1. Introduction
1.1. The Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') is an important piece of statutory legislation governing arbitration and conciliation proceedings in India and providing a framework for the resolution of disputes outside the courts in a time-bound manner. The Act enacted in 1996 was subsequently amended and particularly in the years 2015, 2019 and 2021 for making the law more effective in terms of time, cost and minimal judicial intervention. The timely dispensation of the arbitral proceedings is the hallmark of this legislation, as visible from timelines prescribed in sections 9(2), 11(4), 11(5), 11(13), 12(1)(b), 13(2), second proviso to 24(1), 29A, 29B(4), 33, 34(3), 34(6) of the Act. Recently, the importance of the timelines prescribed in the Act was recognised by the High Court of Judicature at Allahabad (High Court) in the matter of State of UP & Ors. v/s. Harish Chandra India Limited, 2024 SCC OnLine All 3218 (decided on 02.07.2024). The matter pertains to the limitation of filing an appeal under sections 34 and 37 of the Act and the same has been analysed in this case analysis briefly.
2. Brief Facts
2.1. An agreement was entered into by the State of Uttar Pradesh ('Appellants') and M/s Harish Chandra India Limited ('Respondent') for an excavation work.
2.2. Disputes and differences arose between the parties in relation to the aforesaid agreement which were referred to arbitration.
2.3. The Arbitrator gave an award of Rs. 67,42,240/- in favour of the Respondent on 19.07.2009. If the award remained unpaid beyond four months from the date of delivery of the award, the same was to carry simple interest @ 16% from the date of award to the date of actual payment.
2.4. On 17.05.2010, the Appellants filed an application under Section 34 of the Act challenging the arbitration award along with an application for condonation of delay under Section 5 read with Article 137 of the Limitation Act, 1963 ('the Limitation Act').
2.5. The District Judge, Agra vide order dated 1.08.2012 rejected the application filed by the Appellants under Section 5 read with Article 137 of the Limitation Act along with the application under Section 34 of the Act.
2.6. Aggrieved by the order of the District Judge, the Appellants preferred an appeal under Section 37 of the Act before the High Court on 13.03.2013 with a delay of 244 days.
3. Legal Position
3.1. The Supreme Court of India in Union of India v. Varindera Constructions Ltd., (2020) 2 SCC 111, by its judgment and order dated 01.09.2018 held that the impugned Division Bench judgment dated 10-4-2013 [Union of India v. Varindera Constructions Ltd., 2013 SCC OnLine Del 6511] found that apart from the fact that there is no sufficient cause made out in the grounds of delay, since a Section 34 application has to be filed within a maximum period of 120 days including the grace period of 30 days, an appeal filed from the same proceeding under Section 37 should be covered by the same drill. The Supreme Court observed that given the fact that an appellate proceeding is a continuation of the original proceeding, as has been held in Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, 1940 SCC OnLine FC 10 : AIR 1941 FC 5, any delay beyond 120 days in the filing of an appeal under Section 37 from an application being either dismissed or allowed under Section 34 of the Act should not be allowed as it will defeat the overall statutory purpose of arbitration proceedings being decided with utmost despatch. Having observed so, the Supreme Court did not allow the SLP in the matter.
3.2. The Supreme Court in N.V. International v. State of Assam, (2020) 2 SCC 109, citing the abovementioned ruling, espoused on the period of limitation for filing of an appeal under Section 37 of the Act. The Supreme Court further added that "what we have done in the aforesaid judgment is to add to the period of 90 days, which is provided by statute for filing of appeals under Section 37 of the Arbitration Act, a grace period of 30 days under Section 5 of the Limitation Act by following Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, 1940 SCC OnLine FC 10 : AIR 1941 FC 5, as also having regard to the object of speedy resolution of all arbitral disputes which was uppermost in the minds of the framers of the 1996 Act, and which has been strengthened from time to time by amendments made thereto. The present delay being beyond 120 days is not liable, therefore, to be condoned".
3.3. In State of Maharashtra v. Borse Bros. Engineers & Contractors (P) Ltd., (2021) 6 SCC 460, the Supreme Court propounded that a delay under the Act can only be condoned by way of an exception and not by way of rule.
3.4. Following the above-mentioned rulings, the High Court in Harish Chandra case observed that the principle that delays in arbitration matters under the Act can only be condoned on sufficient cause and as an exception is rooted in the very essence of why arbitration is chosen as a method of dispute resolution. The need for timely resolution is paramount in arbitration, especially given its primary objective to provide a faster and more efficient alternative to traditional litigation. The Act was legislated with the intent to streamline the process, minimize court interference, and facilitate quick resolution of disputes, particularly in commercial contexts where time is often a critical factor. Delaying arbitration can have profound consequences, disrupting business operations, causing financial loss, and undermining the trust in the arbitration process. However, the Act also recognizes that there can be genuine circumstances where adhering to these timelines might not be possible. In such cases, the provision for condoning delays exists, but it is clearly stated that this can only happen if sufficient cause is shown. This balance between rigidity and flexibility ensures that while the process remains fast, it does not become unjustly stringent.
3.5. The term 'sufficient cause' is not explicitly defined in the Act, which means its interpretation has largely been shaped by judicial pronouncements. Courts, when determining whether sufficient cause exists, consider various factors such as the nature of the delay, the reasons provided, the conduct of the parties, the impact of the delay on the arbitration process and the other party, and whether the delay was beyond the control of the party seeking condonation.
3.6. The rationale behind such stringent timelines is rooted in the principles of finality and efficiency, which are paramount in arbitration. The 90-day period, followed by a maximum 30- day extension for condonation of delay, is thus a carefully calibrated timeframe that balances the need for promptness with a limited degree of flexibility to accommodate genuine hardships.
4. State seeking condonation of delay
4.1. The High Court also observed in respect of the condonation of delay sought by the Government who often cite bureaucratic, administrative and procedural delays as the reasons. The High Court observed that though these reasons might seem compelling due to the complex and often cumbersome nature of governmental operations, the law applies to all the parties in the same manner. The government cannot be given special, or preferential treatment in legal matters.
5. Decision
5.1. The High Court dismissed the appeal under section 37 being preferred after the limitation period. The High Court further held that even otherwise, the same would have failed on merits since the application under Section 34 was evidently time barred and as such was rightly dismissed in the impugned order by the District Judge.
6. Conclusion
6.1. The Supreme Court, through various landmark judgments, has underscored that the timelines prescribed under the Act are to be adhered to strictly. What emerges from the wisdom of the Supreme Court is that being a legislation for speedy disposal, delay under the Act can only be condoned if sufficient cause is made out and not otherwise. The Supreme Court also issued a directive to the Principal Secretary (Law) of the Government of UP, to take steps in order to avoid filing of appeals beyond the limitation period and submit an action taken report within 6 months.
A copy of the judgment is annexed hereto at page 3 to 16.
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Originally published 04th Mar 2025
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