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TMI Blog2023 (10) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and (3) dated 28.08.2017. In response to Purchase Orders 1 and 2, Operational Creditor issued 65 invoices on different dates from 31.10.2013 to 29.03.2014 total amounting to Rs.3,61,40,025/- out of which payment was made of Rs.2,88,84,623/-. However, till 03.06.2014, there was unpaid amount of Rs.72,55,402/-. In response to 3rd Purchase Order, Operational Creditor issued three invoices amounting to Rs. 21,91,122/-. The Operational Creditor filed a Suit No.67 of 2017 dated 03.10.2017 for recovery of monies under 1st two Purchase Orders i.e. Stage 1 which suit was withdrawn by the Operational Creditor by order dated 18.07.2022. Operational Creditor issued demand notice dated 27.07.2022 claiming amount of Rs.1,78,78,390/- total amount of which included principal amount under Stage 1 and Stage 2 and interest. The date of default as per Part-IV of Section 9 Application is 30.04.2015 for Stage 1 and on 23.10.2018 for Stage 2. Section 9 Application was filed by Operational Creditor on 05.12.2022. Adjudicating Authority by impugned order has dismissed the Section 9 Application on the ground that it is barred by limitation as well as there being no agreement placed on record for interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it. (2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first 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 institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for allowing the withdrawal application contending that withdrawal is necessary to be allowed urgently, when I proposed him, keep the matter for Lok Adalat. The other sides, learned advocate and the other side defendant found absent, nobody was present on their side. However, since the plaintiff is going to withdraw the suit, it may be allowed but as the defendant has strongly objected for the withdrawal requesting for imposing heavy costs on the plaintiff since the plaintiff compelled them to face unnecessary litigation and bear costs of the suit including advocate fees etc. Finally, I came to the conclusion that withdrawal can be allowed, but the plaintiff has to pay the costs to the defendant to compensate their expenditure to face the proceeding. Though the defendant has asked for heavy costs, but considering the facts and circumstances the amount of Rs. 5,000/- would suffice the purpose. Hence, I proceed to pass the following order: ORDER 1. The Application (Exh.26) is allowed subject to costs of Rs. 5,000/- (Rupees Five Thousand only) to be paid to the other side. 2. Concerned clerk is hereby directed to dispose of the matter in view of application (Exh.26) after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings before the High Court with due diligence. Even before the availability of the certified copy, it had knocked the doors of the High Court. The matter before the High Court was hotly contested and ultimately, the petition was dismissed by an elaborate judgment relegating KIAL to the alternate remedy available to it in law. As such, the conditions which enable a party to invoke the provisions of Section 14 of the Limitation Act are very much available to KIAL. If the period during which KIAL was bona fide prosecuting the writ petition before the High Court and that too with due diligence, is excluded applying the principles underlying Section 14 of the Limitation Act, the appeals filed before NCLAT would be very much within the limitation. We find, that KIAL would be entitled to exclusion of the period during which it was bona fide prosecuting the remedy before the High Court with due diligence." 16. The law laid down by the Hon'ble Supreme Court is that even if Section 14 of the Limitation Act does not apply in an appeal, however, the principles underlying Section 14 can be applied while considering exclusion of period under Section 14. Thus, we proceed to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of jurisdiction or other cause of like nature". The withdrawal of the suit filed by the Appellant on its own application cannot be said to be failure of prior proceeding due to defect of jurisdiction or other cause of a like nature. When we look into the order passed by the Civil Court as extracted above, it is clear that the Appellant himself has withdrawn the suit for filing the application, which was withdrawn with subject to payment of cost of Rs.5,000/- to the Defendant. Order XXIII Rule 1 under the application was filed for withdrawal of the suit provides as follows:- "ORDER XXIII WITHDRAWAL AND ADJUSTMENT OF SUITS [1. Withdrawal of suit or abandonment of part of claim. - (1) At any time after the institution of a suit, the plaintiff may as against all or any of the defendants abandon his suit or abandon a part of his claim: Provided that where the plaintiff is a minor or other person to whom the provisions contained in rules 1 to 14 of Order XXXII extend, neither the suit nor any part of the claim shall be abandoned without the leave of the Court. (2) An application for leave under the proviso to subrule (1) shall be accompanied by an affidavit of the next f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh suit. We, thus, are satisfied that the Appellant is not entitled for benefit of Section 14 of the Limitation Act as has been contended by Counsel for the Appellant. 14. Counsel for the Appellant relied on judgment in "Sabarmati Gas Limited" (supra). In the above case, an application was filed under Section 9 by the operational creditor for computing the limitation for filing Section 9 where one of the issues was as to whether Appellant is entitled to exclude the period during which right to proceed against or sue the Corporate Debtor that remain suspended by virtue of Section 22(1) of the Sick Industrial Companies (Special Provisions Act, 1985). In paragraph 2 of the judgment, Hon'ble Supreme Court has noticed the issue which arose in the case, which is as follows:- "2. In the captioned appeal mainly, twin questions of law call for consideration id est :- (i) Whether in computation of the period of limitation in regard to an application filed under Section 9, IBC the period during which the operational creditor's right to proceed against or sue the corporate debtor that remain suspended by virtue of Section 22 (1) of the Sick Industrial Companies (Special Provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and by virtue of Section 22 (1), SICA and the decisions referred above, the appellant could not have, then, resorted to any legal proceedings for enforcing any right which may result in recovery from the properties of the respondent company. For the same reasons, the contention of the respondent that pending the proceedings before the BIFR the appellant could have resorted to arbitration proceedings also has to fail." 16. The Hon'ble Supreme Court in the above case has also held that sufficient cause as contemplated in Section 5 of the Limitation Act also need to be considered. In paragraphs 24 and 25 following was laid down:- "24. When the limitation period for initiating CIRP under Section 9, IBC is to be reckoned from the date of default, as opposed to the date of commencement of IBC and the period prescribed therefor, is three years as provided by Section 137 of the Limitation Act, 1963 and the same would commence from the date of default and is extendable only by application of Section 5 of the Limitation Act, 1963 it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay when once the proceeding concerned is found filed beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meaning of Section 5. It is relevant to notice that according to Part-IV of the application itself the default occurred on 30.04.2015 for Stage 1 and 23.10.2018 for Stage 2. Column 2 of Part-IV of Section 7 Application is as follows:- 2. AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DATES OF DEFAULT IN TABULAR FORM) Principal: Rs. 72,55,402 (Stage 1) + Rs.21,91,122 (Stage 2) = Rs.94,46,524 (Rupees NinetyFour Lakhs Fourty Six Thousand Five Hundred and twenty four only) Interest @12% p.a. = Rs.84,31,866 (Rupees Eighty Four Lakhs Thirty one thousand Eight hundred and Sixty Six only) TOTAL: Rs.1,78,78,390/- (Rupees One crore seventy eight lakhs seventy eight thousand three hundred and ninety only) as on 27.07.2022. Date of Default: 30.04.2015 for Stage 1 and on 23-10-2018 for Stage 2. Computation Table- "ANNEXURE-J" 19. Learned Counsel for the Appellant has also raised submission that there is arbitration clause in contract between the parties and as per the argument of the Appellant, suit was withdrawn by the Appellant because of the reason that there was arbitration clause. It is not the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings should have been for the same relief, the proceedings should have been prosecuted diligently and in good faith and the proceedings should have been prosecuted in a forum which, from defect of jurisdiction or other cause of a like nature, was unable to entertain it. 70. In Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department and Ors. 16, a three-Judge Bench of this Court unanimously held that in the absence of any provision in the Arbitration and Conciliation Act, 1996 which excluded the applicability of Section 14 of the Limitation Act, there was no reason why Section 14 of the Limitation Act should not apply to an application for setting aside an arbitral award. This Court held: "19. A bare reading of sub-section (3) of Section 34 read with the proviso makes it abundantly clear that the application for setting aside 14 (2006) 6 SCC 239 15 (2001) 8 SCC 470 16 (2008) 7 SCC 169 the award on the grounds mentioned in sub-section (2) of Section 34 will have to be made within three months. The period can further be extended, on sufficient cause being shown, by another period of 30 days but not thereafter. It means that as far as application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same party; (2) The prior proceeding had been prosecuted with due diligence and in good faith; (3) The failure of the prior proceeding was due to defect of jurisdiction or other cause of like nature; (4) The earlier proceeding and the latter proceeding must relate to the same matter in issue and; (5) Both the proceedings are in a court. 22. The policy of the section is to afford protection to a litigant against the bar of limitation when he institutes a proceeding which by reason of some technical defect cannot be decided on merits and is dismissed. While considering the provisions of Section 14 of the Limitation Act, proper approach will have to be adopted and the provisions will have to be interpreted so as to advance the cause of justice rather than abort the proceedings. It will be well to bear in mind that an element of mistake is inherent in the invocation of Section 14. In fact, the section is intended to provide relief against the bar of limitation in cases of mistaken remedy or selection of a wrong forum. On reading Section 14 of the Act it becomes clear that the legislature has enacted the said section to exempt a certain period covered by a bona fide litig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (3) of Section 34 of the AC Act places a limit on the period of extension of the period of limitation. Thus the proviso to Section 34(3) of the AC Act is also a provision relating to extension of period of limitation, but differs from Section 5 of the Limitation Act, in regard to period of extension, and has the effect of excluding Section 5 alone of the Limitation Act." 21. The Hon'ble Supreme Court noticed that the Hon'ble High Court in the Writ Petition has stayed the proceedings under SARFAESI Act on the ground that proceedings are without jurisdiction. In paragraph 85 of the judgment, following has been noticed:- "85. In our view, since the proceedings in the High Court were still pending on the date of filing of the application under Section 7 of the IBC in the NCLT, the entire period after the initiation of proceedings under the SARFAESI Act could be excluded. If the period from the date of institution of the proceedings under the SARFAESI Act till the date of filing of the application under Section 7 of the IBC in the NCLT is excluded, the application in the NCLT is well within the limitation of three years. Even if the period between the date of the notice under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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