Delhi High Court
Coronation Construction Pvt. ... vs Indian Oil Corporation Ltd. & Anr. on 13 September, 2010
Author: S.Ravindra Bhat
$~28
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 13.09.2010
+ CS(OS) 1486/2005
CORONATION CONSTRUCTION PVT. LTD. ..... Plaintiff
Through : Sh. Sudhir Makkar, Advocate.
versus
INDIAN OIL CORPORATION LTD. & ANR. CA+ ..... Defendants
Through : Sh. V.N. Koura, Advocate.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
1.
Whether the Reporters of local papers Yes.
may be allowed to see the judgment?
2. To be referred to Reporter or not? Yes.
3. Whether the judgment should be Yes.
reported in the Digest?
MR. JUSTICE S.RAVINDRA BHAT, J (OPEN COURT)
%
I.A. No. 8543/2005
1. This order will dispose of the plaintiff's application under Section 14 of the Limitation
Act, claiming exclusion of the time taken in the prosecution of the arbitration proceedings.
2. The facts necessary for deciding the application are that the plaintiff had claimed `
3,96,11,154/- in arbitration proceedings. There is no dispute that the arbitration was mandated as
an alternative dispute mechanism by virtue of Clause 9.0.0 of the General Conditions of Contract
with the defendant (hereafter referred to as "the IOC"). The first defendant objected to some of
the claims, contending that they were excluded since they were not notified claims, by virtue of
Clause 6.6.1.0. Accordingly, the preliminary question was decided by the Arbitrator, who
announced his order on 06.04.2005, holding that some of the claims (Nos. 1 to 11, 15, 17 and 18)
I.A. No. 8543/2005 in CS(OS) 1486/2005 Page 1
were not arbitrable. These are the subject matter of the present suit. The plaintiff contends that
the Court should exclude the time taken in prosecuting the arbitration proceedings in the interest
of justice, and argues by relying on the decisions of the Supreme Court in Union of India and
Ors v. West Coast Paper Mills Ltd. and Anr. AIR 2004 SC 3079 and M/s. Shakti Tubes Ltd. v.
State of Bihar & Ors. AIR 2009 SC 1200. The Supreme Court had in those decisions relied upon
the terminology of Section 14 and preferred the previous ruling in Commissioner of Sales Tax,
U.P., Lucknow v. Parson Tools and Plants, Kanpur (1975) 4 SCC 22. It had been then ruled that
four conditions are to be broadly taken into consideration while deciding the applications under
Section 14, which are as under:
"XXXXXX XXXXXX XXXXXX
13. In the submission of Mr. Malhotra, placing reliance on the Commissioner
of Sales Tax, U.P., Lucknow v. M/s. Parson Tools and Plants, Kanpur, 1975 (4)
SCC 22, to attract the applicability of S. 14 of the Limitation Act the following
requirements must be specified.
(1) both the prior and subsequent proceedings are civil proceedings prosecuted by
the same party;
(2) the prior proceedings had been prosecuted with due diligence and in good faith;
(3) the failure of the prior proceedings was due to a defect of jurisdiction or other
case of a like nature;
(4) both the proceedings are proceedings in a Court;
XXXXXX XXXXXX XXXXXX"
3. Learned counsel contends that apart from the declaration of law that Section 14 must be
given its broadest and most liberal interpretation, the Court should also construe the term due
diligence, having regard to the facts of the case and also the likely consequence which would the
litigant in case of request for condonation or exclusion of time being refused, i.e. potential loss of
the right to have its grievance adjudicated. For this purpose, the plaintiff relies upon the
decisions reported as Ghasi Ram and Others v. Chait Ram Saini and Ors. 1998 (6) SCC 200;
Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department and Ors.
2008 (7) SCC 167 and J. Kumaradasan Nair & Anr. v. IRIC Sohan & Ors. JT 2009 (2) SC 707.
4. The IOC contends that in the facts of this case, the plaintiff cannot claim to have
prosecuted the arbitration proceedings diligently. It is pointed-out that in the reply to the
arbitration notice initially issued by the plaintiff, the defendants had denied that the disputes
I.A. No. 8543/2005 in CS(OS) 1486/2005 Page 2
were arbitrable. It is submitted that despite these reservations, the plaintiff went ahead and
sought appointment of an arbitrator, which was granted by the Court, reserving liberty to the IOC
to agitate the contentions with regard to arbitrability. The defendants also point to the reply filed
under Section 11(6) - Arbitration and Conciliation Act, 1996 proceeding where this objection
had been explicitly taken.
5. The defendants rely upon the decision reported as Ram Bhawan Singh and Ors. v.
Jagdish and Ors. 1990 (4) SCC 309. It is argued that this ruling clarified that the mere averment
as to the bonafides is insufficient to entitle the applicant to the relief of exclusion of time under
Section 14. Learned counsel argued that the materials on record suggest that contrary to good
faith and due diligence, the plaintiff intentionally pursued the claims before the arbitrator and has
now approached the Court after suffering adverse finding. It is also pointed-out that the plaintiff
has filed an appeal under Section 37 of the Act against determination of the arbitrator with regard
to the maintainability of the claims, which is still pending. During the course of proceedings and
later during the hearing today, learned counsel for the plaintiff further submitted that the said
appeal would be withdrawn.
6. It is evident from the above discussion that certain classes of disputes were facially
excluded by virtue of Clause 6.6.1.0 of the General Conditions of Contract. The plaintiff further
appears to have argued before the arbitrator that such exclusion was contrary to Section 28 of the
Contract Act and had to be, therefore, ignored. The argument, however, did not find favor with
the Arbitrator, who ruled on 06.04.2005 that the dispute could not be arbitrated. No doubt, the
plaintiff had been intimating that the disputes were not arbitrable by IOC in its reply to the notice
- claiming arbitration, as well as in the reply to the Section 11 proceedings. The question,
however, is whether the overall conduct is such as to entitle it to the benefit of Section 14.
7. The authority on the point from Parson Tools and Plants (supra) always appeared to be
uniform in that the Courts are to construe their power under Section 14 in the widest possible
manner. The rulings in Consolidated Engineering Enterprises (supra) and J. Kumaradasan Nair
(supra) further clarified that even the expression "due diligence" should not be construed
narrowly as the Courts should have, with regard to the possible losing of right to remedy of the
plaintiff even if its counsel had pressed a possibly wrong argument contrary to or in ignorance of
law. As far as the judgment in Ram Bhawan Singh and Ors. (supra) cited by the defendants is
concerned, a reading of the same would indicate that the Court had not taken note of the previous
I.A. No. 8543/2005 in CS(OS) 1486/2005 Page 3
ruling in Parson Tools and Plants (supra). Furthermore, the facts their disclose that the affidavit
of the concerned appellant did not give any explanation for the delay of 1198 days. In these
circumstances, the Supreme Court affirmed the High Court's determination that Section 14 was
inapplicable.
8. Having regard to the various judgments cited, this Court is of the opinion that the
consistent approach in regard to Section 14 is to give it the widest possible interpretation. Unless
the conduct of the plaintiff is shown to be palpable or manifestly wrong or perverse, the Courts
would be slow in denying the benefit of Section 14, which is in the larger public interest.
9. The defendants further argue that even if the time spent in the prosecution of the
arbitration proceedings is excluded, the suit would still be time-barred. As far as the second
submission is concerned, the contention is left upon to be submitted by the defendants in the
written statement.
10. Having regard to the above discussion, this Court is of the opinion that the application
deserves to be allowed. The plaintiff's statement that the appeal would be withdrawn is taken on
record. Accordingly, the time for which the plaintiff seeks benefit under Section 14, i.e. from
12.02.1999 till 06.04.2005 is hereby excluded by applying Section 14 of the Limitation Act. I.A.
No. 8543/2005 is allowed in the above terms.
CS(OS) 1486/2005
Issue summons to the defendants. Sh. V.N. Koura, Advocate accepts summons. Let
written statement be filed within four weeks. Replication, if any, shall be filed two weeks
thereafter. List before the Joint Registrar on 09.11.2010, who shall ensure that the parties
complete admission/denial of documents, through exchange of affidavits. List before the Court
on 07.03.2011, for framing issues.
S. RAVINDRA BHAT,J
SEPTEMBER 13, 2010
'ajk'
I.A. No. 8543/2005 in CS(OS) 1486/2005 Page 4
