M/S HPCL Bio-Fuels Ltd. Vs M/S Shahaji Bhanudas Bhad
2024 INSC 851; [2024] 12 S.C.R. 133
Coram: Hon’ble Chief Justice Dr. D.Y. Chandrachud (Former) & Hon’ble Justice J.B. Pardiwala
Forum: Hon’ble Supreme Court of India
Case No.: Civil Appeal No. 12233 of 2024
Date of Decision: November 07, 2024

Facts & Background:

  • M/S HPCL Bio-Fuels Ltd., a wholly-owned subsidiary of Hindustan Petroleum Corporation Ltd., was a Government company under Section 4(35) of the Companies Act, 2013 and was the Corporate Debtor- Appellant.
  • M/S Shahaji Bhanudas Bhadis, the sole proprietor of M/S S.S. Engineer, the Financial Creditor, was the Respondent, manufacturing, supplying, and erecting equipment and machinery for sugar factories and allied products.
  • The Appellant floated tenders between 27.06.2012 and 30.08.2012 to enhance process stations and the Boiling House at Lauriya and Sugauli, wherein the Respondent was the successful bidder.
  • The Appellant issued purchase orders in October and November 2012 to enhance the Boiling House capacity on a turnkey basis. During execution, disputes arose concerning delays, material quality, and non-compliance, resulting in ineffective attempts at conciliation.
  • On 13.06.2013, the Appellant issued tenders for completing specific works and supplies at Sugauli and Lauriya. Subsequently, the Respondent awarded purchase orders in August 2013 on a lump-sum turnkey basis.
  • The Respondent raised invoices between 29.03.2013 and 25.03.2014, claiming an aggregate amount of ₹38,18,71,026, while the Appellant disbursed ₹19.02 crore by 07.11.2013, resulting in an outstanding balance of ₹18,12,21,452.
  • On 02.02.2014, the Respondent requested the Appellant to release the outstanding amount, which the Appellant refused on 04.02.2014. On 09.07.2016, the Respondent issued a legal notice demanding payment and invoking arbitration, which the Appellant failed to answer.
  • On 30.08.2017, the Respondent issued a demand notice under Section 8 of the IBC, 2016, seeking payment of outstanding dues with interest. Thereafter, on 16.02.2018, it filed an arbitration petition under Section 11 of the Arbitration and Conciliation Act, 1996, before the Bombay High Court, which was subsequently withdrawn on 01.10.2018.
  • On 15.10.2018, the Respondent filed an application before NCLT, Kolkata, under Section 9 of IBC, seeking the initiation of CIRP against the Appellant. The Appellant opposed, citing pre-existing disputes and an arbitration invocation notice. On 12.02.2020, NCLT admitted the application and appointed an IRP.
  • The Appellant challenged the NCLT's order before the NCLAT and the Supreme Court. On 15.07.2022, a two-judge bench of the Supreme Court dismissed the appeal, affirming the NCLAT’s order.
  • Following the dismissal of insolvency proceedings, the Respondent filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, before the Bombay High Court, which allowed the petition, appointed an arbitrator, and ruled it was not time-barred.
  • Aggrieved by the Bombay High Court's order, the Appellant filed the present appeal before the Supreme Court.

Main Issue:

  1. Was the Respondent’s fresh application under Section 11(6) of the Arbitration & Conciliation Act, 1996, maintainable, particularly as the High Court had not granted liberty upon withdrawing the initial application?
  2. Was the period spent by the Respondent in pursuing proceedings under the IBC liable to be excluded while computing the limitation period for filing the application under Section 11(6) of the Arbitration & Conciliation Act, 1996?
  3. Whether the delay caused by the Respondent in filing the fresh arbitration application under Section 11(6) of the Arbitration Act, 1996, be condoned under Section 5 of the Limitation Act, 1996?