Date:October 3, 2022
Whether mere notice of conciliation by the MSME facilitation council wipe out the legal defence of limitation?
Law of limitation prescribes money claims be filed within 3 years from the date of cause of action arose.
So, when a claim is filed before the MSME facilitation council, the facilitation council issues notice to the respondent for conciliation, and the respondent participates in such proceeding, questions arise as to :
1. Whether it would be open for the respondent to raise the issue of the claim being barred by limitation in such proceeding? or
2. As the facilitation council has issued notice to the respondent for conciliation, whether the respondent be precluded from raising the defence of limitation?, or
3. Whether by participating in such a conciliation proceeding, the respondent is precluded from raising the defence of limitation?
The Honourable Delhi High Court in the case i.e. Piya Bajwa vs Micro and Small Enterprises decided on 29th January 2021 in W.P No.1134/2021, answered to above questions.
Delhi High Court held that merely because notice for exploring conciliation has been issued does not mean that the legal defence of limitation would be wiped out in case the dispute is not resolved.
In this case, the petitioner received a letter from the facilitation council by which the petitioner was called to participate in a conciliation process and also file a reply.
Petitioner approached the Delhi High Court with apprehension that the council has taken a decision that the petitioner ought to release the outstanding dues.
The petitioner also contended that the claim is time-barred and a decision could not have been taken without hearing the petitioner.
The petitioner also contended that as the claim is time-barred therefore before initiating the conciliation process the question as to whether the claim is maintainable should be considered by the facilitation council. Without doing the same the conciliation process started would be premature.
The court held that:
The apprehension expressed by the petitioner that the petitioner may be forced to resolve the time-barred claim would be assuaged by clarifying that in the conciliation process, the petitioner would be entitled to place its case in an informal manner, along with recordings therein that the claim itself is time-barred. If conciliation fails, then the parties can avail of their remedies in accordance with law under section 18 of the MSME act.
The participation in the conciliation process shall be without prejudice to the rights and contentions of the parties concerned.
The Court also observed that
Exploring the conciliation or mediation prior to invoking arbitration or litigation is this scheme not only in MSME act but also in various other laws for example Section 89 of CPC laid enormous emphasis on exploring settlement where there existed an element of settlement which may be acceptable to the parties.
This process of pre-litigation mediation has statutory recognition in the commercial court’s act, 2015 where under section 12 A pre-institution meditation and settlement have been provided for.
The court held that merely because notice for exploring conciliation has been issued does not mean that the legal defence of limitation would be wiped out in the case the dispute is not resolved.