Introduction

In a landmark decision1, the Supreme Court of India ("Supreme Court") held that delay beyond 120 days in filing an appeal under section 37 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") was condonable. In doing so, the Supreme Court overruled its decision in N.V. International v. State of Assam2.

Facts

In two of the three appeals before the Supreme Court, the High Courts of Bombay and Delhi had respectively; dismissed appeals filed by the Maharashtra Government and by the Central Government and refused to condone the delay in the filing of appeals under section 37 of the Arbitration Act beyond 120 days. The third appeal arose from a decision of the Madhya Pradesh High Court which condoned delay in filing an appeal under section 37, under section 5 of the Limitation Act, 1963 ("Limitation Act"), in the ground that there was a conflict between the decisions of the Supreme Court in NV International and Consolidated Engg. Enterprises v. Irrigation Deptt.3.

Arguments of the governments

The Maharashtra Government inter alia, argued that the reasoning in NV International was erroneous since section 37 of the Arbitration Act provides for appeals from orders under sections 8, 9, 16 and 17, apart from section 34. As such, the reasoning of NV International would only apply to appeals under from section 34, since there was no "hard and fast" application of the 120 day limitation period.

The Maharashtra Government also argued that as per section 29(2) of the Limitation Act, the period of limitation for filing applications under the Arbitration Act would be governed by Article 137 of the Limitation Act, providing for a much longer limitation period of three years. Furthermore, Articles 116 and 117 of the Limitation Act provide different periods of limitation, being 90 days and 30 days respectively. To avoid such arbitrary results, it was argued that "appeals" ought to be read into "applications" in the Arbitration Act, which would lead to a uniform limitation period of three years.

The Central Government referred to the Supreme Court's decisions in Kandla Export Corpn. v. OCI Corpn.4 and BGS SGS SOMA JV v. NHPC5 and argued that neither section 13(1A) nor section 14 of the Commercial Courts Act, 2015 ("Commercial Courts Act") which dealt with appeals, curtailed the applicability of section 5 of the Limitation Act. It was also argued that based on the judgments of the Supreme Court under the Insolvency and Bankruptcy Code, 2016 and the Electricity Act, 2003, section 5 of the Limitation Act becomes inapplicable only by express exclusion (as mentioned in section 29 (2) of the Limitation Act) or as a result of a particular statute, neither of which were applicable in the Arbitration Act.

Arguments of Borse Brothers Engineers ("Borse")

Borse inter alia, relied upon NV International and argued that section 5 of the Limitation Act was not applicable to appeals under section 37 of the Arbitration Act. Borse also argued that each appellate provision under section 37, would have its own rationale, as in the cases of orders from sections 8, 9, 16 and 17 allowing for sufficient cause to be shown beyond the period of 30 days, as opposed to orders under section 34, where any delay beyond 30 days defeat its very object.

Judgement

The Supreme Court held that delay in filing appeals under section 37 to be condonable, keeping in mind however, the object and purpose of the Arbitration Act. Some of the important observations and rationale laid down by the Supreme Court are as under:

  1. An efficient and speedy arbitral procedure and minimized supervisory role of courts are the main objectives of the Arbitration Act.
  2. On a joint reading of sections 37 and 43 as well as section 29(2) of the Limitation Act, the provisions of the latter would also apply to appeals filed under section 37 of the Arbitration Act. As such, Articles 116 and 117 and section 5 of the Limitation Act would apply to appeals under section 37 of the Arbitration Act. In this regard, the Supreme Court referred to paragraphs 40 to 43 of its decision in Consolidated Engg.
  3. Periods of limitation may be justifiably arbitrary in some cases and must always be strictly followed, even if they result in causing hardship to parties6. Borse's argument that the word "appeal" ought to be read into "applications" in Arbitration Act, so as to apply Article 137 of the Limitation Act, was thus rejected.
  4. Appeals under section 37 are governed by sections 13 (A) and 13 (1A) of the Commercial Courts Act which inter alia, provides a directory limitation period of 60 days for filing such appeals7. Section 13(1A) also does not exclude the court's power to condone delay under section 5 of the Limitation Act. There were thus no provisions in the Commercial Courts Act which provided for a period of limitation which also had a self-contained delay condonation provision. Borse's argument that section 5 was excluded by the Commercial Courts Act was thus rejected.
  5. NV International thus overruled since:
    1. As it does not notice the provisions of the Commercial Courts Act.
    2. The period of 90 days plus 30 days and not thereafter mentioned in section 34(3) could not apply to appeals filed under section 37, since the limitation period for filing such appeals was provided for under the Commercial Courts Act (as 60 days and not 90 days).
    3. In the absence of a provision curtailing delay condonation provided in section 13 of the Commercial Courts Act, any bodily lifting of the last part of section 34(3) into section 37 of the Arbitration Act was "unwarranted".
  7. Given the object of the speedy resolution of disputes sought to be achieved under the Arbitration Act and the Commercial Courts Act, the expression "sufficient cause" in section 5 of the Limitation Act, could not long delays beyond the period provided by the appeal provision itself. Additionally, merely because government authorities were involved, a different yardstick for condonation of delay ought not to be laid down8. Lastly, "sufficient cause" in a given case does not give any right in an appellant to have delay condoned.9
  8. The timelines contained in the Arbitration Act10, would mean that the object of speedy resolution of disputes also governs appeals covered by Articles 116 and 117 and the provisions of section 5 of the Limitation Act.11

The Supreme Court ultimately dismissed two of the three appeals on the grounds that the delays mentioned therein were inordinate, unjustified and that no case of condonation was made out by the respective parties. The Supreme Court also dismissed the appeal from the decision of the Madhya Pradesh High Court on the ground that the High Court was bound to follow NV International since it was (then) a binding precedent under Article 141. The delay in filing the concerned appeal under section 37 was however also held to be inordinate and unjustified.

Conclusion

The Supreme Court's decision clarifies an important aspect of condonation of delay under the Arbitration Act. The decision also strikes a fine balance the objects of the Arbitration Act, the Limitation Act, Commercial Courts Act and the concept of "sufficient cause" in condonation of delay in filing appeals.

Footnotes

1. Government of Maharashtra (Water Resources Department) v. Borse Brothers Engineers & Contractors Pvt. Ltd. - Civil Appeal No. 995 of 2021 decided on 19 March 2021.

2. (2020) 2 SCC 109

3. (2008) 7 SCC 169

4. (2018) 14 SCC 715

5. (2020) 4 SCC 234

6. See Boota Mal v. Union of India (1963) 1 SCR 70 (pages 74-75)

7. See BGS SGS SOMA (para 13) which held that section 37 of the Arbitration Act provides the substantive right to appeal while section 13 of the Commercial Courts Act provides the forum and procedure governing such appeals.

8. See Postmaster General v. Living Media India Ltd., (2012) 3 SCC 563 (paras 27-29); State of Rajasthan v. Bal Kishan Mathur, (2014) 1 SCC 592 (paras 8-8.2); State of U.P. v. Amar Nath Yadav, (2014) 2 SCC 422 (paras 2-3); State of T.N. v. N. Suresh Rajan, (2014) 11 SCC 709 at paragraphs 11-13; State of M.P. v. Bherulal, (2020) 10 SCC 654 (paras 3-4); and State of M.P. v. Chaitram Maywade, (2020) 10 SCC 667 (paras 1-4).

9. See Ramlal v. Rewa Coalfields Ltd., (1962) 2 SCR 762.

10. Sections 8, 9(2), 11(4), 11(13), 13(2)-(5), 29A, 29B, 33(3)-(5) and 34(3)

11. See Union of India v. Popular Construction Co. (2001) 8 SCC 470, State of Goa v. Western Builders (2006) 6 SCC 239, Kandla Export and ICOMM Tele Ltd. v. Punjab State Water Supply and Sewerage Board (2019) 4 SCC 401.

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