Case: Tata Consultancy Services Ltd Vs. Inspira IT Products Pvt. Ltd

G.S. Patel, J. 1. The Appeal is directed against an Order dated 18th September 2018 passed by a learned Single Judge of this Court (SC Gupte, J). The Appellant, Tata Consultancy Services Limited (TCS), was the original petitioner before Gupte J and the respondent in arbitration. The Respondent in this Appeal is Inspira IT Products Private Limited (Inspira), also the respondent before the learned single Judge and the claimant in arbitration. By the impugned order, Gupte J dismissed TCSs Petition under Section 34 of the Arbitration and Conciliation Act, 1996. In that Petition, TCS challenged an order of the sole Arbitrator rejecting its application on an issue of limitation. TCSs application was under Section 31(6) of the Arbitration and Conciliation Act. Since the arbitral order disposed of the issue of limitation finally, this is deemed to be an interim award within the meaning of Section 2(1) (c) of the Arbitration and Conciliation Act 1996. 1 2. The facts are not in dispute. On 24th June 2013, TCS placed a purchase order on Inspira for the supply of some IT equipment. That order required delivery to be made by 28th July 2013. Inspiras complaint was that although it was prepared to supply the equipment, TCS neglected or refused to accept delivery. Inspira claimed that it suffered damages. It sent a demand notice to TCS on 23rd March 2016 and followed this with a winding up notice on 30th March 2016. TCS replied in correspondence, after which, on 18th May 2016, Inspira filed a winding up petition against TCS before this Court. 3. TCS opposed Inspiras winding up Petition. While the petition was pending admission, the parties agreed to refer their disputes to arbitration. By consent, the matter was referred to a sole arbitrator. All rights and contentions between the parties (except as to the constitution or composition of the Arbitral Tribunal) were expressly kept at large. 4. Before the first learned sole Arbitrator (there was a change in arbitrator thereafter), TCS raised a preliminary issue of limitation. Its submission was then, as it is even now, that as on the date of the reference, 12th February 2018, and which would be the relevant date of invocation for the purposes of Section 21 of the Arbitration Act, Inspiras claim was barred by limitation, more than three years having passed since the date of actual accrual of the cause of action, if any. Inspira responded that it was entitled to an exclusion of time taken during the winding up proceedings. It submitted that the winding up petition was a civil proceeding for the purposes Section 14(1) of the Limitation Act 1963. Inspira argued that it was prosecuting its winding up petition with due diligence and good faith in a court of first instance and that this proceeding related to the same subject matter as existed in the arbitration reference. The company court, from a defect of jurisdiction or, more appropriately, other cause of like nature, was unable to entertain it. Inspira also said that since the delivery date of 20th July 2013 had been extended to 27th January 2016, the reference was, in any case, within time. This extension claimed by Inspira was disputed by TCS, which said that it had not expressly agreed to any such extension at all. 5. Before Ms. Manjari Shah, the successor sole arbitrator, Inspira relied on several Supreme Court judgments. Ms. Shah accepted Inspiras case that it was entitled to an exclusion of the time spent in prosecuting the winding up petition. She therefore, held that the arbitration reference was within time. 6. Ms. Sethna, the learned Counsel for TCS made several submission before the learned Single Judge in TCSs Section 34 challenge petition. She first submitted that a winding up petition is not a civil proceeding strictly so-called. It is therefore, excluded from the ambit of Section 14(1). Second, there was no question of the petition having been prosecuted in good faith. The reason for this is, in her submission, that a winding up petition cannot be utilised as a means of recovery of disputed claim or debt. Consequently, the winding up petition was not being prosecuted in good faith for recovery. Third, she submitted that the winding up petition was rejected not on account of a defect of jurisdiction or other cause of a like nature. Therefore the essential ingredients of Section 14(1) of the Limitation Act could not be said to be satisfied. 7. In response, Inspira submitted before Gupte J that the expression civil proceeding is not to be narrowly construed to mean only as a civil suit. It is used in contradistinction to a criminal proceeding. Any proceeding before a court or tribunal in regard to a civil right and not a criminal complaint is a civil proceeding for the purposes of Section 14(1). There is a distinction between Section 14(1) and Section 14(2). Section 14(1) requires that the civil proceeding relate to the same subject matter in issue. It does not have to be for the same relief. Given that there was a contract and demonstrable non-acceptance of ready delivery, Inspira said its winding up petition was indeed bona fide. Lastly, the words cause of a like nature extend to the inability of a Company Court to entertain a winding up petition for any of the well settled grounds applicable to this branch of law. It is not necessary, Inspira argued, that for Section 14(1) there should be an express rejection only on the grounds of jurisdiction. 8. Section 14 of the Limitation Act reads thus: 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 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 XXII of the Code of Civil Procedure, 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 proceedings 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 on 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. (Emphasis added) 9. As the emphasised portion shows, there is a material distinction between 14(1) and 14(2). We are only concerned with the former. As Ms. Sethna correctly points out, this has several components or ingredients that have to be met before the exclusion of time can operate. Each of these can be separately identified. There is the question of due diligence; the existence of a civil proceeding; the same subject matter in issue; the prosecution of the previous civil proceeding in good faith; and the fact that a Court which from defect of jurisdiction or other cause of a like nature is unable to entertain it. 10. Ms. Sethna relies on the decision of a Single Judge of this Court in Ajab Enterprises v. Jayant Vegoiles And Chemicals Pvt. Ltd. AIR 1991 Bom 35 The learned Single Judge considered both Section 14(1) and 14(2). He accepted the contention that a company petition for winding up cannot be considered as covering the same issue as in a civil suit. The learned Single Judge relied on the decision of the Supreme Court in Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari AIR 1951 SC 16 to say that there can be no exclusion of time under Section 14 of the time occupied by insolvency proceeding against the judgment debtor in continue the period of limitation in executing a decree against him as the proceedings are not for obtaining the same relief. In addition Ms. Sethna refers to a Full Bench decision of the Lahore High Court in Jai Kishan Singh v. The Peoples Bank of Northern India. (1944) Vol XXV ILR Lahore Series 451 Ms. Sethna relies on the decision of the Supreme Court in SiddharamSatlingappaMhetre v. State of Maharashtra and Others, (2011) 1 SCC 694 paragraph 13 for the submission that the decision of the learned Single Judge in Ajab Enterprises was always binding on Gupte J and he could not possibly taken a different view. 11. A large part of the discussion before the learned Single Judge was on the question of what is meant by cause of a like nature. It is here that the learned Single Judge considered the case of Ajab Enterprises. In our view the learned Single Judge correctly held that the issue was no longer res integra at least in regard to the proposition that Section 14 of the Limitation Act must be interpreted to advance the cause of justice: Union of India And Ors. v. West Coast Paper Mills Ltd. And Anr. (2004) 3 SCC 458 In regard to Ajab Enterprises, SC Gupte, J held that the narrower view taken there could not be said to be good law in view of the completely contrary proposition set out by the Supreme Court in West Coast Paper Mills Ltd. and followed by the Supreme Court itself in M.P. Steel Corporation v. Commissioner Of Central Excise. (2015) 7 SCC 58 The views in Ajab Enterprises are also contrary to the later decision of a Division Bench of this Court in Maharashtra State Farming Corporation Ltd. v. Belapur Sugar And Allied Industries Ltd., (2004) 3 Mh LJ 414 where this Court precisely ordered such an exclusion of time. 12. Of necessity, the submission by Ms. Sethna on Ajab Enterprises results in a completely unviable position. It means that Ajab Enterprises, though plainly contrary to later decisions of the Supreme Court and our Division Bench, was nonetheless binding on Gupte J. That surely cannot be. We do not believe that the decision in SiddharamSatlingappaMhetre is an authority for any such proposition: to constitute binding precedent, the previous decision must be good law. Indeed, we are fully in agreement with the view of Gupte J that the decision in Ajab Enterprises is not and cannot be said to be good law. 13. On behalf of Inspira, apart from the factual conspectus which is not disputed, the submission before us by Dr. Saraf is that Section 14 is of wide amplitude. The test is to see whether there is a substantial identity of subject matter and a pragmatic approach must be taken: RoshanlalKuthalia And Ors. v. RB Mohan Singh Oberoi. (1975) 4 SCC 628 Section 14 is not limited or confined only to cases of defect of jurisdiction but extends to other causes also as held by the Supreme Court in SAL Narayan Row &Anr. v. IshwarlalBhagwandas&Anr. (1966) 1 SCR 190 , AIR 1965 SC 1818 , (1965) 57 ITR 149 In SAL Narayan Row, the Supreme Court clearly said that the words civil proceedings (in that context in Article 132) were used in a wide sense in contradistinction to criminal proceedings and covered all actions that directly affected or related to civil rights. This view was reiterated in Ramesh &Anr. v. Seth Gendalal Motilal Patni &Anr. (1966) 3 SCR 198 , AIR 1966 SC 1445 for the purposes of Article 133 which confers appellate jurisdiction of the Supreme Court in appeals from High Court in regard to civil matters. 14. The learned Single Judge held that there was no reason to see the words civil proceedings any differently for the purposes of Section 14 of the Limitation Act. No narrower view was justified. Indeed the Supreme Court itself, in MP Steel Corporation held that Section 14 needs to be construed liberally so as to advance the cause of justice. Its principle is that whenever a person pursues with due diligence another proceeding and does so bona fide, and this is proved to be abortive because it is without jurisdiction or otherwise such that no decision on merits is possible, that time ought to be excluded. 15. The rational behind this is, to our mind plain. In fact, this case probably provides very good illustration of why this salutary principle enunciated by Supreme Court should apply. After all, TCS knew what Inspiras claim was. It opposed the winding up proceedings. It could hardly be suggested that those winding up proceedings should count for absolutely nothing; that limitation should continue running without exclusion; or that Inpira ought to have simultaneously filed a civil suit to save limitation. No decision came to be rendered in the winding up petition. Any narrower construction would only defeat justice. This is also not the first time that the Court has taken a such a view, as is clear from Maharashtra State Farming Corporation where this Court allowed such an exclusion of time. 16. This takes us to Ms. Sethnas next submission that a winding up petition is not a bona fide remedy for recovery of a debt. Stated thus, the principle is inaccurate, especially if it is based on the decision of the Supreme Court in IBA Health (India) Private Limited v. Info-Drive Systems SDN BHD. (2010) 10 SCC 553 The relevant portion is that a winding up petition could not be said to be a bona fide remedy for recovery of a disputed claim--i.e., one which a company court could not entertain on well-settled principles. Otherwise, as the Supreme Court has itself held in Harinagar Sugar Mills Co. Ltd. v. MW Pradhan, Court Receiver, High Court, Bombay, (1966) 3 SCR 948 , AIR 1966 SC 1707 , (1966) 60 ITR 508 , (1966) 36 Com Cas 426 citing established law, a winding up petition is a perfectly proper remedy for enforcing payment of a just debt. It is a mode of execution which the Court gives to the creditor against a company unable to pay its debts. Our Court has followed this authority in Modern Dekor Painting Contracts Private Ltd. v. Jenson & Nicholson (India) Ltd. (1984) Mh LJ 988, 1985 Tax LR 2090 17. We also find it extraordinarily strange that before the learned Single Judge hearing the company petition TCS should consent to the appointment of sole arbitrator to decide the very dispute that was before the company court, only to then contend that Inspiras claim was entirely time-barred. 18. As to the question of whether the reference to arbitration relates to same subject matter, little needs to be said on that score. Clearly it does. 19. Dr. Saraf submits that, if viewed as Ms. Sethna would have us do, Section 14(1) of the Limitation Act becomes a prohibitory and penal statue rather than the reverse which is its plain intent. It is a liberal provision and it is substantive law granting an applicant a right to exclusion of time, i.e. an extension of limitation as it were, provided the ingredients in that Section are properly made out.

Decision:
0[ds]9. As the emphasised portion shows, there is a material distinction between 14(1) and 14(2). We are only concerned with the former. As Ms. Sethna correctly points out, this has several components or ingredients that have to be met before the exclusion of time can operate. Each of these can be separately identified. There is the question of due diligence; the existence of a civil proceeding; the same subject matter in issue; the prosecution of the previous civil proceeding in good faith; and the fact that a Court which from defect of jurisdiction or other cause of a like nature is unable to entertain it.10. Ms. Sethna relies on the decision of a Single Judge of this Court in Ajab Enterprises v. Jayant Vegoiles And Chemicals Pvt. Ltd. AIR 1991 Bom 35  The learned Single Judge considered both Section 14(1) and 14(2). He accepted the contention that a company petition for winding up cannot be considered as covering the same issue as in a civil suit. The learned Single Judge relied on the decision of the Supreme Court in Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari AIR 1951 SC 16  to say that there can be no exclusion of time under Section 14 of the time occupied by insolvency proceeding against the judgment debtor in continue the period of limitation in executing a decree against him as the proceedings are not for obtaining the same relief. In addition Ms. Sethna refers to a Full Bench decision of the Lahore High Court in Jai Kishan Singh v. The Peoples Bank of Northern India. (1944) Vol XXV ILR Lahore Series 451 Ms. Sethna relies on the decision of the Supreme Court in SiddharamSatlingappaMhetre v. State of Maharashtra and Others, (2011) 1 SCC 694 paragraph 13 for the submission that the decision of the learned Single Judge in Ajab Enterprises was always binding on Gupte J and he could not possibly taken a different view.11. A large part of the discussion before the learned Single Judge was on the question of what is meant by cause of a like nature. It is here that the learned Single Judge considered the case of Ajab Enterprises. In our view the learned Single Judge correctly held that the issue was no longer res integra at least in regard to the proposition that Section 14 of the Limitation Act must be interpreted to advance the cause of justice: Union of India And Ors. v. West Coast Paper Mills Ltd. And Anr. (2004) 3 SCC 458  In regard to Ajab Enterprises, SC Gupte, J held that the narrower view taken there could not be said to be good law in view of the completely contrary proposition set out by the Supreme Court in West Coast Paper Mills Ltd. and followed by the Supreme Court itself in M.P. Steel Corporation v. Commissioner Of Central Excise. (2015) 7 SCC 58  The views in Ajab Enterprises are also contrary to the later decision of a Division Bench of this Court in Maharashtra State Farming Corporation Ltd. v. Belapur Sugar And Allied Industries Ltd., (2004) 3 Mh LJ 414 where this Court precisely ordered such an exclusion of time.12. Of necessity, the submission by Ms. Sethna on Ajab Enterprises results in a completely unviable position. It means that Ajab Enterprises, though plainly contrary to later decisions of the Supreme Court and our Division Bench, was nonetheless binding on Gupte J. That surely cannot be. We do not believe that the decision in SiddharamSatlingappaMhetre is an authority for any such proposition: to constitute binding precedent, the previous decision must be good law. Indeed, we are fully in agreement with the view of Gupte J that the decision in Ajab Enterprises is not and cannot be said to be good law.13. On behalf of Inspira, apart from the factual conspectus which is not disputed, the submission before us by Dr. Saraf is that Section 14 is of wide amplitude. The test is to see whether there is a substantial identity of subject matter and a pragmatic approach must be taken: RoshanlalKuthalia And Ors. v. RB Mohan Singh Oberoi. (1975) 4 SCC 628 Section 14 is not limited or confined only to cases of defect of jurisdiction but extends to other causes also as held by the Supreme Court in SAL Narayan Row &Anr. v. IshwarlalBhagwandas&Anr. (1966) 1 SCR 190 , AIR 1965 SC 1818 , (1965) 57 ITR 149   In SAL Narayan Row, the Supreme Court clearly said that the words civil proceedings (in that context in Article 132) were used in a wide sense in contradistinction to criminal proceedings and covered all actions that directly affected or related to civil rights. This view was reiterated in Ramesh &Anr. v. Seth Gendalal Motilal Patni &Anr. (1966) 3 SCR 198 , AIR 1966 SC 1445  for the purposes of Article 133 which confers appellate jurisdiction of the Supreme Court in appeals from High Court in regard to civil matters.14. The learned Single Judge held that there was no reason to see the words civil proceedings any differently for the purposes of Section 14 of the Limitation Act. No narrower view was justified. Indeed the Supreme Court itself, in MP Steel Corporation held that Section 14 needs to be construed liberally so as to advance the cause of justice. Its principle is that whenever a person pursues with due diligence another proceeding and does so bona fide, and this is proved to be abortive because it is without jurisdiction or otherwise such that no decision on merits is possible, that time ought to be excluded.15. The rational behind this is, to our mind plain. In fact, this case probably provides very good illustration of why this salutary principle enunciated by Supreme Court should apply. After all, TCS knew what Inspiras claim was. It opposed the winding up proceedings. It could hardly be suggested that those winding up proceedings should count for absolutely nothing; that limitation should continue running without exclusion; or that Inpira ought to have simultaneously filed a civil suit to save limitation. No decision came to be rendered in the winding up petition. Any narrower construction would only defeat justice. This is also not the first time that the Court has taken a such a view, as is clear from Maharashtra State Farming Corporation where this Court allowed such an exclusion of time.Stated thus, the principle is inaccurate, especially if it is based on the decision of the Supreme Court in IBA Health (India) Private Limited v. Info-Drive Systems SDN BHD. (2010) 10 SCC 553  The relevant portion is that a winding up petition could not be said to be a bona fide remedy for recovery of a disputed claimi.e., one which a company court could not entertain on well-settled principles. Otherwise, as the Supreme Court has itself held in Harinagar Sugar Mills Co. Ltd. v. MW Pradhan, Court Receiver, High Court, Bombay, (1966) 3 SCR 948 , AIR 1966 SC 1707 , (1966) 60 ITR 508 , (1966) 36 Com Cas 426 citing established law, a winding up petition is a perfectly proper remedy for enforcing payment of a just debt. It is a mode of execution which the Court gives to the creditor against a company unable to pay its debts. Our Court has followed this authority in Modern Dekor Painting Contracts Private Ltd. v. Jenson & Nicholson (India) Ltd. (1984) Mh LJ 988, 1985 Tax LR 209017. We also find it extraordinarily strange that before the learned Single Judge hearing the company petition TCS should consent to the appointment of sole arbitrator to decide the very dispute that was before the company court, only to then contend that Inspiras claim was entirely time-barred.18. As to the question of whether the reference to arbitration relates to same subject matter, little needs to be said on that score. Clearly it does.It is a liberal provision and it is substantive law granting an applicant a right to exclusion of time, i.e. an extension of limitation as it were, provided the ingredients in that Section are properly made out.