CASE TITLE:
National Seeds Corporation Ltd Vs National Agro Seeds Corporation
DATE OF ORDER:
31TH MAY,2022
JUDGE(S):
HON’BLE JUSTICE Rajiv Shakdher and Justice Jasmeet Singh
PARTIES:
PETITIONER:NATIONAL SEEDS CORPORATION
RESPONDENT: NATIONAL AGRO SEEDS CORPORATION
IMPORTANT PROVISIONS
Section 18 of the Limitation Act; Section 25(3) of the Indian Contract Act.
SUBJECT
According to Section 18 of the Limitation Act, the Division Bench of Justice Rajiv Shakdher and Justice Jasmeet Singh held that the period of limitation for an amount shown as outstanding in the book of accounts would be extended from the date of such acknowledgement.
BRIEF FACTS
- The Uttar Pradesh government had announced several farmer subsidy schemes. National Seeds Corporation Ltd. (Appellant) is a government of India undertaking that was required to supply the seeds to the farmer at a 50% subsidised price and receive the remaining 50% from the government of Uttar Pradesh.
- As a result, the appellant and the respondent entered into a dealership agreement on October 24, 2009, for the supply of seeds to the farmer. The respondent had agreed to sell certified seeds of approved varieties at the subsidised price in exchange for a trade discount. As a result, it invoked the agreement's arbitration clause, and the dispute was referred to arbitration.
- The arbitral tribunal granted the respondent's claims while rejecting all of the respondent's counter-claims. As a result, the appellant filed an objection under Section 34 of the A&C Act, which was also denied by the Single Bench in an order dated January 5, 2022. As a result, the appellant filed an appeal against the order dated 05.01.2022 under Section 37 of the Act.
- The appellant challenged the order dated January 5, 2022, as well as the arbitral award on the following grounds: The respondent's claims were ex-facie barred by limitation because they related to subsidies from 2010 to 2014, and the statement of claim was filed in 2018. The 3-year period apparently expired prior to the filing of the statement of claim, so the arbitrator and the Ld. Single Judge erred in allowing the claims. Because the appellant refused to acknowledge its obligation to pay, the statute of limitations was never extended. The respondent's right to a trade discount was conditional on the government paying the subsidy amount.
ANALYSIS BY THE COURT
- The Court referred to various letters sent by the appellant to the respondent in which the respondent acknowledged its obligation to pay the trade discount. The Court ruled that the arbitral tribunal was correct in concluding that the aforementioned notices constituted a "promise to pay" under Section 25(3) of the Indian Contract Act.
- The court here acknowledged debt as well as the debt being within the limitation period.
- The court laid emphasise on the scope of intervention in an appeal under Section 37 of the Arbitration and Conciliation Act of 1996.
- Furthermore, the Court held that the arbitral tribunal was correct in applying Section 18 of the Limitation Act when the appellant admitted the amount due to the respondent as outstanding in its book of accounts/ledger and the period of limitation would be extended from the date of such acknowledgement, and thus the respondent's claims were within limitation.
- The Court also observed that the Arbitral Tribunal determined, in accordance with Clause 8 of the Agreement, the trade discount disbursed would be recovered if it was determined that the respondent had breached its obligations to supply the seeds in the notified districts.The Arbitral Tribunal's decision is without flaw.
CONCLUSION
The Court rejected the appellant's argument that the payment of the trade discount was contingent on the government's payment of a subsidy to the appellant because there was no provision in the agreement for such a contingency. As a result, the Court dismissed the appeal. The Court went on to say that a letter in which a party explicitly admits the amounts due and payable is a "promise to pay" within the meaning of Section 25(3) of the Indian Contract Act.
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