Karnataka High Court dismisses MML's Counterclaim of over Rs. 1,100 crore against JSW Steel

Karnataka High Court dismisses MML's Counterclaim of over Rs. 1,100 crore against JSW Steel

Justice Krishna S. Dixit of the Karnataka High Court rejected Mysore Minerals Ltd. (MML) (respondents) plea to add a counterclaim of about Rs. 1,72.79 crore to a petition filed by Jindal South West (JSW) (petitioner) which was seeking a refund of about Rs. 272 crore from the state-owned company.

JSW Steel had originally filed a plea to claim the refund of excess premium of about Rs 272 crore paid by it in service for supply of iron ore. The company had entered into two lease-cum-sale deeds with the state government in 2006 for expansion of its integrated steel plants. However, when the Supreme Court banned mining operations in Karnataka in 2011, this Memorandum of Understanding (MoU) was kept on hold, leading to a dispute between JSW Steel and MML.

Initially in 2012, JSW Steel had approached the High Court. MML had filed its response in the beginning of 2013. Subsequently, MML sought the court's permission in 2016 to amend its response and file a counterclaim against JSW Steel for Rs 1172.79 crore along with 18 per cent interest.

The pith and substance of petitioner's challenge was that the Counterclaim cannot be made by way of amendment of Written Statement after the expiry of statutory period of limitation. They contended that a Counterclaim is nothing but a 'deemed suit' for all practical purposes and therefore it was bound by the same limitation period like in the case of money suit. If a suit were to be filed on the cause of action on which the respondent's Counterclaim is founded, it would have failed because of the expiry of limitation period, asserted the petitioners.

On the contrary, respondent emphasized on three factors for the justification. First 'doctrine of relation back' whereby amendments become retrospective in the effect from the date of filing of the pleadings concerned. Second, unassailability of the discretionary order granting leave to amend the Written Statement. Third, the foundational facts supporting the Counterclaim being already pleaded in the Written Statement.

The Court in its findings summed up that Order VIII Rule 6-A Civil Procedure Code (CPC) does not put an embargo on filing the counterclaim after filing the written statement, rather the restriction is only with respect to the accrual of the cause of action. "This does not give absolute right to the defendant to file the counterclaim with substantive delay, even if the limitation period prescribed has not elapsed. The court has to take into consideration the outer limit for filing the counterclaim, which is pegged till the issues are framed", added the Court.

The Court elucidated primarily on two question of significance:

First, whether leave to incorporate the time- barred Counterclaim by way of amendment to the Written Statement can be granted under Order VI Rule 17 of CPC, 1908and second whether Court granting leave to amend the Written Statement for taking up a Counterclaim can relax the period of limitation prescribed for filing the same, by invoking the doctrine of relation back.

The Court also pointed out the difference between 'bar of limitation vs. delay and latches.' The Court observed, "the former absolutely bars the recourse to remedy; and the later may deny the remedy in the proceedings in question, the right to remedy being kept open for pursuit in other proceedings; prescription of period of limitation for claiming legal remedies is normally the prerogative of the legislature, whereas, the ground of 'delay & latches' is a matter of discretion inhering the Courts. This discretion needs to be exercised in accordance with the rules of reason & justice, is beside the point."

"The right to remedy ordinarily commits legal suicide if the limitation period prescribed therefor lapses; no court/authority has discretion to entertain the claim for its grant; Section 3(1) of the Limitation Act, 1963 dictates their rejection at the threshold, regardless of the contention from the other side", Court added.

The Court observed, "the provisions of Section 3(1) read with Section 3(2)(b)(ii) of the Limitation Act, by necessary implication exclude the invocation of the doctrine of relation back, while treating an amendment application under Order VI Rule 17 of the Code for introducing a Counterclaim to the Written Statement; the said doctrine does not come to the rescue of the respondent because of mandatory prescription of a specific limitation period by the Act for the filing of a suit which governs the filing of a Counterclaim since it is deemed to be a suit by fiction of law; an argument to the contrary cannot be countenanced without manhandling the text of the provisions enacted in 1963 Act and in CPC".

In the light of foregoing Court ruled that the subject application of the respondent (MML) seeking leave to amend the written statement for introducing the counterclaim was dismissed, which came as a major relief to the Sajjan Jindal-owned JSW Steel, while allowing the writ petition.