Effects of limitation on arbitration awards
On October 3, 2019, the Supreme Court (“SC”) in the case of Oriental Insurance Co. Ltd. vs. M/S Tejparas Associates[i] (“Case”) enunciated on the applicability of Section 14[ii] of the Limitation Act, 1963 (“Limitation Act”) in proceedings challenging an ‘Arbitral Award’ under section 34[iii] of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The SC held that an application under Section 14 of the Limitation Act would be applicable to proceedings under section 34 of the Arbitration Act, subject to the filing of first petition under section 34 within time.
Facts leading the matter to SC
In the relevant facts and circumstances of this Case, the arbitral dispute is founded upon an arbitral clause in an insurance agreement entered into between the parties i.e. the insurance company and claimant company. Aggrieved by the arbitral award, the insurance company had challenged the award before the District Judge in Jaipur. The District Judge in Jaipur held that the petition was not maintainable and accordingly (pursuant to its powers under Order VII Rule 10A CPC[iv]) had directed the petitioner- insurance company to present the petition before the District judge, Jodhpur within a specified time. As the insurance company failed to present the same within time as specified by above, and the respondent moved an application under section 3 of the Limitation Act[v] before the District Judge Jodhpur praying for the dismissal of the petition being time barred. Consequently, the insurance company moved an application under section 14 of the Limitation Act seeking condonation/ exclusion of time during which the insurance company had been prosecuting before the District Judge, Jaipur. Thereafter, the District Court, Jaipur dismissed the petition on the ground of limitation. The High Court affirmed the order of the District Court and consequently, the matter came before Supreme Court.
SC finding on limitation in setting aside an award
The SC held as follows:-
"In the instant case, as already indicated above the condonation of delay sought for filing the petition under Section 34 of the Act, 1996 for the first time. The petition filed under Section 34 of the Act, 1996 at Jaipur was within the period of limitation and the delay regarding which explanation is put forth is for the period of 8 days in representing the petition beyond the date fixed after it was returned under Order 7 Rule 10 of the Civil Procedure Code. Therefore, in that circumstance even if the term “sufficient cause” as contained under Section 5 of the Limitaton Act is taken note. In the present facts the same is not with reference to petition under Section 34 of Act, 1996 for condonation of delay beyond the period prescribed under Section 34(3) of the Act, 1996. Though that is the position what is necessary to be taken note herein is that the application filed for excluding the time is under Section 14 of the Limitation Act. In addition to the very decisions cited above indicating that Section 14 of the Limitation Act would be applicable to the proceedings under Section 34 of the Act, 1996 subject to the petition under Section 34 being filed within time”
Thus, the Supreme Court has hereby held that Section 14 of the Limitation Act would be applicable to the proceedings under Section 34 of the Arbitration Act subject to the condition that the first petition under section 34 was filed within the time mentioned in the Arbitration Act.
It is hereby concluded that this is a progressive law on the applicability of the ‘Limitation Law’ in challenging the ‘Arbitral Awards’, especially in view of the strictly worded and interpreted Section 34(3) of the Arbitration Act. However, it is yet to be seen how the purpose of this judgment is utilized while restraining protracted litigation and its misuse.
This update is authored by Surabhi Pandey, who is an advocate and Associate at Agarwal Jetley & Co., Advocates & Solicitors. Contact: Email: firstname.lastname@example.org or Mob: (+91) - 7749866658
[i] Civil Appeal No. 6524 OF 2009 [ii] Exclusion of time of proceeding bona fide in court without jurisdiction. — (1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it. (2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it. (3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. Explanation.— For the purposes of this section,— (a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted; (b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding; (c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction. [iii]Application for setting aside arbitral award. — (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if— (a) the party making the application furnishes proof that— (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation. —Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. (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. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. [iv]Power of Court to fix a date of appearance in the Court where plaint is to be filed after its return- (1) Where, in any suit, after the defendant has appeared, the Court is of opinion that the plaint should be returned, it shall, before doing so, intimate its decision to the plaintiff. (2) Where an intimation is given to the plaintiff under sub-rule (1), the plaintiff may make an application to the Court- (a) specifying the Court in which he proposes to present the plaint after its return, (b) praying that the Court may fix a date for the appearance of the parties in the said Court, and (c) requesting that the notice of the date so fixed may be given to him and to the defendant. (3) Where an application is made by the plaintiff under sub-rule (2), the Court shall, before returning the plaint and notwithstanding that the order for return of plaint was made by it on the ground that it has no jurisdiction to try the suit,- (a) fix a date for the appearance of the parties in the Court in which the plaint is proposed to be presented, and (b) give to the plaintiff and to the defendant notice of such date for appearance. (4) Where the notice of the date for appearances is given under sub-rule (3),- (a) it shall not be necessary for the Court in which the plaint is presented after its return, to serve the defendant with a summons for appearance in the suit, unless that Court, for reasons to be recorded, otherwise direct, and (b) the said notice shall be deemed to be a summons for the appearance of the defendant in the Court in which the plaint is presented on the date so fixed by the Court by which the plaint was returned. (5) Where the application made by the plaintiff under sub-rule (2) is allowed by the Court, the plaintiff shall not be entitled to appeal against the order returning the plaint. [v]Bar of limitation.— (1) Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence. (2) For the purposes of this Act— (2) For the purposes of this Act—" (a) a suit is instituted— (a) a suit is instituted—" (i) in an ordinary case, when the plaint is presented to the proper officer; (i) in an ordinary case, when the plaint is presented to the proper officer;" (ii) in the case of a pauper, when his application for leave to sue as a pauper is made; and (ii) in the case of a pauper, when his application for leave to sue as a pauper is made; and" (iii) in the case of a claim against a company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator; (iii) in the case of a claim against a company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator;" (b) any claim by way of a set off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted— (b) any claim by way of a set off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted—" (i) in the case of a set off, on the same date as the suit in which the set off is pleaded; (i) in the case of a set off, on the same date as the suit in which the set off is pleaded;" (ii) in the case of a counter claim, on the date on which the counter claim is made in court; (ii) in the case of a counter claim, on the date on which the counter claim is made in court;" (c) an application by notice of motion in a High Court is made when the application is presented to the proper officer of that court.