Supreme Court: ‘Administrative difficulties’ cannot be a valid reason for condoning the delay in challenging a domestic award beyond the statutory period prescribed January 30, 2019
Published in: Between The Lines
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The Supreme Court in the case of M/s Simplex Infrastructure Limited v. Union of India (decided on December 5, 2018) held that administrative difficulties cannot be a valid reason to condone a delay above and beyond the statutory period prescribed under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
M/s Simplex Infrastructure Limited (“Appellant”), a contractor, entered into an agreement dated January 5, 2006, for the construction of permanent shelters in the tsunami-hit Andaman and Nicobar Islands with the Union of India (“Respondent”). Due to differences with regard to the performance of the construction work, the parties were referred to arbitration.
On October 27, 2014, the arbitrator made an award in favour of the Appellant. The Respondent received the copy of the award on October 31, 2014. Aggrieved by the award, the Respondent filed an application under Section 34 (Application for setting aside arbitral award) of the Arbitration Act on January 30, 2015 before the District Judge, Port Blair. On February 12, 2016, the District Judge dismissed the Respondent’s application for want of jurisdiction. On March 28, 2016, the Respondent filed an application under Section 34 of the Arbitration Act before the Calcutta High Court for challenging the arbitral award along with an application for condonation of a delay of 514 days on ground that there was a bona fide mistake in filing the application before the wrong forum and the Respondent’s counsel caused delay due to which necessary formalities were not complied with within the prescribed time. The Calcutta High Court allowed the Respondent’s application and condoned the delay. Aggrieved by the decision of the Calcutta High Court, the Appellant filed an appeal in the Supreme Court and the following issue came up for determination:
Whether the Calcutta High Court was justified in condoning a delay of 514 days by the Respondent in filing the application under Section 34 of the Arbitration Act?
Section 34(3) of the Arbitration Act states as follows:
“34.Application for setting aside arbitral award.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.”
The Appellant argued that even if the benefit of Section 14 of the Limitation Act, 1963 (“Limitation Act”), which deals with the “exclusion of time of proceeding bona fide” in a court without jurisdiction subject to satisfaction of certain conditions, was extended to the Respondent in filing the application under Section 34 of the Arbitration Act, there would still be a delay of 131 days which could not be condoned in view of the specific statutory limitation prescribed under Section 34(3) of the Arbitration Act.
The Respondent argued that delay in filing an application under Section 34 of the Arbitration Act was due to the fact that departmental office was located at Port Blair, Andaman and it was a time-consuming process for obtaining permission from the circle office at Chennai. Hence, there were no willful latches on its part and the delay was caused due to inevitable administrative difficulties of obtaining directions from higher officials. The Respondent in this context relied on the case of Union of India v. Tecco Trichy Engineers & Contractors [(2005) 4 SCC 239], wherein the Supreme Court condoned the delay of 3 months and 27 days and observed that the service of the arbitral award on the general manager could not be taken to be sufficient notice to constitute the starting point of limitation for the purpose of Section 34(3) of the Arbitration Act.
OBSERVATIONS OF THE SUPREME COURT
The Supreme Court examined Section 34(3) of the Arbitration Act which provides that the application for setting aside the award could be made within 3 months from the date of receipt of the arbitral award and the period can only be extended for a further period of 30 days on showing sufficient cause and not thereafter. The Supreme Court observed that the use of the words “but not thereafter” in the proviso makes it clear that the extension cannot be given beyond 30 days. Relying on the case of Union of India v. Popular Construction Company [(2001) 8 SCC 470], the Supreme Court observed that Section 5 of the Limitation Act (Extension of prescribed period on sufficient cause) has no application to the application filed under Section 34 of the Arbitration Act.
The Supreme Court further observed that even if the benefit of Section 14 of the Limitation Act (Exclusion of time of proceeding bona fide in court without jurisdiction) in respect of the period spent in pursuing the proceedings before the District Judge is given to the Respondent, there will still be a delay of 131 days in filing the application under Section 34 of the Arbitration Act before the Calcutta High Court which was beyond the strict timelines prescribed under Section 34(3) of the Arbitration Act. The Supreme Court differentiated facts of the present case with the facts of the case relied upon by the Respondent by holding that there is no dispute with respect to the party who received the arbitral award in the instant matter. With regard to obtaining permission from the circle office at Chennai, the Supreme Court observed that administrative difficulties would not be a valid reason to condone a delay above and beyond the statutory prescribed period under Section 34 of the Arbitration Act.
DECISION OF THE SUPREME COURT
The Supreme Court set aside the judgement rendered by the Calcutta High Court and dismissed the application for condonation of delay filed under Section 34(3)of the Arbitration Act on the ground that it was barred by limitation.
Vaish Associates Advocates View
Strictly interpreting the provisions of law, the Supreme Court in this case, has set aside the application filed by the Respondent beyond the statutory period prescribed under Section 34(3) of the Arbitration Act. While arriving at the conclusion, the Supreme Court laid emphasis on use of words “but not thereafter” in the proviso to Section 34(3) of the Arbitration Act. The said judgment clearly lays down the view that courts should not exercise their powers beyond what has been prescribed in the Arbitration Act as that will only defeat the legislative intent behind the enactment of the said proviso.
Reaffirming its earlier judgement in case of Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department [(2008) 7 SCC 169] on applicability of Section 14 of the Limitation Act on the application filed under Section 34(3) of the Arbitration Act, the Supreme Court brought more clarity in computing the period of limitation in challenging an arbitral award. Though this judgment will serve as a precedent in the importance of filing the application within the limitation period prescribed under the law, the Supreme Court has failed to lay down any criteria for determining as to what would constitute an ‘administrative difficulty’ by the party filing the application for condonation of delay and therefore the same will have to be examined on a case to case basis.
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