Application Challenging Arbitration Award Must Be Filed Within Limitation To Avail Benefit Of Exclusion When Court Was Closed- SC

A Supreme Court Bench of Justice MR Shah and Justice Krishna Murari, while hearing an arbitration matter, has held that the benefit of exclusion of the period during which the Court is closed shall be available when the application for setting aside award is filed within the “prescribed period of limitation” and shall not be available in respect of period extendable by Court in the exercise of its discretion. 

In other words, the benefit of exclusion of the period during which the Court is closed shall be available if the application to challenge an arbitral award must be filed within the limitation period of 90 days.

Senior Advocate Shyam Diwan appeared for the appellant, while Senior Advocate Dhruv Mehta appeared for the respondent.

As per Section 3(4) of the Act, 90 days are prescribed for preferring an application under Section 34 of the Arbitration Act against the arbitral award. However, the said period is extendable by a further period of 30 days in terms of the proviso to Section 34(3) of the Act. 

In this case, an arbitral award was passed against the appellant under the Arbitration Act. The period of 90 days prescribed under Section 34(3) of the Arbitration Act expired, and the appellant was entitled to a further extended period of 30 days. However, the Trial Courts were closed due to Court vacations, and it so happened that the extendable/condonable period expired during the vacation. Subsequently, on the reopening day, the appellant filed the application under Section 34, challenging the award passed by the Arbitral Tribunal and an IA for condonation of delay.

However, the Trial Court refused to condone the delay by observing that the period beyond 120 days is not condonable as, under the Arbitration Act, the maximum period provided for preferring an application under Section 34 is 120 days.

On hearing the parties, the Court found that the central question was whether when the last day of condonable period of 30 days (under Section 34(3) of the Arbitration Act) falls on holiday or during the Court vacation, would the benefit of Section 10 of the General Clauses Act, 1897 be available.

On perusal of the case of Assam Urban Water Supply and Sewerage Board vs. Subash Projects and Marketing Limited, the Court observed that "the benefit of exclusion of period during which Court is closed is available only when application for setting aside the award is filed within ‘prescribed period of limitation’ and it is not available in respect of period extendable by the Court in exercise of its discretion."

Relying on the case of State of Maharashtra vs Hindustan Construction Company Limited, the Apex Court observed that "an application for setting aside an arbitral award under Section 34 of the Arbitration Act has to be made within time prescribed under sub­section (3) of Section 34 i.e. within three months and a further period of 30 days on sufficient cause being shown and not thereafter."

In the context of the Limitation Act, the Court observed that "the Arbitration Act being a special law and provides a period of limitation different from that prescribed under the Limitation Act, the period of limitation prescribed under the Arbitration Act shall prevail and shall be applicable and to that extent the Limitation Act shall be excluded. That, thereafter, it is observed and held that application challenging an award filed beyond period mentioned in Section 34(3) of the Arbitration Act would not be an application “in accordance with” sub­section (3) as required under Section 34(1) of the Arbitration Act."

With regard to Section 10 of the General Clauses Act, the Court observed that "such a contention is untenable in light of the proviso to Section 10 of the General Clauses Act, 1897, which specifically excludes the application of Section 10 of the General Clauses Act, 1897 to any act or proceeding to which the Indian Limitation Act, 1877 applies."

In that context, the Court observed that in light of the application of the Limitation Act, 1963 to the proceedings under the Arbitration Act and when Section 10 of the General Clauses Act, 1897, "benefit of exclusion of period during which the Court is closed shall be available when the application for setting aside award is filed within “prescribed period of limitation” and shall not be available in respect of period extendable by Court in exercise of its discretion."

Therefore, the appeal was dismissed. No orders were passed as to costs.

Cause Title: Bhimashankar Sahakari Sakkare Karkhane Niyamita v. Walchandnagar Industries Ltd. (WIL)  

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