Delhi High Court: Whether Court Can Condone the Delay in Re-filing the Application to Set Aside A Domestic Award Beyond 3 months and 30 days?

Delhi-High-Court

Delhi High Court: Whether Court Can Condone the Delay in Re-filing the Application to Set Aside A Domestic Award Beyond 3 months and 30 days?

Filing the Impugned Award is a Pre-Requisite for Assailing a Domestic Award in India

The prescribed limitation period for filing an application to set aside a domestic award in India is 3 months and 30 days of receipt of the arbitral award by the aggrieved party as provided under proviso to Section 34 (3) of the Arbitration & Conciliation Act, 1996 (‘Arbitration Act’) but not thereafter. This time limit is sacrosanct and a challenge to an award filed after 3 months and 30 days of receipt of the arbitral award by the aggrieved party has to be rejected.[1]

However, as a prevalent legal practice (atleast in India), parties intending to assail the award sometimes file a mere skeleton application, dummy application or mere bunch of papers (the term ‘skeleton application’ is use throughout to describe such applications) only to somehow stop the clock on limitation amounting to a clever manoeuvre to buy time. This reality is not hidden from anyone and used often by parties depending on which side of award you are standing.

Once the application under Section 34 is creeped into the limitation period by filing such skeleton application, parties thereafter file necessary and proper documentation which in legal terms is known as ‘Re-filing’, which usually happens subsequent to the Registry of the Court notifying obvious defects in such skeleton application to the applicant who then blames it on the Registry.

To overcome the hurdle of limitation, parties usually take the stance that the limitation period prescribed under Section 34(3) of the Arbitration Act to assail the award has already been met by them since the skeleton application was filed withing limitation and the proper documentation or application in proper form which is filed later is mere ‘Re-filing’ for which Court has the power to condone the delay in filing.

Thus, two questions require consideration here. Firstly, whether the limitation period as prescribed under Section 34(3) of the Arbitration Act and held as sacrosanct by the Supreme Court applies to Re-filing as well or whether the Court has the power to condone the delay in Re-filing such application when such discretion is not available to the Court in case of filing the skeleton application. Secondly, whether in Re-filing, the Court can dispense with the requirement of annexing a copy of the impugned award in a Section 34 application which is otherwise essential for filing such application.

These questions were recently mooted before the Delhi High Court in Union of India v. Bharat Biotech International Ltd. O.M.P. (COMM) 399/2019 & IA No.13333/2019 (stay) decided on 18 March 2020 and briefly discussed below.

Yardstick while considering condonation of delay in Re-filing

In this regard, a useful guidance can be found in Northern Railway v. Pioneer Publicity Corporation Pvt. Ltd.,[2] wherein the Supreme Court has held that Section 34(3) of the Arbitration Act has no application while considering delay in re-filing of the petition. It only applies to the initial filing of the objections under Section 34 of the Arbitration Act.

In that case, after filing of Section 34 application, since there were objections, time was granted by the Deputy Registrar of the court to remove those objections within seven days. The applicant removed the office objections and refiled the petition on a later date. In these facts, the Supreme Court held that Section 34(3) of the Arbitration Act has no application to re-filing of the application but only applies to the initial filing of a challenge petition under Section 34 of the Arbitration Act. Thus, in the case before the Supreme Court, the application was filed in court, but was not admitted on account of office objections. Subsequently, these objections were removed and the application was refiled. Though such refiling was beyond limitation, the court held the date of filing as the applicable date for reckoning the period of limitation and not the date of its refiling.

Discretion is not Unfettered

In light of the above Supreme Court ruling, it is germane that the rigors of condonation of delay in re-filing are not as strict as condonation of delay of filing under Section 34(3) of the Arbitration Act. But that does not mean that a party can be permitted an indefinite and unexplainable period for refilling the application.[3]

Although, the courts would have the jurisdiction to condone the delay in Re-filing of Section 34 application, the approach in exercising such jurisdiction cannot be liberal and the conduct of the applicant will have to be tested on the anvil of whether the applicant acted with due diligence and dispatch. The applicant would have to show that the delay was on account of reasons beyond the control of the applicant and could not be avoided despite all possible efforts by the applicant. The purpose of specifying an inelastic period of limitation under section 34(3) of the Arbitration Act would also have to be borne in mind and the Courts would consider the question whether to condone the delay in re-filing in the context of the statute.[4]

In this regard, reference may be made to the decision in Delhi Development Authority v. M/s. Durga Construction Co.[5], wherein a Division Bench of the Delhi High Court, while dealing with an application for condonation of delay in Re-filing of a petition beyond the time prescribed under Section 34(3) of the Arbitration Act, inter alia held that though the Court is empowered to condone delay beyond the extended period of limitation of 3 months and 30 days, it is requisite for the party seeking the condonation to show that despite his diligence, the rectification of defects and re-filing could not be carried out within the limitation period, for bonafide reasons beyond his control.

Condonation of Delay in Re-filing: When to be granted

To determine this issue, the foremost question which needs to be considered by the Court is whether the original filing was non est and a mere bunch of papers, or whether the same was filed in compliance with all legal requirements. If the Court finds that the initial petition was hopelessly inadequate or insufficient or contained defects which are fundamental to the very filing of the petition, then the filing has to be treated as non est, and the date of filing has to be treated as the date on which the petitioner re-filed the petition after annexing all the necessary documents and removing objections raised by the Registry. On the other hand, if the initial filing is found to be valid, then the petition would have to be treated as having been filed within time and the question then would be whether the delay in re-filing, after curing of defects, ought to be condoned.[6]

Non-filing of the Award with the Application Assailing the Award

In Executive Engineer (Irrigation and Flood Control) and Ors. vs. Shree Ram Construction Co. and Ors.[7]the award was assailed basis only a photocopy of the Award. In view thereof, the Division Bench of the Delhi High Court observed that the Registry of the Court requires a Certified Copy of the impugned arbitral award, which must be read as a signed copy of the award and should have accompanied the application under Section 34 of the Arbitration Act assailing the award. Thus, failure to do so would be fatal and would have the effect of deeming the filing to be a non-filing.

Thus, a failure to file the certified copy of the award must be read as a failure to file a signed copy of the award and the same would be a fatal defect and would render the filing of the application under section 34(3) of the Arbitration Act inconsequential.

Union of India v. Bharat Biotech International Ltd.

In this case, condonation of delay in re-filing was sought by the applicant primarily on the ground that a duly signed petition along with the affidavit, the statement of truth and Vakalatnama was filed before the statutory period of limitation of 90 days as prescribed under Section 34(3) of the Arbitration Act had expired. It was further contended that neither the Delhi High Court (Original Side) Rules, 1967 (‘Original Side Rules ’) nor the Practice Directions (‘Practice Directions’) in relation to proceedings under the Arbitration Act require the arbitral award to be filed along with the Section 34 petition and that in fact the award along with the entire arbitral record were required to be summoned by the Court as a matter of practice.

On the other hand, the respondents opposed these applications primarily on the ground that these petitions, when originally filed within the statutory period of limitation, were merely a ‘bunch of papers’ and could not be treated as being valid in the eyes of law. It is contended that a complete and valid petition was filed only after the limitation period of 3 months and 30 days as prescribed under Section 34(3) of the Arbitration Act had already expired. Thus, the respondent pleaded that the original filing of such skeleton application was non est and the application has to be treated as being validly filed only when the impugned award was placed on record later at the time of Re-filing and therefore, what the applicant is actually seeking is not a condonation of delay in Re-filing but condonation of delay in filing.

Applying the law in respect of deciding whether to allow delay in Re-filing and the judicial discretion to be exercised as set out above, HMJ Rekha Palli observed that the arbitral award was not placed on record at the time of initial filing and only filed later when the extended period of limitation had already expired and that the petition, as originally filed, had been substantially altered at the time of re-filing.

This, in Court’s view, is an entirely unacceptable practice. Even the fact that when the petition was initially filed no court fees was affixed, the vakalatnama was undated, the accompanying statement of truth was incomplete and lacked critical information, and the supporting affidavit made reference to documents which were not even annexed to the petition.

However, the most glaring defect at the time of the initial filing as also the only re-filing done prior to exhaustion of limitation period was that even a copy of the award which the petitioner sought to assail, was not annexed with the petition. The Court thus observed that it is uncomprehending as to how a petition seeking to assail an award without even annexing a copy thereof can be claimed as a valid filing and that too without even moving an application seeking exemption from filing a copy of the impugned award.

In view thereof, the Court held that the petitioner’s failure to file the impugned award along with the petition at the time of initial filing or at the time of its Re-filing within the period of limitation, cannot be underplayed as a ‘trivial’ defect but is a defect of such gravity that it would render the original filing as a mere dummy filing.

The Court held that a bare perusal of the Practice Directions does not support the contention of the applicant. Further, the Original Side Rules, Chapter XXVIII Rule 1, being the applicable provision, also merely states that the existing Practice Directions in relation to the proceedings under the Arbitration Act shall stand incorporated by inclusion in these Rules. The same, however, do not, in any manner, either deal with or dispense with the requirement of annexing a copy of the impugned award in a Section 34 petition.

Thus, the Court held that filing a copy of the impugned award would be a sine qua non in every petition laying a challenge thereon.

Further, in the facts of the case, on a combined consideration of the significant deficiencies in the original petition especially the non-filing of a copy of the award, with the principles enunciated in Durga Construction, the Court held that the initial filing was non est in the eyes of law and is inconsequential.

Thus, the petition, being re-filed after the date on which the extended period of limitation of 3 months and 30 days stood expired, has to be treated as being barred by limitation. In view thereof, the Court held that these applications in question, though styled as applications seeking condonation of delay in re-filing, have to necessarily be treated as applications seeking condonation of delay in filing the petition beyond the statutorily prescribed period which as per settled law, the Court does not have the power to condone. Therefore, the Court refrained to condone the delay.

An important observation of the Court in this case which requires emphasis is that at the time of considering applications of like nature, it is important for the Court to bear in mind the legislative intent for prescribing a statutory period of limitation under Section 34(3) of the Arbitration Act viz. ensuring expeditious disposal of arbitration and preventing delay in implementation of an award by parties who would malafidely challenge the same. Ultimately, the Arbitration Act sought to breathe life into a much needed alternate system of dispute resolution and lend greater credence to it, by removing any unwarranted obstacles to its smooth functioning. A liberal approach while dealing with an application for condonation of delay in challenging the award would only endanger and frustrate the purpose for which the Arbitration Act was enacted.[8]

Comments

It is true that justice can be done only when the matter is fought on merits and in accordance with law rather than to dispose it off on such technicalities and that too at the threshold. However, the same may not hold true in the backdrop of the Arbitration Act which decidedly and calculatedly shuts off curial discretion after the expiry of thirty days beyond three months having elapsed from the date on which a copy of the Award had been received by the appealing party.

In the context of the Arbitration Act, it appears that liberality in condoning delay in refiling would run counter to the intention of Parliament which has employed plain language to facially prescribe a cut off date beyond which there is no latitude for condonation of delay. And this is for very good reason. Across the globe, it has been accepted that there is a pressing need to bring adjudicatory proceedings to a prompt and expeditious conclusion, especially where commercial and business conflicts arise.

Thus, it should be wholly impermissible to extend or expand the time for concluding judicial proceedings at the second stage, that is, that of Re-filing, when this is impermissible at the very initial stage, that is, of filing objections to an award as also observed by HMJ Vikramajit Sen (as he then was) in Executive Engineer.

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

[1] Union of India vs. Popular Construction Co. (2001) 8 SCC 470

[2] (2017) 11 SCC 234

[3] Delhi Transco Ltd. & Anr. v. Hythro Engineers Pvt. Ltd. 2012(3) ARBLR 349 (Delhi)

[4] Himachal Futuristic vs. I. T. I Ltd. 2017 SCC OnLine Del 8522

[5] ILR(2014) 1 Delhi 153

[6] Union of India v. Bharat Biotech International Ltd. O.M.P. (COMM) 399/2019 & IA No.13333/2019 (stay)

[7] (2010) 120 DRJ 615 (DB) similar view was taken in SKS Power Generation (Chhattisgarh) Ltd. vs. ISC Projects Private Limited 2019 SCC OnLine Del 8006

[8] Union of India v. Bharat Biotech International Ltd. O.M.P. (COMM) 399/2019 & IA No.13333/2019 (stay)

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