Superintending Engineer, Public Works Department and Another vs Er. Sundharam, Contractor

R.S. Ramanathan, J.—Heard both sides.

The Petitioners herein filed Ar. OP No. 22 of 1998 challenging the arbitral award, dated 19.01.1998, on the file of the Principal Sub-Judge, Madurai, on 21.04.1998 to set aside the award passed by the arbitrator. The arbitrator also referred the arbitral award to the Principal Sub-Judge, Madurai, in Ar. OP No. 5 of 1998 to pass a decree as per the provisions of the Act. The learned Principal Sub-Judge, dismissed the Ar. OP No. 22 of 1998, by order, dated 11.12.2000. Aggrieved by the same, the Petitioners preferred an appeal before this Court in CMA No. 1463 of 2001 and this Court passed an order in CMA No. 1463 of 2001 holding that the Principal Sub-Judge, Madurai, has no inherent jurisdiction to deal with the Ar. OP No. 22 of 1998 filed u/s 34 of the Arbitration and Conciliation Act, 1996 and as per Section 2(1)(e) of the said Act, ''court'' means the principal civil court of original jurisdiction in a district and, therefore, only the District Court, Madurai, has got jurisdiction and the sub-court has no jurisdiction and the said order was passed in CMA No. 1463 of 2001 on 23.12.2005 and the copy of the order was made ready on 21.01.2006 and thereafter, the Petitioners filed Ar. OP before the District Court and also filed IA No. 1325 of 2009 on 24.03.2006 u/s 34(3) of the Arbitration and Conciliation Act, to condone the delay of 37 days in filing the application to set aside the arbitral award.

The Respondent herein filed a counter stating that as per Section 34(3) of the Arbitration and Conciliation Act, arbitral award can be set aside if the application is filed within a period of three months from the date of award and if the same is not filed within three months, the court has got power to condone the delay of only 30 days in filing the application to set aside the award and in total, an application to set aside the final award has to be filed within a period of 120 days and in this case, it was filed beyond the period of 120 days and hence, the application filed to condone the delay is not maintainable. As the court has no jurisdiction to condone the delay beyond the period of 120 days, the learned Principal District Judge dismissed the IA No. 1325 of 2009 holding that Section 5 of the Limitation Act, 1963 is not applicable to the arbitration proceedings and, therefore, the petition is not maintainable. Aggrieved by the same, the Petitioners herein filed CRP No. 149 of 2009 and this Court dismissed that civil revision petition and observed that the District Court has not considered the scope of Section 14 of the Limitation Act and without considering the applicability of Section 14 of the Limitation Act, the learned Principal District Judge has held that the court has no power to condone the delay beyond 120 days and on that ground, set aside the order of the District Court made in IA No. 1325 of 2009 and remanded the matter to the lower court to decide the issue afresh in the light of Section 14 of the Limitation Act. The learned Principal District Judge, after hearing both parties, dismissed the application holding that even after taking into consideration of Section 14 of the Limitation Act, the delay is more than 120 days and hence, the delay cannot be condoned and dismissed the application to condone the delay. Aggrieved by the same, this civil revision is filed by the revision Petitioners.

Mr. S.C. Harold Singh, the learned government advocate appearing for the revision Petitioners, placed the judgments of the Hon''ble Supreme Court reported in State of Goa Vs. Western Builders, and Consolidated Engg. Enterprises Vs. Principal Secy. Irrigation Deptt. and Others, and submitted that Section 14 of the Limitation Act can be invoked in this case and Ar. OP No. 22 of 1998 was filed before the Subordinate Court, Madurai, in a bona fide manner and that was prosecuted with due diligence and that was finally disposed of by this Court, by the order, passed in CMA No. 1463 of 2001, dated 23.12.2005 and the order copy was made ready on 21.01.2006 and, therefore, the period from 19.01.1998 to 21.01.2006 is to be excluded for calculating the period of limitation and if so, the application filed on 24.03.2006 is within the period prescribed u/s 34(3) of the Arbitration and Conciliation Act and, therefore, the court has got power to condone the delay.

He further submitted that though it was stated in the petition that there is a delay of 37 days, there is no delay if the period of limitation is considered from the date of order passed in CMA No. 1463 of 2001 and by way of abundant caution, this application was filed. He further submitted that even assuming that there is a delay by invoking Section 5 of the Limitation Act, the delay can be condoned and, therefore, relying upon Section 43 of the Arbitration and Conciliation Act by which it has been made clear that the Limitation Act shall apply to arbitration proceedings in court and, therefore, the petition for condoning the delay can be allowed.

On the other hand, the learned Counsel appearing for the Respondent, Mr. Alagarsamy, submitted that the petition filed for condoning the delay is not maintainable and the period from the date of award till the date of disposing of CMA No. 149 of 2009 cannot be excluded and the Petitioners filed Ar. OP No. 22 of 1998 only on 21.04.1998 and not on 25.03.1998 as contended by the revision Petitioners and, therefore, even in the first instance, it was filed after 92 days and as per Section 34(3) of the Arbitration and Conciliation Act, it has to be filed within 90 days and the court has got power to condone the delay of 30 days and, therefore, even while filing of the arbitration proceedings, there was a delay of 2 days. He further submitted that CMA No. 1463 of 2001 was disposed of on 23.12.2005 and, therefore, from that date onwards the limitation starts and even excluding the period from 21.04.1998, the date of presentation of Ar. OP No. 22 of 1998 to 23.12.2005, the date of the order in CMA No. 1463 of 2001, the petition ought to have been filed on or before 19.01.2006 and the application was filed only on 24.03.2006 and hence, this Court has no power to condone the delay even if Section 14 of the Limitation Act is made applicable. He further submitted that Section 5 of the Limitation Act cannot be invoked as it has been held by the Hon''ble Supreme Court that to set aside the arbitral award, Section 5 of the Limitation Act cannot be made applicable as the Act itself provides 30 days'' time to condone the delay and, therefore, Section 29(2) of the Limitation Act can be made applicable.

To appreciate the contentions of both parties, we will have to see the provisions of Section 14 of the Limitation Act and Section 34 of the Arbitration and Conciliation Act.

Section 34 of the Arbitration and Conciliation Act reads as follows: "34. 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:

xxx xxx xxx; 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,

xxx xxx xxx

(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:

xxx xxx xxx

(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.

It is seen from Section 34(3) of the said Act, an application for setting aside may be filed within a period of three months from the date of receipt of arbitral award and the court can entertain the application within a further period of 30 days, if the applicant satisfies the court that he was prevented by sufficient cause from making the application within the said period of three months, but not thereafter. Therefore, under that Act, within three months from the date of receipt of the arbitral award, the application to set aside the arbitral award has to be filed and if the same could not be filed within a period of three months, the court has got power to receive the application within 30 days thereafter, if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months.

u/s 43 of the Arbitration and Conciliation Act, the Limitation Act is made applicable to arbitration as it applies to proceedings in court. Therefore, it was contended by Mr. S.C. Herold Singh, the learned special government pleader, for the revision Petitioners that when the Limitation Act is made applicable to the arbitration proceedings and Section 5 of the Limitation Act is also made applicable and hence, the court has got power to condone the delay even though, the delay exceeds the period of 30 days. The arguments of the learned Counsel appearing for the Petitioners cannot be accepted, having regard to Section 29(2) of the Limitation Act.

As per Section 29(2) of the Limitation Act, "where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of Section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in Sections 4 - 24 (inclusive) shall apply only insofar as, and to the extent to which, they are not expressly excluded by such special or local law".

A reading of Section 29(2) of the Limitation Act would make it clear that when the special or local law prescribes a period of limitation different from the period prescribed by the Schedule and the provisions of the Limitation Act are not expressly excluded, then Sections 4 - 24 of the Limitation Act shall apply.

In this case, as stated supra, u/s 34(3) of the Arbitration and Conciliation Act, it has been specifically stated that the court can entertain the application beyond the period of 90 days, if the applicant is able to satisfy the court that he was prevented from sufficient cause from making application within the said period of 3 months and in that case, the court can entertain the application within a further period of 30 days, but not thereafter. Therefore, the Act contains a prohibition that the court cannot entertain the application beyond the period of 90 days from the date of the award and if the applicant satisfies the court that he was prevented by sufficient cause, the court can entertain the application after the expiry of 90 days, if the same is filed within 30 days and not thereafter. Therefore, the provisions of Limitation Act have been expressly excluded by the Arbitration and Conciliation Act and hence, Section 5 of the Limitation Act cannot be made applicable.

Further, it is no longer res Integra and it has been held in the reported judgment in Union of India Vs. M/s Popular Construction Co., , that "there is no dispute that the Arbitration and Conciliation Act, 1996 is a "special law" and that Section 34 provides for a period of limitation different from that prescribed under the Limitation Act. The question then is whether exclusion in terms of Section 29(2) of the Limitation Act, 1963 has been expressed in Section 34 of the 1996 Act (paras 12, 14 and 16, pages 349-350 of Arb. LR):

In the language of Section 34 of the 1996 Act the crucial words are "but not thereafter" used in the proviso to Sub-section (3). 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 that 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.

The history and scheme of the 1996 Act support the conclusion that the time limit prescribed u/s 34 to challenge an award is absolute and inextensible by court u/s 5 of the Limitation Act. The Arbitration and Conciliation Bill, 1995 which preceded the 1996 Act stated as one of its main objectives the need "to minimize the supervisory role of courts in the arbitral process". This objective has found expression in Section 5 of the Act which prescribes the extent of judicial intervention in no uncertain terms.

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). But an application filed beyond the period mentioned in Section 34, Sub-section (3) would not be an application "in accordance with" that subsection. 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 the award becomes enforceable as soon as the limitation period u/s 34 expires. This is a significant departure from the provisions of the Arbitration Act, 1940. 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.

Therefore, Section 5 of the Limitation Act cannot be made applicable.

As a matter of fact, in CRP No. 149 of 2009, this Court has also held that the matter was remanded only for the purpose of finding out whether Section 14 of the Limitation Act was made applicable to the facts of the case.

Section 14 of the Limitation Act reads as follows:

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.

Further, the Hon''ble Supreme Court in the judgment in Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department and Ors. (supra), laid the conditions for invoking Section 14 and held that (para 12, pages 151-152 of Arb. LR):

(1) Both the prior and subsequent proceedings are civil proceedings prosecuted by the same party;

(2) The prior proceeding had been prosecuted with due diligence and in good faith;

(3) The failure of the prior proceeding was due to defect of jurisdiction or other cause of like nature;

(4) The earlier proceeding and the latter proceeding must relate to the same matter in issue; and

(5) Both the proceedings are in a court.

The policy of the section is to afford protection to a litigant against the bar of limitation when he institutes a proceeding which by reason of some technical defect cannot be decided on merits and is dismissed. While considering the provisions of Section 14 of the Limitation Act, proper approach will have to be adopted and the provisions will have to be interpreted so as to advance the cause of justice rather than abort the proceedings. It will be well to bear in mind that an element of mistake is inherent in the invocation of Section 14. In fact, the section is intended to provide relief against the bar of limitation in cases of mistaken remedy or selection of a wrong forum. On reading Section 14 of the Limitation Act it becomes clear that the legislature has enacted the said section to exempt a certain period covered by a bona fide litigious activity. Upon the words used in the section, it is not possible to sustain the interpretation that the principle underlying the said section, namely, that the bar of limitation should not affect a person honestly doing his best to get his case tried on merits but failing because the court is unable to give him such a trial, would not be applicable to an application filed u/s 34 of the Act of 1996. The principle is clearly applicable not only to a case in which a litigant brings his application in the court, that is, a court having no jurisdiction to entertain it but also where he brings the suit or the application in the wrong court in consequence of bona fide mistake of law or defect of procedure. Having regarded to the intention of the legislature this Court is of the firm opinion that the equity underlying Section 14 should be applied to its fullest extent and time taken diligently pursuing a remedy, in a wrong court, should be excluded.

Similar view was taken in the judgment in State of Goa v. Western Builders (supra). It is further held that (para 19, page 156 of Arb. LR)-- "Section 14 of the Limitation Act has to be construed liberally and due diligence and caution are essentially prerequisites for attracting Section 14. Due diligence is a measure of prudence or activity expected from and ordinarily exercised by a reasonable and prudent person under the particular circumstances. The time during which a court holds up a case, while it is discovering that it ought to have been presented in another court, must be excluded as the delay of the court cannot affect the due diligence of the party. Section 14 requires that the prior proceeding should have been prosecuted in good faith and with due diligence. The definition of good faith as found in Section 2(h) of the Limitation Act would indicate that nothing shall be deemed to be in good faith which is not done with due care and attention. It is true that Section 14 will not help a party who is guilty of negligence, lapse or inaction. However, there can be no hard and fast rule as to what amounts to good faith. It is a matter to be decided on the facts of each case. It will, in almost every case, be more or less a question of degree. The mere filing of an application in wrong court would not prima facie show want of good faith. There must be no pretended mistake intentionally made with a view to delaying the proceedings or harassing the opposite party. In the light of these principles, the question will have to be considered whether the Appellant had prosecuted the matter in other courts with due diligence and in good faith".

The Hon''ble Supreme Court has also stated the distinction between Sections 5 and 14 of the Limitation Act, in the matter of Consolidated Engg. Enterprises v. Principal Secy. Irrigation Dept. (supra), that (para 16, page 155 of Arb. LR)--"the power to excuse delay and grant an extension of time u/s 5 is discretionary whereas u/s 14, exclusion of time is mandatory, if the requisite conditions are satisfied. Section 5 is broader in its sweep, than Section 14 in the sense that a number of widely different reasons can be advanced and established to show that there was sufficient cause in not filing the appeal or the application within time. The ingredients in respect of Sections 5 and 14 are different. The effect of Section 14 is that in order to ascertain what is the date of expiration of the prescribed period, the days excluded from operating by way of limitation, have to be added to what is primarily the period of limitation prescribed".

Bearing in mind the principles laid down by the Hon''ble Supreme Court in the aforesaid judgments, we will have to see whether the applicant has prosecuting the earlier proceedings with due diligence and in good faith.

It is admitted that the arbitral award was passed on 19.01.1998. As per Section 34 of the Arbitration and Conciliation Act, an application to set aside the arbitral award can be made to a court by filing an application. The court is defined u/s 2(1)(e) as the principal civil court of original jurisdiction in a district and at the time of passing of the Act, the original jurisdiction was conferred only on the munsif courts and sub-courts and later, by amendment of Civil Court Act, original jurisdiction was also conferred on the District Court. Therefore, on the date of filing the application to set aside the award, there was a confusion whether application can be filed in the District Court or in the sub-court and many applications were filed before the sub-court, which was the higher forum having original jurisdiction in a district till that controversy has been cleared later, by the Division Bench judgment of this Court reported in 2006 (1) CTC 178. Therefore, when Ar. OP No. 22 of 1998 was filed by the applicant before the Sub-Court, Madurai, the Petitioner was under the bona fide belief that the sub-court was the competent court as per the Act and, therefore, in good faith, he was prosecuting the Ar. OP No. 22 of 1998 before the sub-court and, therefore, it can be held that the Petitioner was prosecuting in good faith and with due diligence, the Ar. OP No. 22 of 1998 before the Sub-Court, Madurai, till it was finally held in CMA No. 1463 of 2001 by this Court on 23.12.2005 that the sub-court has no jurisdiction and District Court alone has got jurisdiction and the application thereafter was filed before the District Court. Therefore, as per Section 14 of the Limitation Act, the time during which the Petitioner has been prosecuting the Ar. OP No. 22 of 1998 shall be excluded and in that event period from 21.04.1998, the date of filing to 23.12.2005, the date of order in CMA No. 1463 of 2001 can be excluded for calculating the period of limitation.

It was contended by Mr. S.C. Herold Singh, the learned Counsel appearing for the Petitioner that the period to be excluded is not the period from 21.04.1998, but from the date of award, dated 19.01.1998 and, therefore, the period of limitation starts only from 23.12.2005, viz. the order passed in CMA No. 1463 of 2001 and if so calculated, the fresh application filed on 24.03.2006 is within time. The argument of the learned Counsel appearing for the Petitioner cannot be accepted as it has been made clear in the explanation to Section 14 of the Limitation Act that for the purpose of Section 14 in excluding the time during which the former civil proceeding was pending, the date on which that proceeding was initiated and the date on which it ended shall both be counted. There fore, the date on which the Ar. OP No. 22 of 1998 filed, namely, 21.04.1998 and the date of order passed in CMA No. 1463 of 2001, viz. 23.12.2005 had to be considered as 2 days and the period between those two days including those two days can be excluded for calculating the period of limitation. Therefore, if so calculated even on 21.04.1998, 92 days have lapsed from the date of the award and, therefore, as per Section 34(3) of the Arbitration Act, the court has got power to consider the application if the same has been filed within 28 days thereafter. Admittedly, CMA No. 1463 of 2001 was disposed on 23.12.2005 and the copy was made ready on 21.01.2006 and even assuming that date can be reckoned as the starting point for limitation, fresh application ought to have been field on or before 18.02.2006. But in this case, the application was filed only on 24.03.2006, which is beyond the period of 30 days. Therefore, in any event, the application was filed beyond the period as laid down u/s 34(3) of the Arbitration and Conciliation Act even after taking into consideration Section 14 of the Limitation Act and as held supra, the court has no power to entertain the application, if the same is filed beyond the period of 30 days as provided under Sections 33 and 34 of the Act. Hence, in any event, the petition filed by the Petitioners is beyond the period prescribed u/s 34(3) of the Act and hence, the court has no power to condone the delay and, therefore, the petition is not maintainable accordingly, this civil revision petition is dismissed. Consequently, connected miscellaneous petition is closed. No costs.