India: Supreme Court Overturns Position On Condonation Of Delay In Appeals

Under the Arbitration and Commercial Courts Acts

In a landmark decision, on 19 March 2021, the Supreme Court of India (Supreme Court) in Government of Maharashtra v M/s Borse Brothers Engineers & Contractors Pvt Ltd (Civil Appeal No. 995 of 2021), overturned its earlier position and observed that Section 5 of the Limitation Act, 1963 (i.e. extension of prescribed period in certain cases), would apply to appeals arising out of Section 37 of the Arbitration & Conciliation Act, 1996 (Arbitration Act) and Section 13 (1A) of the Commercial Courts Act, 2015 (CC Act). This judgment delivered by a full bench headed by Justice R F Nariman reversed the findings in N V International v State of Assam [(2020) 2 SCC 109], which had strictly imported the limitation period of 120 days from Section 34(3) of the Arbitration Act to be applicable to Section 37 appeals.

Nexus between S. 37 of the Arbitration Act and Section 13(1A) of the CC Act

The substantial question of law had arisen in the present case from Civil Appeals against decisions of High Courts of Bombay, Delhi, and Madhya Pradesh wherein the issue of condonation of delay beyond 120 days in filing of appeals under Section 37, as per N V International, had been decided differently by each court. To resolve this contradiction the Bench, at the very outset, considered the nexus between Section 37 of the Arbitration Act and Section 13(1A) of the CC Act. Following its observations in Kandla Export Corporation v OCI Corporation [(2018) 14 SCC 715] and BGS SGS SOMA JV v NHPC [(2020) 4 SCC 234], the Bench once again upheld the position that Section 13(1A) did not bestow any independent right but rather only provided for a forum for appeals originating from Order XLIII Rule 1 (read with Section 104) of the CPC and Section 37 of the Arbitration Act. Therefore, the issue of condonation of delay would have to be analysed in view of both the Arbitration and CC Acts.

The Bench then considered the main objectives and intent of the Arbitration Act and the CC Act and concluded that both the legislations sought speedy disposal of disputes through their respective procedures. The Bench placed reliance on its decisions in Kandla Export Corporation case, Union of India v Popular Construction Co. [(2001) 8 SCC 470] and ICOMM Tele Ltd. v Punjab State Water Supply and Sewerage Board [(2019) 4 SCC 401] to emphasise that speedy disposal and limited judicial intervention are key to both legislations.

Condonation of delay under S.37 of the Arbitration Act

The Supreme Court then analysed the applicability of Section 5 of the Limitation Act to appeals under Section 37 of the Arbitration Act and Section 13(1A) of the CC Act. In context of the Arbitration Act, it was observed that Section 37, unlike Section 34(3), does not provide for any limitation period or condonation thereof. A cumulative reading of Section 37 with Section 43 of Arbitration Act suggests that the Limitation Act would be applicable to arbitration as well as court proceedings. Appeals under Section 37, where the specified value within the meaning of the CC Act is below INR 300,000, are governed by Articles 116 and 117 of Limitation Act. These Articles stipulate time periods of 90 days and 30 days for appeals to High Court and intra-High Court appeals, respectively. However, this does not address the issue of condonation of delay beyond the stipulated periods. To this extent, Section 29(2) of the Limitation Act becomes relevant since it states that in the case of special acts, such as the Arbitration Act, Sections 4-24 of the Limitation Act apply only to the extent that they are not expressly excluded by such special acts, while calculating the period of limitation. As such, in the absence of any such specific exclusion, Section 5 of the Limitation Act becomes applicable to Section 37 appeals.

Condonation of delay under S. 13(1A) of the Commercial Courts Act

In the context of the CC Act, the Bench noted at the very outset that the said legislation had been completely disregarded in the N V International judgment and would be per incuriam on that count. It was observed that, while Section 13(1A) of the CC Act mentions a limitation period of 60 days for appeals to be filed, it however, lacks a provision for condonation of delay, either open-ended or capped. In order to plug this lacuna by applying the Limitation Act, the Bench considered whether Section 21 of the CC Act stipulating the overriding effect of the Act, would consequently exclude the Limitation Act. However, the Court decided to the contrary, placing reliance upon B K Education Services Pvt Ltd v Parag Gupta & Associates [(2019) 11 SCC 633], wherein the Limitation Act was held applicable to IBC despite a similar overriding provision. Specifically concerning the applicability of Section 5 of the Limitation Act to appeals under Section 13(1A), the Bench opined that a middle course would have to be adopted between the strict finding of 30 days condonation in N V International case vis-à-vis an open-ended time frame in Section 5.

Decision

As seen in contexts of both the Arbitration and CC Act, the Bench has upheld the applicability of Section 5 of Limitation Act to appeals arising out of Section 37 of the Arbitration Act and Section 13(1A) of the CC Act. However, more importantly the Court delved into the interpretation of "sufficient cause" in the context of Section 5 to observe that condonation of delay could only be 'by way of exception and not by way of rule'. It further clarified that if a party had acted bona fide, and not negligently, a short delay would be condoned at the Court's discretion.

Comment

In overturning the N V International judgment, the Supreme Court has rightly denounced the blanket application of 120 days limitation period under Section 34(3) of the Arbitration Act to appeals under Section 37, since firstly, Section 37 includes appeals from various other Sections, apart from Section 34, such as Sections 8, 9, 16, 17. Secondly, the said case had entirely failed to consider the period of limitation of 60 days under Section 13(1A) of the CC Act which would, in light of the judgment, be inadvertently overridden by the 120 day limitation as per Section 34(3) and directly contravene the legislative intent of the CC Act. In view of the above, the present decision of the Supreme Court is a welcome step towards more streamlined adjudication on the issue of limitation in appeals arising under the Arbitration and CC Act.

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