11 May 2021
INTRODUCTION:
The Supreme Court in the case of Government of Maharashtra (Water Resources Department) Represented by Executive Engineer v. M/s Borse Brothers Engineers & Contractors Pvt. Ltd.[1] has inter alia set right the law regarding the period of limitation for condonation of delay in filing appeals under Section 37[2] of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). Overruling its earlier decision in N.V. International v. State of Assam[3] (“N.V. International”) and emphasising the central object of speedy disposal of disputes sought to be achieved by the Arbitration Act and the Commercial Courts Act, 2015 (“Commercial Courts Act”), the Court has allowed condonation of only ‘short delays’, setting out strict parameters for permitting the same.
FACTS
The Supreme Court has, by way of a common judgment in the instant case, disposed of three different appeals filed against decisions of the Bombay High Court[4], Delhi High Court[5] and Madras High Court[6], respectively (“Appeals”). The Bombay High Court and the Delhi High Court had dismissed the appeals filed by the Government of Maharashtra and by the Union of India respectively, refusing to condone the delay in the filing of the appeal under Section 37 of the Arbitration Act beyond 120 days. The Madhya Pradesh High Court had, on the other hand, condoned a delay of 57 days holding that it was open for the High Court to condone the delay applying Section 5 of the Limitation Act. In this regard, the Madhya Pradesh High Court had refused to follow the judgment in N.V. International on the ground that there was a conflict between the said judgment and the judgment of a larger bench of the Supreme Court in Consolidated Engg. Enterprises v. Irrigation Department[7].
The two primary issues to be decided by the Court were (i) Whether the judgment of a Division Bench of the Court in N.V. International laid down the law correctly; and (ii) Whether the appellate court could condone the delay in filing the appeal under Section 37 of the Arbitration Act.
FINDINGS AND ANALYSIS OF THE COURT
At the outset, the Court set out and dealt with the relevant provisions of Arbitration Act, the Limitation Act, 1963 (“Limitation Act”) and the Commercial Courts Act. While referring to the Statement of Objects and Reasons of the Arbitration Act, the Court noted that the requirement of ‘an arbitral procedure which is efficient’ and ‘the minimal supervisory role of courts in arbitral process’ showed that one of the main objectives of the Arbitration Act was the speedy disposal of disputes through the arbitral process.
The Court also laid emphasis on certain other provisions[8] of the Arbitration Act which inter alia prescribe minimum judicial interference thereby ensuring speedy resolution of disputes. The Court also noted that under the Arbitration Act, a party to an arbitration could file an application under Section 34 for setting aside an arbitral within a period of three months from the date of the receipt of the award and that an extension of 30 days (and nothing further) could be granted if the applicant established sufficient cause for delay in filing the application. Thereafter, referring to Section 37 of the Arbitration Act, the Court noted that the said section allowed parties to file an appeal against an order passed in a Section 34 application (i.e. an application for setting aside an arbitral award). It further noted that Section 37 also allowed parties to file an appeal against the following orders: (i) Court refusing to refer the disputing parties to arbitration under Section 8;(i) Court refusing or granting any interim measure under Section 9; (iii) tribunal accepting the plea that the it does not have jurisdiction under Section 16; and (iv) tribunal granting or refusing to grant an interim measure under Section 17. It, however, highlighted that Section 37 neither provided for a period of limitation within which an appeal could be filed thereunder, nor did it prescribe a period of condonation of delay, beyond which delay could not be condoned. The Court also noted that Section 43 of the Arbitration Act provides that the Limitation Act applies to arbitrations as it applies to court proceedings.
The Court also took note of certain provisions of the Limitation Act such as Section 5 (extension of prescribed limitation period in certain cases); Section 29(2)[9]; Articles 116 and Article 117[10] of the schedule to the Limitation Act. Thereafter, it highlighted the Statement of Objects and Reasons of the Commercial Courts Act which inter alia provides that “The proposal to provide for speedy disposal of high value commercial disputes has been under consideration of the Government for quite some time. The high value commercial disputes involve complex facts and question of law. Therefore, there is a need to provide for an independent mechanism for their early resolution.” The Court also referred to certain provisions of the Commercial Courts Act which inter alia include (i) Section 3, which provides that ‘Specified Value’ of a commercial dispute refers to the value of the subject-matter in the suit / arbitration; (ii) Section 10, which provides that where the subject-matter of an arbitration is a commercial dispute of a Specified Value, all applications and appeals arising out of such arbitration would be heard and disposed by the commercial court or the commercial division of a High Court, as the case may be; (iii) Section 13, which provides that a person aggrieved by the judgment or order in a commercial dispute may appeal to the commercial appellate court or the commercial appellate division of the High Court, as the case may be, within a period of 60 days from the date of the judgment or order; (iv) Section 14, which provides for expeditious disposal of appeals; and (v) Section 21, which provides the overriding effect of the provisions of Commercial Courts Act over any other law in force. It also highlighted that the ‘Specified Value’ of the subject-matter in respect of a suit in relation to a commercial dispute has been set out in Section 2(i) as INR Three Lakh or such higher value as may be notified by the Central Government.
Analysing the interplay between the relevant provisions of the said statues and reiterating its earlier decisions[11], the Court emphasised that the underlying theme of both the Arbitration Act as well as the Commercial Courts Act was speedy disposal of disputes.
The Court observed that on reading Section 37 of the Arbitration Act along with Section 43 thereof, it was clear that the provisions of the Limitation Act would apply to appeals filed under Section 37. This, according to the Court, would lead to the application of Articles 116 and 117 of the Limitation Act. Further, the Court held that there could be no doubt whatsoever that Section 5 of the Limitation Act would also apply to the appeals, both by virtue of Section 43 of the Arbitration Act and Section 29(2) of the Limitation Act. In this regard, the Court reiterated its earlier decision in Consolidated Engg. Enterprises v. Irrigation Deptt.[12], wherein it was held that ‘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… The AC 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 makes the provisions of the Limitation Act, 1963 applicable to proceedings—both in court and in arbitration—under the AC Act. There is also no express exclusion of application of any provision of the Limitation Act to proceedings under the AC 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 AC Act…Where 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.”
Applying the provisions of the Commercial Courts Act (particularly definition of ‘Specified Value’ and the provisions contained in Sections 10 and 13 respectively) to the aforesaid observation regarding applicability of Limitation Act, the Court held that only in cases when the ‘Specified Value’ is less than INR Three Lakh, 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. The Court further cautioned that even for such rare situations, the main object of the Arbitration Act requiring speedy resolution of disputes would be the most important principle to be applied when applications under Section 5 of the Limitation Act are filed to condone delay beyond 90 days and/or 30 days depending upon whether Article 116(a) or 116(b) or 117 applies.
It further noted that if an appeal under Section 37 was preferred against an arbitral award in arbitration of a dispute of the ‘Specified Value’, the appeal would be governed by Section 13(1A) of the Commercial Courts Act, which is a special law, as compared with the Limitation Act, which is a general law. It also highlighted that Section 13(1A) of the Commercial Courts Act only provided 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 or cannot be condoned.
With respect to the application of Section 5 of the Limitation Act to Section 37 appeals governed by a uniform 60-day period of limitation, the Court noted that reading the Arbitration Act and the Commercial Courts Act as a whole, it was clear that when Section 37 of the Arbitration Act is read with either Article 116 or 117 of the Limitation Act or Section 13(1A) of the Commercial Courts Act, the object and context provided by the aforesaid statutes is the speedy disposal of appeals filed under Section 37 of the Arbitration Act. The Court noted that to read Section 5 of the Limitation Act consistently with the aforesaid object, it was necessary to discover as to what the expression ‘sufficient cause’ meant in the context of condoning delay in filing appeals under Section 37 of the Arbitration Act. Acknowledging that the expression ‘sufficient cause’ contained in Section 5 of the Limitation Act was elastic enough to yield different results depending upon the object and context of a statute, the Court held that given the object sought to be achieved under both the Arbitration Act and the Commercial Courts Act, that is, the speedy resolution of disputes, the expression “sufficient cause” was not elastic enough to cover long delays beyond the period provided by the appeal provision itself. It noted that the expression ‘sufficient cause’ was not itself a loose panacea for the ill of pressing negligent and stale claims.
In the light of the above, the Court dismissed the appeal from the decision of the Bombay High Court on the ground that there was no explanation in the condonation of delay application, beyond the usual file-pushing and administrative exigency and that the appellant had not approached the court in a bona fide manner. Similarly, the Court dismissed the appeal from decision of Delhi High Court on the ground that there was no sufficient cause whatsoever to condone the long delay. Further, placing public enterprises on the same footing as private enterprises, the Court observed that merely because the government was involved in the said appeals, a different yardstick for condonation of delay could not be laid down. In case of the appeal from decision of Madhya Pradesh High Court, the Court allowed the appeal and set aside the condonation of delay granted by the Lower Court on the ground that the explanation provided had fallen woefully short of making out any sufficient cause.
CONCLUSION:
Emphasising on the underlying object of speedy disposal of disputes, the Court has provided necessary clarification on the limitation period for filing appeals under Section 37 of the Arbitration Act, as also the condonation of delays in filing such appeals. The Court has made detailed observations regarding the same, taking into consideration the relevant provisions of the law and the need for adherence to timelines, especially in commercial disputes. Further, in line with the Dicean principle of ‘equality before the law’, by applying the same yardstick to condonation of delay in cases involving public sector companies, the Court has sought to place all involved in commercial business on an equal footing. This is yet another laudable and progressive effort by the Supreme Court in arbitration and commercial matters.
For further information, please contact:
Aditya Mehta, Partner, Cyril Amarchand Mangaldas
aditya.mehta@cyrilshroff.com
[1] Judgment dated March 19, 2021 passed in Civil Appeal No. 995 of 2021 (@ SLP (CIVIL) No.665 of 2021) with Civil Appeal No. 999 of 2021 (@ SLP (CIVIL) No.15278 of 2020) and with Civil Appeal No. 996-998 of 2021 (@ SLP (CIVIL) No. 4872-4874 of 2021)( Diary No.18079 of 2020)
[2] “37. Appealable orders.—
(1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—
(a) refusing to refer the parties to arbitration under section 8;
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award under section 34.
(2) Appeal shall also lie to a court from an order of the arbitral tribunal—
(a) accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or
(b) granting or refusing to grant an interim measure under section 17.
(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or takeaway any right to appeal to the Supreme Court.”
[3] (2020) 2 SCC 109
[4] Civil Appeal arising out of SLP (C) No. 665 of 2021
[5] Civil Appeal arising out of SLP (C) Diary No.18079 of 2020
[6] Civil Appeal arising out of SLP (C) No.15278 of 2020
[7] (2008) 7 SCC 169
[8] In this regard, the Court referred to (i) Section 5 which limits the extent of judicial intervention in arbitrations; (ii) Section 8 which deals with the power of the Courts to refer parties to arbitration where there is an arbitration agreement; (iii) Section 9(2) which prescribes a period of 90 days for commencement of arbitration proceedings in cases where the Court orders any interim measure before the commencement of the arbitral proceedings; (iv) Section 11(4) which provides for a time line within which parties are to appoint their arbitrator(s); (v) Section 11(13) which requires Courts (or the person or institution designated by such Court) to dispose of applications for appointment of an arbitrator as expeditiously as possible and to make an endeavour to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party; (vi) Section 13 that provides the procedure to challenge an arbitrator; (vii) Section16 (2) which deals with the competence of the arbitral tribunal to rule on its own jurisdiction and specifically provides that a plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; (viii) Section 29A that provides a time limit within which an arbitral award shall be made (except awards made in international commercial arbitrations); (ix) Section 29B that provides for a fast track procedure for resolution of disputes by arbitration; (x) Section 33 (3 ) which provides arbitral tribunals a time period of thirty days from the date of the arbitral award to correct any error of the type mentioned therein, on its own initiative; (xi) Section 33(4)which prescribes parties a time limit of 30 days from the date of receipt of award to request the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.
[9] Section 29(2) provides that in cases where any special law prescribed a period of limitation for any suit, appeal or application which was different from the period prescribed under the Limitation Act, such suit, appeal or application would be equally barred under the Limitation Act as if such period under the special law were the period prescribed under the Limitation Act
[10] Articles 116 and Article 117 of the schedule to 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
[11] State of Goa v. Western Builders, (2006) 6 SCC 239; ICOMM Tele Ltd. v. Punjab State Water Supply and Sewerage Board, (2019) 4 SCC 401; Kandla Export Corpn. v. OCI Corpn., (2018) 14 SCC 715.
[12] (2008) 7 SCC169
