Bombay High Court
Multi Commodity Exchange Of India Ltd. … vs M/S. Madhya Bharat (International) … on 13 March, 2025
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2025:BHC-AS:11944-DB
PALLAVI COMM APPEAL NO 17 of 2024 MCEX Final.doc
MAHENDRA
WARGAONKAR
Digitally signed by
PALLAVI MAHENDRA
WARGAONKAR IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Date: 2025.03.13
21:04:33 +0530 CIVIL APPELLATE JURISDICTION
COMMERCIAL FIRST APPEAL NO.17 OF 2024
Multi Commodity Exchange of India Ltd. )
Company incorporated under the provisions )
of the Companies Act, 1956 )
having its registered office at Exchange Square, )
Suren Road, Chakala Andheri (East), )
Mumbai - 400 093. )
Through its Authorised representative )
Mr. Manoj Jain (Chief Operating Officer) ) ...Appellant
(Orig. Plaintiff)
Versus
1. M/s. Madhya Bharat (International) )
Pvt. Ltd. incorporated under the provisions )
of the Companies Act and having its registered )
office at Unit No.630 & 631, Usha Nagar Extn.,)
Indore - 452 001, )
Madhya Pradesh. )
2. Mr. Ram Kumar Agarwal )
having his address at 630, Usha Nagar Extn., )
Indore - 452 001. )
3. Ms. SnehPrabha Agarwal )
having his address at 630,Usha Nagar Extn., )
Indore - 452 001. )
4. Mr. Ankit Agarwal )
having his address at 630/631, )
Usha Nagar Extn., Opp. Dashara Maiden )
Indore - 452 001. ) ...Respondents
(Orig. Defendants)
__________
Mr. Siddhesh Bhole a/w Mr. Ashwin Pimpale and Mr. Apoorva Kulkarni i/b.
SSB Legal & Advisory, for the Appellant.
Mr. Sunil Chaturvedi i/b. Chiyarajawala & Co., for the Respondents.
__________
CORAM : G. S. KULKARNI &
ADVAIT M. SETHNA, JJ.
RESERVED ON : 15 JANUARY 2025
PRONOUNCED ON : 13 MARCH 2025
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JUDGMENT (Per Advait M. Sethna), J. :
1. This Commercial First Appeal is filed against the judgment dated 8
March 2022 passed by the City Civil Court, Dindoshi in Commercial Suit
No.701 of 2020 (“Impugned Judgment” for short).
2. Considering the order passed by a co-ordinate Bench of this Court dated
13 November 2024 this appeal ought to be taken up finally at the stage of
admission.
3. Admit. We have heard the learned counsel for the parties.
4. The appellant (plaintiff) is the Multi Commodity Exchange of India
Limited (“MCX” for short) a company dealing with facility of online trading,
clearing and settlement of commodity derivatives. The respondent no.1
(defendant no.1) is a registered member of the appellant-exchange who regularly
used the online platform provided by the appellant-exchange for the purpose of
trading and the remaining defendants are the Directors of respondent no.1.
5. By way of the present appeal, the appellant (plaintiff) has assailed the
impugned judgment and order passed by the Commercial Court by which the
commercial suit filed by the appellant (plaintiff) for recovery of a sum of
Rs.12,12,980/- with further interest @ 18% p.a. from the date of filing of the
suit, till the realization of the entire amount was dismissed, on the ground that it
was filed beyond the period of three years under the provisions of the Limitation
Act, 1963 (“Limitation Act” for short) and hence, was time-barred.
6. The issues framed by the trial Court for determination read thus :-
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Sr. POINTS FINDINGS
No.
1. Whether the plaintiff is entitled to recover an amount of No.
Rs.12,12,980/- with the interest at rate of 18% p.a. from the
defendants?
2. Whether the suit is within limitation? No.
3. What order and decree? Suit is dismissed.
7. With the assistance of the learned counsel for the parties, we have
perused the record.
8. Mr. Siddhesh Bhole, learned counsel for the appellant (plaintiff), at the
very outset would refer to the plaint dated 7 October 2022 to contend that
under the terms of membership, respondent no. 1 (defendant no.1) was required
to pay annual fees, VSAT charges, User ID charges, penalty (as applicable),
submit annual report as well as annual compliance report to maintain margins
and fulfill other documents. However, with the passage of time, the respondents
(defendants) began to default on such payments and submission of reports. Such
defaults were in the nature of outstanding amounts of annual charges/dues/fees,
payable to the appellant (plaintiff) by the respondents (defendants) towards
membership fees and other charges pertaining to the year 2008-2009 to 2015-
2016.
9. As averred in the plaint, the appellant (plaintiff) by its letter dated 7
April 2017, highlighted the default committed by the respondents (defendants)
and called upon the respondents (defendants) to make payment and rectify such
defaults. The appellant (plaintiff), however, did not receive any response from
the respondents (defendants), because of which, the appellant (plaintiff) sent
another letter dated 31 May 2017 calling upon the respondents (defendants) to
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make the payments. However, there was yet no response, pursuant to which the
appellant (plaintiff) once again addressed another letter to the respondents
(defendants) on 16 November 2017.
10. Mr. Bhole, referring to the plaint would point out that as the respondents
(defendants) failed to respond to the above communication, the appellant
(plaintiff), issued a show cause notice to the respondents (defendants) on 2
January 2018, to the effect that if the respondents (defendants) failed to
reply/respond such show cause notice, respondents (defendants) would be
declared as a ‘Defaulter’. There was no response to such show cause notice from
the respondents (defendants). In view thereof, another notice dated 22 February
2018 was sent to the respondents (defendants) by the appellant (plaintiff),
calling upon the respondents (defendants) to appear for a personal hearing.
However, the respondents (defendants) did not attend the personal hearing. As
a result thereof, the respondents (defendants) were declared as a ‘Defaulter’ by
the appellant (plaintiff) vide a communication dated 8 March 2018. The
appellant (plaintiff) also published notice in widely circulated newspapers dated
20 March 2018 and 21 March 2018, respectively, informing the public about the
declaration of the respondents (defendants) as defaulter and inviting claims
from the clients of the appellant (plaintiff) to submit their claim(s) against the
respondents (defendants) if any.
11. Pursuant to above, the appellant (plaintiff) vide notice dated 17 May
2018, called upon the respondents (defendants) to hand over to the appellant
(plaintiff) all books and other documents as per the Rule 41(f) of the Exchange
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Rules and to provide list of the respondents’ (defendants’) debtors and creditors.
However, to this also there was no response from the respondents (defendants),
leading the appellant (plaintiff) on 18 December 2018 to issue a recovery notice
to the respondents (defendants) calling upon them to make a good payment of
Rs. 11,05,573.43 along with interest @ 18 percent amounting to Rs.
1,07,407.22. The respondents (defendants) not only failed to respond to such
notice, but also did not make the payment as required under the terms of its
membership and thus defaulted. It was in such circumstances, that Mr. Bhole
would submit that the appellant (plaintiff) was constrained to file the said suit
for recovery of Rs.12,12,980.65 inclusive of 18% interest, before the Trial Court.
12. Mr. Bhole has drawn our attention to the various averments as made in
the plaint in support of his submissions and the prayers made therein.
According to him, the cause of action to file the suit in question had arisen,
when the respondents (defendants) failed to make payment of its annual fees
and other dues and in view thereof, respondents (defendants) was declared as a
defaulter by the appellant (plaintiff) on 8 March 2018. It is contended that
pursuant to such declaration, the appellant became entitled to recover a sum of
Rs.12,12,980.65 in total, i.e., principal along with interest @ 18% p.a. from the
respondents (defendants). In this regard, he would place reliance on paragraphs
13 and 14 of the plaint which read thus:-
“13. In the circumstances, this Hon’ble court be pleased to pass a
decree ordering and directing all the Defendants to pay the
Principal amount of Rs.11,05,573.43/- along with the interest
@18% of Rs.1,07,407.22/-i.e. Rs.12,12,980.65/- in total to the
Plaintiff, as Particulars of claim annexed hereto and marked as
Exhibit J.
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14. The plaintiff states that the cause of action arose when the
Defendant No. 1 did not make payment of its annual fees and
other dues and as a result the Plaintiff declared the Defendants as
a defaulter on March 8, 2018.”
13. According to Mr. Bhole, for the purposes of ascertaining the cause of
action, as also when the right to sue accrued in the above factual backdrop, the
Rules of Multi Commodity Exchange of India Limited (as amended upto
1.7.2017) (The “MCX Rules” for short) framed under Section 4(5) read with
Section 7(A) of the Securities Contract (Regulation) Act, 1956 had became
relevant.
14. In this regard it is submitted that Rule 41 of the MCX Rules which
provides for default and declaration of defaulter, had become applicable. It is
submitted that under clause (iv) of Rule 41, any member of the appellant-
exchange who fails or neglects to pay subscriptions, security deposit or any other
charges, levies for continuous period of six months, such member would be
declared as defaulter under Rule 41 of the said Rules (supra). According to Mr.
Bhole there is a procedure contemplated under the MCX Rules for declaring a
member as a defaulter upon happening of any of the events/ instances as
stipulated under Rule 41 of the MCX Rules (supra). He would urge that, non-
payment of the membership fees, dues and other charges and failure to deposit
the same with the appellant (plaintiff) would make the respondents (defendants)
defaulter under the said Rules.
15. According to Mr. Bhole, upon following the procedure laid down under
the said Rules, respondents (defendants) were declared as a defaulter on 8
March 2018 by the appellant (plaintiff). It is not in dispute that the default in
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payment of membership fees, charges, dues, etc., payable to the appellant
(plaintiff) by the respondents (defendants) pertained to the period from 2008-
2009 to 2015-2016. Mr. Bhole in this context would submit that under the
MCX Rules, the cause of action and the right to sue would accrue only on and
from the date of the defaulting member is declared as a defaulter, i.e. on or from
8 March 2018. Mr. Bhole would next place reliance on Rule 42A to submit that
pursuant to such declaration of respondents (defendants) as defaulter, the
competent authority under the MCX Rules, is empowered to initiate recovery
proceedings against or in the name of the defaulter.
16. Mr. Bhole would next contend that considering the nature, framework
and scheme of the MCX Rules (supra), the appellant (plaintiff) can initiate
proceedings in a Court against such defaulters for recovering any amounts due
and payable from them. According to him, for instituting such legal proceedings
for recovery of dues from the defaulting members, the time frame for instituting
such proceedings would have to be reckoned from the date on which such
member is adjudged/declared as defaulter, under the MCX Rules (supra) after
following the procedure contemplated therein.
17. Mr. Bhole would then submit that the trial Court ought to have
considered that the issue of limitation entails a mixed question of law and fact.
Overlooking this vital aspect, the trial Court proceeded to dismiss the suit solely
and erroneously on the ground that it was not filed within the stipulated period
of three years as mandated under the Limitation Act. Thus, he would urge that
the impugned judgment of the trial Court cannot be sustained, it deserves to be
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set aside and the appeal be accordingly allowed.
18. On the other hand, Mr. Sunil Chaturvedi, learned counsel for
respondents (defendants) would submit that there is no error, irregularity much
less illegality whatsoever in the impugned judgment. He would at first refer to
the prayer in the plaint from which he submits that it was crystal clear, that the
suit of the appellant (plaintiff) was purely for recovery of monies, claimed to be
payable jointly and severally by the respondents (defendants) to the appellant
(plaintiff). He would urge that it is not in dispute that the appellant (plaintiff)
was fully aware of the nature of defaults in purported payment of membership
fees, dues and other charges by the respondents (defendants) that arose during
the period 2008-2009 which continued upto 2015-2016. According to him,
even going by the documents annexed to the plaint, more particularly, the letter
dated 2 January 2018 addressed by the appellant (plaintiff) to the respondents
(defendants) would clearly indicate that such amounts were attributable to be
the annual fees, charges, etc. payable by the respondents (defendants) to the
appellant (plaintiff) relating to the said period i.e. 2008-2009 to 2015-2016.
The liability to pay such amounts was attributable to defaults in making
payments by respondents (defendants) arising in such period. He would also
submit that the show cause notice dated 2 January 2018 under Rule 41A of the
MCX Rules was issued by the appellant (plaintiff) to the respondents much after
the cause of action had arisen during the period of default, that too without any
justification for such belated action.
19. Mr. Chaturvedi would urge that, Rules 41A and 42 the MCX Rules
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which deal with declaration of defaulter are not relevant and/or applicable for
the purposes of ascertaining the accrual of right to sue from which the limitation
is to be reckoned. Therefore, for instituting the said money recovery suit against
the respondents (defendants) the cause of action arose on the default of non-
payment by the respondents (defendants) which had taken place during the
2008-2009 to 2015-2016. Such default had no connection whatsoever with the
subsequent and separate action of declaration of the respondents (defendants) as
a defaulter, under the MCX Rules.
ANALYSIS & CONCLUSION
20. As the facts noted above would indicate that a suit for recovery of money
was filed by the appellant (plaintiff) against respondent (defendant) before the
trial Court for a decree that the respondent (defendant) be ordered to pay a sum
of Rs.12,12,980.65/- as per the particulars of claim to the appellant (plaintiff)
with applicable interest @ 18% p.a. The defaults in the payments arose during
the period 2008-09 continuing until the year 2015-16 during which the
respondent (defendant) consistently failed to pay dues in the nature of
membership charges, fees/ penalties to the appellant (plaintiff). It is on 8 March
2018 that the respondent (defendant) was declared as a defaulter by the
appellant (plaintiff) under the MCX Rules.
21. In the given facts a peculiar submission is canvassed by Mr. Bhole on
behalf of the appellant (plaintiff). This is to state that although the defaults in
payments by the respondent (defendant) arose during the period 2008-09 to
2015-16, it is the action of the appellant (plaintiff) declaring the respondent
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(defendant) as a defaulter which would be material and relevant for the purposes
of determining the limitation period of 3 years to file such suit under the
Limitation Act. Therefore, according to Mr. Bhole, as the respondent
(defendant) was lebelled/declared as a defaulter on 8 March 2018, the period of
3 years would reckon from such date and not from when the defaults arose. We
are called upon to test the legality of such stand of the appellant (plaintiff) in the
context of the impugned judgment of the trial Court which dismissed the suit of
the appellant (plaintiff) on the ground of it being barred by limitation as it was
filed beyond 3 years. The primary question which arises for consideration is
whether the impugned judgment dated 8 March 2022 holding that the suit was
barred by limitation, can be sustained.
22. We may at the threshold note the various heads of amounts, due and
payable by the respondents (defendants) to the appellant (plaintiff) which read
thus:
Sr. No. Particulars of Dues/Charges/Fees/Penalties Period of Amount
levy (in Rs.)1 Non-Compliance Charges on shortages – 3383.08
2 User ID charges 2008-09 26422.00
3 Inspection Penalties (non-compliance in Inspection for F.Y. 2008-09 48818.27
2006-07) (Out of Total Penalty of Rs.50,000/-, Rs.1181.73
was recovered on 24.12.2008)
4 Minimum Usage Fees (Min Usage Fees for Q4) 2008-09 28090.00
5 Inspection Penalties (Non Compliance observed in FMC 2008-09 5200.00
Inspection report for the period 01-04-06 to 31-08-2007)
6 VSAT Installment 2008-09 5000.01
7 User ID charges 2009-10 22060.00
8 User ID charges 2009-10 26472.00
9 Minimum Usage Fees (Min Usage Fees for Q1) 2009-10 27575.0010 Annual Fees 2009-10 82725.00
11 Annual Returns penalty 2009-10 20600.00
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13 Annual Compliance Report penalties (Non Submission of 2009-10 2000.00
Annual Compliance Report for FY 2008-09-Period
01.07.2009 to 20.07.2009)
14 Annual Compliance Report penalties (Non Submission of 2009-10 2900.00
Annual Compliance Report for FY 2008-09 for the period
21.07.2009 to 18.08.2009)
15 Minimum Usage Fees (Min Usage Fees for 03) 2009-10 27575.00
16 ACR Penalties (Non-Submission of ACR for FY 2008-09 2009-10 4300.00
(19-08-2008 to 30-09-2009 Rs.100/- per day for 43 days)
17 Annual Compliance Report penalties (Annual Compliance 2009-10 4600.00
Report Charges)
18 Minimum Usage Fees (Min Usage Fees for Q4) 2009-10 27575.00
19 Annual Returns penalty 2009-10 2100.00
20 VSAT/Bandwidth/NPN Charges 2009-10 28000.0121 Annual Compliance Report penalties (Annual Compliance 2010-11 13600.00
Report Charges-16/11/2009 to 31/03/2010)
22 Annual Fee 2010-11 82725.00
23 Annual Returns Penalty 2010-11 11500.00
24 Annual Compliance Report penalties (Non submission of 2010-11 6100.00
Annual Compliance Report for period 01.04.2010 to
31.05.2010)
25 Annual Returns penalty 2010-11 18300.00
26 Annual Returns penalty 2010-11 3100.00
27 VSAT/Bandwidth/NPN Charges 2010-11 28000.01
28 Annual Compliance Report penalties 2011-12 3000.00
29 Annual Fees 2011-12 82725.00
30 VSAT/Bandwidth/NPN Charges 2011-12 28000.01
31 Inspection Penalties (Annual Report Charges) 2011-12 40000.00
32 Annual Fees 2012-13 84270.00
33 VSAT/Bandwidth/NPN Charges 2012-13 28000.00
34 Annual Fees 2013-14 84270.00
35 Annual Fees 2014-15 84270.00
36 Annual Fees 2015-16 84270.00
37 Non-Compliance Charges on shortages (Cir-140 (1-l) dated 2015-16 473.04
11-04-2013)
Total 11,05,573.43A bare perusal of the above would demonstrate that the default in payments
of the above sums of monies by the respondents (defendants) to appellant
(plaintiff), commenced in the year 2008-2009 and continued until the year 2015-
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2016, which is not controverted by the appellant (plaintiff). In view thereof, at this
juncture, we refer to the applicable MCX Rules which read thus:-
“41. DEFAULT
a. Declaration of DefaulterA member of the Exchange shall be declared by the relevant authority
a defaulter, where the monies, commodities, securities and bank
guarantees deposited with the Exchange are nor adequate to discharge
the members obligations and liabilities.
A member of the Exchange shall also be declared a defaulter by
direction of the Governing Board, or a Committee, or the Managing
Director, on the happening of any one or more of the following
instances
i) If he is unable to fulfill his engagements or obligations; or
ii) If there is inadequate balance in his designated bank account and
as a consequence an instruction issued by the Exchange for
debiting his account towards recovery of pay in dues, margin
dues or any other dues fails;
iii) If he admits or discloses his inability to fulfill or discharge his
engagements, obligations or liabilities; or
iv) If he fails or is unable to pay within the specified time the
damages and the money difference due on a closing out effected
against him under the Bye-Laws/Regulations of the of the
Exchange; or
v) If he fails to pay any sum due to the Clearing House/Clearing
Corporation] or to deliver to the Clearing House ST/Clearing
Corporation] any commodity or instrument on the due date;
vi) If he fails to pay/reimburse to the Settlement Guarantee Fund of
the Exchange in respect of the amount used from it for the
purpose of fulfilling settlement obligations on this behalf.
b. i) If he fails to pay or deliver such money and /or such
commodities and / or instruments arising out of an award given
by the Arbitrator under the Arbitration proceedings provided in
the Bye-Laws of the Exchange; or
ii) If he fails to pay or deliver such money and/or such
commodities and / or instruments arising out of a transaction
executed on the Exchange, provided such obligation is not
disputed by the member/trading member; or
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iii) If he fails to pay or deliver to the Exchange or Relevant
Authority all monies, delivery commitments and other assets due
to a member of the Exchange who has been declared a defaulter
within such time as directed by the Managing Director.
iv) If any Member of the Exchange fails or neglects to pay
subscription, security deposit or any other levies as required by
the Board for a continuous period of six (6) months.
v) If he has been declared as a defaulter by any other
Commodity Exchange.
vi) If he has been adjudicated as an insolvent or a winding up order
has been passed against such member then such member shall be
ipso facto declared as a defaulter although he may not be at the
same time a defaulter on the Exchange.”
“42A. Proceedings in name of or against the Defaulter
The Relevant Authority shall be entitled to but not bound to:
a. initiate any proceedings in a court of law either in the name of the
Exchange or in the name of the defaulter against any person for the
purpose of recovering any amounts due to the defaulter,b. initiate any proceedings in a court of law either in the name of the
Exchange or in the name of creditors (who have become creditors of
the defaulter as a result of transactions executed subject to and in
accordance with Bye-laws, Rules and Business Rules of the Exchange)
of the defaulter against the defaulter for the purpose of recovering any
amounts due from the defaulter. The defaulter as well as the creditors
of the defaulter shall be deemed to have appointed the Exchange as
their constituted attorney for the purpose of taking such proceedings.”
We may note the provisions of Article 113 of the Limitation Act which
reads thus:
Sr. No. Description of suit Period of Time from which
limitation period begins to run
113. Any suit for which no period of Three years. When the right to sue
limitation is provided elsewhere accrues.
in this Schedule.
The learned trial Judge has observed that the suit being for recovery of
monies was required to be filed within aforementioned period of three years.
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The cause of action to file such suit had arisen upon defaults in payments by the
respondents (defendants) to the appellant (plaintiff), which arose, undisputedly,
during the period 2008-2009 to 2015-2016. For this reason, the trial court held
that the appellant (plaintiff) having instituted the suit belatedly in the year 2019
was not within the prescribed period of limitation of three years as stipulated
under Article 113 of the Limitation Act (supra).
23. We may refer to the prayers in the plaint, which makes it clear that the
suit was filed as a pure money suit by the appellant (plaintiff) for a decree jointly
and severally against the respondents (defendants) to pay a sum of
Rs.12,12,980.65 as per particulars of claim (“Exhibit J” to the plaint) with
further interest. The prayer in the suit reads thus :
“(a) that the Defendant Nos. 1 to 4 be ordered and decreed to pay jointly
and severally to the Plaintiff the sum of Rs.12,12,980.65/- as per
Particulars of Claim (Exhibit J annexed hereto) with further interest
@ 18 p.a. from the date of filing of the suit till actual payment
and/or realization.”
Also paras 13 and 14 of the plaint (supra) which are pertinent to be
noted, point out to the admitted defaults of the respondents (defendant) in
making the payments to constitute the cause of action to file such suit.
24. Thus, in our view, such an action of labelling of the respondents
(defendants) as defaulter is an independent, separate consequential action
arising pursuant to the default, which has already taken place. Thus, default and
defaulter cannot be intermingled or confused with one another, in the manner
the appellant (plaintiff) would want us to do.
25. Having examined the issues and controversy before us in detail and on
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perusal of record, we find that the trial Court has rightly applied Article 113 of
the Limitation Act in adjudicating the suit. Article 113 categorically provides for
computation of three years limitation period from the time when the right to
sue accrues. Mr. Bhole does not dispute the application of this article to the
given facts. Such right to sue would emanate from and depend upon the cause
of action arising in the facts and circumstances of each case. The given facts,
bring out that such cause of action arose upon the default by the respondents
(defendants) in making payment towards the membership fee and other charges
for the period 2008-2009 to 2015-16. The position in law in such context is
well settled as elucidated below.
26. At this juncture, we would advert to a few decisions in support of our
analysis in the given facts and circumstances.
27. On the expression “Right to Sue”, the Supreme Court in State of Punjab
and Ors v. Gurdev Singh1 held thus:-
“6. First of all, to say that the suit is not governed by the law of Limitation
runs afoul of our Limitation Act. The statute of limitation was
intended to provide a time limit for all suits conceivable. Section 3 of
the Limitation Act provides that a suit, appeal or application instituted
after the prescribed “period of limitation” must subject to the
provisions of Sections 4 to 24 be dismissed although limitation has
not been set up as a defence, Section-2(J) defines the expression
“period of limitation” to mean the period of limitation prescribed in
the Schedule for suit, appealor application. Section 2(J) also defines,
“prescribed period” to mean the period of limitation computed in
accordance with the provisions of the Act. The Court’s function on the
presentation of plaint is simply to examine whether, on the assumed
facts the plaintiff is within time. The Court has to find out when
the “right to sue” accrued to the plaintiff. If a suit is not covered by
any of the specific articles prescribing a period of limitation, it must fail
within the residuary article. The purpose of the residuary article is to
provide for cases which could not be covered by any other provision in
the Limitation Act. The residuary article is applicable to every variety
1. (1991) 4 SCC 1
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COMM APPEAL NO 17 of 2024 MCEX Final.docof suits not otherwise provided for. Article 113 (corresponding
to Article 120 of the Act 1908) is a residu- ary article for cases not
covered by any other provisions in the Act. It prescribes a period of
three years when the right to sue accrues. Under Article 120 it was six
years which has been reduced to three years under Article
113. According to the third column in Article 113, time commences to
run when the right to sue accrues. The words “right to sue” ordinarily
mean the right to seek relief by means of legal proceedings. Generally,
the right to sue accrues only when the ’cause of action arises, that is,
the right to prosecute to obtain relief by legal means. The suit must be
instituted when the right asserted in the suit is infringed or when there
is a clear and unequivocal threat to infringe that right by the defendant
against whom the suit is instituted.”
28. It is equally apposite to refer to a judgment of the Supreme Court in the
case of Shakti Bhog Food Industries Limited v. Central Bank of India and Anr. 2,
wherein the Supreme Court it had the occasion to construe and interpret the
expression “when the right to sue accrues” as it appears under Section 113 of the
Limitation Act. In this regard, paragraph 17 reads thus:
“17. The expression used in Article 113 of the 1963 Act is “when the
right to sue accrues”, which is markedly distinct from the
expression used in other Articles in First Division of the Schedule
dealing with suits, which unambiguously refer to the happening
of a specified event. Whereas, Article 113 being a residuary
clause and which has been invoked by all the three Courts in this
case, does not specify happening of particular event as such, but
merely refers to the accrual of cause of action on the basis of
which the right to sue would accrue.”
29. The Supreme Court referring to the Shakti Bhog Judgment (supra) in a
recent decision in the case of Indian Evangelical Lutheran Church Trust
Association v. Sri Bala & Co. 3 interpreted Article 113 of the Limitation Act in
paragraphs 9.8 and 9.9 of the said judgment which read thus:
“9.8 Under Article 113 of the Limitation Act, time commences to run
when the right to sue accrues. This is in contradistinction to
Article 54 of the Limitation Act relating to a suit for specific
performance of a contract which is on the happening of an event.
2. (2020) 17 SCC 260
3. (2025) SCC OnLine SC 48
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COMM APPEAL NO 17 of 2024 MCEX Final.docNo doubt, the second suit which is the present suit filed by the
respondent/plaintiff is also for specific performance of the
contract but the right to sue accrued to file the second suit is on
the basis of Order VII Rule 13 of the Code subsequent to the
rejection of the plaint in the earlier suit on 12.01.1998. Therefore,
the right to sue by means of a fresh suit was only after 12.01.1998.
The expression “when the right to sue accrues” in Article 113 of
the Limitation Act need not always mean “when the right to sue
first accrues”. For the right to sue to accrue, the right sought to be
vindicated in the suit should have already come into existence
and there should be an infringement of it or at least a serious
threat to infringe the same vide M.V.S. Manikyala Rao vs. M.
Narasimhaswami, (AIR 1966 SC 470). Thus, the right to sue
under Article 113 of the Limitation Act accrues when there is an
accrual of rights asserted in the suit and an unequivocal threat by
the defendant to infringe the right asserted by the plaintiff in the
suit. Thus, “right to sue” means the right to seek relief by means
of legal procedure when the person suing has a substantive and
exclusive right to the claim asserted by him and there is an
invasion of it or a threat of invasion. When the right to sue
accrues, depends, to a large extent on the facts and circumstances
of a particular case keeping in view the relief sought. It accrues
only when a cause of action arises and for a cause of action to
arise, it must be clear that the averments in the plaint, if found
correct, should lead to a successful issue. The use of the phrase
“right to sue” is synonymous with the phrase “cause of action” and
would be in consonance when one uses the word “arises” or
“accrues” with it. In the instant case, the right to sue first occurred
in the year 1993 as the respondent/plaintiff had filed the first suit
then, which is on the premise that it had a cause of action to do
so. The said suit was filed within the period of limitation as per
Article 54 of the Schedule to the Limitation Act.
9.9 Thus, generally speaking, the right to sue accrues only when the
cause of action arises, that is, the right to prosecute to obtain
relief by legal means. The suit must be instituted when the right
asserted in the suit is infringed or when there is a clear and
unequivocal threat to infringe that right by the defendant against
whom the suit is instituted. Article 113 of the Schedule to the
Limitation Act provides for a suit to be instituted within three
years from the date when the right to sue accrues and not on the
happening of an event as stated in Article 54 of the Schedule to
the Limitation Act.”
30. We now gainfully refer to the judgment of the Supreme Court in the case
of B & T AG v. Ministry of Defence4, where the Supreme Court in the context
4. (2024) 5 SCC 358
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of interpreting “cause of action” observed thus:
“64. “Cause of action” means the whole bundle of material facts, which
it is necessary for the plaintiff to prove in order to entitle him to
succeed in the suit. In delivering the judgment of the Board in
Mussummat Chand Kour and Another v. Partab Singh and
Others, reported in ILR (1889) 16 Cal 98, Lord Watson observed:
“Now the cause of action has no relation whatever to the defence
which may be set up by the defendant, nor does it depend upon
the character of the relief prayed for by the plaintiff it refers
entirely to the grounds set forth in the plaint as the cause of
action, or in other words to the media upon which the plaintiff
asks the court to arrive at a conclusion in his favour.”
31. The position that emerges from the above judgments is that the right to
sue would accrue when a cause of action arises. Thus, in the facts of the present
case, the cause of action arose when the respondents (defendants) defaulted in
making the payment of the membership and other dues to the appellant-
exchange during the period 2008-09 to 2015-16, which continued since 2008-
2009, making it a case of continuing cause of action for the said period. Equally
significant it is to note that under Article 113 of the Limitation Act, a suit is to
be instituted within 3 years from the date when the right to sue accrues and; not
on the happening of an event as envisaged under Article 54 of the Limitation
Act. Such happening of an event in the facts of the present case would clearly
indicate the subsequent affirmative action of the appellant (plaintiff) in
declaring, categorizing the respondents (defendants) as “defaulter” under the
MCX rules and bye-laws.
32. We are afraid that accepting the submissions of Mr. Bhole would result in
distorting the language and purport of Article 113 of the Limitation Act by
reading into it the MCX Rule/bye-laws which operate under a completely
different legal sphere. This can be clarified by an illustration viz; A member of
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the exchange commits a default of payment of membership dues and/or such
other dues for the year 2010. The default of non-payment continues up to the
year 2015. Under the rules and bye-laws of the exchange, he is declared as
defaulter in the year 2019. The exchange files a money recovery suit against the
defaulting member in the year 2020. In such situation, merely because upon
following the procedure under the rules the member was declared as defaulter in
the year 2019 for a cause of action of default which had arisen way back in 2010
and continues up to the year 2015, a suit for recovery of monies initiated in
2020 by the exchange against such defaulting member, is clearly barred under
Article 113 of the Limitation Act.
33. We may observe that the sequel to accepting the case of the appellant
(plaintiff) would lead to infusing life in a claim, which is ex facie barred by law
of limitation. We are bound to confine ourselves to the averments in the plaint
and the reliefs which are purely in the nature of money recovery. The suit in the
present case does not seek any declaratory reliefs to declare the defaulting
respondents (defendants) as defaulter, under the institutional paradigm of MCX
Rules, bye-laws of the appellant (plaintiff). We cannot countenance a situation
which would result in a departure from the clear and unambiguous purport of
Article 113 of the Limitation Act, whereby the right to sue would necessarily fall
back on the default by the respondents (defendants) which gave rise to the cause
of action in favour of the appellant (plaintiff) to sue the respondents
(defendants).
34. The learned trial Judge in the given facts was justified in deciding the
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issue of limitation as preliminary issue as provided under Order XIV, Rule 2 of
the Code of Civil Procedure, 1908. In such situation, when the suit was ex facie
barred by law of limitation, it was just, legal, and proper to dismiss it on such
ground alone taking recourse to the parameters as laid down under Article 113
of the Limitation Act. In the facts and circumstances before us, we therefore, are
unable to agree with Mr. Bhole that issue of limitation would always involve a
mixed question of law and fact.
35. In view of the foregoing discussion, no interference with the impugned
judgment is warranted. The appeal is misconceived and is devoid of merit.
36. The Appeal is dismissed. No costs.
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