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Condonation of Delay under Arbitration Act

The word Condone[1] means to 'voluntarily pardon or overlook' whereas in the field of civil law delayed appeal is an appeal that takes place after the time for appealing has expired, but only when the reviewing court has granted permission because of special circumstances.[2]

Applications to condone delay under S.34 of Arbitration and conciliation act of 1996 (Act) were not taken up earlier by tribunal to allow preliminary arbitration appeal. However, the Apex court has reconsidered that the refusal of application to condone delay would make an appeal under S.37 to condone the order set aside maintainable.

The dictum Justice delayed is Justice denied has been well recognised in almost all jurisdictions governed by the rule of law. The dictum highlights that time limits are an important appendage to the proper administration of justice. Such recognition has in turn given rise to both statutory limitations on the time within which civil claims can be prosecuted and to procedural limitations on the time within which a particular step in an action can be taken[3].

However, the time limits are seldom wholly prescriptive. The courts generally retain the discretionary powers to set aside such time limits especially when the time limits are of a procedural nature[4].
  1. Appeals lying U/S 34 of act for condonation of delay

    "12. As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are but not thereafter used in the proviso to sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of section 5 of that Act.
     Parliament did not need to go further. 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. No principle of interpretation would justify such a result.[5]

    The Apex court in its landmark judgement for defining the rejection of appeals on ground of delay in filing appeal after the period of limitation set under S.34 expired. By providing the Arbitration act being a special law laid down in S.29(2) it has excluded effect of limitation act under S.5.

    It was laid down in Arbitration and Conciliation Bill, 1995 which preceded the 1996 Act stated as one of its main objectives the need:
    To minimise the supervisory role of courts in the arbitral process. This objective has found expression in Section 5 of the Act which prescribes the extent of judicial intervention in no uncertain terms:

    5. Extent of judicial intervention. Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.[6]

    The development of Arbitration in India has been remarkable as the court has considered the statement of object as laid down in S.5 of the act providing provisions for carrying out the arbitration proceedings in a fair, efficient manner with the capacity to bring the parties to the dispute to an amicable resolution. Hence the approach of the Apex court in dealing with a challenge to an arbitral award under S.34 of Arbitration and conciliation act of 1996 (Act), has to reflect the consciousness of the legislative intent to restrict and curtail the extent of judicial intervention in arbitral proceedings and enforcement of awards.[7]

    A challenge to the award under S.34(3) has restricted the power vested in Court to condone the delay beyond thirty days after the application for such delay has been filed. As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are 'but not thereafter' used in the proviso emphasizing the mandatory nature of the time limit provided in Sub-section (3) of S.34[8]. The statute confers a discretion on the court to condone delay only to extent of 30 days if sufficient cause is made out and this discretion doesn't extend beyond 30 days.[9]

    In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act and would therefore bar the application of section 5 of Limitation act as well. It was made abundantly clear that the statutory period of limitation for setting aside the award is 30 days and extendable up to 3 months on account of delay due sufficient cause.[10]

    Under S.31(1) it is stated in mandatory terms that an award. Must be made in writing and signed by all members of arbitral tribunal where 'award' refers to the complete and final arbitral award[11] and if there is more than one arbitrator then only when acting together they express their decision in writing, authenticated signatures the award takes effect.

    S.31(2) r/w S.29 of the act requires an Arbitral award to be in writing and signed by all arbitrators and the dissenting opinion to the award is open to a minor arbitrator and he may also confer a minor award as was laid down in various rulings of the court that dissenting opinion has been held to be the correct view by the Courts in various cases.
    The View held by the Apex court in its ruling in Ssangyong Engg. and Construction Co. Ltd. v. NHAI[12] was:

    "Under the scheme of Section 34 of the 1996 Act, the disputes that were decided by the majority award would have to be referred afresh to another arbitration. This would cause considerable delay and be contrary to one of the important objectives of the 1996 Act, namely, speedy resolution of disputes by the arbitral process under the Act.

    Therefore, in order to do complete justice between the parties, invoking our power Under Article 142 of the Constitution of India, and given the fact that there is a minority award which awards the Appellant its claim based upon the formula mentioned in the agreement between the parties, we uphold the minority award, and state that it is this award, together with interest, that will now be executed between the parties.

    Hence following the view of this court in the above case, only one date recognised by law i.e. the date on which a signed copy of the final award is received by the parties, will be one from which the period of limitation for filing objections would start ticking. There can be no finality in the award, except after it is signed, because signing of the award gives legal effect and finality to the award. Section 34 of the Act provides for objections to be filed against the arbitral award, and not the majority award alone.

    Consequently, the time limit to file objections against an award Under Section 34(3) of the Act, does not relate to only the majority award, but to the arbitral award, which includes the opinion of the dissenting member of the tribunal. It was contended that if the majority award was taken to mean the arbitral award, the dissenting opinion of the minority would have no relevance. Such a view would cause grave prejudice to the award debtor[13].
     
  2. Period Of Limitation For Appeal Lying U/S 37 Of The Act

    An appeal has been defined as testing the soundness of the decision and proceedings of the inferior court or tribunal, by a superior court or forum.[14]The right of appeal is a vested right to enter the superior court accrues to the litigant from the date that Lis commences. However, the statute does not provides for remedy of appeal against a particular order then no appeal against such an order would be maintainable.

    The Non-Obstante clause introduced in 2019 states:
    Notwithstanding anything contained in any other law an appeal shall lie from the following orders (and from no others) to the court authorized by law to hear appeals from original decrees of the court passing the order´┐Ż [15]

    This amendment was clarificatory in nature as to say that no appeal shall lie from any other statute as the right to appeal is already and only conferred by S.37 of the act clear from Parenthesis "(and from no other)"[16].As the act is a self-contained and exhaustive code implies that the Scheme of the act is complete in itself ,and the jurisdiction of civil courts to take cognizance of the cases arising under the act, by necessary implication is barred. Under S.37 of the act:
    1. An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:
      1. refusing to refer the parties to arbitration under section 8;
      2. granting or refusing to grant any measure under section 9;
      3. setting aside or refusing to set aside an arbitral award under section 34.][17]
      The Apex court further held that:
      35. Complete further adds a degree of certainty to the code. It has to be a compilation of provisions which would comprehensively deal with various aspects of the purpose sought to be achieved by that law and its dependence on other legislations is either absent or at best is minimal. The provisions of the enactment in question should provide for a complete machinery to deal with various problems that may arise during its execution.

      Sufficient powers should be vested in the authority/forum created under the Act to ensure effectual and complete implementation of the Act. There should be complete and coherent scheme of the statutory provisions for attainment of the object and purpose of the Act. It essentially should also provide for adjudicatory scheme to deal with grievances/claims of the persons affected by enforcement of the provisions of the Act, preferably, including an appellate forum within the framework of the Act. In other words, the Act in itself should be a panacea to all facets arising from the implementation of the Act itself.[18]

      Ratio Decidendi laid down in the case of Consolidated Engg. Enterprises and Ors. v. Principal Secy. Irrigation Dept. and Ors.[19] that S.37 of the act will be governed by the Article 116 of the schedule to the Limitation act.

      The intention of the legislature in enacting Section 14 of the Act is to give relief to a litigant who had approached the wrong forum Provisions of Limitation Act, 1963 apply to all proceedings under the AC Act, both in court and in arbitration, except to the extent expressly excluded by the provisions of the AC Act.

     
  3. Period Of Limitation Under Chintal Bhayana Case /Borse Brothers

    Chintel India Ltd. V. Bhayana Builders [20]:
    The question that was referred in this judgement was whether an Order refusing to condone delay in filing application under Section 34 of Act is appealable order under Section 37(1)(c) of Act." The Hon'ble Justice Rohinton Fariman laid down that:

    9. We now come to Section 37(1)(c) It is important to note that the expression "setting aside or refusing to set aside an arbitral award" does not stand by itself. The expression has to be read with the expression that follows:
    Under Section 34
    .
    Section 34 is not limited to grounds being made out Under Section 34(2). Obviously, therefore, a literal reading of the provision would show that a refusal to set aside an arbitral award as delay has not been condoned Under Sub-section (3) of Section 34 would certainly fall within Section 37(1)(c). The aforesaid reasoning is strengthened by the fact that Under Section 37(2)(a), an appeal lies when a plea referred to in Sub-section (2) or (3) of Section 16 is accepted.

    This would show that the Legislature, when it wished to refer to part of a section, as opposed to the entire section, did so. Contrasted with the language of Section 37(1)(c), where the expression "Under Section 34" refers to the entire Section and not to Section 34(2) only, the fact that an arbitral award can be refused to be set aside for refusal to condone delay Under Section 34(3) gets further strengthened

    37. Consequently, the question of law is answered by stating that an appeal Under Section 37(1)(c) of the Arbitration Act, 1996 would be maintainable against an order
    refusing to condone delay in filing an application Under Section 34 of the Arbitration Act, 1996 to set aside an award.[21]

    The Apex court in the above judgement ordered that consequently, application Under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award is also rejected being barred by time meaning that the Court has not dealt with the application for setting aside of the award on merits and the same has been disposed of solely as a consequence of rejection of the application for condonation of delay and there has been no enquiry as regards the rights of the parties on the issue of setting aside of the award.

    This judgment cannot be said to state the law correctly as it does not advert to the decision of this Court in Essar Constructions (supra) and is against the interpretation of Section 37(1)(c) of the Arbitration Act, 1996 given by us above. On the contrary, this Court makes it clear that Section 5 of the Limitation Act is excluded by Section 34(3) of the Arbitration Act, 1996 and that no condonation of delay can take place beyond the period of 120 days. Consequently, the reasoning of the Division Bench of the Bombay High Court in State of Maharashtra v. Ramdas construction co.[22] and Union of India v. Radha Krishna Seth & anr[23]. does not commend itself to the law and hence both these judgments as a result were overruled in this Ruling of the Apex court.
     

Government of Maharashtra vs Borse Brothers Engineers and Contractors Pvt ltd.
The Period of filing of appeal under S.37 after the lapsing of the period of 120 days for appeal under S.34(3) inclusive of appeal under S.37 laying down that in the above order the delay was held to be condonable due to an sufficient cause and appeal can be allowed on discretion of court if the delay is presumably 'short'.

The previous ruling of the Hon'ble Apex court was overturned which included the limitation period of appeal lying under S.34(3) from under S.37 will be within the period of 90 days given under schedule of limitation act by application of S.5 of limitation act applicable from S.43 of the Act.[24]Section 21 of the Commercial Courts Act[25] was also pressed into service stating that the non-obstante Clause contained in the Commercial Courts Act would override other Acts, including the Limitation Act, because of which, the applicability of Section 5 thereof would be excluded and S.13A of the Commercial court act allowing period of 60 days for filing appeal under S.37 with the objective of speedy resolution and minimum judicial intervention being achieved.

Justice the dictum as follows:
Given the aforesaid and the object of speedy disposal sought to be achieved both under the Arbitration Act and the Commercial Courts Act, for appeals filed Under Section 37 of the Arbitration Act that are governed by Articles 116 and 117 of the Limitation Act or Section 13(1A) of the Commercial Courts Act, a delay beyond 90 days, 30 days or 60 days, respectively, is to be condoned by way of exception and not by way of rule.

In a fit case in which a party has otherwise acted bona fide and not in a negligent manner, a short delay beyond such period can, in the discretion of the court, be condoned, always bearing in mind that the other side of the picture is that the opposite party may have acquired both in equity and justice, what may now be lost by the first party's inaction, negligence or laches.

Given the object sought to be achieved under both the Arbitration Act and the Commercial Courts Act, that is, the speedy resolution of disputes, the expression "sufficient cause" is not elastic enough to cover long delays beyond the period provided by the appeal provision itself", the Court said.

63. Apart from this, there is a long delay of 131 days beyond the 60-day period provided for filing an appeal Under Section 13(1A) of the Commercial Courts Act. There is no explanation worth the name contained in the condonation of delay application, beyond the usual file-pushing and administrative exigency. This appeal is therefore dismissed.

The judgment of the High Court is wholly incorrect inasmuch as Consolidated Engg. (supra) was a judgment which applied the provisions of Section 14 of the Limitation Act and had nothing to do with the application of Section 5 of the Limitation Act. N.V. International (supra) was a direct judgment which applied the provisions of Section 5 of the Limitation Act and then held that no condonation of delay could take place beyond 120 days.

End-Notes:

  1. Bryan A.Garner's Black's Law Dictionary 8th Edn. Thomson west, 2004
  2. Cases: judgements of appeal and error.
  3. All India Judges' Association & Others v Union of India & Others (2002) 4 SCC 247: Smt Manju Devi v Additional District Judge & Others 2007(4) AWC 3403.
  4. Section 34(3) of the Arbitration and Conciliation Act 1996.
  5. Union Of India v. Popular construction Co., AIR 2001 SC 4010.
  6. Associate Builders v. Delhi Development Authority,(2015) 3 SCC 49.
  7. Vijaya Bank v. Maker Development Services, 2001 (3) Bom CR 652.
  8. Hindustan Construction Co. Ltd. V. State of Maharashtra,(2010) 4 SCC 518.
  9. Himachal Techno Engineers v. State of Himachal Pradesh, (2010) 12 SCC 210.
  10. Simplex Infrastructures ltd. v. Union of India,(2019) 2 SCC 455.
  11. Satwant Singh Sodhi v. State of Punjab,(1999) 3 SCC 487.
  12. (2019) 15 SCC 13.
  13. Dakshin Haryana Bijli Vitran Nigam Ltd. V. Navigant Technologies Pvt. Ltd., LL 2021 SC 126.
  14. Tirupathi Balaji Developers Pvt. Ltd. v. State of Bihar,(2004) 5 SCC 1.
  15. Report of the High level Committee to Review the institutionalism to Arbitration Mechanism in India, chaired by Justice B.N. Srikrishna, 30 July 2017 , available at https: / /legalaffairs.gov.in/. at p.69.
  16. United States v. Shilling, 53 Fed 81: 3 CCA 440.
  17. Substituted by the Arbitration and Conciliation (Amendment) Act, 2015, w.e.f. 23.10.2015.
  18. Girnar Traders and Ors. vs. State of Maharashtra and Ors., (2011) 3 SCC 1.
  19. 2008 (6) ALLMR (SC) 423.
  20. AIR 2021 SC 1014.
  21. Supra 21
  22. 2021 4 SCC 629
  23. 2006 6 Mah. L.J 678
  24. N.V international
  25. Section 21 Commercial Courts Act, 2015; Save as otherwise provided, the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law for the time being in force other than this Act.

    Award Winning Article Is Written By: Mr.Kanishka Pandey
    Awarded certificate of Excellence
    Authentication No: AU35614219661-31-0821

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