THE SET IN STONE RULE OF LIMITATION UNDER SECTION 34 OF THE ARBITRATION & CONCILIATION ACT,1996

BY SWATI SINGH

LEGAL INTERN, H.K. LAW OFFICES

Introduction

         The reason behind growth of Arbitration was its peculiar features such as party autonomy, least interreferences by courts and above all the summary process leading to speedy disposal of the cases. These features are very important specially for commercial disputes which involve huge economic stakes and any inordinate delay could cause loss not just to the parties but to the nation’s economy as a whole. Therefore, the Act itself prescribes period of limitation at various stages of the proceedings.

            Recently, a dispute arose before the Hon’ble Supreme Court that whether the Section 5 of the Limitation Act, 1963 which provides for condonation of delay in certain cases will apply in cases of applications filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as Act). This article analyses the rule of limitation under the section 34 of the Act, applicability of Section 5 to the said provision, the judicial decision of the case of Mahindra andMahindra Financial Services Ltd. v. Maheshbhai Tinabhai Rathod & Ors.[1] and the analysis of such reasoning.

The Rule of Limitation provided under Section 34

            The Section 34 of the Act provides for setting aside of the arbitral award and the sub-section 3 provides that “ An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award, or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months if may entertain the application within a further period of thirty days, but not thereafter.” Thus, the maximum time that can be allowed for filing of the application, in any case, could be of four months and not more than that.

The conundrum regarding the ‘receipt’ of the award

            The section 34 says down that the period of limitation has to be calculated from the date of receipt of the award. The section 3 of the Act lays down that “any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address” and the sub-section 2 state that “the communication is deemed to have been received on the day it is so delivered”.  Moreover, the Section 31(5) of the Act provides only for the delivery of the signed copy of the award to the parties. So, this raises the question whether the date of delivery is to be taken as the date of receipt of award and the period of limitation be calculated from this date itself.

            The hon’ble courts, through a series of judgements have held that that the word ‘receipt’ in section 34 has to be read in a strict sense and it does not encompass deemed receipt as mentioned under Section 3 of the Act. In the case of State of Himachal Pradesh v. Himachal Techno,[2] the hon’ble court observed that even if an award is delivered to the very office of a party on a non-working day, that date of mere physical delivery cannot be regarded as the receipt of award for the purposes of Section 34. There must be an effective delivery to regard it as ‘receipt’ of the award.

            Further, in the case of Union of India v. Tecco Trichy Engineers and Contractors,[3] the hon’ble apex court held that condition laid down in Section 34(3) is not a matter of mere formality but a matter of substance. In order to set the period of limitation in motion, there must be an effective delivery under Section 31(5) which is done only on actual receipt of the award. Moreover, in the case of State of Maharashtra & Ors. v. Ark Builders,[4] the court observed that the condition of reception of arbitral award implies the reception of the same in accordance with the Section 31 of the Act. The Section 31(5) provides that a signed copy of the award is to be delivered to each party.

Applicability of Section 5 of the Limitation Act, 1963

            The Section 5 of the Limitation Act, 1963 provides for the condonation of delay in certain cases. It states that “Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” 

In the case of Collector, Land Acquisition v. Katiji,[5] the court observed that “When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay”. In G. Ramegowda, Major, Etc v. Special Land Acquisition[6], the court observed that “the expression ‘sufficient cause’ in Section 5 must receive a liberal construction so as to advance substantial justice and generally delays in preferring appeals are required to be condoned in the interest of justice where no gross negligence or deliberate inaction or lack of bona fides is imputable to the party seeking condonation of the delay”.

However, for the purposes of Section 34 of the Act, this general rule provided under Section 5 of the Limitation Act is not followed. The maxim generalia specialibus non derogant applies in such cases, which means that general laws do not prevail over special laws. In the case of Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department,[7] the Supreme Court held that Arbitration and Conciliation Act, 1996 is a special law, consolidating and amending the law relating to arbitration and matters connected therewith or incidental thereto. 

In Union of India v. Popular Construction Co.[8] the court observed that since section 34 is prescribing a period of limitation different from that prescribed under the Limitation Act and providing a ceiling on the period by which the period of limitation could be extended, the corresponding provisions in the Limitation Act prescribing the period of limitation for filing an application for setting aside an award [Article 119(b) of the Schedule to Limitation Act] and for extending the period of limitation for sufficient cause (section 5 of under Section 34 to challenge an award is absolute and  unextendible  by  court   under  Section  5  of  the Limitation Act. In P. Radha Bai v.  P.  Ashok Kumar[9]  also, it was observed that the words “but not thereafter” in the proviso of Section 34 (3) of the Arbitration Act are of a mandatory nature, and   couched   in   negative   terms, which leaves no room for doubt.

The Case of Mahindra and Mahindra Financial Services Ltd. v. Maheshbhai Tinabhai Rathod [10]

            In the judgment delivered on 16th December, 2021, the Supreme Court held that Section 5 of the Limitation Act cannot be applied to condone the delay beyond the prescribed period mentioned under Section 34(3) of the Arbitration and Conciliation Act, 1996. The petition was filed with a delay of 185 days beyond the allowed time period under Section 34(3) of the Act. The single judge had refused to condone the delay but the Division Bench, in appeal, reversed this judgement and directed to place it before the Single Bench for admission. The Supreme Court, however, restored the order of the Single bench.

            Relying on a number of judgements, the bench comprising C.J.I. N.V. Ramana, A.S. Bopanna and Hima Kohli observed that “No doubt the delay of 197 days may not seem too inordinate. In appropriate cases the delay is to be condoned so as not to defeat the meritorious case. However, that would arise only when the power under Section 5 of Limitation Act is available to be exercised.” The court observed that in instant case extent of condonation is circumscribed the Section 34(3) and so Section 5 of Limitation Act is not applicable to condone the delay beyond the period prescribed therein. So, the court set aside the decision of the Division Bench that had condoned the delay.

The Purpose behind such stringent sub-section

            The Arbitration and Conciliation Bill, 1995 which preceded the 1996 Act stated as one of its main objectives the need “to minimise the supervisory role of courts in the arbitral process” as observed in the case of Union of India v. Popular Construction Co.[11] This objective has found expression in Section 5 of the Act which prescribes the extent of judicial intervention stating that “notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except   where so provided in this Part.” Section 34 being present in the Part I of the Act, this provision applies to the same.

The importance of the period fixed under Section 34 is emphasised by the provisions of Section 36 which provides that only once the time for making an application to set aside the arbitral award under Section 34 has expired, the   award  shall   be   enforced under the Code of Civil Procedure, 1908 in the same   manner as if it were a decree of the court. Moreover, the Section 34(1) itself provides that recourse to a court against an arbitral award may be made only by an application for setting aside such award “in accordance with” sub-section (2) and sub-section (3). Therefore, an application filed beyond the period mentioned in Section 34, sub-section (3) would not be an application “in accordance with” that sub-section. Thus, by virtue of Section 34(1) too, recourse to the court against an arbitral award cannot be made beyond the period prescribed. 

Conclusion

         Thus, there is an extremely important purpose behind interpretating the provision of limitation under Section 34(3) in the strict sense so as to uphold the essential features of speedy disposal in the Arbitration cases. The Act being a special law overrides the general provisions of the Limitation Act as has been upheld in a number of judgements. This provision is important to ease the speedy enforcement of the arbitral awards and an important step towards making India a hub of arbitration. Therefore, thorough the judgement of Mahindra and Mahindra Financial Services Ltd. v. Maheshbhai Tinabhai Rathod,[12] the Indian judiciary has reasserted this point.


[1] 2021 SCC OnLine SC 1315.

[2] (2010) 12 SCC 210.

[3] (2005) 4 SCC 239.

[4] (2011) 4 SCC 616

[5] (1987) 2 SCC 107.

[6] 1988 SCR (3) 198.

[7] 2008 (7) SCC 169.

[8] 2001 (8) SCC 470.

[9] (2019) 13 SCC 445.

[10] Supra at 1.

[11] (2001) 8 SCC 470.

[12] Supra at 1.

Published by meghachaturvedi

Associate Partner, H.K. Law Offices

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