Common Commercial Disputes Queries – September 2023

By Gunjan Chhabra

Questions Answered in this month’s CCDQ:

 

1. ??? ? 138 (?????? ????????) ????????? ?? ??????? ?? ??? ?????????? ???? ?? ???? ???????
2. ????? ?? ?????????? ?????????? ?? ??? ???? ???????, ???? ??? ??? ???
3. ??? ??????????? ????????? ???????? ?? ??????? ?? ??? ???? ????????, ????? ??? ????? ?? ?? ?????????
4. ???? ?? ??? ??????? ?? ???????? ???????? ??????? ??????? ?? ? ???? ?? ?????? ? 138 ????????? ??????? ??? ?? ?? ????????
5. ???? ??? ????????? ???-???? ????????? ?? ???? ???? ?????
6. ?? ?? ??? ?????? ???? ?? ??? ?????, ? ???????????? ??? ????? ?? ???????????
7. ??????????? ?? ????????? ????????? ?????????, ????? ???? ??? ???????????? ????

 

??? ? 138 (?????? ????????) ????????? ?? ??????? ?? ??? ?????????? ???? ?? ???? ???????

Hymavathi v. State of Andhra Pradesh (#SupremeCourtofindia decided on 06.09.2023), was an appeal against the Order of the High Court quashing a criminal complaint under Section 138 of the negotiable instruments act for cheque bouncing.

The High Court had quashed the complaint stating that the limitation for enforcing promissory notes had long expired, and as such the complaint was no longer in respect of a legally recoverable debt.

The Supreme Court observed as follows:

1. In respect of such proceedings under NI Act, if the the question as to whether the debt or liability is barred by limitation is to be considered, it has to be decided on the basis of evidence as it is a mixed question of law and evidence.
2. It is only in cases where the amount is out and out non-recoverable, the question of threshold jurisdiction can arise, where the Court can be justified in interfering under Section 482 of the CrPC before the stage of evidence, otherwise it would not be justified. (Reliance placed on A.V. Murthy vs. B.S. Nagabasavanna (2002) 2 SCC 642 & S. Natarajan vs. Sama Dharman & Anr. (2021) 6 SCC 413).
3. The High Court has failed to consider that even though the promissory notes were of 2012 and the cheques to extinguish the liability therein were of 2017, the words used in the promissory note were “I am bound by…promissory to repay capital or principal loan amount.. interest.. within the date of December 2016”. According to Article 34 of the Schedule of Limitation Act, the limitation of a promissory note is 3 years from when the fixed period expires. Therefore cheque issued in April 2017 and complaint filed in July 2017 both are well within limitation. Therefore even from that view the High Court’s conclusion was incorrect.

In view of the above, the High Court’s quashing order was set aside and the complaints restored.

 

????? ?? ?????????? ?????????? ?? ??? ???? ???????, ???? ??? ??? ???

Microvision Technologies Pvt. Ltd. v. Union of India (Bombay High Court, decided on 24.08.2023), was a review petition seeking review of District Court’s order

The Petitioner was a supplier within the meaning of the Micro, Small and Medium Enterprises Development Act, 2006 (“#MSME Act”) who had been awarded contracts of electrification of surveillance system of Central Railways at certain places.

When disputes arose, the matter was referred for conciliation under Section 18(2) upon failure of which the matter was referred to arbitration under Section 18(3) of the MSME Act.

Pending the reference application, the Petitioner filed an Application under Section 11(6) of the #Arbitration & Conciliation Act, 1996. The Court appointed the sole #arbitrator who then passed the award and concluded the proceedings.

This award was challenged as being patently illegal. In this challenge, the review petitioner filed a transfer petition to Nashik Court, since as per Section 18 of MSME Act, the Nashik Court would have jurisdiction.

The court where the challenge was filed, rejected the transfer petition, stating that since arbitration agreement provided the seat as Mumbai, Nashik District Court had no authority to appoint the arbitrator.

It was against this refusal to transfer, that the present review was filed.

The Court observed as follows:

 

1. The High Court was wrong in observing that the Arbitration Agreement would continue to be valid even in the face of FC’s powers under Section 18 of the MSME Act. (Reliance placed on Gujarat State Petronet Limited Vs. MSEFC 2010 SCC OnLine Bom 2208 which set aside Steel Authority of India Ltd. Vs. MSEFC AIR 2018 Bombay 265).
2. The application was filed under Section 11(6) of the A&C Act and not 11(5). This provision dealt with appointment of arbitrator upon failure of institution to do the same (in this case the MSEFC).
3. In such a case it would be relevant that Section 11(6) is read harmoniously with section 18(4) of the MSME Act according to which jurisdiction of MSEFC is determined according to where the supplier is located, which was Nashik.

 

In view of the above, the challenge order was reviewed, the file was restored, and the petition was transferred to District Court Nashikh.

 

??? ??????????? ????????? ???????? ?? ??????? ?? ??? ???? ????????, ????? ??? ????? ?? ?? ?????????

Union Territory of Ladakh and Ors v. Jammu & Kashmir National Conference & Anr. (#SupremeCourtofindia , decided on 06.09.2023) was a matter relating to the non-allocation of a symbol to the Respondent Political party to contest in the upcoming elections in a Development Council in Kargil.

Apart from powers of the election commission and a discussion regarding the entitlement of the Respondent to the symbol, the Court made certain interesting observations:

1. It could not be accepted, that since the elections had reached the penultimate stage, Respondent could not be granted with relief. The Court clarified that “no litigant should have even an iota of doubt… that just because of systemic delay or the matter not being taken up by Courts resulting in efflux of time the cause would be defeated, and the Court would be rendered helpless to ensure justice to the party concerned… this Court can even turn the clock back, if the situation warrants such dire measures… even restore status quo ante”.
2. This power has properly been clarified by the Supreme Court in a 5 judge bench decision (Nabam Rebia and Bamang Felix v Deputy Speaker, Arunachal Pradesh Legislative Assembly, (2016) 8 SCC 1).
3. It is irrelevant that the 5 judge bench decision has been referred to a larger bench by a 2023 decision for review. (referred by Subhash Desai v Principal Secretary, Governor of Maharashtra, 2023 SCC OnLine SC 607). A Mere reference to a larger bench does not unsettle declared law.
4. The Court stated, “ We make it absolutely clear that the High Courts will proceed to decide matters on the basis of the law as it stands. It is not open, unless specifically directed by this Court, to await an outcome of a reference or a review petition, as the case may be. It is also not open to a High Court to refuse to follow a judgment by stating that it has been doubted by a later Coordinate Bench.”
5. In any case, when faced with conflicting judgments by Benches of equal strength of this Court, it is the earlier one which is to be followed by the High Courts (Reliance placed on National Insurance Company Limited v Pranay Sethi, (2017) 16 SCC 680).

In view of the above, the Appeal was dismissed.

 

???? ?? ??? ??????? ?? ???????? ???????? ??????? ??????? ?? ? ???? ?? ?????? ? 138 ????????? ??????? ??? ?? ?? ????????

Riya Basri v. Mark Alexander (#SupremeCourtofindia , decided on 23.08.2023), was an appeal filed against a common order of Meghalaya high court quashing criminal complaints filed under Section 138 r/w sections 141 and 142 of the NI Act.

The case dealt with cheques issued by Respondent no. 3, partnership firm, other respondents being partners, to the Appellant for rental payments.

When proceedings under NI Act were initiated, Respondents 1 &2 filed petition seeking quashing of complaints which were allowed by HC in their favour. Plea raised by R-1 was that when the cheques were issued, R-3 had already retired from the firm.

The issue before Supreme Court was whether the quashing against Respondent 1 was justified.

The Court observed as follows:

1. The plea of retirement ought to be analysed in light of evidence. This is because although Respondent 3 claims that retirement deed was executed in April 2018 before issuance of cheques, the fact remains that public notice of retirement was issued by the firm only in February 2022, that is after issuance of criminal complaints, and immediately after the summoning order was issued by the trial court.
2. Powers under Section 482 of the Criminal Procedure Code can be exercised by the High Court only in cases when it comes across unimpeachable and incontrovertible evidence that indicates that the partner of the firm did not have any concern with the issuance of the cheques.
3. This is not true in the present case as it was not the case of Respondent no. 1 that the Partnership deed mentioned him as a sleeping partner of the firm.

 

In view of the above, the Quashing Order was set aside qua Respondent no. 2 and he was reinstated as accused in the criminal complaint.

 

 

???? ??? ????????? ???-???? ????????? ?? ???? ???? ?????

Zee Entertainment Enterprises Ltd. v. Triller Inc (Bombay High Court, decided on 7.09.2023) was a summary suit instituted, wherein the Plaintiff had filed an interim application seeking attachment of all properties of the Defendant.

The case revolved around record music licence agreement wherein the Plaintiff had granted limited rights to the Defendant to exploit Plaintiff’s sound recordings.

One of the contentions raised by the Defendant was that the suit was barred for non-compliance of section 12-A of the Commercial Courts Act, 2015 (Pre-Institution Mediation & Settlement).

The Court observed as follows:

1. There was no denial (except bare denial) that the Defendant had in fact exploited the licence agreement. In view, the invoices were indeed payable by the Defendant.
2. The Plaintiff has already made three attempts to settle the matter of which two had failed. It was thereafter that the suit and interim application was filed. In such a case it cannot be said that Section 12-A of the Commercial Courts has been circumvented as such.
3. The Defendant was clearly attempting to delay the proceedings and in the meanwhile alienate properties to deprive the Plaintiff of its dues.

 

In view of the same, the Court decreed the suit for the amounts to be paid with interest and costs.

 

?? ?? ??? ?????? ???? ?? ??? ?????, ? ???????????? ??? ????? ?? ???????????

Ministry of Youth Affairs & Sports v. Ernst and Young (Delhi High Court, decided on 23.08.2023) was a Petition under Section 34 of the Arbitration & Conciliation Act, 1996 (“A&C Act”) challenging an award passed by a three #arbitrator tribunal (“AT”).

The award was passed in proceedings relating to disputes which had arisen from a contract between the parties for the Respondent to provide games planning, project management and work force services to the Petitioner.

In the section 34 Petition, preliminary objection was raised on ground of limitation.

After dealing with certain corrections and addendums made to the award, the last correction was sent by the AT to the Petitioner by way of a scanned copy in May 2018.

Regarding the start of limitation the Court observed as follows:

 

1. The period of start of limitation for filing a petition under Section 34 stood extended till May 2018 when the AT suo Moto corrected and sent the correction of the award to the parties. (Section 33 of the A&C Act, Relied on USS Alliance Vs. State of Uttar Pradesh and ors. 2023 SCC Online SC 778).
2. It cannot be accepted, that since the Petitioner had made a request under Section 33 of the A&C Act (for correction of the award), and the AT informed them In June 2018, that they had become functus officio, that date would be start of limitation.
3. It is also important, that despite the physical signed copy of the addendum award being received by the Petitioner on 1st June 2018, the start of limitation would be May 2018 itself, when the scanned copy of the award was received by the Petitioner.
4. “Signed copy” as mentioned in Section 31(5) of the A&C Act, for purposes of start of limitation, means a copy authenticated by the arbitrator, it doesn’t mean the physical ink signed copy. Service of Scanned copy is enough. (Reliance placed on Continental Telepower Industries Ltd. Vs. Union of India and Ors & Delhi Urban Shelter Improvement Board Vs. Lakhvinder Singh 2017 SCC OnLine Del 9810 ).

 

In view of the above, the Court observed that there was a delay of 2 days beyond the three month period provided in Section 34(3). However, as per the proviso, delay could be condoned upto a further period of 30 days. In light of this, the Court granted the Petitioner liberty to file a condonation of delay application.

 

??????????? ?? ????????? ????????? ?????????, ????? ???? ??? ???????????? ????

Liberty Footwear Company v. Liberty Shoes Ltd. (Delhi High Court, decided on 21.08.2023), was a Petition under Section 9 of the Arbitration & Conciliation Act, 1996 (“A&C” Act).

The Petitioner was proprietor of #trademark ‘LIBERTY’, for which parties entered into a licence agreement.

Disputes arose between parties when the Respondent allegedly defaulted on 17 Crores of licence fee with consistent delays in payments, whereafter #arbitration was invoked.

The Petitioner sought relief in section 9 for restraining the Respondent from using the Petitioner’s mark ‘LIBERTY’ amongst other reliefs.

The Respondent’s plea was that since, the first Section 9 Petition had been filed before District Court, karnal where a status quo order had already been passed, Delhi High Court lacked jurisdiction owing to Section 42 of the A&C Act.

The Court observed as follows:

1. The Arbitration clause in the agreement did not provide for a seat of arbitration.
2. Where the seat is designated, the Courts of the seat alone have jurisdiction. But Where no seat is designated by the Agreement or the seat is only a convenient venue, then there may be several Courts where part of cause of action may arise. (BGS SGS SOMA JV v. NHPC Limited, (2020) 4 SCC 234).
3. Once an application has been filed under Part I, that Court alone has jurisdiction over the arbitral proceedings & all subsequent applications. Section 42 bars parties from approaching any other court. (General Manager East Coast Railway Rail Sadan v. Hindustan Construction Co. Ltd., 2022 SCC OnLine SC 907).
4. There can be no debate that the first Court where a party to an Arbitration Agreement files an application under Part I of the A&C Act must be (a) a Court of competent jurisdiction & (b) the Petition must be validly/properly constituted. (Priya Hiranandani Vandervala v. Niranjan Hiranandani 2016 SCC OnLine Del 3435).
5. It is not for this Court to decide whether the petition under Section 9 before District Court, Karnal has been filed with a malafide intent or hidden agenda. It is for that Court itself to decide this question. (Priya Hiranandani Vandervala v. Niranjan Hiranandani 2016 SCC OnLine Del 3435).
6. It could also not be accepted that since the Respondent’s website was accessible from Delhi (interactive website), therefore Courts at Delhi had jurisdiction. This is because this was not an infringement action, but an action arising out of termination of agreement. In such case, the jurisdiction is of the Court where the termination took effect. (Hero Electric Vehicles Pvt. Ltd v. Lectro E-Mobility Pvt. Ltd., 2021 SCC OnLine Del 1058).

In view of the above, the Court, without expressing any views on maintainability regarding the action initiated in District Court, Karnal, dismissed the present Petition.