LIMITATION PERIOD FOR APPEAL UNDER SECTION 37 OF ARBITRATION ACT

 

Limitation period FOR APPEAL under section 37 of Arbitration Act

The Supreme Court in a matter captioned as Executive Engineer v. M/s Borse Brothers Engineers & Contractors Pvt. Ltd CIVIL APPEAL NO. 999 OF 2021 SLP (CIVIL) No.15278 of 2020 along with other civil appeals has dealt with the issue of limitation period in filing appeal u/s 37 of Arbitration & Conciliation Act 1996 (As amended and up to date). While so doing, the Supreme Court has also overruled its earlier judgment captioned as N.V. International v. the State of Assam CIVIL APPEAL NO. 9244 OF 2019. The Supreme Court was swayed by the very objective of speedy justice as per the provisions of Arbitration & Conciliation Act 1996 (A & C Act or AC Act in short) and it was also further reinforced in Arbitration & Conciliation (Amendment Act) 2015. The Commercial Courts Act 2015 (CCA) and its implication are also dealt with, in as much as the enacted for adjudicating the commercial disputes within the meaning of the CCA is also analysed as the underlying object being speedy disposal of cases.

The Supreme Court has earlier held that that any delay beyond 120 days in the filing of an appeal under Section 37 of A & C Act from an application being either dismissed or allowed under Section 34 of the Arbitration and Conciliation Act, 1996 should not be allowed as it will defeat the overall statutory purpose of arbitration proceedings being decided with utmost despatch.

We know that Section 37 of the Arbitration Act provides for appeals from several orders, including orders made under sections 8, 9, 16 and 17, apart from orders that may be passed under section 34 of the A & C Act.

                 OBJECT & TERMS OF A & C Act

The main objectives of the A & C Act are to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; and to minimize the supervisory role of courts in the arbitral process. Section 5 of the Act deals with as under:

5. Extent of judicial intervention.—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.”

Similarly, Section 8 provides as under:

“8. Power to refer parties to arbitration where there is an arbitration agreement.—

(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:  [Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

It may also be worthwhile to reproduce the Section 9 of the A & C Act 1996

“9. Interim measures, etc., by Court.—

(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.”

Similarly, relevant extract of Section 11 of the Act may be perused as under:

“11. Appointment of arbitrators.— xxx xxx xxx

(4) If the appointment procedure in sub-section (3) applies and—

(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court; xxx xxx xxx

(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case maybe, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party”.

Section 13 of the A & C Act contains challenge procedure.

13. Challenge procedure.—

(1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.

(2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section(3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.

(3) Unless, the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

(4) If a challenge under any procedure agreed upon by the parties or under the procedure under subsection (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.

(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.

(6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.”

With a view to clear understanding of the matter in hand, it may be worthwhile to reproduce Section 16, 29 A, and 29 B of the A & C Act. The same is as under::

16. Competence of arbitral tribunal to rule on its jurisdiction.— xxx xxx xxx

16 (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.”

29A. Time limit for arbitral award.—

(1)  The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23:

Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.

(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under subsection (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period: 17 Provided that while extending the period under this subsection, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay. Provided further that where an application under subsection (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application: Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.

(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.

(6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.

(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.

(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.

(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party”

29B. Fast track procedure.—

(1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).

(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties.

(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):—

(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing;

(b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them;

(c) An oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;

(d) The arbitral tribunal may dispense with any technical formalities, if an oral hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.

(4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.

(5) If the award is not made within the period specified in sub-section (4), the provisions of subsections (3) to (9) of section 29A shall apply to the proceedings.

(6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties.”

                                  ANALYSIS

After analysis of the aforesaid provisions and applying the principles of Limitation Act, 1963 In Executive Engineer (Supra) the Supreme Court has observed that Section 37 of the Arbitration Act, when read with section 43 thereof, makes it clear that the provisions of the Limitation Act will apply to appeals that are filed under section 37. Articles 116 and 117 of the Limitation 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. There can be no doubt whatsoever that section 5 of the Limitation Act will apply to the aforesaid appeals, both by virtue of section 43 of the Arbitration Act and by virtue of section 29(2) of the Limitation Act.

Conversely, Section 3 of the Limitation Act provides for the bar of limitation and the same may be read with section 29(2) of the Limitation Act. It provides that subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence. “Prescribed period” means that period of limitation computed in accordance 29 with the provisions of the Limitation Act. “Period of limitation” means the period of limitation prescribed for any suit, appeal or application by the Schedule to the Limitation Act [vide Section 2(j) of the said Act]. Section 29 of the Limitation Act relates to savings. Sub-section (2) thereof which is relevant is extracted below:

“29. (2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of Section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in Sections 4 to 24 (inclusive) shall apply only insofar as, and to the extent to which, they are not expressly excluded by such special or local law.”

Article 116 of the Schedule prescribes the period of limitation for appeals to the High Court (90 days) and appeals to any other court (30 days) under the Code of Civil Procedure, 1908. It is now well settled that the words “appeals under the Code of Civil Procedure, 1908” occurring in Article 116 refer not only to appeals preferred under the Code of Civil Procedure, 1908, but also to appeals, where the procedure for filing of such appeals and powers of the court for dealing with such appeals are governed by the Code of Civil Procedure. (See decision of the Constitution Bench in Vidyacharan Shukla v. Khubchand Baghel [AIR 1964 SC 1099] .) Article 119(b) of the Schedule prescribes the period of limitation for filing an application (under the Arbitration Act, 1940), for setting aside an award, as thirty days from the date of service of notice of filing of the award.

The A & C Act is no doubt, a special law, consolidating and amending the law relating to arbitration and matters connected therewith or incidental thereto. The A&C Act does not prescribe the period of limitation, for various proceedings under that Act, except where it intends to prescribe a period different from what is prescribed in the Limitation Act. On the other hand, Section 43 of A & C Act makes the provisions of the Limitation Act, 1963 applicable to proceedings—both in court and in arbitration—under the A&C Act. There is also no express exclusion of application of any provision of the Limitation Act to proceedings under the A&C Act, but there are some specific departures from the general provisions of the Limitation Act, as for example, the proviso to Section 34(3) and sub-sections (2) to (4) of Section 43 of the A& C Act.

We know that the Schedule to the Limitation Act prescribes a period of limitation for appeals or applications to any court, and the special or local law provides for filing of appeals and applications to the court, but does not prescribe any period of limitation in regard to such appeals or applications, the period of limitation prescribed in the Schedule to the Limitation Act will apply to such appeals or applications and consequently, the provisions of Sections 4 to 24 will also apply. It therefore follows that where the special or local law prescribes for any appeal or application, a period of limitation different from the period prescribed by the Schedule to the Limitation Act, then the provisions of Section 29(2) of the said Act will be attracted. In such a situation, the provisions of Section 3 of the Limitation Act shall apply, as if the period of limitation prescribed under the special law was the period prescribed by the Schedule to the Limitation Act, and for the purpose of determining any period of limitation prescribed for the appeal or application by the special law, the provisions contained in Sections 4 to 24 of Limitation Act will apply to the extent to which they are not expressly excluded by such special law. The very object of provision as contained in Section 29(2) of the Limitation Act is to ensure that the principles contained in Sections 4 to 24 of the Limitation Act apply to suits, appeals and applications filed in a court under special or local laws also, even if that prescribes a period of limitation different from what is prescribed in the Limitation Act, of course, except and to the extent of clear exclusion of the application of any or all of those provisions.

Similarly, the Commercial Courts Act (CCA) is applied to the aforesaid appeals, given the definition of “specified value” and the provisions contained in sections 10 and 13 thereof. Thus, it is only when the specified value is for a sum less than Three Lakh rupees that the appellate provision contained in section 37 of the Arbitration Act will be governed, for the purposes of limitation, by Articles 116 and 117 of the Limitation Act. If it is assumed that depending upon which court decides a matter, a limitation period of either 30 or 90 days is provided, may lead to arbitrary results, and that, therefore, the uniform period provided by Article 137 of the Limitation Act should govern appeals as well has not passed muster. According to Supreme Court it is settled that periods of limitation must always to some extent be arbitrary and may result in some hardship, but that should be strictly followed.

A recent judgment of Supreme Court in ICOMM Tele Ltd. v. Punjab State Water Supply and Sewerage Board, (2019) 4 SCC 401, states:

25. Several judgments of this Court have also reiterated that the primary object of arbitration is to reach a final disposal of disputes in a speedy, effective, inexpensive and expeditious manner. Thus, in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. [Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., (2017) 2 SCC 228 : 36 (2017) 1 SCC (Civ) 593] , this Court held: (SCC p. 250, para 39) “39. In Union of India v. U.P. State Bridge Corpn. Ltd. [Union of India v. U.P. State Bridge Corpn. Ltd., (2015) 2 SCC 52 : (2015) 1 SCC (Civ) 732] this Court accepted the view [ Indu Malhotra, O.P. Malhotra on the Law and Practice of Arbitration and Conciliation (3rd Edn., Thomson Reuters, 2014).] that the A&C Act has four foundational pillars and then observed in para 16 of the Report that: (SCC p. 64)

‘16. First and paramount principle of the first pillar is ‘fair, speedy and inexpensive trial by an Arbitral Tribunal’. Unnecessary delay or expense would frustrate the very purpose of arbitration.””

31. Thus, from the scheme of the Arbitration Act as well as the aforesaid judgments, condonation of delay under section 5 of the Limitation Act has to be seen in the context of the object of speedy resolution of disputes.

After the enactment of CCA, it is obvious that the bulk of appeals to the appellate court falls under section 37 of the Arbitration Act, are governed by section 13 of the Commercial Courts Act. The Sub-section (1A) of section 13 of the Commercial Courts Act provides the forum for appeals as well as the limitation period to be followed. Section 13 of the Commercial Courts Act being a special law as compared with the Limitation Act which is a general law, which follows from a reading of section 29(2) of the Limitation Act. Section 13(1A) of the Commercial Courts Act lays down a period of limitation of 60 days uniformly for all appeals that are preferred under section 37 of the Arbitration Act.

Whether, the application of section 5 of the Limitation Act is excluded by the scheme of the Commercial Courts Act needs elucidation. Section 13(1A) of the Commercial Courts Act does not contain any provision akin to section 34(3) of the Arbitration Act. Section 13(1A) of the Commercial Courts Act only provides for a limitation period of 60 days from the date of the judgment or order appealed against, without further going into whether delay beyond this period can be condoned or not. If one reads the object of expeditious disposal of appeals is laid down in section 14 of the Commercial Courts Act, then, language of section 14 makes it clear that the period of six months spoken of is directory and not mandatory. As a contrast, section 16 of the Commercial Courts Act read with the Schedule thereof and the amendment made to Order VIII Rule 1 of the CPC as held in BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234, whereas, section 37 of the Arbitration Act provides the substantive right to appeal, section 13 of the Commercial Courts Act provides the forum and procedure governing the appeal.

If it is to be seen from the perspective of CPC, the defendant in a suit is given 30 days to file a written statement, which period cannot be extended beyond 120 days from the date of service of the summons; and on expiry of the said period, the defendant forfeits the right to file the written statement and the court cannot allow the written statement to be taken on record. This provision was enacted as a result of the judgment of Supreme Court in Salem Advocate Bar Assn. (II) v. Union of India, (2005) 6 SCC 344. 35. In a recent judgment of this Court namely, SCG Contracts (India) (P) Ltd. v. K.S. Chamankar Infrastructure (P) Ltd., (2019) 12 SCC 210, it is held as under:

“8. The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 came into force on 23-10-2015 bringing in their wake certain amendments to the Code of Civil Procedure. In Order 5 Rule 1, sub-rule (1), for the second proviso, the following proviso was substituted: “Provided further that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the written statement on such other day, as may be specified by the court, for reasons to be recorded in writing and on payment of such costs as the court deems fit, but which shall not be later than one hundred twenty days from the date of service of summons and on expiry of one hundred and twenty days 39 from the date of service of summons, the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.” Equally, in Order 8 Rule 1, a new proviso was substituted as follows: “Provided that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the written statement on such other day, as may be specified by the court, for reasons to be recorded in writing and on payment of such costs as the court deems fit, but which shall not be later than one hundred and twenty days from the date of service of summons and on expiry of one hundred and twenty days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.”

This was re-emphasised by re-inserting yet another proviso in Order 8 Rule 10 CPC, which reads as under:

“10. Procedure when party fails to present written statement called for by court.—

Where any party from whom a written statement is required under Rule 1 or Rule 9 fails to present the same within the time permitted or fixed by the court, as the case may be, the court shall pronounce judgment against him, or make such order in relation to the suit as it thinks fit and on the pronouncement of such judgment a decree shall be drawn up:

Provided further that no court shall make an order to extend the time provided under Rule 1 of this Order for filing of the written statement.” A perusal of these provisions would show that ordinarily a written statement is to be filed within a period of 30 days. However, grace period of a further 90 days is granted which the Court may employ for reasons to be recorded in writing and payment of such costs as it deems fit to allow such written statement to come on record. What is of great importance is the fact that beyond 120 days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the Court shall not allow the written statement to be taken on record. This is further buttressed by the proviso in Order 8 Rule 10 also adding that the court has no further power to extend the time beyond this period of 120 days.

                                  CONCLUSION

The courts have expressed several reasons supporting the existence of statutes of limitations, namely, (1) that long dormant claims shall hardly entail justice in them, (2) the defendant might have lost the evidence to disprove a stale claim, and (3) a person raising claim should pursue them with reasonable diligence. 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 own inaction, negligence or laches. After the discussion as per above, the hon’ble Supreme Court has held in Executive Engineer  (Supra) on the facts of the appeal u/s 37 of the A & C Act that a long delay of 75 days beyond the period of 60 days provided by the Commercial Courts Act cannot be condoned. The delay was sought to be condoned on the premise that delay caused due to time consumed in procedural approval and since the appellant is a public entity formed under the Energy department of the State Government, the delay caused in filing the appeal is bona fide and thus the delay deserved to be condoned was negated by the Supreme Court. Moreover, it is also held that, merely because, the government is involved, a different yardstick for condonation of delay cannot be laid down as also held in Postmaster General v. Living Media India Ltd., (2012) 3 SCC 563.

                                        -----

                              Anil K Khaware

                              Founder & Senior Associate

                              Societylawandjustice.com