The Apex Court, in the recent case of My Preferred Transformation and Hospitality Pvt. Ltd and Anr vs. M/s Faribad Implements Pvt. Ltd. has held that the limitation period for setting aside an arbitral award under Section 34 of the Arbitration & Conciliation Act, 1996 cannot be extended beyond the statutory time limit of 90 days after the standard condonation period of 30 days has expired even during vacation of the Court.
Facts Of The Case
The Appellant had signed a lease agreement with the Respondent, who owned a specific property. A disagreement erupted over the leased property and the Respondent began arbitration proceedings to resolve the said disagreement. The dispute was eventually settled, and the Arbitrator ruled in favour of the Respondent.
The Appellants received a scanned copy of the award via e-mail on 04.02.2022, and a signed hard copy on the same day thereupon, on the receipt of the award copies the limitation period was set in motion.
As per Section 34(3), the limitation period for setting aside an arbitral award is three months. In the present case, the limitation period expired on 14.05.2022. However, according to the Supreme Court’s order dated 10.01.2022, the limitation period was extended to 29.05.2022 because of the COVID-19 Pandemic.
The Division Bench of the Delhi High Court dismissed the Section 34 application due to the expiration of the condonation period during the Court’s summer vacation. The Appellants filed a Section 37 application, which was also dismissed. The Division Bench stated that the limitation period expired on 28.06.2022. Dissatisfied with the ruling, the Appellants approached the Apex Court, arguing that their petition should not be barred by time due to the expiration of the condonation period during the summer vacation of the Court.
Issues Involved
1. Whether the Limitation Act, 1963 applies to arbitration under the Arbitration & Conciliation Act, 1996 ?
2. Whether the 30-days condonation period is a part of the limitation period, or it is a separate discretionary extension?
3. Whether Section 10 of the General Clauses Act, 187 (which permits filing on the next working day when a deadline falls on a holiday) applies to arbitration cases?
Contention Of The Parties
The Appellants contended that Section 10 of the GCA applies to Section 34(3), including when the condonable period expires on a holiday and that the term ‘‘certain day’’ in Section 10 of the GCA gives it wider import than Section 4 of the Limitation Act, and extends its applicability to when the condonable period expires on a court holiday.
The Respondents submitted that Section 4 of the Limitation Act only applies to the 3-month limitation period and not to the 30-day condonable period under Section 34(3) and that the wording of Section 4 only makes it applicable to the 3-month period and not the 30-day condonable period, which cannot be extended any further.
Supreme Court’s Verdict
The Apex Court upheld the decision of the Division Bench of the Delhi High Court by concurring with its reasoning. The court also observed that the Appellant’s application under Section 34 of the Arbitration Act was time barred. It stated that the 120 days period for challenging an award as per Section 34(3) of the A&C Act is strict and cannot be extended, even if the condonation period expires during the vacation of the Court.
The Supreme Court clarified that Section 4 of the Limitation Act would apply to the initial three-month limitation period and not to the thirty-day additional condonation period as envisaged under Section 34(3) of the A&C Act.
In the present case, the Appellants received the award on 14.02.2022 and the limitation period expired on 14.05.2022. However, even after extending the limitation period due to COVID-19, the Appellant filed a Section 34 petition when the Delhi High Court reopened instead of filing it on the last day of limitation, which was a working day. Therefore, the petition could not reap the benefits of Section 4 of Limitation Act, under which the filing of petitions is allowed on the next working day in cases of Court vacations.
The Apex Court also held that the condonable period beyond the prescribed limitation period under Section 34(3) of the A & C Act is strictly limited to 30 days and cannot be extended further under any circumstances.
Analysis
Applicability of Section 10 of the General Clauses Act,1897 to Arbitration:
Section 10 of the General Clauses Act, 1897 (GCA) states that if the prescribed time limit for any suit, appeal, or application ends on a day when the court is closed, the suit, appeal, or application may be instituted, preferred, or filed on the next day when the court reopens.
The Apex Court while interpreting Section 10 of the General Clauses Act, 1897, observed that as Limitation Act applies to arbitration proceedings, the General Clauses Act should cease to be applicable because it does not apply to proceedings where Limitation Act is applicable. This observation of the court is important because it addresses a general and essential question that the Section 10 of the General Clauses Act supersedes provisions of the Limitation Act.
Uniformity of Statutes for Limitation Periods:
The Limitation Act and the General Clauses Act are already enforced in our country for their application in matters where a specific statute does not provide for a certain limitation period. Therefore, introducing a uniform/Standardized limitation period does not seem to be beneficial because such uniformity might not consider unique circumstances pertaining to different cases.
The legislature introduced different limitation periods for different statutes despite the existence of Limitation Act and the General Clauses Act because certain statutes needed their own limitation period in order to deliver justice without any material delays.
Conclusion
The decision of the Supreme Court is a welcomed decision as it will ensure timely enforcement of mainly commercial contracts. This will also help India to perform better on the ease of doing business index as a country.
Further, this decision will create a certain sense of awareness & alertness among the legal fraternity and the parties to an arbitral dispute. However, it will be interesting to witness the Supreme Court’s approach in cases of serious medical exigencies or ongoing judicial custody or investigations by law enforcement wings.
Authors: Rebecca Singh, Aditya Khare & Gaurav Shenoy