Dispute Resolution And Arbitration Update

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The Appellant had issued a tender for execution of works pertaining to ‘Provision of Separator made of ‘W' Steel Section Mounted on Steel Channel Post in connection with the work at Dibrugarh Town- New Tinsukia...
India Litigation, Mediation & Arbitration
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Union of India (represented by the General Manager, NF Railway, Maligaon, Gauhati) & Ors v. Jyoti Forge & Fabrication

Gauhati High Court | Arb. A/6/2022

Background facts

  • The Appellant had issued a tender for execution of works pertaining to 'Provision of Separator made of 'W' Steel Section Mounted on Steel Channel Post in connection with the work at Dibrugarh Town- New Tinsukia to protect track mounting (11 kms)'. The Respondent was found successful in the tender process and a Letter of Acceptance (LOA) dated February 22, 2013 was issued in its favor, post which a formal Agreement was executed between the two parties.
  • Although the Respondent was required to complete the work by November 21, 2013 as per the said Agreement, it could not do so. Hence, the Respondent requested the Appellant to grant extension of time for completion of work and ultimately time was extended from time to time and finally the Respondent had completed the work on July 18, 2014. The Respondent was then made to sign a no claim certificate while claiming refund of their security deposit and earnest money
  • Thereafter, vide a letter dated July 21, 2015, the Respondent claimed enhanced price variation as per Clause 3.15 of the Agreement which provided for Payment of Price Variation (PVC). The Appellant denied the price variation on the ground that the Respondent had signed a no claim certificate and also stated that the extension granted to the Respondent to finish the work was on the condition that there shall be no Liquidated Damages (LD) and no PVC. Since a dispute had arisen between the parties, arbitration was invoked in terms of the Agreement and the proceedings were commenced before a Sole Arbitrator.
  • Upon completion of the said arbitral proceedings, the Sole Arbitrator passed an Award dated May 25, 2019, thereby allowing the PVC as claimed by the Respondent to a tune of INR 26,62,378 along with interest @6.5% per annum from the date of completion of the work along with costs (Award).
  • Being aggrieved by the said Award, the Appellant filed a Petition under Section 34 of the Arbitration & Conciliation Act, 1996 (Arbitration Act) along with an Application for condonation of delay (Application), before the Learned District Judge, Tinsukia.
  • Vide an Order dated January 20, 2022, the District Judge held that the provisions of the Limitation Act, 1963 (Limitation Act) would not be applicable to a Petition under Section 34 of the Arbitration Act and therefore dismissed the aforesaid Application (Impugned Order).
  • Aggrieved by the Impugned Order, the Appellant preferred the instant Appeal.

Issue at hand? 

  • Whether the Court has the power to condone the delay in filing an Application challenging the award by under Section 34 of the Arbitration Act, after a lapse of 3 months and 30 days and thereafter?

Decision of the Court

  • At the outset, the High Court (HC) examined Section 34 of the Arbitration Act and held that it places a limit on the period of condonation of delay by using the phrase 'may entertain the application within a further period of 30 days but not thereafter.' It further held that the words 'but not thereafter' in the proviso to sub-Section (3) of Section 34 of the Arbitration Act constitutes an express exclusion within the meaning of Section 29(2) of the Limitation Act and as a result, the same would prevent the application of Section 5 of the Limitation Act.
  • The HC further held that if a petition is not filed within the prescribed period of 3 months, the Court is left to exercise its discretion to condone the delay only to the extent of 30 days thereafter and that too if sufficient cause is shown. The HC also noted that the intent of the legislature is evidenced by use of the words 'but not thereafter' in the proviso to Section 34(3), which makes it clear that as far as the limitation for filing a Petition for setting aside an Arbitral Award is concerned, the statutory period prescribed is 3 months, which is extendable by another period up to 30 days subject to the satisfaction of the Court.
  • The HC relied on the decisions of the Supreme Court in the cases of Union of India v. Popular Construction Company1 and Simplex Infrastructure Ltd v. Union of India2 and held that Section 5 of the Limitation Act is not applicable to a Petition challenging an Arbitral Award under Section 34 of the Arbitration Act.
  • The HC further held that Section 34(3) of the Arbitration Act provides for a complete and exhaustive code with regard to the limitation for filing an Application for setting aside an Arbitral Award and also stated that a Petition for setting aside an Arbitral Award cannot be entertained beyond the prescribed time limit of 3 months and 30 days, regardless of whether sufficient cause is shown.
  • The HC held that the Appellant failed to provide a reasonable explanation for the delay in filing the Petition under Section 34 of the Arbitration Act. It was further noted that the Appellant did not mention how much time was lost in obtaining internal approval and did not explain what prevented them from filing the Appeal immediately after receiving the copy of the Arbitral Award.
  • In view of the above, the HC held that there is no reason to interfere with the findings and conclusion arrived at by the District Judge, Tinsukia set out in the Impugned Order and thereby dismissed the Appeal.

Footnotes

1. (2001) 8 SCC 470

2. (2019) 2 SCC 455

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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