M/S SIMPLEX INFRASTRUCTURE LTD versus UNION OF INDIA on 5 December 2018

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M/S SIMPLEX INFRASTRUCTURE LTD

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UNION OF INDIA

(Civil Appeal No. 11866 of 2018)

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DECEMBER 05, 2018

[DR. DHANANJAYA Y CHANDRACHUD ANDVINEET SARAN, JJ.]

Arbitration and Conciliation Act, 1996:

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Cs. 34 – Application under – Delay of 514 days in filing –Condonation of delay – If permissible – Held: By virtue of s. 34(3),recourse to the court against an arbitral award cannot be beyondthe period prescribed therein i.e. three months – The proviso theretoallows this period to be further extended by another period of thirtydays on sufficient cause being shown – The words ‘but notDthereafter” in the proviso makes the legislative intent clear thatstatutory period of three months is extendable by another period ofupto thirty days and no more – Section 5 of Limitation Act has noapplication to the application u/s. 34 – However, the provisions ofs. 14 of Limitation Act would be applicable to the application u/s.E34 – In the present case, even if benefit of s.14 of Limitation Act isgiven, in view of the proviso to s.34, only 30 days can be condonedbeyond the limitation period of three months – There will still be adelay of 131 days in filing the application, which cannot becondoned – Administrative difficulties would not be a valid reasonto condone a delay above and beyond the statutory periodFprescribed u/s. 34 – High Court was not justified in condoning thedelay of 514 days in filing the application u/s. 34 – Applicationu/s. 34 is dismissed on the ground that it is barred by limitation –Limitation Act, 1963 – ss.5 and 14.

Allowing the appeal, the Court

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HELD : 1. Section 34 of Arbitration and Conciliation Act,1996 provides that recourse to a court against an arbitral awardmay be made only by an application for setting aside such award“in accordance with” sub-section (2) and sub-section (3). Sub-section (2) relates to the grounds for setting aside an award. An H

application filed beyond the period mentioned in sub-section (3)of Section 34, would not be an application “in accordance with”that sub-section. By virtue of Section 34(3), recourse to the courtagainst an arbitral award cannot be beyond the period prescribed.Sub-section (3) of Section 34, read with the proviso, makes itabundantly clear that the application for setting aside the awardon one of the grounds mentioned in sub-section (2) will have tobe made within a period of three months from the date on whichthe party making that application receives the arbitral award. Theproviso allows this period to be further extended by anotherperiod of thirty days on sufficient cause being shown by the partyfor filing an application. The intent of the legislature is evincedby the use of the words “but not thereafter” in the proviso. Thesewords make it abundantly clear that as far as the limitation forfiling an application for setting aside an arbitral award isconcerned, the statutory period prescribed is three months whichis extendable by another period of upto thirty days (and no more)subject to the satisfaction of the court that sufficient reasons wereprovided for the delay. [Para 8][681-C, G-H]

2. Section 5 of the Limitation Act, 1963 deals with theextension of the prescribed period for any appeal or applicationsubject to the satisfaction of the court that the appellant orapplicant had sufficient cause for not preferring the appeal ormaking the application within the prescribed period. Section 5of the Limitation Act has no application to an applicationchallenging an arbitral award under Section 34 of the 1996 Act.[Para 9][682-F-G]

Union of India v. Popular Construction Company (2001)8 SCC 470 : [2001] 3 Suppl. SCR 619 – relied on.

3. Section 14 of the Limitation Act deals with the “exclusionof time of proceeding bona fide” in a court without jurisdiction,subject to satisfaction of certain conditions. From the schemeand language of Section 34 of the Act of 1996, the intention of thelegislature to exclude the applicability of Section 14 of theLimitation Act is not manifest. Having regard to the legislativeintent, the provisions of Section 14 of the Limitation Act, 1963would be applicable to an application submitted under Section 34

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Aof the Act of 1996 for setting aside an arbitral award.”[Para 10][685-D-E]

Consolidated Engineering Enterprises v. PrincipalSecretary, Irrigation Department (2008) 7 SCC 169 :[2008] 5 SCR 1108 – relied on.

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4. In the present case, application under Section 34 of the1996 Act was submitted on 30 January 2015 before the DistrictJudge, for setting aside the arbitral award dated 27 October 2014.On 12 February 2016, the District Judge dismissed therespondent’s application for want of jurisdiction. It was only onC28 March 2016, that the respondent filed an application underSection 34 of the 1996 Act before the High Court challenging thearbitral award, along with an application for condonation of delayof 514 days. A plain reading of sub-section (3) along with theproviso to Section 34 of the 1996 Act, shows that the applicationfor setting aside the award on the grounds mentioned in sub-Dsection (2) of Section 34 could be made within three months andthe period can only be extended for a further period of thirtydays on showing sufficient cause and not thereafter. Even if thebenefit of Section 14 of the Limitation Act is given to therespondent, there will still be a delay of 131 days in filing theEapplication. That is beyond the strict timelines prescribed in sub-section (3) read along with the proviso to Section 34 of the 1996Act. The delay of 131 days cannot be condoned. To do so, as theHigh Court did, is to breach a clear statutory mandate.Administrative difficulties would not be a valid reason tocondone a delay above and beyond the statutorily prescribedFperiod under Section 34 of the 1996 Act. [Paras 11, 13 and 15][685-G-H; 686-G-H; 687-A-B; 688-D]

Union of India v Tecco Trichy Engineers & Contractors(2005) 4 SCC 239 : [2005] 2 SCR 983 – distinguished.

G5. Therefore, in view of the period of limitation prescribedin Section 34(3), the Single Judge of the High Court was notjustified in condoning the respondent’s delay of 514 days infiling the application. The petition under Section 34stands dismissed on the ground that it is barred by limitation.[Para 16][688-E-F]H

Case Law Reference

[2001] 3 Suppl. SCR 619relied onPara 9[2008] 5 SCR 1108relied onPara 10[2005] 2 SCR 983distinguishedPara 15

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 11866of 2018.

From the Judgment and Order dated 27.04.2016 of the High Courtat Calcutta in GA No. 958 of 2016.

C. A. Sundaram, Sr. Adv., Rakesh Sinha, Sourav Ghosh, SamratSengupta, Ms. Soumya Dutta, Debayan Ghosh, Advs., for the Appellant.

Ms. Kiran Bhardwaj, Ms. Pranay Ranjan, Sumit Teterwal,Venkatesh, R. B. Yadav, Varun Singh, Ms. Nishta Kumar, Mrs. AnilKatiyar, Advs., for the Respondent.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

1. The present appeal arises from the judgment of a learned SingleJudge of the High Court of Calcutta by which the respondent’s applicationfor condoning a delay of 514 days in filing an application under Section34 of the Arbitration and Conciliation Act, 1996 (‘the 1996 Act’) wasallowed.[1]

2. The appellant, who is a contractor, entered into an agreementfor the construction of 821 units of permanent shelters in the tsunami-hitAndaman and Nicobar Islands with the Union of India, represented bythe Executive Engineer, Andaman Central Division, Central PWD, PortBlair.[2] The scope of work involved the construction of single storiedpermanent shelters, including internal water supply, sanitary installationand internal electrification. Due to differences with regard to theperformance of the construction work, the parties were referred toarbitration. On 27 October 2014, the arbitrator made an award infavour of the appellant and directed the respondent to pay a sum of9,96,98,355/- with simple interest @ 10% per annum from 1 January2009 till actual payment. The respondent received the copy of the awardon 31 October 2014.

1The High Court delivered judgment on 27 April 2016.

2 The date of the agreement is 5 January 2006

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A3. Aggrieved by the award, the respondent filed an application[3]under Section 34 of the 1996 Act on 30 January 2015 before the DistrictJudge, Port Blair for setting aside the arbitral award. During the pendencyof the arbitration proceedings, the appellant had filed an application[4]under Section 9 of the 1996 Act before the High Court of Calcutta prayingfor an injunction on encashment of bank guarantee against the respondentBand the application was duly contested by the respondent.

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4. On 12 February 2016, the District Judge dismissed therespondent’s application under Section 34 of the 1996 Act for want ofjurisdiction. The District Judge observed:

C“…According to the provision of Section 42 of the Arbitrationand Conciliation Act, when an application has been made regardingan arbitration agreement before any Court under the same part;that Court shall only have jurisdiction over the arbitrationproceedings and all subsequent application arising out of thatagreement and the arbitral proceedings shall be made in that courtDand in no other court.

In this case the parties have preferred an application under Section9 of the Arbitration and Conciliation Act before the Hon’ble HighCourt of Kolkata… Thus, it is clear to me that this AppellantCourt has no jurisdiction to entertain this appeal according to SectionE42 of the Arbitration and Conciliation Act.”

5. On 28 March 2016, the respondent filed an application[5] underSection 34 before the High Court of Calcutta for challenging the arbitralaward dated 27 October 2014, along with an application[6] for condonationof a delay of 514 days. The respondent justified the delay on ground ofFthere being a bona fide mistake in filing the application before the wrongforum and the respondent’s counsel causing delay due to which necessaryformalities were not complied with within the prescribed time.

6. On 27 April 2016, the learned Single Judge of the High Courtallowed the respondent’s application and condoned the delay of 514 days.GThe High Court held:

3O.A No.2/20154AP No 91 of 20085A.P. No. 224/2016H6G.A. No. 958/2016 in A.P. No. 224/2016

“After considering the submissions made by the learned advocatefor the applicant/petitioner and upon perusing the application forcondonation of delay, it appears that sufficient cause has beenshown to explain the delay in filing the application, being AP No.224 of 2016 and as such the delay is condoned…”

7. The issue which has been raised before this Court is whetherthe learned Single Judge was justified in condoning a delay of 514 daysby the respondent in filing the application under Section 34. In dealingwith this issue, this Court needs to assess whether the benefit of Sections5 and Section 14 of the Limitation Act can be extended to the respondent,and if so, whether a delay beyond the specific statutory limitationprescribed under Section 34(3) of the 1996 Act could be condoned.

8. Section 34 of the Arbitration and Conciliation Act, 1996 providesthus:

“34. Application for setting aside arbitral award.—

(1) Recourse to a Court against an arbitral award may be madeonly by an application for setting aside such award in accordancewith sub-section (2) and sub-section (3)…

(3) An application for setting aside may not be made after threemonths have elapsed from the date on which the party makingthat application had received the arbitral award or, if a requesthad been made under Section 33, from the date on which thatrequest had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant wasprevented by sufficient cause from making the application withinthe said period of three months it may entertain the applicationwithin a further period of thirty days, but not thereafter.”

Section 34 provides that recourse to a court against an arbitralaward may be made only by an application for setting aside such award“in accordance with” sub-section (2) and sub-section (3). Sub-section(2) relates to the grounds for setting aside an award. An application filedbeyond the period mentioned in sub-section 3 of Section 34, would notbe an application “in accordance with” that sub-section. By virtue ofSection 34(3), recourse to the court against an arbitral award cannot bebeyond the period prescribed. Sub-section (3) of Section 34, read withthe proviso, makes it abundantly clear that the application for setting A

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Aaside the award on one of the grounds mentioned in sub-section (2) willhave to be made within a period of three months from the date on whichthe party making that application receives the arbitral award. The provisoallows this period to be further extended by another period of thirty dayson sufficient cause being shown by the party for filing an application.The intent of the legislature is evinced by the use of the words “but notBthereafter” in the proviso. These words make it abundantly clear that asfar as the limitation for filing an application for setting aside an arbitralaward is concerned, the statutory period prescribed is three months whichis extendable by another period of upto thirty days (and no more) subjectto the satisfaction of the court that sufficient reasons were provided forCthe delay.

9. Section 5 of the Limitation Act, 1963 provides thus:

“5. Extension of prescribed period in certain cases. —Any appealor any application, other than an application under any of theprovisions of Order XXI of the Code of Civil Procedure, 1908,Dmay be admitted after the prescribed period if the appellant or theapplicant satisfies the court that he had sufficient cause for notpreferring the appeal or making the application within such period.

Explanation. —The fact that the appellant or the applicant wasmisled by any order, practice or judgment of the High Court inEascertaining or computing the prescribed period may be sufficientcause within the meaning of this section.”

Section 5 of the Limitation Act, 1963 deals with the extension ofthe prescribed period for any appeal or application subject to thesatisfaction of the court that the appellant or applicant had sufficientFcause for not preferring the appeal or making the application within theprescribed period. Section 5 of the Limitation Act, 1963 has no applicationto an application challenging an arbitral award under Section 34 of the1996 Act. This has been settled by this Court in its decision in Union ofIndia v Popular Construction Company[7], where it held as follows –

G“As far as the language of Section 34 of the 1996 Act is concerned,the crucial words are “but not thereafter” used in the proviso tosub-section (3). In our opinion, this phrase would amount to anexpress exclusion within the meaning of Section 29(2) of theLimitation Act, and would therefore bar the application of Section H7(2001) 8 SCC 470 at para 12 and 14

5 of that Act. Parliament did not need to go further. To hold thatthe court could entertain an application to set aside the awardbeyond the extended period under the proviso, would render thephrase “but not thereafter” wholly otiose. No principle ofinterpretation would justify such a result.

…Here the history and scheme of the 1996 Act support theconclusion that the time-limit prescribed under Section 34 tochallenge an award is absolute and unextendible by court underSection 5 of the Limitation Act… “

10. Section 14 of the Limitation Act, 1963 provides thus:

“14. Exclusion of time of proceeding bona fide in court withoutjurisdiction. —

(1) In computing the period of limitation for any suit the time duringwhich the plaintiff has been prosecuting with due diligence anothercivil proceeding, whether in a court of first instance or of appealor revision, against the defendant shall be excluded, where theproceeding relates to the same matter in issue and is prosecutedin good faith in a court which, from defect of jurisdiction or othercause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, thetime during which the applicant has been prosecuting with duediligence another civil proceeding, whether in a court of firstinstance or of appeal or revision, against the same party for thesame relief shall be excluded, where such proceeding is prosecutedin good faith in a court which, from defect of jurisdiction or othercause of a like nature, is unable to entertain it.

(3) Notwithstanding anything contained in Rule 2 of Order XXIIIof the Code of Civil Procedure, 1908 (5 of 1908), the provisionsof sub-section (1) shall apply in relation to a fresh suit institutedon permission granted by the court under Rule 1 of that Order,where such permission is granted on the ground that the first suitmust fail by reason of a defect in the jurisdiction of the court orother cause of a like nature.

Explanation. —For the purposes of this section,—

(a) in excluding the time during which a former civil proceedingwas pending, the day on which that proceeding was instituted andthe day on which it ended shall both be counted; A

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A(b) a plaintiff or an applicant resisting an appeal shall be deemedto be prosecuting a proceeding;

(c) misjoinder of parties or of causes of action shall be deemed tobe a cause of a like nature with defect of jurisdiction.”

Section 14 of the Limitation Act deals with the “exclusion of timeBof proceeding bona fide” in a court without jurisdiction, subject tosatisfaction of certain conditions. The question whether Section 14 ofthe Limitation Act would be applicable to an application submitted underSection 34 of the 1996 Act has been answered by this Court inConsolidated Engineering Enterprises v Principal Secretary,CIrrigation Department[8]. This court observed thus:

“At this stage it would be relevant to ascertain whether there isany express provision in the Act of 1996, which excludes theapplicability of Section 14 of the Limitation Act. On review of theprovisions of the Act of 1996 this Court finds that there is noDprovision in the said Act which excludes the applicability of theprovisions of Section 14 of the Limitation Act to an applicationsubmitted under Section 34 of the said Act. On the contrary, thisCourt finds that Section 43 makes the provisions of the LimitationAct, 1963 applicable to arbitration proceedings. The proceedingsunder Section 34 are for the purpose of challenging the awardEwhereas the proceeding referred to under Section 43 are theoriginal proceedings which can be equated with a suit in a court.Hence, Section 43 incorporating the Limitation Act will apply tothe proceedings in the arbitration as it applies to the proceedingsof a suit in the court. Sub-section (4) of Section 43, inter alia,Fprovides that where the court orders that an arbitral award be setaside, the period between the commencement of the arbitrationand the date of the order of the court shall be excluded in computingthe time prescribed by the Limitation Act, 1963, for thecommencement of the proceedings with respect to the dispute sosubmitted. If the period between the commencement of theGarbitration proceedings till the award is set aside by the court, hasto be excluded in computing the period of limitation provided forany proceedings with respect to the dispute, there is no good reasonas to why it should not be held that the provisions of Section 14 ofthe Limitation Act would be applicable to an application submitted H8(2008) 7 SCC 169 at para 23

H8(2008) 7 SCC 169 at para 23

under Section 34 of the Act of 1996, more particularly where noprovision is to be found in the Act of 1996, which excludes theapplicability of Section 14 of the Limitation Act, to an applicationmade under Section 34 of the Act. It is to be noticed that thepowers under Section 34 of the Act can be exercised by the courtonly if the aggrieved party makes an application. The jurisdictionunder Section 34 of the Act, cannot be exercised suo motu. Thetotal period of four months within which an application, for settingaside an arbitral award, has to be made is not unusually long.Section 34 of the Act of 1996 would be unduly oppressive, if it isheld that the provisions of Section 14 of the Limitation Act are notapplicable to it, because cases are no doubt conceivable wherean aggrieved party, despite exercise of due diligence and goodfaith, is unable to make an application within a period of fourmonths. From the scheme and language of Section 34 of the Actof 1996, the intention of the legislature to exclude the applicabilityof Section 14 of the Limitation Act is not manifest. It is well toremember that Section 14 of the Limitation Act does not providefor a fresh period of limitation but only provides for the exclusionof a certain period. Having regard to the legislative intent, it willhave to be held that the provisions of Section 14 of the LimitationAct, 1963 would be applicable to an application submitted underSection 34 of the Act of 1996 for setting aside an arbitral award.”

The position of law is well settled with respect to the applicabilityof Section14 of the Limitation Act to an application filed under Section34 of the 1996 Act. By applying the facts of the present case to the wellsettled position of law, we need to assess whether the learned SingleJudge of the High Court was justified in condoning the delay for filing anapplication under Section 34 of the 1996 Act.

11. The respondent submitted an application under Section 34 ofthe 1996 Act on 30 January 2015 before the District Judge, Port Blairfor setting aside the arbitral award dated 27 October 2014. On 12February 2016, the District Judge dismissed the respondent’s applicationfor want of jurisdiction. It was only on 28 March 2016, that the respondentfiled an application under Section 34 of the 1996 Act before the HighCourt of Calcutta challenging the arbitral award, along with an applicationfor condonation of delay of 514 days.

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A12. The contention of Mr Aryama Sundaram, learned seniorcounsel for the appellant is that even if the benefit of Section 14 of theLimitation Act is extended to the respondent in filing the application underSection 34 of the 1996 Act, there would still be a delay of 131 dayswhich could not be condoned in view of the specific statutory limitationprescribed under Section 34(3) of the 1996 Act. The learned seniorBcounsel has tendered the following tabulated chart:

DELAY CHART

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The appellant has, in this connection, relied on Union of India v PopularConstruction Company (supra) and Consolidated EngineeringFEnterprises v Principal Secretary, Irrigation Department (supra)to support its case. On the other hand, it is the respondent’s contentionthat there were no willful latches on its part and the delay was causeddue to inevitable administrative difficulties of obtaining directions fromhigher officials.

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13. A plain reading of sub-section (3) along with the proviso toSection 34 of the 1996 Act, shows that the application for setting asidethe award on the grounds mentioned in sub-section (2) of Section 34could be made within three months and the period can only be extendedfor a further period of thirty days on showing sufficient cause and notthereafter. The use of the words “but not thereafter” in the proviso H

makes it clear that the extension cannot be beyond thirty days. Even ifthe benefit of Section 14 of the Limitation Act is given to the respondent,there will still be a delay of 131 days in filing the application. That isbeyond the strict timelines prescribed in sub-section (3) read along withthe proviso to Section 34 of the 1996 Act. The delay of 131 days cannotbe condoned. To do so, as the High Court did, is to breach a clear statutorymandate.

14. The respondent received the arbitral award on 31 October2014. Exactly ninety days after the receipt of the award, the respondentfiled an application under Section 34 of the 1996 Act before the DistrictJudge, Port Blair on 30 January 2015. On 12 February 2016, the DistrictJudge dismissed the application for want of jurisdiction and on 28 March2016, the respondent filed an application before the High Court underSection 34 of the 1996 Act for setting aside the arbitral award. After theorder of dismissal of the application by the District Judge, the respondenttook almost 44 days (excluding the date of dismissal of the applicationby the District Judge and the date of filing of application before the HighCourt) in filing the application before the High Court. Hence, even if therespondent is given the benefit of the provision of Section 14 of theLimitation Act in respect of the period spent in pursuing the proceedingsbefore the District Judge, Port Blair, the petition under Section 34 wasfiled much beyond the outer period of ninety days.

15. The respondent has relied on the decision of this Court inUnion of India v Tecco Trichy Engineers & Contractors[9], wherethis Court had to decide the effective date from which the limitationwithin the meaning of sub-section (3) of Section 34 of the Act shall becalculated. The Chief Project Manager on behalf of the Southern Railwayhad entered into a contract with a contractor for construction of a railwaybridge. Disputes between the parties were referred to arbitration and anaward was delivered in the office of the General Manager, SouthernRailway. The Chief Engineer preferred an application against the awardunder Section 34 of the 1996 Act before the High Court. The learnedSingle Judge and the Division Bench of the High Court rejected theapplication holding it as barred by limitation. This Court reversed theorder of the High Court and condoned the application for delay. ThisCourt observed that in huge organisations like the Railways havingdifferent divisional heads and various departments within the division,the copy of the award had to be received by the person who had9(2005) 4 SCC 239

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688 SUPREME COURT REPORTS [2018] 14 S.C.R.

Aknowledge of the proceedings and who would be the best person tounderstand and appreciate the award and grounds for challenge. ThisCourt found that all arbitral proceedings for the Railways were beingrepresented by the Chief Engineer and the General Manager had simplyreferred the matter for arbitration as required under the contract. Whilecondoning the delay of three months and 27 days, this Court found thatBthe service of the arbitral award on the General Manager could not betaken to be sufficient notice to constitute the starting point of limitationfor the purpose of Section 34(3) of the 1996 Act. The decision in thiscase has no applicability to the facts of the present case as there is nodispute with respect to the party who received the arbitral award. It isCan admitted position that on 27 October 2014, the arbitrator made anaward in favour of the appellant and on 31 October 2014, the Union ofIndia received a copy of the award. One of the reasons stated by therespondent for delay in filing an application under Section 34 of the 1996Act was that the departmental office was located at Port Blair, Andaman and it was a time-consuming process for obtaining permission from theDcircle office at Chennai. Administrative difficulties would not be a validreason to condone a delay above and beyond the statutory prescribedperiod under Section 34 of the 1996 Act.

16. Under the circumstances, we are of the considered opinionthat in view of the period of limitation prescribed in Section 34(3), theElearned Single Judge of the High Court was not justified in condoningthe respondent’s delay of 514 days in filing the application. The judgmentrendered by the learned Single Judge of the High Court of Calcutta on27 April 2016, in GA No. 958 of 2016 is set aside and the appeal isallowed. The petition under Section 34 stands dismissed on the ground Fthat it is barred by limitation. There shall be no order as to costs.

Kalpana K. Tripathy

Appeal allowed.

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