In Civil Appeal No.2693 Of 2022 -SC- Limitation Act is applicable to arbitrations in same manner as it is applied in court proceedings: SC Justices Ajay Rastogi & Sanjiv Khanna[30-03-2022]

Read Order: HARYANA DEVELOPMENT AUTHORITY, KARNAL Vs. M/S MEHTA CONSTRUCTION  COMPANY AND ANOTHER 

Mansimran Kaur

New Delhi, April 7, 2022: Accepting the application of the appellants pertaining to condonation of delay in filing of objections to the arbitral award granted by the sole arbitrator, the Supreme Court has referred to the Limitation Act and clarified that Section 43(1) expressly states that the Act shall apply to arbitrations as it applies to the proceedings in court.

The Division Bench of Justice Ajay Rastogi and Justice Sanjiv Khanna was dealing with the impugned order passed by the Punjab and Haryana High Court dated December 11, 2019 as well as the order dated January 8, 2018 passed by the Additional District Judge, Karnal.

Brief facts of the case were such that the appellant,  Haryana Urban Development Authority, Karnal, Haryana, and the respondent – M/s. Mehta Construction Company, on July 6,1998  had entered into an agreement whereby the respondent was to construct water body, water body fall, pedestrian bridge, back wall of deck, pump chamber (partly above and partly below the GI pipe), lay CI and RCC pipes and all other works contingent thereto for development of town park in Sector 8 and 9 (Phase – II), Karnal, for an amount not exceeding Rs.32.50 lakhs. The scope of the work was enhanced to Rs.40,23,962  and then to Rs.45,87,326.

The appellant alleged that the respondent did not comply with the terms and conditions of the contract and also did not complete the contract within the stipulated time frame. Consequently the respondent instituted an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator in order to settle the disputes pursuant to the contract. 

However, the application was disposed of by an order dated October 19, 2012 with a direction to the parties to approach the Arbitrator-cum-Superintending Engineer, HUDA Circle, Karnal in terms of Clause 25-A of the agreement for settlement of disputes.

The sole arbitrator passed an award dated December 20, 2013 awarding an amount of Rs.1,19,69,945 along with interest @ 18% per annum on the delayed payments.

The cause of action arose when the order passed by the sole arbitrator was assailed by the appellant under Section 34 of the Act along with the application of condonation of delay. The Additional District Judge, however, passed an order  dated January 8, 2018 in the favor of the respondents by observing that the objections were barred by limitation and there is no reasonable explanation provided for the same by the appellants.  

Thereafter, the appellant instituted an appeal under Section 37 of the Act, which was dismissed by the impugned order passed on December 11, 2019 by the Single Judge of the Punjab and Haryana High Court. 

The Supreme Court produced sub-section (3)34 to Section 34 of the Arbitration Act and stated that an application for setting aside an award is to be made within three months from the date on which a party filing objections under sub-section (1) to Section 34 has received the arbitral award or, if a request has been made under Section 33, from the date on which that request has been disposed of by the arbitral tribunal. However, the proviso also grants thirty days time for filing of objections if it the Court is satisfied that there was reasonable cause for the delay in filing of the same. 

In the present case, it was an admitted position that the application for setting aside of the award dated  December  20, 2013 was made on  March, 28  2014 accompanied by an application for condonation of delay. The Court, was thus in the position of accepting a delay of eight days , which was less than thirty days, in terms of the provision to sub-section (3) to Section 34.

Given the short condonable delay which had occurred, the Apex Court was of the view that the High Court and the Additional District Judge, Karnal were not justified in refusing to condone the delay. According to the Bench, the application for condonation of delay in filing of the objections should have been allowed.

The Bench held that the High Court and the Additional District Judge , Karnal should have accepted the application of condonation of delay of such a short period.

The Court also referred to sub-section (1) of Section 43 of the Limitation Act and observed that the provisions of the Limitation Act shall apply to the arbitration proceedings in the same manner as they apply to the court proceedings.

In the light of the above stated observations, the Apex Court remitted the matter to the file of the Additional District Judge , Karnal and allowed the appeals of the appellants. However, the Court also remarked that the observations of this Court are only confined to the issue of limitation period of filing of objections, and the issue pertaining to deciding the objections on the basis of merits shall be assessed by the Additional District Court under Section 34 of the Act.