prescribed. Although, it is
the general practice to make a formal application under
Section 5 of the Limitation Act, 1963, in order to enable
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the Court or Tribunal to weigh the sufficiency of the cause
for the inability of the appellant/applicant to approach the
Court/Tribunal within the time prescribed by limitation,
there is no bar to exercise by the Court/Tribunal of its
discretion to condone delay, in the absence of a formal
application.
64. A plain reading of Section 5 of the Limitation Act
makes it amply clear that, it is not mandatory to file an
application in writing before relief can be granted under
the said section. Had such an application been mandatory,
Section 5 of the Limitation Act would have expressly
provided so. Section 5 would then have read that the
Court might condone delay beyond the time prescribed
by limitation for filing an application or appeal, if on
consideration of the application of the appellant or the
applicant, as the case may be, for condonation of delay,
the Court is satisfied that the appellant/applicant had
sufficient cause for not preferring the appeal or making
the application within such period.”
(Emphasis supplied)
121. The position of law that emerges from the aforesaid discussion is
that the benefit under Section 5 of the Limitation Act is available in
respect of the applications filed for appointment of arbitrator under
Section 11(6) of the Act, 1996. Further, the requirement of filing an
application under Section 5 of the Limitation Act is not a mandatory
prerequisite for a court to exercise its discretion under the said
provision and condone the delay in institution of an application or
appeal. Thus, the only question that remains to be considered is
whether in the facts of the present case, the respondent could be
said to have made out a case for condonation of delay in instituting
the fresh Section 11(6) application.
122. As discussed, the respondent took a conscious decision to abandon
its first Section 11(6) application with a view to pursue proceedings
under Section 9 of the IBC. The respondent made such choice
despite a specific objection raised by the appellant in its reply to
the statutory demand notice that there were pre-existing disputes
between the parties. In view of this, maximisation of the chances of
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getting the application under Section 9 of the IBC admitted by the
NCLT seems to have been the only reason for the abandonment of
the first Section 11(6) application by the respondent. In light of such
conduct on the part of the respondent, we are of the view that the
present case does not warrant the exercise of our discretion under
Section 5 of the Limitation Act.
123. The primary intent behind Section 5 of the Limitation Act is not to
permit litigants to exploit procedural loopholes and continue with the
legal proceedings in multiple forums. Rather, it aims to provide a
safeguard for genuinely deserving applicants who might have missed
a deadline due to unavoidable circumstances. This provision reflects
the intent of the legislature to balance the principles of justice and
fairness, ensuring that procedural delays do not hinder the pursuit
of substantive justice. Section 5 of the Limitation Act embodies the
principle that genuine delay should not be a bar access to justice,
thus allowing flexibility in the interest of equity, while simultaneously
deterring abuse of this leniency to prolong litigation unnecessarily.
124. The legislative intent of expeditious dispute resolution under the Act,
1996 must also be kept in mind by the courts while considering an
application for condonation of delay in the filing of an application
for appointment of arbitrator under Section 11(6). Thus, the court
should exercise its discretion under Section 5 of the Limitation Act
only in exceptional cases where a very strong case is made by
the applicant for the condonation of delay in filing a Section 11(6)
application.
125. Before we part with the matter, we would like to address the
submission of the respondent that this Court, while dismissing its
appeal against the order of the NCLAT, had granted it liberty to avail
such remedies, including arbitration, as may be available to it in
law, to realise its dues from the appellant. The relevant paragraph
is reproduced hereinbelow:
“35. Needless to mention that the appellant may avail
such other remedies as may be available in accordance
with law including arbitration to realise its dues, if any.”
126. The liberty granted by this Court to the respondent has been prefixed
by the words “Needless to mention…”. Hence, it is amply clear that
the observations were merely clarificatory and not intended to confer
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upon the respondent a special right or privilege to file a proceeding
which is not otherwise permissible under law. The intention cannot
be said to have been to help the respondent come out of its action of
unconditionally withdrawing the first Arbitration Petition or to deprive
the appellant of defences available to it under law. Such intention
cannot be attributed to this Court, particularly in the absence of any
discussion on this point.
127. Further, the said paragraph only gives liberty to the respondent to
avail such other remedies “as may be available” “in accordance
with law”. Hence, it cannot be construed as giving the respondent
the liberty to file a proceeding that is not available or that is not in
accordance with law.
128. The reliance placed by the petitioner upon the paragraph 35 referred
to above is nothing but a completely incorrect reading of the said
paragraph. In BSNL v. Telephone Cables Limited reported in
2010 5 SCC 213, this Court observed thus:
“41. Instances abound where observations of the court
reserving liberty to a litigant to further litigate have been
misused by litigants to pursue 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 the respondent as the fresh Section 11 petition could
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be said to be hit by the principles analogous to Order 23 Rule 1
and is also barred by limitation for being beyond the prescribed
period of 3 years.

F. CONCLUSION
131. In view of the aforesaid discussion, we have reached to the following
conclusion:
(i) In the absence of any liberty being granted at the time of
withdrawal of the first application under Section 11(6) of the
Act, 1996, the fresh application filed by the respondent under
the same provision was not maintainable;
(ii) The fresh application filed by the respondent under Section
11(6) of the Act, 1996 was time-barred;
(iii) The respondent is not entitled to the benefit of Section 14(2)
of the Limitation Act; and
(iv) The respondent is also not entitled to the benefit of condonation
of delay under Section 5 of the Limitation Act.
132. As a result, the appeal filed by the appellant is allowed and the
impugned order passed by the High Court of Bombay is hereby set
aside.
133. Pending application(s), if any, shall stand disposed of.
134. The parties shall bear their own costs.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Ankit Gyan