Time Spent In Bona Fide Proceedings Before Court Without Jurisdiction To Be Excluded When Considering Objection On Limitation In S.11 Plea: Delhi HC

The Delhi High Court bench comprising of Justice Subramonium Prasad, while hearing a Section 11 petition, has held that the petitioner's claim cannot be treated as dead one simply because they spent time on bona fide court proceedings before a court without jurisdiction. Facts The respondent issued a work order in favour of the petitioner for the design, manufacture, supply, installation, testing, commissioning and handing over of a Fire-Fighting system at JMD SUBURIO, Sector-67, Sohna Road, Gurgaon, Haryana, for a total consideration of rupees 1.69 crore. The petitioner commenced the work, and the work progressed substantially. However, the respondent did not release the payment. By 2018, the petitioner had completed most of the work, but the bills were not being certified and were delayed for no reason. After prolonged insistence, on 09 January 2019, the respondent agreed to carry out the final measurement for the work done by the petitioner. The price of the work done was calculated and verified by the respondent. The petitioner, vide letter dated 28 March 2019, agreed to rectify the snag point after receiving the payment. However, the respondent did not release the payment. Thereafter, the respondent vide email dated 17 June 2019 terminated the contract. The petitioner then filed an application under Section 12(a) of the Commercial Court Act for pre-litigation mediation as mandated under the A&C Act, and a Non-Starter Report dated 01 September 2021 was prepared. Thereafter, the petitioner filed a suit before the Commercial Court. In the said suit, the respondent had filed a Section 8 application on the ground that an arbitration agreement existed within the work order dated 03 September 2014, and the matter should be referred to arbitration. The district judge vide order dated 26 April 2024 allowed the application and referred the parties to arbitration. The petitioner sent a Section 21 notice, dated 07 May 2024, to the respondent invoking the arbitration clause. The respondent failed to reply to the notice, and the petitioner was compelled to file a Section 11 petition. Submissions: The respondents made the following reply to the Section 11 petition: The petitioner's claim is barred by limitation, and no useful purpose can be achieved by referring the dispute to arbitration. Reliance was placed on Geo Millier & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd (2020) and BSNL v. Nortel Networks (India) (P) Ltd. (2021) to demonstrate how the claims are barred by limitation.If a claim is ex-facie barred by limitation, the court must not refer the dispute to arbitration. Reliance was placed on SBI General Insurance Co. Ltd v. Krish Spinning (2024) and Arif Azim Co. Ltd. v. Aptech Ltd. (2024). Analysis of the Court: The bench observed that the contract was terminated by the respondent via email on 17 June 2019. Thereafter, the petitioner filed an application under Section 12(a) of the Commercial Court Act on 16 March 2021 for pre-litigation mediation, and the same was disposed by a Non-Starter report dated 01 September 2021 on the ground that despite issuance of notice, the respondent herein has not appeared. The petitioner thereafter filed a suit for recovery in which the respondent filed an application Section 8 of the A&C Act on the ground that there is an arbitration agreement, the suit is not maintainable, and the parties be referred to arbitration. The District Judge, Commercial Court, vide order dated 26 April 2024, allowed the respondent's application and referred the dispute to arbitration. The bench further observed that after getting the suit disposed of under Section 8 of the A&C Act, the respondent is now coming to the court and arguing that the claim is barred by limitation. The petitioner had initiated proceedings under the Commercial Courts Act by moving an application under Section 12(a) on 16 March 2021, seeking pre-litigation mediation. Section 14 of the Limitation Act excludes time spent on bona fide court proceedings without jurisdiction. The petitioner approached the Commercial Court, the competent court to entertain disputes under the Commercial Court Act. Before the written statement was filed, the respondent raised the objection of an arbitration agreement being present in the work order and prayed to refer the dispute to arbitration. Therefore, it cannot be said that the petitioner's claim is barred by limitation. The petitioner has availed the remedy of the Commercial Court Act in 2019, which was within the limitation period. The pre-mediation litigation had concluded as a Non-Starter due to the respondent's non-appearance, prompting the petitioner to file a suit. However, the suit was dismissed after the respondent filed an application u/s 8 of the Arbitration and Conciliation Act, citing the existence of an arbitration clause. Therefore, the court cannot say that the...

Time Spent In Bona Fide Proceedings Before Court Without Jurisdiction To Be Excluded When Considering Objection On Limitation In S.11 Plea: Delhi HC

Mohd Talha Hasan

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