TMI Blog2022 (1) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... est at the rate of 21% monthly compoundable interest on principle amount from 20th January, 2011 to 20th December, 2016. It is thus clear that even according to the claimant the cause of action arose for payment of interest as well as principle amount after expiry of 45 days from the date of each invoice. The last invoice is dated 2nd June, 2011, the alleged part payment of ₹ 16 lakhs on 28th July, 2015 thus would not extend the period of limitation. It is clear that the entire claim had already become barred by law of limitation prior to 28th July, 2015 and was not a legally enforceable debt as on 28th July, 2015. Learned single Judge in the impugned judgment dated 5th September, 2019 considered the issue of limitation in detail and has rightly held that the supplies were payable respectively at the expiry of 45 days of each individual notice. The arbitration agreement was arrived at between the parties on 22nd November, 2016 and accordingly the terminus ad quem in respect of the claim in the arbitration was 22nd November, 2016. It is with reference to that date the bar of limitation has to be construed - the arbitral proceedings in this case commenced when both the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mr. J. P. Sen, Senior Advocate a/w Mr. Kezer Kharawala and Mr. Pradosh Patil i/by M/s. Lex Juris for the Appellant. Mr. Chetan Kapadia a/w Mr. Rohan Agrawal, Ms. Sakina Ruhawala i/by M/s.Consulta Juris for the Respondent. JUDGMENT (Per R.D. Dhanuka, J.) :- The appellant has filed this Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 impugning the judgment dated 5th September, 2019 passed by the learned Single Judge, dismissing the Commercial Arbitration Petition No. 987 of 2018 impugning the Arbitral Award dated 9th June, 2018 passed by the learned arbitrator. 2. The appellant was the original claimant in the arbitral proceedings and the original petitioner in commercial arbitration petition whereas the respondent herein was the original respondent in the arbitral proceeding and also respondent in the commercial arbitration petition. For the sake of convenience, the parties are described as per their original status in the statement of claim before the learned arbitrator. Some of the relevant facts for the purpose of deciding this appeal are as under :- 3. It is the case of the claimant that on 30th October, 2020 offer was se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing No. 465 of 2015 before this Court inter-alia praying for winding-up of the respondent-company. 8. On 25th May, 2015, the parties hold a meeting. It is the case of the claimant that the respondent has unequivocally admitted a sum of ₹ 2,22,49,067/- as due and payable by them to the claimant as on 31st March, 2015. On 22nd November, 2015, this Court by consent of parties referred the entire dispute to the arbitration. During the period between 2016-17, both the parties entered upon the reference. The arbitral proceedings accordingly commenced. The claimant examined four witnesses who were cross-examined by the learned counsel for the respondent. The respondent examined three witnesses. Both the parties made oral submissions. On 9th June, 2018, the learned arbitrator made an award rejecting claims made by the claimant on the ground of limitation except part of the claim in the sum of ₹ 3,68,005/- with interest thereon from the date of award until payment and/or realization. On 15th June, 2018, the learned arbitrator forwarded an amended arbitral award. Being aggrieved by the said order dated 9th June, 2018 and amended award dated 15th June, 2018, the claimant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enior counsel that on 30th June, 2013, the respondent issued a cheque of ₹ 50 lakhs as part payment towards the material supplied to the claimant. However, the said cheque was dishonored when presented on 30th July, 2013. The claimant filed a criminal complaint under section 138 of the Negotiable Instruments Act, 1881 in the Court of the learned Metropolitan Magistrate, 6th Court, Mazgaon against the respondent. The respondent thereafter issued three cheques i.e. on 5th February, 2014, 25th July, 2015 and 28th July, 2015, in aggregate sum of ₹ 50 lakhs, the value of the dishonored cheque. The said criminal complaint was accordingly withdrawn by the claimant filed under section 138 of the Negotiable Instruments Act, 1881. 13. It is submitted by the learned senior counsel that there was a joint meeting held between the parties on 25th May, 2015 when the representatives of the respondent admitted that a sum of ₹ 2,22,49,067/was due and payable by the respondent to the claimant. On 31st March, 2016. the parties agreed to reconcile their accounts in view of the claimant s position that the amount due was in fact far larger. By an order dated 29th November, 2016, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimant were held not to extend the period of limitation on the ground that those payments had been appropriated towards the earlier invoices and not the 37 invoices on the basis of which the claim had been constituted. He submits that the learned arbitrator erroneously held that the respondent while making payment had not effected any appropriation, but the claimant having appropriated the sums paid against the specific invoices and not generally against the amounts due must be held for appropriation / adjustment. 17. It is submitted by the learned senior counsel that the findings of the learned Arbitrator that the Minutes of the Meeting held on 25th May, 2015 was of no assistance to the claimant on the basis that it contained no unequivocal admission of ₹ 2,22,49,067/- due from the respondent to the claimant is erroneous. He submitted that part payment of the debt is made by cheque, written in the handwriting of the person liable to pay the debt. This evidence, both of fact of payment and of acknowledgment are within the meaning of section 18 of the Indian Limitation Act. Thus, a fresh period of limitation is liable to be computed from the time when the cheque was hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Judgment of Patna High Court in case of Rajpati Prasad v/s. Kaushalya Kuer and Ors., 1980 SCC OnLine Pat 107. (f) The Judgment of Gujarat High Court in case of Hindustan Apparel Indutries v/s. Fair Deal Corporation, New Delhi, 2000 SCC OnLine Guj 137. (g) The Judgment of Delhi High Court in case of Bhushan Steel and Strips Ltd. v/s. Bhartiya Loha Udyog (P.) Ltd., 2010 SCC OnLine Del 581. (h) The Judgment of Supreme Court in case of Food Corporation of India v/s. Assam State Cooperative Marketing and Consumer Federation Ltd. and Ors., (2004) 12 SCC 360. (i) The Judgment of Kerala High Court in case of P. D. Pillai v/s. Mrs. Kaliyanikutty Amma and Ors., 1994 SCC OnLine Ker 146. (j) The Judgment of this Court in case of Maharashtra State Farming Corporation Ltd. v/s. Belapur Sugar and Allied Industries Ltd., 2004 (3) Mh. L. J. 414. (k) An unreported Judgment delivered on dated 23rd October, 2017 by the Supreme Court in case of Kanyalal Rewachand Mirani v/s. M/s. Trans Fabpower India Pvt. Ltd. in Diary No(s). 14198 of 2017. (l) The Judgment of this Court in case of Chintaman Dhundiraj v/s. Sadguru Narayan Maharaj Datta Sansthana and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimant adjusted the said amount of ₹ 50 lakhs fully towards the invoice nos.078, 082 and 083 and partly towards invoice no.840. He submits that the invoice nos.078, 082 and 083 did not form part of the statement of claim. 26. It is submitted by the learned counsel that during the period 20132014, the respondent had made payment of ₹ 76 lakhs to the claimant. In the statement of claim, the claimant partly adjusted the said amount towards principle and partly towards interest. The invoices against each of these part payments that were adjusted did not form part of the claim made by the claimant in the statement of claim. He submits that on 18th July, 2014, the three years period of limitation expired. He submits that when the issue was referred to arbitration by the orders dated 22nd November, 2016 and 29th November, 2016, all questions including that of limitation were kept open. Learned counsel invited our attention to some of the paragraphs of the statement of claim dated 25th December, 2016 filed by the claimant contending that 38 invoices to the tune of ₹ 3,74,25,675/- were due and payable by the respondent. It was alleged in the statement of claim that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was returned dishonored. He submits that the witness examined by the respondent Mr. Jubin Thakkar had deposed that the said cheque for ₹ 50 lakhs which was issued as a security deposit as prescribed under the purchase order and not towards any liability. 30. It is submitted that the said amount of ₹ 50 lakhs was subsequently paid because the mother of Jubin Thakkar (RW-3) was aged and had to defend the proceedings under Section 138 of the Negotiable Instruments Act, 1881 and was finding difficulties. He submits that even if the said amount of ₹ 50 lakhs was to be construed as an acknowledgment within the meaning of section 19 of the Limitation Act, 1963, the same could only be extended to the benefit of invoice no.084, outstanding in the sum of ₹ 1,57,830/- and nothing more. 31. It is submitted by the learned counsel for the respondent that the witness (RW-3) examined by the respondent had deposed in his evidence that the email dated 20th July, 2011 was in fact under duress because of antisocial elements engaged by the claimant. He submits that the email mentioned the amount of ₹ 15 crores which was due and payable by the respondent to the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimant of the said payment of ₹ 50 lakhs against three old invoices fully and one invoice partly. He submits that 38 invoices which were subject matter of the proceedings before the learned Arbitration caused 38 separate causes of action. The claimant having elected and taken benefit of appropriation and having saved limitation in respect of earlier four invoices is estopped from taking inconsistent pleas. Till the election of appropriation / adjustment, the claimant could have adjusted part payment against each invoice however, the claimant having adjusted part payment only against four invoices, it is now not open to the claimant to suggest that the cheque when handed over represented acknowledgment of liability towards payment under 38 invoices. The arguments now advanced by the claimant are contrary to the stated case of the claimant in the arbitral proceedings. 35. Learned Arbitrator and the learned single Judge considered the effect of part payment against four invoices. He invited our attention to the findings rendered by the learned Arbitrator in paragraphs 25 and 38 of the arbitral award. He submits that the learned Arbitrator after considering the adjustment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s date of reference of arbitration i.e. 22nd November, 2016. 38. It is submitted that merely because the company petition is filed by the claimant cannot be a ground for extension of limitation. Learned Arbitrator having rendered a finding of fact which being not perverse, no interference was permissible with the said finding of fact under section 34 of the Arbitration Act and thus rightly not interfered with by the learned single Judge. In this appeal under section 37 of the Arbitration Act, this Court cannot re-enquire into the merits of the entire case. Neither there is patent illegality nor any error apparent on the face of record in the impugned award or in the impugned judgment rendered by the learned single Judge. 39. Mr. Sen, learned senior counsel for the claimant submits that the respondent has not disputed that the cheque of ₹ 50 lakhs issued by the respondent was towards part payment in respect of the claim made by the claimant arising out of the goods sold and delivered and thus the said cheque having been dishonored would extend the period of limitation in respect of all pending invoices. He submits that this issue was specifically urged by the claimant be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 3,74,30,757/- in installments in the financial year 2012-2013 to the claimant which was appropriated by the claimant against the principle amount of few invoices of ₹ 2,51,89,564/and 21% agreed rate of interest amounting to ₹ 1,38,41,158/-. 43. According to the claimant, a sum of ₹ 4,48,22,112/- was outstanding amount towards principal amount as on 31st March, 2013 for the material sold and delivered by the claimant to the respondent. In paragraph 8 of the statement of claim, it was averred that in the financial year 2013-2014, the respondent had paid a sum of ₹ 76 lakhs in installments to the claimant which was appropriated against the principle amount against the few invoices of ₹ 51,68,477/- and 21% agreed rate of interest amounting to ₹ 22,70,306/- thereon. It was further averred that as such the principal amount of ₹ 3,97,64,459/- together with 21% agreed rate of interest amounting to ₹ 3,03,52,783/- i.e. total amounting to ₹ 7,01,17,241.72 was outstanding from 28th April, 2011 to 31st December, 2014 against those invoices. 44. In paragraph 9 of the statement of claim, it was averred that against the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Criminal Complaint bearing No.1154/SS/2013, full and final settlement amount of ₹ 50 lakhs was paid by the respondent which the respondent was entitled to recover towards defective materials. It is apparent that the claimant did not make any mention of any other dues payable by the respondent. In the written statement to the counter claim, it was averred by the claimant that the counter claim filed by the respondent was barred by law of limitation. The claimant denied that the respondent had made payment of ₹ 50 lakhs to the claimant in lieu of dishonored cheque. The claimant examined few witnesses. 48. Learned Arbitrator referred to some part of the oral evidence led by the claimant in paragraph 25 of the arbitral award and held that the witness examined by the claimant admitted that as the payments were received from the respondent, they were adjusted against the earliest outstanding invoices. The working had been done on FIFO basis (First In First Out). Whenever payment was received, on that particular date the claimant would calculate what was the total outstanding amount including interest. The amount so received was then subtracted from such outstanding amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued. Learned single Judge also held that there was no dispute that the last acknowledgment before 25th May, 2015 came on 5th January, 2012. It was thus not made before expiration of the prescribed limitation period for the suit or application, as the case may be. 52. Learned single Judge rightly held that if according to the claimant itself, adjustment was made towards a particular outstanding invoice, that payment cannot enure to the benefit of claimant so as to extend the period of limitation for other outstanding invoices. This clearly appears to be a possible view or a view which a fair or judiciously minded person would take. No challenge to the award can be entertained on this basis within the parameters of the grounds of challenge available under section 34 of the Arbitration Act. In our view, the arbitral proceedings in this case commenced when both the parties agreed to refer their disputes to arbitration on 22nd November, 2016 in the company petition. The cause of action has to be within the period of three years prior to the date of commencement of the arbitral proceedings. A perusal of the record clearly indicates that the cause of action in this case was much p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at his discretion to any lawful debt actually due and payable to him from the creditor, whether is regular or is not barred by law in force for the time being as to the limits of the suit. In this case, admittedly the respondent did not intimate the claimant that the said sum of ₹ 50 lakhs was made towards any particular invoice or was by way of part payment towards all the outstanding invoices on the date of such part payment. 56. At this stage, it would be apposite to refer to section 61 of the Indian Contract Act which provides that where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionably. In our view, since the claimant in this case has invoked section 60 of the Indian Contract Act, 1872, section 61 of the Indian Contract Act cannot be invoked. 57. We shall now deal with the judgments referred to and relied upon by both the parties in the later part of this judgment. In our view, the judgment of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) relied upon by the learned senior counsel for the claimant is concerned, there is no dispute about the propositions of law laid down by the Kerala High Court in the said judgment. The said judgment however, would not assist the case of the claimant. It is held by the Kerala High Court that when an acknowledgment relates to the part of the claim which is not specified, it would be available as an acknowledgment to save limitation under Section 18 of the Limitation Act. In this case, however though the respondent had not specified that the said payment of ₹ 50 lakhs was as part payment against all outstanding invoices, the claimant chose to exercise option under Section 60 of the Indian Contract Act and thus the said judgment would not assist the case of the claimant on this ground itself. 62. In so far as the judgment of this Court in case of Maharashtra State Farming Corporation Ltd. (supra) is concerned, this Court in the said judgment has held that the petitioner had pursued the winding up petition diligently, the time taken in prosecuting the proceedings needs to be excluded while directing to pursue civil remedy available in law. In this case, the parties had agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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