India Yamaha Motor Pvt Ltd v. Seema Bhatia

(iv) Panchu Gopal Bose Vs. Board of Trustees for Port of

Calcutta (1993) 4 SCC 338, observing that the proceedings before the arbitrator are like civil proceedings before the Court, within the meaning of Section 14 of the Limitation Act.

(v) Fatechand Ganeshram Agarwal Vs. Wasudeo Shrawan

Dalal AIR (35) 1948 Nagpur 334, holding that time spent in arbitration proceedings is to be excluded from the computation of the period of limitation in a suit instituted subsequently in respect of the same subject matter, provided the other requirements of Section 14 are satisfied, and disagreeing with the judgments to the contrary.

(vi) Paragraphs 8.52 and 8.53 of the 76th

(vii) State of Goa Vs. Western Builders (2006) 6 SCC 239, holding that Section 43 of the Arbitration Act clearly says that Limitation Act, 1963 shall apply to arbitration as it applies to proceedings in a Court and thus Section 14 of the Limitation Act has not been excluded qua arbitral proceedings.

11. The senior counsel for the plaintiff has also fairly disclosed that the view of Justice Chagla, speaking for the High Court of Bombay, in Purshottamdas Hassaram Sabnani Vs. Impex (India) Ltd. AIR 1954 Bom 309 was to the contrary and which led to the 76th Report of the Law Commission.

12. The senior counsel for the plaintiff thus contends that Section 14 of the Limitation Act is applicable in the present case.

13. With respect to „mutual, open and current account‟ within the meaning of Article 1 of the Schedule to the Limitation Act, the senior counsel for the plaintiff has today drawn attention to A.M. Shaik Ali Vs. DS&A Co. Employees Stores 1991 SCC OnLine AP 83 holding that even in the absence of a plea in the plaint that the suit transactions constituted a mutual, open and current account, Article 1 is applicable inasmuch as whether there is a mutuality and reciprocity of demands is a legal inference to be drawn from the facts, by looking into the accounts and they need not to be pleaded.

14. The senior counsel for the plaintiff has also drawn attention to page 61 of the Part-IIIA file, being the Dealer Ledger Report filed by the plaintiff of the transactions with the defendant, which show entries on (a) 31st May, 2003 of “Warranty Instant Credit Note”; (b) 1st April, 2003 of “Debit Note”; and, (c) 31st December, 2003 of “credit of interest on deposit for the period April, 2003 to December, 2003”.

15. The senior counsel for the plaintiff otherwise agrees that the question, whether the plaintiff is entitled to the benefit of Section 14 or not, cannot be decided without evidence.

16. The counsel for the defendant has also not controverted that the application, if maintainable in this proceeding, is to be decided after evidence and not at this stage. The counsel for the defendant also fairly states that she has not found any direct judgment holding Section 14 benefit to be not available in the facts and circumstances of the present case. It is however her contention that as per the pleadings of the plaintiff, even after exclusion of time spent in other proceedings, the suit claim is barred by time. The counsel for the defendant thus contends that there is no need for trial on merits on the aspect of Section 14.

17. The counsel for the defendant has in this regard, drawn attention to the plaint, where the plaintiff has inter alia pleaded that (i) the plaintiff is an Indian subsidiary of Yamaha Corporation, Japan; (ii) the defendant carrying on business in the name and style of Doon Motorcycles, was the dealer of Motorcycles and Scooters of Escorts Ltd.; (iii) the business of motorcycles and scooters of Escorts Ltd. was purchased by the plaintiff, and the defendant, under a Dealer‟s Sales Agreement dated 1st November, 1996, became a dealer of the plaintiff; (iv) the plaintiff used to supply its products to the defendant for further sale to customers and the invoices for the same were raised on the defendant from time to time; (v) the defendant failed to pay the due amount against such invoices on time, despite repeated reminders; (vi) the defendant also did not furnish the requisite „C‟ forms;

(vii) as on 25th November, 2000, a sum of Rs.2,04,00,000/- was due from the defendant to the plaintiff; (viii) a Memorandum of Understanding (MoU) dated 8th December, 2000 was entered into between the plaintiff and the defendant qua further working and outstanding; (ix) the defendant did not take any steps as agreed by her, for clearance of the outstanding dues and violated the terms and spirit of the Dealer‟s Sales Agreement as well as the subsequent MoU; (x) the plaintiff invoked the arbitration clause in the Dealer‟s Sales Agreement dated 1st November, 1996 and referred the dispute with the defendant to the Indian Council of Arbitration; and, (xi) however the defendant filed CS(OS) No.1996/2006 for declaration that there was no subsisting arbitration agreement between the parties and vide order dated 13th September, 2007 in the said suit, the arbitration proceedings were stayed and the said suit and the appeal filed thereagainst were decided in favour of the defendant, bringing a closure to the arbitration proceedings.

18. I may mention that the plaintiff, in the plaint has also given particulars of how it is the successor of the entities to which the payments are due but the said facts are not relevant for the present purpose and have thus not been incorporated in the aforesaid narration.

19. The counsel for the defendant, has particularly drawn attention to paras no.31 to 33 of the plaint, which are as under: “(31) It is respectfully submitted that the cause of action in favour of YMIL and against the Defendant arose when the Defendant entered into the Dealer Agreement with YMEL. The cause of action in favour of predecessor of Plaintiff and against the Defendant arose on 8.12.2000 when YMEL entered into the Memorandum of Understanding. The cause of action further arose, when the Defendant failed to honor the terms of the MOU. The cause of action arose in November, 2003, when YMIL was constrained to stop supply of its products to the Defendant. The cause of action also arose when the Defendant got issued a legal notice dated 2nd August, 2004 against YMIL and when YMIL Plaintiff replied to the said notice on 28th September, 2004. The cause of action further arose on 13.09.2007 when the Hon‟ble High Court decreed CS(OS) No.1996/2006 in favour of the Defendant and granted liberty to YMIL to take recourse to proper civil remedy for recovery of dues from the Defendant. The cause of action further arose on 19.04.2012 when the appeal being RFA (OS) No.71/2008 filed by YMIL challenging the order dated 13.09.2007 was dismissed by the Hon‟ble High Court. The cause of action further arose on 15.03.2008 when entire business of YMIL was purchased by Plaintiff herein as going concern. The cause of action is continuous and still subsists in favour of the Plaintiff. (32) It is submitted that on account of non-payment of legal debts as per the open, running and mutual statement of account maintained by predecessors of Plaintiff and thereafter being continued by Plaintiff in the regular course of business in view of purchase of entire business of YMIL by Plaintiff herein as going concern vide Business Transfer Agreement dated 15.03.2008, an amount of Rs.1,46,59,899/- (Rupees One Crore Forty Six Lakhs Fifty Nine Thousand Eight Hundred Ninety Nine only) is due and payable by the Defendant to Plaintiff herein. (33) As stated hereinabove, since earlier the predecessors of Plaintiff were pursuing its claim for recovery against Defendant in arbitration, the Plaintiff has filed accompanying application under Section 14 of the Limitation Act for exclusion of time consumed in said proceedings, the contents of which are not repeated herein again for the sake of brevity and to avoid prolixity. It is therefore submitted that suit filed by Plaintiff is well within the period of limitation.” (Emphasis added)

20. The counsel for the defendant has contended that as per the plaint, the cause of action for the present suit accrued to the plaintiff, in November, 2003, when the plaintiff admits to having stopped supply of its products to the defendant. It is argued that even if the period during which the arbitration and challenge thereto was being undertaken is excluded, the suit is still barred by time.

21. The senior counsel for the plaintiff, though agrees that if the computation of limitation is done on the basis of November, 2003, the suit claim is barred by time but has drawn attention to the rejoinder to the reply of the defendant to the application of the plaintiff under Section 14 of the Limitation Act.

22. I may mention that the plaintiff, in the application under Section 14 of Limitation Act, has pleaded as under: “(4) That despite MOU dated 08.12.2000 the Defendant failed to discharge its admitted liabilities towards the Plaintiff. That when the Plaintiff started pressurizing the Defendant for payment of the outstanding dues, the Defendant, in order to avoid payment of the outstanding dues, sent a false, frivolous and concocted legal notice dated 2nd August, 2004. However, it is pertinent to note that in legal notice dated 02.08.2004 the Defendant admitted execution of MOU dated 08.12.2000. (5) It is submitted that the cause of action for filing of suit against the Defendant for recovery of outstanding amount arose on 02.08.2004 and expired on 01.08.2007. It is submitted that the Plaintiff invoked the arbitration clause and filed its statement of claim before the Indian Council of Arbitration on 18.07.2006 i.e. well within limitation period. (12) As stated above, since the last date of limitation for filing of the present suit was 01.08.2007, there occurred a delay of 2093 days in filing the present suit. However, as stated above, since the period during which the Plaintiff was pursuing its remedy before different forums from the period 18.07.2006 to 01.05.2012 i.e. 2113 days is excluded, the filing of present suit by Plaintiff on 27.04.2013 is within time in terms of statutory provision laid down in Section 14 of the Limitation Act, 1963.” (Emphasis added)

23. However in rejoinder, the plaintiff has pleaded as under: “(2) That the cause of action for filing the instant suit against the Defendant for recovery of outstanding amount arose on 01.01.2005 as the Plaintiff was maintaining mutual, open and current account and the last admitted entry in the open running, and mutual account of Defendant is one payment received from Defendant on 19.03.2004. Consequently, the period of limitation started from close of the year 2004 i.e., 01.01.2005 and was expiring on 31.12.2008. It is pertinent to mention here that the Plaintiff invoked arbitration clause under DSA dated 01.11.1996 and filed its statement of claim before the Indian Council of Arbitration on 18.07.2006 i.e. after 564 days from original start date of limitation i.e., 01.01.2005, well within the limitation period.”

24. The senior counsel for the plaintiff contends that even though the plaintiff has not pleaded, what is pleaded in the rejoinder aforesaid, in the plaint or in the application under Section 14 of the Act, but it is a question of law and once it has been held in A.M. Shaik Ali supra that there need not be a plea of mutual, open and current account, the pleadings in the plaint and in the application are irrelevant. It is further argued that mutual, open and current account has been pleaded in para no.32 of the plaint.

25. The counsel for the defendant has drawn attention to the judgment of the Division Bench of this Court in Bharath Skins Corporation Vs. Taneja Skins Company Pvt. Ltd. (2012) 186 DLT 290 and Era Constructions (India) Ltd. Vs. D.K. Sharma 2007 SCC OnLine Del 1317 on the aspect of what constitutes a mutual, open and current account within the meaning of Article 1 of the Schedule to the Limitation Act. It is argued, that to be mutual, there must be transactions on each side, creating independent obligations on the other, and not merely transactions which create obligations on the one side, with those on the other being merely complete or partial discharge of such obligations. It is argued that where the relationship is that of a seller and buyer of goods, where the seller has undertaken to make delivery of goods and the buyer has agreed to pay for them and has made part payments from time to time, there can be no question that insofar as the payments have been made after the goods have been delivered, they have been made towards the price due and such payments were in discharge of obligations created in the buyer and do not create any obligations on the sellers in favour of the buyer. It is contended that there was no shifting balances in the account between the plaintiff / its predecessor and the defendant and it was not as if on any occasion there was balance in favour of the defendant. It is however clarified that the defendant does not admit the right pleaded by the plaintiff to recover the dues of others, with whom the defendant earlier had relationship. It is argued that in the present case, bills were raised from time to time on the defendant and against these bills the defendant has been making payments from time to time; though the payments did not correspond to the bills raised, the amounts that represented invoices have been shown on the debit side of the account and the amount received from the defendant have been shown on the credit side and such account has been held to be not a mutual, open and current account.

26. The counsel for the defendant has further contended that single entry alleged by the plaintiff of 19th March, 2004 cannot constitute open, mutual and current account. It is contended that the plaintiff having pleaded the MOU dated 8th December, 2000 and having pleaded that in November, 2003 supplies to the defendant were stopped, there could be no reciprocal demands in terms of the MOU of after November, 2003.

27. The counsel for the defendant has also contended that it has been held in M.P. Steel Corporation supra that the time available will only be the balance of the days left at the time the proceedings were initiated in a wrong forum. It is contended that even after the time taken from 18th July, 2006 when the arbitration was initiated and till 19th April, 2012 when the Division Bench of this Court upheld the judgment of non-existence of the arbitration agreement, the suit is barred by time. It is stated that as per the plea in the plaint, the cause of action arose on 1st December, 2003; the period of limitation available to the plaintiff was of three years and the suit could have been instituted till 30th November, 2006. Counting from 1st December, 2003 till 18th July, 2006 when the arbitration proceedings were initiated, 959 days had been exhausted and balance days left to the plaintiff were only 137; on the contrary, the 2102 days between 18th July, 2006 and 19th April, 2012, are far beyond the period of limitation and the suit is barred by time.

28. The counsel for the defendant has also referred to S.R. Dutta Vs. Chuni Lal Bhatia 1980 SCC OnLine Del 335, to contend that contents of the replication do not constitute a pleading. It is argued, that the cause of action pleaded in the plaint has to be considered and pleading in the rejoinder to be ignored, as the defendant had no opportunity to respond thereto.

29. I have considered the rival contentions.

30. Though I have in Lal Mahal Limited supra, relying on Purshottamdas Hassaram Sabnani supra approved by a three Judge bench of the Supreme Court in The Commissioner of Sales Tax, U.P. Lucknow Vs. Parson Tools and Plants, Kanpur (1975) 4 SCC 22 and also referring to Consolidated Engineering Enterprises supra and reasoning, that Section 43(4) of the Arbitration Act having expressly provided for computing the time prescribed by the Limitation Act for commencement of proceedings (including arbitration) with respect to disputes submitted to arbitration and arbitral award wherein is set aside by the Court, held that the provisions of Section 14 of the Limitation Act will have no application to the said situation and the computation of limitation will be under Section 43(4) of the Arbitration Act only, but refrain from deciding the question of exclusion of time spent in arbitration under Section 14 of the Limitation Act in this suit as I am of the opinion that the suit of the plaintiff is liable to be dismissed otherwise. The said question is left to be further decided in another appropriate case.

31. I am also of the opinion that the question, whether the account maintained by the plaintiff / its predecessor, of transactions with the defendant, was a mutual, open and current account within the meaning of Article 1 of the Schedule to the Limitation Act or not is also beyond the scope of the present stage of the proceedings. Suffice, it is to observe that the judgments cited by the counsel for the defendant do appear to suggest that considering the relationship pleaded by the plaintiff, there was no occasion for a mutual, open and current account.

32. I however otherwise find against the plaintiff and dismiss the suit. My reasons therefor are as under:

I. To that extent, I am unable to agree with A.M. Shaik Ali supra.

It has rightly been held in Bhagwati Prasad Vs. Chandramaul AIR 1966 SC 735, Ram Sarup Gupta Vs. Bishun Narain Inter College (1987) 2 SCC 555, D.M. Deshpande Vs. Janardhan Kashinath Kadam (1998) 8 SCC 315, Bachhaj Nahar Vs. Nilima Mandal (2008) 17 SCC 491 and Transformative Learning Solutions Pvt. Ltd. Vs. Pawajot Kaur Baweja 2019 SCC OnLine Del 9229 that in a suit no evidence beyond pleadings can be led or read and no decision on the basis thereof rendered.

33. Resultantly, the suit is dismissed. The defendant is found entitled to costs of the suit; professional fee assessed at Rs.[3] lacs. Decree sheet be drawn up.