Arbitration In IndiaUncategorizedTimeline under Section 34 of the A&C Act shall be construed literally

The Bombay High Court  in Nagrik Sahakari Rugnalaya and Research Center Limited v.  Arneja Nagrik Hospital Pvt. Ltd, [Commercial Appeal No. 1/2023, decided on 10.04.2023] held that application under Section 34(3) of the A&C Act has to be filed within a period of three months from the Arbitral Award; which is extended to a period of thirty days from the expiry of three months, where ‘sufficient cause’ of delay has been explained. Moreover,  an application seeking condonation of delay/extension of time can be filed subsequent to filing of the main proceedings and the main proceedings cannot be rejected on the sole ground that the condonation application has not been filed.

FACTS

The Arbitral Tribunal on 10.11.2021, passed an  Award directing e Nagrik Sahakari Rugnalaya and Research Center Limited (hereinafter referred as “the Appellant”) to pay an amount of Rs. 4 Crores (Rupees Four Crores) to Arneja Nagrik Hospital Pvt. Ltd (hereinafter referred to as the ”Respondent”) along with interest at the rate of 12% per annum along with costs of the arbitration proceedings.

The Appellant aggrieved by the Award passed by the Arbitral Tribunal, filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”) on 30.06.2022. The  application of the Appellant was dismissed by the Ld. District Judge-9, Nagpur in Miscellenous Civil Application No. 545 of 2022 for the period beyond limitation vide order dated 06.12.2022 (hereinafter referred to as the “Impugned Order”).

The Appellant being aggrieved by the Impugned Order has  preferred the present appeal under Section 37 of the A&C Act read with Section 13 of the Commercial Courts Act, 2015 (hereinafter referred to as the “Commercial Courts Act”).

ISSUES BEFORE THE HIGH COURT

1. Whether the reasons given by the Appellant for the delay caused in filing the application indicates “sufficient-cause” under Section 34 of A&C Act?
2. Whether an application under Section 34 of the A&C Act can be rejected on the ground that the application for delay condonation was filed subsequently and separately?
3. Whether the Ld. District Judge erred in interpreting the term ’ninety days’ by presuming it to be 3 months?

CONTENTIONS OF THE PARTIES

The Appellant contended that the Ld. District Judge has erred in interpreting the timeline provided under Section 34(3) of the A&C Act.  Moreover, the provision of Section 34(3) of the A&C Act provides a total of 120 days for the filing of application from the date of Arbitral Award.

It was submitted that the period from 05.03.2020 to 28.02.2022 had to be excluded in ascertaining the limitation due to pandemic situation. Hence, the application under Section 34 of the A&C Act was filed within the extended period of limitation. Moreover, the Ld. District Judge should have considered the sufficient cause indicated in the application for filing in the extended limitation period.

It was argued that merely  because the application seeking extension of time was not filed alongwith, the application under Section 34 of the A&C Act cannot be dismissed .

The Respondent contended that  Ld. District Judge  had rightly dismissed the application filed by the Appellant on the ground of period of limitation. Moreover, in absence of indication of “sufficient cause”, the Impugned Order cannot be interfered with.

DECISION  AND FINDINGS

The Bombay High Court observed that an application under Section 34(3) of the A&C Act has to be filed within the period of three months from receipt of the Arbitral Award. The application can be further filed within the period of  30 days after the expiry of 3 months on showing “sufficient cause” for the delay.

The Court further observed that the Ld. District Judge has erred in considering the time limit of 3 months as 90 days and further the period of 30 days and total time limit to s.  The Court relied on State of Himachal Pradesh & Anr. v. Himachal Techno Engineers & Anr. [(2010) 12 SCC 210] and held that the provision of Section 34(3) of the A&C Act clearly states the limitation to be 3 months and 30 days and quashed and set aside the Impugned Order passed by the Ld. District Judge .

The Court further relied on State of MP & Anr. v. Pradeep Kumar & Anr. [(2000) 7 SCC 372] and held that the application was filed within the period of limitation and also cannot be rejected on the ground of non-submission of application of extension of time limit.  The Court quashed the Impugned Order and restored the proceedings before the Ld. District Judge and allowed the application of extension of time period and further directed the Ld. District Judge to decide the application under Section 34 of A&C Act on merits.

AMLEGALS REMARKS

The Bombay High Court clarified two principles;  the term ‘3months’ has to be construed literallyand the other being the time period for filing an application for extension of time. The Bombay High Court has correctly set aside the order of the Ld. District Judge, as the Impugned Order was erroneous on equating 3 months with 90 strict days, which curtail down the limitation period, thereby causing injustice . The Bombay High Court has also correctly observed that subsequent filing of an application for extension of time cannot be a ground for rejection the main proceedings.

– Team AMLEGALS assisted by Ms. Aayushi Udeshi (Intern)

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