INTRODUCTION
Arbitration aims for the expeditious resolution of commercial disputes, utilizing independent mechanisms like Commercial Courts. Despite the clear objective, confusion surrounds the limitation period for filing applications under Sections 34 and 37 of the Arbitration Act, 1996[1]. Supreme Court has clarified the interplay of the Limitation Act[2], Commercial Courts Act[3] and the Arbitration and Conciliation Act, 1996[4] in the case of State of Maharashtra v Borse Brothers[5] trying to clarify the limitation period for applications filed u/s 34 and 37 of the act, it has paved way for condonation of delay where there is “sufficient cause”. Further, there are a lot of case laws dealing with the issue of condonation of delay (extension of prescribed time in certain cases subject to sufficient cause) like Bhimashankar Sahakari Sakkare Karkhane Niyamita v Walchangar Industries Ltd.[6], Simplex Infrastructure v UOI[7], Ircon International v PNC Jain[8].
Through this article, the position of law shall be discussed on whether the application u/s 34 and 37 should be condoned by the court taking into consideration the objective behind Arbitration, the principle of minimal judicial intervention and various legal pronouncements.
CONDONATION OF DELAY UNDER THE ARBITRATION AND CONCILIATION, 1996.
Section 34 talks about the application for setting aside an arbitral award. Section 34(3)[9] says that an application u/s 34 shall be filed within 3 months after the party has received the Arbitral award.
The Supreme Court in the case of Simplex Infrastructure v UOI[10], relied on the position of law settled u/s 34 (3) of the act and held that the application for setting aside the arbitral award needs to be filed within 3 months and the period can only be extended for a further period of 30 days that too when an application has been filed u/s 33[11] on showing sufficient cause and not thereafter.
This position of the court was upheld further in the case of Bhimashankar v Walchangar Industries[12].
Further, the Delhi HC in the case of Ircon International v PNC Jain[13] held that condonation u/s 34 cannot be granted liberally as the same would defeat the very purpose of the enactment of the Arbitration Act.
The Gauhati High Court has ruled that a delay in filing a petition under Section 34 of the Arbitration and Conciliation Act cannot be condoned beyond 120 days. Justice Malasri Nandi’s bench emphasized that the Court lacks the authority to extend the delay beyond the limitation period specified in Section 34(3) of the Act, which is 3 months plus an additional 30 days. The court clarified that Section 5 of the Limitation Act[14] does not apply to petitions under Section 34(1) of the Arbitration and Conciliation Act.[15]
No provision has been given for a limitation period for an application u/s 37 of the act.
The Supreme Court in the case of State of Maharashtra v M/S Borse Brothers[16] clarified the limitation period for applying u/s 37 of the act by taking into consideration section 13 of the Commercial Courts Act[17] and sections 116 & 117 of CPC[18]. For commercial disputes with a specified value of 3,00,000 or more, the appeal should be filed in the Commercial Court within 60 days whereas for disputes of a specified value less than 3,00,000, the appeal should be filed in the High Court. For filling an appeal within the same High Court, the period will be 30 days whereas for filling an appeal in another High Court or challenging the decision of the district court, the period will be 90 days.
The court also allowed condonation of delay in filling application if the party is successful in showing that there was a sufficient case. This has paved the way for discussion as to what constitutes a sufficient cause and whether this position taken by the law is antithetical to the principle of minimal judicial intervention and interferes with the objective of arbitration.
LEGAL BASIS FOR CONDONATION OF DELAY U/S 37
The court in the case of Borse Brothers relying on the judgement of Baswaraj v Land Acquisition Officer [19] observed that sufficient cause means that the party should not have acted negligently or there was a want of bona fide on its part given the facts and circumstances of a case or it cannot be alleged that the party has “not acted diligently” or “remained inactive”. The court further said that circumstances and facts of each case should be taken into consideration and the discretionary powers of the court should be used cautiously.
The court further said that where a case has been presented before the court after the expiry of the limitation period, the applicant has to explain to the court an adequate and justified reason behind the delay and mere negligence on the part of the applicant cannot be allowed.
Condonation of delay under sections 34 and 37 requires more than a sufficient cause; the court must consider relevant facts, parties’ bona fide, and diligence, limiting discretion to pertinent matters.
Further, the court while relying on the decision of Arjun Singh v Mohindra Kumar[20] observed the difference between good cause and sufficient cause and said that every sufficient cause is a good cause and vice versa and said that if there is a difference, it is that more concrete and higher degree of proof is required for showing a sufficient cause.
The court in this case was cautious in allowing condonation of delay in only exceptional cases where there is a justified and sufficient reason behind the delay and the applicant was placed in certain circumstances in which they couldn’t help but get delayed in applying.
THE REASON BEHIND THE LAW OF LIMITATION
The statute of limitations, rooted in public policy, serves to maintain peace, curb fraud and perjury, promote diligence, and prevent oppression. It aims to resolve past matters that have not been reasonably addressed and have become stale due to the passage of time.
According to Halsbury laws of England, the courts have expressed at least three differing reasons supporting the existence of statutes of limitations namely, (1) that long-dormant claims have more cruelty than justice in them, (2) that a defendant might have lost the evidence to disprove a stale claim, and (3) that persons with good causes of actions should pursue them with reasonable diligence.”
The court in the case of Popat Kotecha property v SBI Staff Assistant[21] held that an unlimited limitation would lead to a sense of insecurity and uncertainty, and therefore, limitation prevents disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a party’s inaction, negligence or laches.
The application of the law of limitation may cause hardship but it needs to be applied by taking into account the legal maxim dura lex sed lex which means the law is hard but it is the law. The law of limitation may be hard on the parties but it needs to be applied by the court according to the statute of the law and the court cannot simply refuse to apply the law based on the inconvenience caused to the parties.
ANALYSIS
When it comes to Arbitration, the objective behind it is to provide a speedy disposal of cases or disputes of commercial character, minimising the wastage of time and money and preventing the disputes from remaining unaddressed by the courts. The history and scheme of the Arbitration and Conciliation Act 1996 help in achieving this objective, thus disallowing any extension of the limitation period for an application filed u/s 34.
When it comes to application filed u/s 37, the act does not explicitly provide a period but the period needs to be derived taking into consideration the objective of the act and the legislative intent behind the act which was to ensure speedy disposal of cases and ensuring minimal judicial intervention.
The court needs to be cautionary in its approach to condone a delay for an application filed u/s 37, the court cannot exercise its discretion in a manner that breaches the legislative intent behind the act, the court needs to draw a line and cannot interfere unnecessarily.
In the case of UOI v Popular Construction[22], the importance of fixed periods was highlighted. Further, it was observed that Finality is a fundamental principle of Arbitration and fixed periods for challenging an arbitral award can be a decisive factor in ensuring Finality.
Although Condonation can have the potential to breach the objective of Arbitration, sometimes it becomes necessary to advance substantial justice in cases where there was no gross negligence on the part of the parties but the circumstance was as such which bounded the applicant and they couldn’t help but delay in filing the application.
The Supreme Court in the case of Borse Brothers opened doors for courts to allow condonation of delay in certain circumstances. This should be done only in exceptional circumstances while taking into context the Arbitration Act, the law of limitation and the objective of both the laws.
CONCLUSION
In conclusion, the article underscores the delicate balance needed in condoning delays under sections 34 and 37 of the Arbitration Act, 1996. While emphasizing the objective of swift dispute resolution, it acknowledges the importance of fixed time periods for maintaining finality. While the Borse Brothers case allows for condonation under exceptional circumstances, there is a potential risk of undermining the Act’s objectives by permitting delays. The delicate balance required between swift resolution and adherence to fixed time frames may introduce uncertainties, raising concerns about the effectiveness of the Arbitration Act in achieving its intended efficiency and justice goals.
Authors Name: Gurman Narula & Sharad Khemka (National Law Institute University , Bhopal)
Reference(s):
[1] The Arbitration and Conciliation Act, 1996 (26 of 1996) ss 34, 37.
[2] The Limitation Act, 1963 (36 of 1963).
[3] The Commercial Courts Act, 2015 (4 of 2016).
[4] The Arbitration and Conciliation Act, 1996 (26 of 1996).
[5] State of Maharashtra v Borse Brothers Engineers & Contractors (P) Ltd (2021) 6 SCC 460.
[6] Bhimashankar Sahakari Sakkare Karkhane Niyamita v Walchandnagar Industries Ltd 2023 LiveLaw (SC) 288.
[7] Simplex Infrastructure v Union of India 2016 AIR CC 2674.
[8] Ircon International Ltd v Pnc Jain Construction Co (Jv) 2023 DHC 703.
[9] The Arbitration and Conciliation Act, 1996 (26 of 1996) s 34(3).
[10] Simplex (n 7).
[11] The Arbitration and Conciliation Act, 1996 (26 of 1996) s 33.
[12] Bhimashankar (n 6).
[13] Ircon (n 8).
[14] The Limitation Act, 1963 (36 of 1963) s 5.
[15] The Arbitration and Conciliation Act, 1996 (26 of 1996) s 34(1).
[16] Borse (n 5).
[17] The Commercial Courts Act, 2015 (4 of 2016) s 13.
[18] The Code of Civil Procedure, 1908 (5 of 1908) ss 116,117.
[19] Baswaraj & Anr v Spl Laq Officer 2013 (14) SCC 81.
[20] Arjun Singh v Mohindra Kumar & Ors 1964 AIR 993.
[21] Popat and Kotecha Property v State Bank of India Staff Association AIRONLINE 2005 SC 1032.
[22] Union of India v Popular Construction Co 2001 (8) SCC 470.
