Strict adherence to limitation in filing an application for setting aside of an arbitral award in India

The Arbitration and Conciliation Act, 1996 (“Act”) under Section 34(3) provides for a specific statutory limitation of filing an application for setting aside of an arbitral award. Section 34(3) provides that an application for setting aside an arbitral award may not be made after the lapse of three months (90 days) from the date of receipt of arbitral award. Further the proviso to Section 34(3) provides that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

The Supreme Court of India in the matter of M/s Simplex Infrastructure Limited vs. Union of India (Civil Appeal No. 11866 of 2018) has, recently, enforced the strict adherence to the above mentioned timeline. The Supreme Court largely also dealt with the applicability of Section 5 and Section 14 of the Limitation Act, 1963 (“Limitation Act”) in an application for setting aside of arbitral award. For reference, the Limitation Act is an Act to consolidate and amend the law for the limitation of suits and other proceedings.

Facts of the matter

The Arbitrator pronounced an award dated 27.10.2014 in favor of the Appellant and directed the Respondent to pay a certain sum along with interest in favor of the Appellant. The Respondent received the copy of the award on 31.10.2014. The Respondent aggrieved by the award filed an application for setting aside of the award under Section 34 of the Act on 30.10.2015 before the District Judge, Port Blair. It is also pertinent to mention herein that during the pendency of the arbitration proceedings, the Appellant had filed an application under Section 9 of the Act before the High Court of Calcutta praying for an injunction on encashment of bank guarantee against the Respondent and the application was duly contested by the Respondent.

The District Judge, Port Blair on 12.02.2016 dismissed the application for setting aside the arbitral award on jurisdictional grounds holding that Section 42 of the Act bars it to entertain the application. The Respondent after much delay thereafter on 28.03.2016 filed an application for setting aside the arbitral award before the High Court of Calcutta, which had the correct jurisdiction to hear the application. The High Court of Calcutta on 27.04.2016 condoned the delay of 514 days in filing of the application for setting aside of the application. Accordingly, the Appellant filed an appeal against the judgment dated 27.04.2016 passed by the High Court of Calcutta.

Issues before the Supreme Court

The question that arose before the Supreme Court was whether the High Court of Calcutta was justified in condoning the delay of 514 days. In order to deal with this issue the Supreme Court had to also assess the applicability of Section 5 and Section 14 of the Limitation Act.

The judgment

Delving into the timeline provided in Section 34(3) of the Act, the Supreme Court discussed the intent of the legislature. It observed that the legislature is evinced by the use of the words “but not thereafter” in the proviso. The Supreme Court envisaged that words “but not thereafter” make it abundantly clear that as far as the limitation for filing an application for setting aside an arbitral award is concerned, the statutory period prescribed is three months which is extendable by another period of thirty days and no more, subject to the satisfaction of the court that sufficient reasons were provided for the delay.

The Supreme Court thereafter appreciated the application of the Limitation Act, 1963. Section 5 of the Limitation Act deals with the extension of the prescribed period for any appeal or application subject to the satisfaction of the court that the appellant or applicant had sufficient cause for not preferring the appeal or making the application within the prescribed period. The Supreme Court relying upon the judgment of Union of India vs. Popular Construction Company (Civil Appeal No. 6997 of 2001) ruled out the application of Section 5 of the Limitation Act. The Supreme Court in the above mentioned matter of Popular Construction Company had ruled that the time-limit prescribed under Section 34 of the Act to challenge an award is absolute and unextendible by Court under Section 5 of the Limitation Act. The Supreme Court in its judgment has observed that to hold that the Court could entertain an application to set aside the award beyond the extended period under the proviso would render the phrase “but not thereafter” wholly otiose. The Supreme Court accordingly ruled out the application of Section 5 of the Limitation Act in an application filed for setting aside of arbitral award.

Lastly the Supreme Court dealt with the application of Section 14 of the Limitation Act. Section 14 of the Limitation Act, 1963 deals with the “exclusion of time of proceeding bona fide” in a court without jurisdiction, subject to satisfaction of certain conditions. The Supreme Court relying upon its judgment Consolidated Engineering Enterprises vs. Principle Secretary, Irrigation Department (Civil Appeal No. 2461 of 2008), held that Section 14 of Limitation Act would apply to proceedings under Section 34 of the Act. In the above mentioned matter of Consolidated Engineering Enterprises the Supreme Court has held that Section 34 of the Act of 1996 would be unduly oppressive, if the provisions of Section 14 of the Limitation Act are not applicable to it, because cases are no doubt conceivable where an aggrieved party, despite exercise of due diligence and good faith, is unable to make an application within the prescribed timeline. The Supreme Court in the above mentioned matter also observed that Section 14 of the Limitation Act does not provide for a fresh period of limitation but only provides for the exclusion of a certain period wherein the application under Section 34 was filed before a court without jurisdiction to entertain the application, hence Section 14 of the Limitation Act would apply to application filed under Section 34 of the Act.

Applying the aforesaid observations the Supreme Court came to a conclusion that even after deducting 379 days (applying Section 14 of the Limitation Act) out of the 514 days delay in filing of the application under Section 34, there was still a delay of 131 days which is more than the period of limitation prescribed under Section 34(3) of the Act. The Supreme Court accordingly set aside the judgment of the High Court of Calcutta allowed the appeal.

Conclusion

The Supreme Court has through this judgment upheld the strict adherence to the timeline of three month extendable by another thirty days as provided under Section 34 of the Act. The judgment has reinforced the legislative intent of the thirty days extension provided by the Act. The judgment compels the award debtor to file an application for setting aside the award within the strict timeline provided and incidentally unburdens the Court from entertaining applications for setting aside award filed after the expiry of the timeline provided under Section 34 of the Act.

Published by Pushkar Taimni

Pushkar Taimni is a lawyer based in India. He can be contacted at taimnico@gmail.com.

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