SEC 34 ARB (r/w sec 5 LTA)
Mahindra and Mahindra Financial Services Ltd. vs Maheshbhai Tinabhai Rathod, 2021 SC
FACTS – Respondent availed loan facility for purchase of tractors and an agreement was entered into between the parties in respect of the transaction. However, it is noted that due to nonadherence to the terms of contract, dispute arose between the parties and the same was referred to arbitration by invoking the arbitration clause contained in the agreement.
The learned Arbitrator passed the award dated and allowed the claim made by the appellant.
The appellant herein thereafter filed an execution petition on to execute the award and recover the amount due and payable by the respondent. The notice of execution petition from the court of the Civil Judge, District Court, Bhavnagar was issued to the respondent.
The respondent, at that stage, on assailed the arbitral award by filing the petition under Section 34 of the Act 1996. By such time there was delay of 185 days beyond the time period allowed under Section 34 (3) of the Act 1996. Hence along with the petition, the respondent moved Notice of Motion in Arbitration Petition under Section 5 of the Limitation Act seeking condonation of delay contending that the respondent had knowledge of the proceedings only when summons was received from the execution court on 15.11.2011.
The appellant herein filed their objection to the Notice of Motion. The learned Single Judge while considering the Notice of Motion in the petition under Section 34 of Act 1996 noted that the respondent refused to accept the registered post containing the award and, in that view, declined to condone the delay.
The respondent therefore filed an appeal before the learned Division Bench, which has by a cryptic order condoned the delay against the statutory provision and the law enunciated by this Court.
CAUSE – The order dated 24.09.2012 passed by the learned Division Bench of the High Court of Judicature at Bombay allowed the appeals, condoned the delay and directed to place the Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996 for admission hearing before the learned Single Judge for consideration on merits.
ARGUMENTS – Mr. V.N. Raghupathy, learned counsel for the respondents contended that the respondent was a farmer and that no amount is due, has relied on the decision of Supreme Court in Collector, Land Acquisition, Anantnag and Another vs. Mst. Katiji and Others AIR 1987 SC 1353 as the basis to allow the appeal.
ISSUE – Whether the action of the learned Division Bench in condoning the delay by applying Section 5 of Limitation Act to a proceeding under Section 34(3) of Act 1996 in the manner it has done in the instant case justified?
DECISION – The scope available for condonation of delay being selfcontained in the proviso to Section 34(3) and Section 5 of Limitation Act not being applicable has been taken note by this Court in its earlier decisions, which we may note. In Union of India vs. Popular Construction Co. (2001) 8 SCC 470 it has been held as hereunder:
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 subsection (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 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…………
………The history and scheme of the 1996 Act support the conclusion that the timelimit prescribed under Section 34 to challenge an award is absolute and unextendible by court under Section 5 of the Limitation Act………
…….Ann application filed beyond the period mentioned in Section 34, subsection (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………
Further, in State of Himachal Pradesh & Anr. vs. Himachal Techno Engineers & Anr. (2010) 12 SCC 210 it was noted and held as hereunder: ……….
“While Section 5 of the Limitation Act does not place any outer limit in regard to the period of delay that could be condoned, the proviso to subsection (3) of Section 34 of the Act places a limit on the period of condonable delay by using the words “may entertain the application within a further period of thirty days, but not thereafter”. Therefore, if a petition is filed beyond the prescribed period of three months, the court has the discretion to condone the delay only to an extent of thirty days, provided sufficient cause is shown. Where a petition is filed beyond three months plus thirty days, even if sufficient cause is made out, the delay cannot be condoned.”
The same view was taken by this Court in P. Radha Bai vs. P. Ashok Kumar (2019) 13 SCC 445 wherein this Court held as follows
“The proviso to Section 34 (3) enables a court to entertain an application to challenge an award after the three months’ period is expired, but only within an additional period of thirty dates, “but not thereafter”. The use of the phrase “but not thereafter” shows that the 120 days’ period is the outer boundary for challenging an award. If Section 17 were to be applied, the outer boundary for challenging an award could go beyond 120 days. This Court has consistently taken this view that the words “but not thereafter” in the proviso of Section 34 (3) of the Arbitration Act are of a mandatory nature, and couched in negative terms, which leaves no room for doubt……… “
Nodoubt the delay of 197 days may not seem too inordinate. In appropriate cases the delay is to be condoned so as not to defeat the meritorious case. However, that would arise only when the power under Section 5 of Limitation Act is available to be exercised. The case of Katiji case is one where such power was available to be exercised as it was not excluded. In the instant case where limitation is prescribed, the extent to which it can be condoned is circumscribed and it has been held by this Court that Section 5 of Limitation Act is not applicable to condone the delay beyond the period prescribed under Section 34(3) of Act 1996, the learned Division Bench was not justified in condoning the delay in a casual manner. The order is not sustainable, the same is therefore set aside and the order of learned Single Judge is restored.