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

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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.

70Copy pinpoint70. 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.

71Copy pinpoint71. 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.

72Copy pinpoint72. 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.

73Copy pinpoint73. 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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74Copy pinpoint74. 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.

75Copy pinpoint75. 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.

76Copy pinpoint76. 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.”

77Copy pinpoint77. 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.

78Copy pinpoint78. 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.

79Copy pinpoint79. 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.”

80Copy pinpoint80. 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;

81Copy pinpoint81. 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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82Copy pinpoint82. 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.

83Copy pinpoint83. 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.

84Copy pinpoint84. 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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85Copy pinpoint85. 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.

86Copy pinpoint86. 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.

87Copy pinpoint87. 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.

88Copy pinpoint88. 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)

89Copy pinpoint89. 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

90Copy pinpoint90. 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.

91Copy pinpoint91. 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.

92Copy pinpoint92. 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.

93Copy pinpoint93. 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.

94Copy pinpoint94. ‘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.

95Copy pinpoint95. 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.

96Copy pinpoint96. 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.”

97Copy pinpoint97. 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.

98Copy pinpoint98. 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.

99Copy pinpoint99. 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)

100Copy pinpoint100. 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)

101Copy pinpoint101. 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)

102Copy pinpoint102. 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)

103Copy pinpoint103. 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.

104Copy pinpoint104. 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.

105Copy pinpoint105. 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.

106Copy pinpoint106. 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.

107Copy pinpoint107. 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.

108Copy pinpoint108. 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)

109Copy pinpoint109. 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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110Copy pinpoint110. 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

111Copy pinpoint111. 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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112Copy pinpoint112. 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?

113Copy pinpoint113. 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.”

114Copy pinpoint114. 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.

115Copy pinpoint115. 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)

116Copy pinpoint116. 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)

117Copy pinpoint117. 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.

118Copy pinpoint118. 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.”

119Copy pinpoint119. 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)

120Copy pinpoint120. 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)

121Copy pinpoint121. 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.

122Copy pinpoint122. 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.

123Copy pinpoint123. 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.

124Copy pinpoint124. 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.

125Copy pinpoint125. 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.”

126Copy pinpoint126. 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.

127Copy pinpoint127. 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.

128Copy pinpoint128. 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)

129Copy pinpoint129. 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.

130Copy pinpoint130. 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

131Copy pinpoint131. 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.

132Copy pinpoint132. 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.

133Copy pinpoint133. Pending application(s), if any, shall stand disposed of.

134Copy pinpoint134. The parties shall bear their own costs.

Result of the case: Appeal allowed.

† Headnotes prepared by: Ankit Gyan