Delhi District Court
Web Overseas Limited vs Universal Industrial Plants ... on 24 June, 2020
IN THE COURT OF SH. VIPIN KUMAR RAI, ADDITIONAL
DISTRICT JUDGE06, SOUTHEAST DISTRICT, SAKET
COURTS, NEW DELHI
OMP (COMM) No. 20/18
Web Overseas Limited
A Company incorporated and registered
under the Companies Act, 1956, having
its registered office at :
S385, Lower Ground Floor,
Greater KailashI, New Delhi110048
..... Petitioner
Versus
Universal Industrial Plants Manufacturing
Company Private Limited,
A Company incorporated and registered
under the Companies Act, 1956 having its
registered office at :
R19, Hauz Khas Enclave,
New Delhi110016
..... Respondent
Date of institution of Petition : 05.11.2018
Date of judgment reserved : 23.06.2020
Date of pronouncement of judgment : 24.06.2020
OMP (COMM) No. 20/18
Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 1 of 24
PETITION UNDER SECTION 34 OF THE ARBITRATION AND
CONCILIATION ACT, 1996 AGAINST THE FIRST PARTIAL
AWRAD DATED 01.10.2018, PASSED BY THE LEARNED
SOLE ARBITRATOR
1. This petition u/s 34 of Arbitration and Conciliation Act is
against the order dated 01.10.2018 passed by the Arbitral Tirbunal
holding that counter claim of respondent filed on 07.07.2018 cannot be
rejected, as not maintainable. The impugned order accordingly rejected
the application u/o 7 R 11 CPC as not maintainable. Dismissal of
counter claim was sought as barred by limitation and therefore, hit by
Order 7 R 11(d) CPC. Petitioner was claimant before the Arbitral
Tribunal in which respondent had filed a counter claim on 07.07.2018.
Facts are briefly stated. Petitioner entered into discussion with
respondent for purchase of Oxygen Nitrogen Plant and placed an order and accordingly Performa Invoice dated 05.11.2012 was raised by the respondent signed by both the parties mentioning the terms and conditions of supply. Admittedly total consideration was USD 4,35,000/, rate of conversion of one USD was Rs. 54.60 and thus, total sale consideration was Rs. 2,37,51,000/ and as per clause 5 of the Performa Invoice 25% i.e. Rs. 59,37,750/ was to be paid in advance. Rs. 5,00,000/ was to be paid at the time of signing of the Performa Invoice dated 05.11.2012, further Rs. 5,00,000/ was to be paid before OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 2 of 24 08.11.2012, Rs. 37,50,200/ was to be paid by 19.11.2012. 5% of total invoice amount i.e. Rs. 11,87,550/ was to be paid before 05.01.2013.
2. Remaining 75% to the tune of Rs. 1,78,13,250/ was to be paid prior to dispatch when the goods were ready. First installment of Rs. 5,00,000/ was paid on 05.11.2012 and second installment to be paid by 08.11.2012 was paid around 17/20.11.2012. Third installment of Rs. 37,50,200/ to be paid by 19.11.2012 was also delayed and respondent extended the period for making this payment till 30.11.2012. Petitioner was requested for extension of further time till third week of January 2013 by sending an email on 26.12.2012. A sum of Rs. 5,00,000/ in the meanwhile was paid by the petitioner on 07.12.2012 and again a sum of Rs. 5,00,000/ further was paid on 10.12.2012. In the email dated 26.12.2012, Mr. Gaurav Seth, Director of petitioner had requested for extension and was willing to accept a reasonable and affordable increase in price and was also understanding that delivery of the machine will be delayed due to delayed payment. The said email was replied vide email dated 27.12.2012 extending the period for making the payment upto third week of January and it was also stated that there will be an increase in price. As petitioner did not make the payment, respondent vide letter dated 05.02.2013 informed petitioner that respondent company has already invested to the tune of over Rs. 1 crore towards manufacturing of the plant as per ordered OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 3 of 24 contract and despite information for making the payment by 20.01.2013, there was again delay in payment as per terms of the contract and they were unable to buy the bought out components and materials to complete the manufacture of the plant and unable to process the order any further and in case manufacturing of the ordered plant which is 100% tailor made is scrapped, the investment made by the respondent to the tune of over Rs. 1 crore towards manufacturing of the plant and machinery goes waste and petitioner will be liable to compensate respondent additionally as per terms of contract and it was further seeking of release of the balance pending advance and to arrange for the balance payment regarding deliveries also in due course. Vide email dated 20.02.2013 respondent informed that Mr. Gaurav is addressing this project and is expected to be back on 25.02.2013 and he would follow up on the same. Vide email dated 04.05.2013 respondent informed petitioner after making reference to the meeting of the said date informed that there has been increase in prices and it has worked out the best price considering all the facts and the revised Performa Invoice subject to immediate payment of 50% advance was referred. Invoice dated 05.05.2013 as per revised price was sent.
3. There was further discussion between the parties in the month of May in respect of the increase price. There are differences as OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 4 of 24 to what actually transpired in this meetings because respondent submits that petitioner was very much willing to make the payment as per the revised rate in all interaction and meeting which is denied by the petitioner. The fact remains that vide letter dated 30.07.2013 sent by petitioner, it was informed that revised price was not acceptable. Respondent states that the said letter came as a shock to the respondent. Be it as it may, this change/increase in price was not acceptable to the petitioner and was rejected vide its communication dated 30.07.2013 and petitioner expressed its disinclination to proceed with further negotiation and requested for return of the amount of Rs. 20,00,000/. Respondent objected to the same stating that it had invested over Rs. 1 crore towards execution of petitioner's order and it was stuck very badly and suffering huge loss and that there was no refund as per the terms of the contract and petitioner will have to pay respondent in case petitioner cancelled the order. Reference was made to an email dated 10.08.2013 by the respondent to the petitioner. Then, there is legal notice dated 18.10.2013 sent by respondent to the petitioner. This was detailed notice giving details of contract and the communication and stated that Rs. 20,00,000 is not refundable and it has to pay additional 25% of the plant cost i.e. USD 4,35,000/ plus 50,00,000/ damages to cover the loss incurred by the respondent. This notice was replied by the petitioner through counsel vide letter dated 11.11.2013 stating that there was no concluded contract at any point of time and in view of the OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 5 of 24 revised order increasing the price petitioner was not interested to proceed further and rejected the revised order vide letter dated 30.07.2013 and asked for return of advance payment of Rs. 20,00,000/. There is further legal notice dated 05.02.2014 sent by the respondent calling upon the petitioner to pay a sum of Rs. 85,00,000 towards cost incurred in manufacturing the plant as well as compensation for the loss suffered by the respondent in view of breach of the terms of the contract.
4. Subsequently suit was filed on 13.05.2014 by the petitioner for recovery of Rs. 22,82,082/ along with interest and an application u/s 8 of Arbitration and Conciliation Act was filed by the respondent in August 2014. Suit was filed later on received by transfer by the District Court due to enhancement of pecuniary jurisdiction. This application raised the contention of contract/Performa Invoice executed on 05.11.2012 containing the detail terms and condition of the contract including arbitration clause for any and all the dispute and that petitioner had continued to act under the said contract and had referred to an email of the petitioner dated 26.12.2012 in this regard. The application u/s 8 of Arbitration and Conciliation Act also refers to the letters dated 18.10.2013 and 05.02.2014 of the respondent. The letter dated 05.02.2014 specifically refers in Clause II(d) that in case of cancellation of order due to any reason whatsoever, the buyers shall OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 6 of 24 agree to pay the damages and advance is non refundable.
Clause II(d) of a standard terms and conditions of supply in performa invoice read as under :
"The buyer will have to send TT/LC timely, exactly as per terms of the offer/proforma invoice/contract without deviation to enable the seller to make shipment without any difficulties. In case of cancellation of Order due to any reason whatsoever, the buyer shall agree to pay the damages and advance is non refundable."
The application u/s 8 of the Act further asked for reference to arbitration to avoid multiplicity of the proceedings and possibility of conflicting decisions. It was so stated in para 14 of the application. Vide order dated 27.01.2017 the matter was referred to the Arbitration. Parties were referred to Delhi International Arbitration Centre. It was subsequent thereto that statement of claim was filed by the petitioner and respondent filed the counter claim only on 07.07.2018 and after filing his statement of defence on 17.05.2018.
5. It is in respect of the counter claim that plea of limitation was raised and the application u/o 7 R 11(d) was filed. The contention raised in the petition u/s 34 of Arbitration and Conciliation Act is that despite admitting that the counter claim is barred by limitation, benefit of section 14 of Limitation Act has been granted to the respondent and OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 7 of 24 the learned Arbitrator has wrongly interpreted the provision of Section 14 of the Limitation Act. It was contended that benefit of Section 14 of Limitation Act can not be granted to the respondent/counter claimant as it is available only to the plaintiff and that plaintiff ought to be prosecuting his claim in some proceedings relating to the same matter and issue in good faith. It was argued that as respondent had neither filed any suit in respect of its claim nor had given any notice as contemplated u/s 21 of Arbitration and Conciliation Act and any Section 11 of Arbitration and Conciliation Act was also not filed well within limitation so as to claim benefit of Section 14 of the Limitation Act and the application u/s 8 of the Arbitration and Conciliation Act can not be taken in the nature of prosecuting one's claim in civil proceeding. It was further argued that there was nothing like good faith of the respondent in the entire proceedings relating to the suit in which application u/s 8 of Arbitration and Conciliation Act was filed and even otherwise an application u/s 8 of Arbitration and Conciliation Act can not be taken as prosecution of one's claim by the respondent and therefore, question of good faith does not arise.
6. On the contrary, counsel for respondent submitted that after repudiation of the contract by the petitioner on 30.07.2013, on 28.08.2014 respondent filed an application u/s 8 of Arbitration and Conciliation Act for referring the parties to Arbitration in the suit filed OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 8 of 24 by petitioner on 16.05.2014 and as only 13 months has expired from the date of cause of action on 30.07.2013 and counter claim was filed on 07.07.2018 after expiry of about 18 months from the date of referring the parties to the Arbitration i.e. order dated 27.01.2017 on the application u/s 8 of Arbitration and Conciliation Act, the counter claim is within 3 years of limitation as the deadline of filing counter claim after excluding the period of 2 years and 5 months for which the application u/s 8 of Arbitration and Conciliation Act remain pending, accordingly will be 29.12.2018.
7. Counsel for respondent further argued that there was no occasion for the counter claim, otherwise also, being barred by limitation as in the legal notice dated 18.10.2013 as well as 05.02.2014, claim for damages was made by the respondent by making reference to the contract while stating that the advance also as per the contract is non refundable. It was argued that the said claim was duly explained by stating that an investment of more than Rs. 1 crore has already been made by the respondent in connection with the said project tailor made for the petitioner. It was argued that the legal notice dated 05.02.2014 giving details of the claim of respondent read with application u/s 8 of Arbitration and Conciliation Act filed on 28.08.2014 is to be taken as notice u/s 21 of Arbitration and Conciliation Act and it being so there is no occasion for counter claim of respondent being time barred OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 9 of 24 independent of any application of Section 14 of Limitation Act. It was argued that in view of finding on limitation being in favour of the respondent, there was no occasion for challenging the said reasoning but respondent is making this legal submission in reply to the present petition. It was further submitted that it is not that respondent has come up with its claim all of a sudden or that it had given up its claim earlier. In view of filing of the suit by the plaintiff and filing of the application u/s 8 of Arbitration and Conciliation Act, respondent bonafidely believed that the matter shall be referred to the Arbitration and therefore, did not take recourse to seeking independent reference by taking recourse to Section 11 of Arbitration and Conciliation Act. It was submitted that it was respondent who knowing well about existence of Arbitration Clause had resorted to filing of the suit on a malafide plea subsequently also raised as to there being no concluded contract and now can not raise the plead that respondent never raised any claim earlier or that its claim is barred by time. It was argued that claim of respondent was stated in detail in its legal notice dated 05.02.2014 supported with terms of the contract and making reference to the said notice in the application u/s 8 of Arbitration and Conciliation Act should be treated as due notice and compliance as required under Section 21 of the Arbitration and Conciliation Act.
There is reference to the judgment of Air India Vs. Shyam Antenna Electronic (P) Limited decided on 24.09.2001 in suit OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 10 of 24 no. 2546/96 by Hon ble High Court of Delhi by the counsel for petitioner on the point of Section 14 of the Limitation Act. In the said case plaintiff had some claim against defendant and had issued the letter of demand for the same. Defendant filed the suit for declaration of the said letter dated 31.07.1994 as illegal and void. During pendency of the suit, the court directed Air India to handover the delivery against the Airway bill on furnishing of a bank guarantee equal to the value of the shipment by the defendant. The goods were released accordingly. Defendant who had filed that suit for declaration, after release of the goods stopped appearing and the said suit was dismissed in default on 19.07.1994. Air India thereafter, filed the suit on 08.10.1996 i.e. more than two years after dismissal of the suit of defendant in default and the plea of bar of limitation was taken. It is in this background that Air India had raised the claim for benefit of Section 14 of Limitation Act and it was discussed that as Air India had not set up his own claim and sought a relief in the earlier suit of defendant therefore extension of benefit u/s 14 was not applicable.
8. Counsel for petitioner on the point of Section 8, 11 and 21 of Arbitration and Conciliation Act 1996 relied upon the judgment of Voltas Limited Vs. Rolta India Limited and State of Goa Vs. Praveen Enterprises both of Hon'ble Supreme Court and Narayan OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 11 of 24 Prasad Jalan Vs. Chetan PS Chauhan and Others OMP 292/2004 decided on 18.08.2005 by Hon'ble High Court of Delhi and Anacon Process Control Private Limited Vs. Gammon India Limited decided on 22.12.2016 in Arbitration application no. 108/2015 by Hon'ble High Court of Bombay. The first two judgments were basically referred on the point of twin test in respect of applicability of Section 21 of Arbitration and Conciliation Act 1996 for limitation. The judgment of Narayan Prasad Jalan was referred on the point that u/s 8 of Arbitration and Conciliation Act, the judicial authority merely refers parties to the Arbitration and it has no power to appoint the Arbitrator or refer to dispute to the Arbitrator which can be done only u/s 11 of the Act. The judgment of Anacon Process Control Private Limited was referred on the point that a petition u/s 8 of Arbitration and Conciliation Act cannot be treated as a request to the party for arbitration for applicability of Section 21 of Arbitration and Conciliation Act. Reference was made to para 14 of the judgment which read as under :
14. Again, in the decision of the Madras High Court in the case of Cash and Gain Finance and Investments v. Manjula Udaya Shankar (supra), it is categorically held that if at all Section 21 must be applied, it must be applied and given full expression only from the time a request is made subsequent to OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 12 of 24 the order of the Court under Section 8 of the Act directing the parties to arbitration. The relevant portion of the judgment is reproduced hereunder : "13.... the provisions (Section 8 and 21) operate under two distinct circumstances. An application filed under Section 8 is not an application that is contemplated under Section 21 at all.
Section 8 is a petition before the Court where a suit is pending and where the court is bound to pass an order. Section 21 contemplates that the arbitral proceedings in respect of a particular dispute commences when a request for a reference is received by the respondent."
"16.... A petition under Section 8 is not a request to the party. If at all Section 21 must be applied. It must be applied and given full expression only from the time a request is made subsequent to the order of the Court under Section 8 directing the parties to arbitration."
9. Counsel for respondent submitted that the judgment in the Voltas case and Praveen Enterprises case laying down the twin test should not be read as going against respondent. He further submitted that there cannot be any hard and fast rule as to how notice as to claim being raised and request for arbitration in case of dispute is to be communicated to the other party. It was submitted that raising of a OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 13 of 24 claim in the legal notice dated 18.10.2013 and subsequently specifying and quantifying in detail in the legal notice dated 05.02.2014 is very much there. There is also reference in the legal notice dated 05.02.2014 as to instruction of respondent to initiate legal proceedings against petitioner/ Web Overseas. It was further submitted that there was ample time available to the petitioner to reflect upon the claim of respondent and respond but petitioner instead of the same filed the suit on 13.05.2014 and in response, respondent filed an application u/s 8 of Arbitration and Conciliation Act giving reference to both the notices dated 18.10.2013 and 05.02.2014 and requesting for reference to arbitration and to avoid multiplicity of proceedings. It was submitted that the moment petitioner received this application request for arbitration in respect of the claims raised in the legal notice dated 05.02.2014 is complete as the said request should be read in conjunction with legal notice dated 05.02.2014 so far petitioner is concerned and the requirement of Section 21 of Arbitration and Conciliation Act by raising a claim, communicating to the petitioner and requesting for arbitration is complete. It was submitted that ordinarily Section 8 application will not be treated as a request to the other party but in cases where already claim has been raised with manifest intention as to initiation of legal proceedings, prior to filing of any suit or legal proceeding by the petitioner, reference in the application u/s 8 of the Act for arbitration should be taken as request to OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 14 of 24 petitioner also and should supplant the legal notice dated 05.02.2014 where specific reference for arbitration was not made. Counsel for respondent had also made reference to the judgment of Hon'ble High Court of Delhi in Five Square Agro Gold Private Limited Vs. Mayank Mohan Agarwal decided on 14.01.2019 in RFA No. 385/2017. Reference was made to para 6 of the said judgment for stoppage of limitation on filing of an application u/s 8 of Arbitration and Conciliation Act. Same is reproduced as under :
"In fact, in my opinion, the factum of filing of the application under Section 8 of the Arbitration and Conciliation Act by the respondent/defendant will amount to invoking of the arbitration clause, and thus, and in fact the limitation will stop running as from the date of filing of the application under Section 8 of the Arbitration and Conciliation Act by the respondent/defendant. Once the limitation stops running, it would stop running possibly even so far as the appellant/plaintiff is concerned, however, this aspect of limitation will be finally decided in the arbitration proceedings."
10. Counsel for petitioner submitted that the said reference is obiter and related to the plaintiff in that case and not to the defendant. It is correct that in the said case, counsel for appellant/plaintiff submitted that benefit of Section 14 of Limitation Act should be extended to it in OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 15 of 24 respect of arbitration proceedings which the appellant/plaintiff intends to initiate and the Court agreed with the arguments on behalf of appellant/plaintiff that the time spent to pursue the suit and the appeal should be excluded u/s 14 of the Limitation Act. Para 5 (ii) is reproduced in this regard : "5(ii) I agree with these arguments urged on behalf of appellant/plaintiff that for the time spent by the appellant/plaintiff to pursue the suit as also this appeal, for these periods exclusion will be available to the appellant/plaintiff under Section 14 of the Limitation Act, and the concerned arbitration tribunal will liberally consider the application filed by the appellant/plaintiff under Section 14 of the Limitation Act when disputes are raised for being decided in the arbitration proceedings."
11. I have carefully gone through the record and considered the arguments and written submissions by both the parties.
The policy of Section 14 is to protect a litigant against the bar of limitation when a proceeding initiated by him in respect of the same issue as in the subsequent suit in court or claim before arbitration as the case may be, was being pursued bonafidely and in good faith and the said proceeding fails due to defect of jurisdiction or other cause of like nature. The interpretation for applicability of Section 14 of the OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 16 of 24 Limitation Act is to be done to advance the cause of justice rather than abort the proceedings. There will always be an element of mistake inherent while invoking Section 14 of the Limitation Act and the Section is intended to provide relief in respect of such mistake relating to remedy or forum or of the like nature. Good faith and due diligent in respect of the earlier proceeding is of paramount significance. It is important to note that the mistake, if any, invariably occurred on the part of counsel as in the earlier proceeding also respondent was duly represented through counsel. It is correct that Section 8 application is not with reference to any claim of respondent as claim can only be raised by filing a suit/counter claim in court or statement of claim before Arbitral Tribunal but developments in this case as to sending of notice dated 05.02.2014 by the respondent and thereafter filing of the suit in May 2014 by the petitioner and thereafter filing of Section 8 application in August 2014 by the respondent in the said suit gains significance. All through respondent was stressing upon the arbitration agreement. Stand of petitioner was that there was no concluded contract and therefore the arbitration agreement was not applicable and accordingly petitioner filed the suit but for respondent's stand was for a recourse to the arbitration. The option available to the respondent was to contest this suit by filing application u/s 8 of Arbitration and Conciliation Act and also to raise its claim by taking recourse to arbitration. But it cannot be lost sight of that taking recourse to OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 17 of 24 arbitration would have required filing of the application u/s 11 of Arbitration and Conciliation Act as petitioner was contesting and opposing the application u/s 8 of the Act. Finding as to arbitration agreement will be necessary while passing u/s 8 of the Act also. Respondent bonafidely believed while referring to its letter dated 05.02.2014 and 18.10.2013 in respect of its claim and seeking reference to arbitration to avoid multiplicity of proceedings that the matter will be referred to the arbitration. It is altogether different matter that the court u/s 8 of the Act could not have constituted the Arbitral Tribunal and referred the claim of the suit and claim of respondent in the letter dated 05.02.2014 but there was no occasion for the parties themselves having agreed as to the Arbitral Tribunal for reference of dispute after order u/s 8 of the Act or having consented before the court itself for appointment of the arbitrator and reference of the matter. In this background non filing of any application u/s 11 and sending of any separate notice to the petitioner by the respondent for arbitration needs to be appreciated.
In view of the aforesaid discussion in my considered opinion, there was no reason for not extending the benefit of Section 14 as the contest by the respondent by way of prosecuting application u/s 8 of Arbitration and Conciliation Act is civil proceeding in nature and was bonafidely in good faith prosecuted by the respondent who could not have filed any counter claim in the said suit in view of the stand OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 18 of 24 taken by him. The mistake of not taking independent recourse for constitution of Arbitral Tribunal and reference of dispute by filing an application u/s 11 of Arbitration and conciliation Act in the facts and circumstances of this case will be a bonafide mistake in good faith. It is important to note that petitioner itself is beneficiary of Section 14 of Limitation Act in this case as it was prosecuting its claim by way of suit before the court despite existence of arbitration agreement and as no objection was taken by respondent on the said aspect, no point was raised as to limitation of claim of the petitioner but there can be no occasion for claim of petitioner being within time without benefit of Section 14 of Limitation Act. Having itself had the benefit of Section 14 of the Limitation Act, extension of the same benefit to the respondent cannot be faulted with. If petitioner was having the bonafide impression of the civil court having jurisdiction, respondent was also having bonafide impression of getting the matter referred to the arbitration without any delay.
12. I also find merit in the submission made on behalf of respondent that the claim raised by the respondent is in consonance with its stand and reply in the legal notice dated 05.02.2014. Application u/s 8 of Arbitration and Conciliation Act is not a civil proceeding in respect of a claim in itself but definitely it is an application in the civil proceeding for referring the parties to the OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 19 of 24 Arbitration. In case an application is made in this regard before filing written statement, court refers the parties to the Arbitration and the same includes the claim which was before the court and the claim which was going to be raised by the respondent. The application u/s 8 of Arbitration and Conciliation Act not only made reference to the terms of the contract dated 05.11.2011 but referred to the letter/legal notice dated 18.10.2013 and 05.02.2014 sent on behalf of respondent raising claim on behalf of respondent. It reflects assertion of its claim by the respondent also and in good faith it believed that this will be raised by filing the claim in the Arbitration. I do not see any reason as to why in the facts and circumstances of the case like the present one where respondent raises the claim in the legal notice in detail and upon filing of the suit by the opposite party, refers to those notices in the application u/s 8 of Arbitration and Conciliation Act while seeking reference of the matter to the Arbitration, it should not be considered as bonafide and in good faith asserting its claim by virtue of the said application u/s 8 of Arbitration and Conciliation Act during the pendency of the said application for extending the benefit u/s 14 of Arbitration and Conciliation Act.
13. There has been instances when parties have been prosecuting their claim/contention and/or related points before a particular forum and after dismissal/disposal of the same or withdrawal OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 20 of 24 of the same, file afresh seeking benefit of Section 14 of the Limitation Act and such benefits are extended. The prime consideration for extension of benefit u/s 14 of Limitation Act is whether plaintiff was prosecuting the earlier proceeding bonafidely and in good faith. The earlier proceeding was wrong proceeding and ought not have been filed is not material. No claim was prayed for or could not have been finally granted is not material. This is the mistake that Section 14 of the Limitation Act inheres and protects. What is material is whether the earlier proceeding was civil proceeding being prosecuted in good faith or not. Mistake of the parties, bonafide and good faith are to be essentially construed and inferred in the factual matrix of a given case and what may not amount to be bonafide and good faith for prosecution of a civil proceeding in one case may amount to bonafide prosecution and in good faith in another case. There is no hard and fast rule or strait jacket formula for the same. There has been instances where relief was being sought in writ petition and the same was declined on the ground of the disputed question of facts and similarly relief being sought in contempt petition being declined as not proper.
14. Reference of the matter immediately to the Arbitration on the application u/s 8 of Arbitration and Conciliation Act would have taken care of the claim of respondent also and the same would have been within time. At the earliest, the cause of action arose on OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 21 of 24 30.07.2013 and claim ought to have been raised by 30.07.2016 by both the parties. Application u/s 8 of Arbitration and Conciliation Act was filed on 28.08.2014. There was still more than two years available for filing the claim by the respondent. Respondent bonafide believed that the matter will be referred to the Arbitration and there will still be time left for filing the claim within limitation and that his application u/s 8 of Arbitration and Conciliation Act read with letter dated 18.10.2014 and 05.02.2014 takes care of the requirement of raising the claim within time. Respondent can not be faulted with as to its good faith in this regard and prosecuting the application u/s 8 of Arbitration and Conciliation Act in the facts and circumstances of the case where claim was being raised by the respondent is to be taken as in the nature of civil proceeding and respondent is also to be treated as a claimant in respect of its claim and it will stand as a plaintiff in respect of its claim. If any other construction is to be put on interpretation of Section 14 of Limitation Act, at no point of time a defendant/counter claimant will be able to seek the benefit of Section 14 of the Limitation Act. In respect of the counter claim, counter claimant is to be treated at par with the plaintiff. Point of limitation in respect of counter claim is to be decided in same way, point of limitation is decided in respect of a suit filed by the plaintiff. If in case of a suit filed in the court subsequently referred to Arbitration, raising of a claim before Arbitrator on the date of reference of matter to the Arbitration or immediately thereafter, it is OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 22 of 24 saved by virtue of the claim having already been raised in suit in court within limitation, there is no reason to treat differently in case of a claim referred and reiterated in conjunction with documents filed with and referred in the application u/s 8 of Arbitration and Conciliation Act by the defendant.
15. I do not see any illegality in the extension of the benefit u/s 14 of Arbitration and Conciliation Act. In fact there is also merit in the submissions made on behalf of respondent in connection with applicability of Section 21 of Arbitration and Conciliation Act 1996 in view of claim raised and reiterated in the legal notice dated 18.10.2013 and 05.02.2014 referred in the application u/s 8 of Arbitration and Conciliation Act while seeking reference of the matter to the Arbitration by specifically stating in para 14 of the application that it is needed even to avoid multiplicity of the proceedings. In view of the aforesaid discussion the petition u/s 34 of Arbitration and Conciliation Act is devoid of any merit and is dismissed accordingly.
16. In view of the incorporation of SubSection 2A in Section 34 of the Arbitration and Conciliation Act, it is clear that merely on the ground of erroneous application of law, the Arbitral Award is not to be set aside. In my considered opinion, holding by Arbitral Tribunal that counter claim can not be rejected on the ground of limitation as OMP (COMM) No. 20/18 Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 23 of 24 respondent/counter claimant was contesting the matter in court with due diligence and ultimately succeeded in getting the parties referred to the Arbitration, does not suffer from any illegality warranting interference u/s 34 of Arbitration and conciliation Act. Application/petition u/s 34 of Arbitration and Conciliation Act is accordingly dismissed.
File be consigned to record room.
Announced on 24.06.2020 (Vipin Kumar Rai)
by way of Video Conferencing ADJ06 (South East)
through Cisco Webex. Saket Courts, New Delhi
VIPIN
KUMAR
RAI
Digitally signed
by VIPIN KUMAR
RAI
Date: 2020.06.24
17:28:21 +0530
OMP (COMM) No. 20/18
Web Overseas Limited Vs. Universal Industrial Plants Manufacturing Company Private Limited Page No. 24 of 24