India: Strict Limitation For Appeal Under Section 37 Of The Arbitration & Conciliation Act Govt. Of Maharashtra v M/S Borse Brothers Engineers & Contractors Pvt. Ltd.
[Civil Appeal no. 995/2021; Hon'ble Justice R. F. Nariman]

The issue of limitation with respect to proceedings in relation to arbitration, has continued to avail indispensable significance, given the very object sought to be achieved by the statute is speedy disposal of disputes, and resultant strict timelines statutorily laid down therein. As regards bringing challenge to the award rendered by arbitral tribunal, a plethora of judicial precedents have made a threadbare interpretation of the statutory prescriptions of the Arbitration and Conciliation Act, 1996 (Arbitration Act) to declare strict and mandatory timelines of Section 34 of Arbitration Act, acknowledging clear exclusion of condonation of delay under Section 5 of Limitation Act.

This view continued to be carried forth in relation to appeal under Section 37 of the Arbitration Act as well, under impression that appellate proceeding is a continuation of the original proceeding¹ and therefore, delay beyond 120 days in filing of appeal under this section should not be allowed as it will defeat the overall statutory purpose of arbitration proceedings.² This view was revaluated and overruled by the apex court in the light of provisions of the Commercial Courts Act. Thereby the judgment of N.V. International v State of Assam [(2020) 2 SCC 109], which held the field for the time being on the issue, came to be declared as per incuriam for not considering the provisions of the Commercial Courts Act.³

The apex court, while examining the interplay between the provisions of the Arbitration Act and the Commercial Courts Act, held that the provisions of Article 116 and 117 of the Limitation Act will apply to appeals filed under Section 37 of the Arbitration Act, which provide for a limitation period of 90 days and 30 days, depending upon whether the appeal is from any other court to a High Court or an intra-High Court appeal. The court further held that the provisions of Section 5 of the Limitation Act will apply to appeals under Section 37 of Arbitration Act, both by virtue of Section 43 of the Arbitration Act as well as Section 29(2) of the Limitation Act. However, the applicability of Section 5 of the Limitation Act to an appeal filed under Section 37 of the Arbitration Act was held to be seen in the context of the object of 'speedy resolution of disputes'.

It was further held that appeals under Section 37 of the Arbitration Act are governed by Section 13 of the Commercial Courts Act, sub-section (1A) of which provides the forum for appeals as well as limitation period of 60 days to be uniformly followed for all kinds of appeal. It was noted that Section 37 of the Arbitration Act provides substantive right to appeal, whereas Section 13 of the Commercial Courts Act provides for the forum and procedure governing the appeal.⁴ The court observed that Section 13(1A) of the Commercial Courts Act applies an intermediate period of 60 days for filing of an appeal, that is, a period which is halfway between 30 days and 90 days provided by Articles 116 and 117 of the Limitation Act. The court, while holding that the scheme of the Commercial Courts Act does not exclude application of Section 5 of the Limitation Act, also proceeded to reject the argument of casus omissus which was set up to suggest the bodily lifting of last part of Section 34(3) to be read into Section 37 of the Arbitration Act, towards capping the limitation under Section 37.

The applicability of Section 5 of the Limitation Act on the appeals filed under Section 37 of the Arbitration Act being upheld, the court laboured further to steer a middle course between one extreme laid down by N.V. International (Supra) which did not allow condonation of delay beyond 30 days, and another extreme which provided for an open-ended provision to condone any amount of delay subject to "sufficient cause" being shown. Deliberating as to what the expression "sufficient cause" means in the context of condoning delay in filing appeals under Section 37 of the Arbitration Act, the court noted the difference between a delay in filing of commercial claims under the Arbitration Act or the Commercial Courts Act on the one hand, and claims under the Motor Vehicles Act, on the other hand.⁵ It was observed that given the object sought to be achieved by both the Arbitration Act as well as the Commercial Courts Act is speedy resolution of disputes, the expression "sufficient cause" is not elastic enough to cover long delays. It was further observed that the expression "sufficient cause" is not itself a loose panacea for the ill of pressing negligent and stale claims, and in that context, it was held that merely because the government is involved, a different yardstick for condonation of delay cannot be laid down.⁶

Deliberating further, the court noted the settled law that merely making out a sufficient cause in the facts of a given case, will not confer a right in the appellant to have the delay condoned. Pertinently, the proof of sufficient cause is a condition precedent for the exercise of discretionary jurisdiction vested in court by Section 5, towards enquiring whether it should condone the delay, and in that course the court may consider all the relevant facts, including diligence of party or its bona fides.⁷ It was thus observed that condonation of delay in relation to appeal under Section 37 of the Arbitration Act, or Section 13(1A) of the Commercial Courts Act, has to be by way of exception and not by way of rule, while bearing in mind the other side of the picture 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.

It would follow from aforesaid that even though the applicability of Section 5 of the Limitation Act to appeals under Section 37 of the Arbitration Act may appear advantageous, however, the fact remains that the prevailing original period of limitation of 90 days now stands declared as reduced to 60 days. This apart, the applicability of Section 5 of the Limitation Act being subject to all caveats, including of bonafides and diligence, not only the setting out of "sufficient cause" would require higher standards of substantiation, even the exercise of discretion by court to condone the delay would require exercise of required caution, bearing in mind the right accrued to another party in equity and justice due to first party's omission to act in time. Pertinently, a party intending to file an appeal under Section 37, against the eligible outcome of proceedings under Sections 8, 9, 16, 17 or 34 of the Arbitration Act, would be required to act more swiftly and diligently in consonance with statutory objective of "speedy resolution of disputes".

Footnotes

1. [AIR (1941) FC 5] Lachmeshwar Prasad Shukul v Keshwar Lal Chaudhuri

2. [(2020) 2 SCC 109] N.V. International v St. of Assam & [(2020) 2 SCC 111] UoI v Varinder Constructions Ltd.

3. [Civil Appeal no. 995/2021] Govt. of Maharashtra v M/s Borse Brothers Engineers & Contractors Pvt. Ltd.

4. [(2020)4SCC234] BGS SGS SOMA JV v NHPC

5. [(2020) SCC Online SC 1053] Brahampal v National Insurance Company

6. [(2012)3SCC563] Postmaster General v Living Media India ltd.

7. [(1962)2SCR762] Ramlal v Rewa Coalfields Ltd.

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