P.R. Wasan vs Union of India (UOI) and Another

N.K. Agarwal, J.—Legality and propriety of the order dated 26-11-2008, passed by the District Judge, Bilaspur in MJC Case No. 117/ 04 is under assail in the instant petition.

Brief facts as projected by the Petitioner are that: On 9-11-2004, the Respondent/Railway moved an application u/s 34 of the Arbitration and Conciliation Act, 1996 (for short ''the Act'') for setting aside arbitral award dated 2-8-2010. On 22-2-2006 Respondent moved an application under proviso to Section 34(3) of the Act for condonation of delay of seven days in filing application u/s 34 of the Act. In the above application, it has been stated that the Respondent had received the arbitral award on 10-8-2004 and thus application filed on 9-11-2004 was within limitation, but in any case, if it is found that Respondent had received the arbitral award on 2-8-2004, then delay would be of seven days which is neither deliberate nor intentional.

The Court below vide order impugned allowed the application and condoned the delay. Hence this petition.

Shri Sanjay K. Agrawal, learned Counsel appearing for the Petitioner would submit although, Respondent had filed application u/s 34 of the Act on 9-11-2004 i.e. seven days after expiry of period of limitation, but since application for con-donation of delay was filed on 22-2-2006, therefore, duly constituted application u/s 34 was deemed to be filed on 22-2-2006 i.e. much after expiry of extended period of limitation under proviso to Section 34(3) of the Act.

According to Section 34(3) of the Act, an application for setting aside may not be after three months have lapsed from the date on which the party making that application had received the arbitral award or, if a request had been made u/s 33, from the date on which that request had been disposed of by the arbitral tribunal. As per proviso to Section 34(3), 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. Since the application has not been filed within the prescribed period of limitation i.e. three months or within thirty days thereafter, therefore, the Respondent is precluded from filing an application for setting aside the arbitral award and the Court below went wrong in allowing the application for condonation of delay and in proceeding further with the application filed u/s 34 of the Act. In support of his contention, reliance has been placed upon the judgment of Supreme Court in cases of Union of India Vs. M/s Popular Construction Co., : Union of India Vs. M/s Popular Construction Co., and Chhattisgarh State Electricity Board Vs. Central Electricity Regulatory Commission and Others, .

On the others hand, Smt. Nausina Ali, learned Counsel appearing for the Respondent No. 1 supported the order impugned and contended that the order deserves to be upheld.

I have heard the counsel appearing for the parties and perused the order impugned.

The core question involved for decision making in the instant case is whether proviso to Section 34(3) of the Act puts a bar on the Court to entertain the application filed u/s 34(1) and 34(2) of the Act if the application for condonation of delay has been filed on a date subsequent to date of filing of application u/s 34 of the Act and also after expiry of extended period of limitation of thirty days as provided under proviso to Section 34(3) of the Act.

In the order to appreciate the contention purforth by the counsel for the Petitioner, it would be appropriate to reproduce Sections 34 and 36 of the Act which reads as under:

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 accordince 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 compensation 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 fey 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 u/s 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 Ors. action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

Enforcement: Where the time for making an application to set aside the arbitral award u/s 34 has been expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.

The Supreme Court in case of Union of India Vs. M/s Popular Construction Co., has held in para 16 as under:

Furthermore, Section 34(1) itself provides that 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). Sub-section (2) relates to grounds for setting aside an award and is not relevant for our purposes. But an application filed beyond the period mentioned in Section 34, Sub-section (3) would not be an application "in accordance with" that Sub-section. Consequently by virtue of Section 34(1), recourse to the Court against an arbitral award cannot be made beyond the period prescribed. The importance of the period fixed u/s 34 is emphasized by the provisions of Section 36 which provide that:

where the time for making an application to set aside the arbitral award u/s 34 has expired...the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court.

This is a significant departure from the provisions of the Arbitration Act, 1940. Under the 1940 Act, after the time to set aside the award expired, the Court was required to "proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow" (Section 17). Now the consequence of the time expiring u/s 34 of the 1996 Act is that the award becomes immediately enforceable without any further act of the Court. If there were any residual doubt on the interpretation of the language used in Section 34, the scheme of the 1996 Act would resolve the issue in favour of curtailment of the Court''s powers by the exclusion of the operation of Section 5 of the Limitation Act.

The same view was reiterated by the Supreme Court in case of Chhattisgarh State Electricity Board (supra), para 13 of which reads as under:

Section 34(3) of the Arbitration and Conciliation Act, 1996, which is substantially similar to Section 125 of the Electricity Act came to be interpreted in Union of India v. Popular Construction Company (supra). The precise question considered in that case was whether the provisions of Section 5 of Limitation Act are applicable to an application challenging an award u/s 34 of the Arbitration and Conciliation Act, 1996. The two Judge Bench referred to earlier decisions in Mangu Ram Vs. Municipal Corporation of Delhi, , Vidyacharan Shukla Vs. Khubchand Baghel and Others, , Hukumdev Narain Yadav v. L.N. Mishra (supra), Patel Naranbhai Marghabhai and others Vs. Deceased Dhulabhai Galbabhai and others, and held:

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 to Sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of the Act. Parliament did not need to go further. To hold that the Court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase "but not thereafter" wholly otiose. No principle of interpretation would justify such a result.

Furthermore, Section 34(1) itself provides that 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). Sub-section (2) relates to ground for setting aside an award and is not relevant for our purposes. But an application filed beyond the period mentioned in Section 34, Sub-section (3) would not be an application "in accordance with" that Sub-section. Consequently by virtue of Section 34(1), recourse to the Court against an arbitral award cannot be made beyond the period prescribed. The importance of the period fixed u/s 34 is emphasized by the provisions of Section 36 which provide that:

where the time for making an application to set aside the arbitral award u/s 34 has expired... the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court.

This is a significant departure from the provisions of the Arbitration Act, 1940. Under the 1940 Act, after the time to set aside the award expired, the Court was required to "proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow" (Section 17). Now the consequence of the time expiring u/s 34 of the 1996 Act is that the award becomes immediately enforceable without any further act of the Court, If there were any residual doubt on the interpretation of the language used in Section 34, the scheme of the 1996 Act would resolve the issue in favour of curtailment of the Court''s powers by the exclusion of the operation of Section 5 of the Limitation Act.

A careful reading of ratio laid down by the Supreme Court in the above referred cases, it would be crystal clear that the Supreme Court has held that the Court cannot entertain an application to set aside award beyond extended period as provided under proviso to Section 34(3) of the Act. The Supreme Court has not held that although an application u/s 34(3) of the Act has been filed within the extended period under proviso to Section 34(3) of the Act, but, if an application for condonation of delay is filed beyond the above period, then, the Court cannot entertain the above application for setting aside the arbitral award.

The Petitioner could not point out any proposition of law suggesting that application u/s 34 of the Act filed without condonation of delay application would be deemed to be filed on the date when the application for condonation of delay was filed.

u/s 36 of the Act, where the time for making an application to set aside the arbitral award u/s 34 has been expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the Court.

Section 34 includes proviso to Section 34(3) of the Act. Undisputedly, the application u/s 34 of the Act has been filed within the extended period. Merely the application for condonation of delay has been filed on a date subsequently thereto, it cannot be said that no application has been filed for setting aside arbitral award within the period prescribed therefor under the statute, and therefore, the Court has no right to condone the delay or to entertain the application. Filing of application for condonation of delay is a rule of procedure. It is not a case that without there being any application filed by the Respondent to condone the delay, delay has been condoned.

As per proviso to Section 34(3), 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. The word "application" presupposes the application u/s 34 of the Act and not an application for condonation of delay. In view of above, the grounds raised is sans merit. The trial Court, in its discretion, has rightly condoned the delay which is well within the limit as provided under the statute.

For the reasons mentioned hereinabove, the petition has no merit. The same deserves to be and is hereby dismissed. No order as to costs.