Supreme Court of India: Whether the ‘Administrative Difficulties’ Could Be A Valid Reason for Condoning the Delay in Challenging a Domestic Award Beyond the Statutory Prescribed Period?

Supreme-Court-of-India-1_85138_730x419

Section 5 of the Limitation Act, 1963 of India (‘Limitation Act’) enables the Court to admit an appeal or an application after the expiry of the prescribed period on ‘sufficient cause’ being shown for the delay. Further, Section 14 of the Limitation Act deals with ‘Exclusion of time of proceeding bona fide in court without jurisdiction’. In M/s. Simplex Infrastructure Ltd. Vs. Union of India, Civil Appeal No. 11866 of 2018 decided on 5 December 2018, the Supreme Court of India dealt with the issue of whether the benefits of Sections 5 and Section 14 of the Limitation Act can be extended to condone a delay beyond the specific statutory limitation prescribed under Section 34(3) of the Indian Arbitration and Conciliation Act, 1996 (‘Act’). Detailed case analysis given below:

Factual Matrix

The Parties entered into a construction agreement in 2006. Dispute arose amongst the parties and after going through arbitration, an award (‘Award’) was rendered in 2014.  During the pendency of the arbitration proceedings, the Appellant filed an application for interim measures before the High Court of Calcutta which was duly contested by the Respondent. In 2015, the Award was assailed under Section 34 of the Act by the Respondent before a wrong Court (District Judge, Port Blair).  The District Judge, Port Blair dismissed the Respondent’s application under Section 34 of the Act for want of jurisdiction reasoning that when an application for interim measures has been made regarding an arbitration agreement before High Court of Calcutta under the same part; that Court shall only have jurisdiction over the arbitration proceedings and all subsequent application arising out of that agreement and the arbitral proceedings shall be made in that court and in no other court. Thereafter, in 2016, the Respondent again challenged the Award under Section 34 of the Act but this time before the court with proper jurisdiction i.e. the High Court of Calcutta with an application for condonation of delay.

It is noteworthy that under Section 34 of the Act, the application for setting aside the award on one of the grounds mentioned in sub-section (2) have to be made within a period of three months from the date on which the party making that application receives the arbitral award. In addition, the proviso of the said Section allows this period to be further extended by another period of thirty days on ‘sufficient cause’ being shown by the party for filing an application “but not thereafter”.

In light of the above, the Respondent justified the delay on ground of there being a bona fide mistake in filing the application before the wrong forum and the Respondent’s counsel causing delay due to which necessary formalities were not complied with within the prescribed time. The High Court condoned the delay which was beyond the statutory time limit of 4 months (further extendable to thirty days subject to satisfaction of ‘sufficient cause’ by the court). Aggrieved by this condonation of delay by the High Court, the Appellant filed an appeal before the Supreme Court in the present proceedings.

Applicable Legal Principles

Section 34(3) of the Act

“34. Application for setting aside arbitral award.—

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3)…

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided 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.”

Section 5 of the Limitation Act

“5 Extension of prescribed period in certain cases.—

Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

Explanation.—The fact that the appellant or the applicant was missed by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section.”

Section 14 of the Limitation Act

14 Exclusion of time of proceeding bona fide in court without jurisdiction.—

(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order, where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature.

Explanation.—For the purposes of this section,—
(a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted;

(b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding;

(c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction.”

Section 29(2) of the Limitation Act

“29. Savings.—

(2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.”

Parties Contentions

The Appellant contended that even if the benefit of Section 14 of the Limitation Act is extended to the Respondent in filing the application under Section 34 of the Act, there would still be a delay of 131 days which could not be condoned in view of the specific statutory limitation prescribed under Section 34(3) of the Act.

The Respondent’s contended that there were no willful latches on its part and the delay was caused due to inevitable administrative difficulties of obtaining directions from higher officials.

Judgement

The issue before the Supreme Court was whether the High Court was justified in condoning the delay in filing the application under Section 34 of the Act by the Respondent.

To decide this issue, the Court considered Section 5 and Section 14 of the Limitation Act. The Court held that the words “but not thereafter” appearing in Section 34(3) of the Act makes 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 upto thirty days (and no more) subject to the satisfaction of the court that sufficient reasons were provided for the delay.

With regard to the application of Section 5 of the Limitation Act to an application challenging an arbitral award under Section 34 of the Act, the Court relied on its earlier decision of Union of India v Popular Construction Company (2001) 8 SCC 470. In that case, the Supreme Court, analyzed Section 29(2) of the Limitation Act and the scheme and object of the Act to address the issue of whether the provisions of Section 5 of the Limitation Act were applicable to an application challenging an award, under Section 34 of the Act.

It is worth mentioning that Section 29(2) of the Limitation Act inter alia states that the provisions of the Limitation Act could be made applicable to the proceedings before a court, where the special statute does not specifically exclude its application. Relying on the said provision, the Court inter alia held that once a special statute prescribes for a limitation period for condonation of delay then provision of Section 5 of the Limitation Act has no application. Therefore, the Court concluded that Section 5 of the Limitation Act is not applicable to the proceedings under section 34 of the Act (which is a special Act prescribing specific limitation period for condonation of delay for setting aside an arbitral award).

Next issue before the Court was whether Section 14 of the Limitation Act would be applicable to an application submitted under Section 34 of the Act for setting aside the award. To decide this issue, the Court relied on its earlier decision of Consolidated Engineering Enterprises v Principal Secretary Irrigation Department (2008) 7 SCC 169. In that case, the Supreme Court inter alia held that neither Section 34(3) of the Act nor any other provision of the Act excludes the application of Section 14 of the Limitation Act and provisions of Section 14 of the Limitation Act would apply to applications under Section 34 of the Act. The Court further held that even where there is jurisdiction for applying Section 14 of the Limitation Act, the period of limitation will continue to be three months subject to extension under the proviso to Section 34(3) of the Act but in computing the limitation period of three months for the application under Section 34(1) of the Act, the time during which the applicant was prosecuting the matter bona fide and with due diligence before the wrong court will have to be excluded.

In light of the above, the Court concluded as under:

  • A plain reading of sub-section (3) along with the proviso to Section 34 of the Act, shows that the application for setting aside the award on the grounds mentioned in sub-section (2) of Section 34 of the Act could be made within three months and the period can only be extended for a further period of thirty days on showing sufficient cause and not thereafter.
  • The use of the words “but not thereafter” in the proviso makes it clear that the extension cannot be beyond thirty days.
  • Even if the benefit of Section 14 of the Limitation Act is given to the Respondent, there will still be a delay of 131 days in filing the application. That is beyond the strict timelines prescribed in sub-section (3) read along with the proviso to Section 34 of the Act.
  • The delay of 131 days cannot be condoned. To do so, as the High Court did, is to breach a clear statutory mandate.

Thus, the Court set aside the impugned order of the High Court and held that administrative difficulties would not be a valid reason to condone a delay above and beyond the statutory prescribed period under Section 34 of the Act.

My Comments

Earlier this year, the Supreme Court of India, In the case of P.Radha Bai and Ors. v. P. Ashok Kumar and Anr., Civil Appeal No(s) .7710 to 7713 of 2013 decided on 26 September 2018, dealt with a similar issue of whether by virtue of Section 17 of the Limitation Act, a delay in challenging an arbitral award can be condoned beyond the period prescribed under Section 34(3) of the Act in a situation where such delay is alleged to be caused due to fraud played (Section 17 of the Limitation Act) on the party challenging the award. After analysing the above provisions, the Court concluded that once the party has received the Award, the limitation period under Section 34(3) of the Act commences. Section 17 of the Limitation Act which deals with the effect of fraud or mistake on deciding the limitation of the Limitation Act would not come to the rescue of such objecting party.

My views remain the same as mentioned in the case summary of P.Radha Bai and Ors. v. P. Ashok Kumar and Anr which was decided on identical grounds by the Supreme Court of India earlier this year and the same is available at Supreme Court of India: Whether A Delay In Challenging An Arbitral Award Caused Due To Fraud Can Be Condoned Beyond The Prescribed Limitation Period?

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