The Supreme Court has held that delay in filing of objection cannot be justified on the grounds of Section 17 of the Limitation Act by taking a defence of fraud having been played on the objector. The Court opined that the period of limitation under Section 34(3) of the Arbitration Act is sacrosanct.
The said judgment was passed in the matter of P. Radha Bai & Ors. Vs. P. Ashok Kumar, Civil Appeal Nos. 7710-7713 of 2013 decided on 26.09.2018
Dissatisfied with the arbitral award, the losing party i.e. the respondents raised objections before the arbitrators. The arbitrators called upon all the parties and conducted conciliation. Accordingly, the parties entered into a MoU which contemplated for execution of gift deed and release deed in favour of Respondent No.1. It was claimed by the respondents that the appellants failed to execute the required documents as per the MoU with an intent to defeat their rights under Section 34 of the Arbitration and Conciliation Act, 1996 (referred to as “the Act” hereinafter). The respondents thereafter preferred objections under Section 34 of the Act, however, beyond the time period prescribed by the said section.
An interesting question of law which fell for the consideration of the apex court was concerning the applicability of Section 17 of the Limitation Act, 1963 for condonation of a delay caused on the account of alleged fraud played on the objector (party challenging the award) beyond the period prescribed under section 34(3) of the Act.
It was argued on behalf of the appellants that limitation period provided under Section 34 (3) of the Arbitration Act begins ‘only’ upon the receipt of the award by the parties and the same cannot be diluted by a different starting point provided under the Limitation Act, in light of Section 29 (2) of the Limitation Act. The period of limitation under Section 34(3) of the Arbitration Act is ‘unbreakable’ and is meant to run continuously. It was further contended by the appellants that the expression ‘had received the arbitral award’ found in Section 34(3) of the Act expressly excludes applicability of Section 17 of the Limitation Act.
On the contrary, the respondents argued that Section 17 of the Limitation Act, shall be applicable to arbitration proceedings just as Section 14 of the Limitation Act and Limitation Act is applicable to all proceedings before the court. It was further contended that the Act under Section 34 (3) provides for a different time period than the one present under Article 137 of the Limitation Act, accordingly, the special law would therefore, prevail in so far as the issue of period of limitation is concerned.
In order to answer the above question of law, the apex court first started with an analysis of Section 29(2) of the Limitation Act. The court noted that Section 29(2) of the Limitation Act is divided into 2 limbs. The first part stipulates that the limitation period prescribed by the special law or local law will prevail over the limitation period prescribed in the Schedule to the Limitation Act. In this case, the Arbitration Act is a “special law” which prescribes a specific period of limitation in Section 34(3) for filing objections to an arbitral award passed under the 1996 Act and consequently the provisions of Arbitration Act would apply. We also note that there is no provision under the Limitation Act dealing with challenging an Award passed under the Arbitration Act. The second part mandates that Sections 4 to 24 of the Limitation Act will apply for determining the period of limitation “only in so far as, and to the extent to which, they are not expressly excluded by such special or local law”. Thus the Court observed that the extent of the application of Sections 4 to 24 of the Limitation Act will apply for determining the limitation period under the Act only if they are not “expressly excluded” by the Act.
The Court then proceeded to consider the phrase “express exclusion” in Section 29(2) of the Limitation Act. The Court referred to the judgment in Hukumdev Narain Yadav vs. Lalit Narain Mishra (1974) 2 SCC 133 wherein a Bench of three Judges held that what needs to be seen is whether the scheme of the special law, and the nature of the remedy provided therein are such that the legislature intended it to be a complete code by itself which alone should govern the several matters provided by it. If on an examination of the relevant provisions it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act.
The Court then went on to discuss the scheme of Section 34. It was observed by the Court that Section 34 is the only remedy for challenging an award passed under Part I of the Act. Section 34(3) is a limitation provision, which is inbuilt into the remedy provision and one does not have to look at the Limitation Act for the same. Section 34(3) prohibits the filing of an application for setting aside of an Award after three months have elapsed from the date of receipt of award or disposal of a request under Section 33. The Court further clarified that the phrase “may not be made” as used in the UNCITRAL Model Law has been understood to mean “cannot be made”. The limitation provision in Section 34(3) also provides for condonation of delay. Unlike Section 5 of Limitation Act, the delay can only be condoned for 30 days on showing sufficient cause. The crucial phrase “but not thereafter” reveals the legislative intent to fix an outer boundary period for challenging an Award to a maximum of 120 days.
The Court reasoned that if Section 17 of the Limitation Act were to be applied, the outer boundary for challenging an Award could go beyond 120 days thereby leaving the phrase “but not thereafter” redundant and otiose. The Court felt that this would defeat the Act’s objective of speedy resolution of disputes. It was further observed by the Court that if Section 17 were to be extended to Section 34, the determination of “time for making an application to set aside the arbitral award” in Section 36 will become uncertain and create confusion in the enforcement of Award.
Thus the court held that Section 17 of the Limitation Act was not applicable to a proceeding under Section 34 of the Arbitration Act.