This article is written by Vivek Maurya from ICFAI Law University, Dehradun. This article describes the changes in the Arbitration Act, 1996, after the Borse Brothers case.
Table of Contents
Introduction
In the case of Government of Maharashtra v. Borse Brothers Engineers & Contractors Pvt. Ltd. (2021), the Supreme Court of India recently reversed a previous decision in the case of NV International v. the State of Assam, (2019). The Supreme Court emphasized that an aggrieved party must file an appeal within 60 days of the date of the judgment under Section 37 of the Arbitration and Conciliation Act, 1996. The Supreme Court also ruled that the appellate court can excuse a delay in submitting appeals under Section 37 of the Arbitration and Conciliation Act. However, such forgiveness must be granted only as an exception and is only permitted if the delay is ‘short.’
Background and issues of the case
When it came to filing an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 after 120 days, both the Bombay High Court and Delhi High Court declined to excuse the delay. The Supreme Court of India also heard an appeal against a ruling of the Madhya Pradesh High Court, which found that a High Court might excuse a delay in filing a Section 37 appeal in accordance with Section 5 of the Limitation Act, 1963. Appeals were filed against decisions of three different High Courts. On March 19, 2020, the Supreme Court consolidated all three appeals and dismissed them in a single decision.
Due to the absence of a time restriction under the Arbitration and Conciliation Act, 1996, the following issues came before the Court:
- As a result of these appeals, a serious legal dispute emerges as to whether the law is correctly laid forth in the judgment of a Division Bench of this court in N.V. International v. The State of Assam?
- Does Section 37 of the Arbitration and Conciliation Act, allow the appellate court to excuse a delay in filing the appeal?
Judgment
It is noted out by the Supreme Court that Section 37 of the Arbitration and Conciliation Act, 1996, read with Section 43 of the Arbitration and Conciliation Act, 1996, made it apparent that the Limitation Act will apply to appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996. This triggers Article 116 and Article 117 of the Limitation Act, which sets a limitation term of 90 days or 30 days, depending on whether the appeal is from a lower court to the High Court or from a High Court to another High Court. As a result of Section 43 of the Arbitration and Conciliation Act and Section 29(2) of the Limitation Act, Section 5 of the Limitation Act will apply to the aforementioned appeals.
The Court, on the other hand, looked at how the Limitation Act worked in coordination with the Commercial Court Act, 2015 for appeals under Section 37 when the value of the commercial dispute’s subject matter satisfied the criteria of ‘specified value’ under the Commercial Court Act, 2015. As a result, the Supreme Court ruled as follows.
- Article 116 and Article 117 of the Limitation Act would apply if an appeal under Section 37 is filed against an arbitral award in arbitration for less than the specified value.
- The appeal will be regulated by Section 13(1A) of the Commercial Court Act, 2015 if an appeal under Section 37 is filed against an arbitral judgment in arbitration of a dispute of the specified value. The Commercial Court Act of 2015 establishes a 60-day limitation period for all appeals, which would be the time limit for filing an appeal under Section 37 of the Arbitration and Conciliation Act of 1996. The Supreme Court reviewed the Kandla Export Corpn. v. OCI Corporation (2018), the decision to address the interaction between Section 13 of the Commercial Court Act, 2015 and Section 37 of the Arbitration and Conciliation Act, 1996.
Whether a delay in filing an appeal under Section 37 of the Arbitration and Conciliation Act can be condoned under Section 5 of the Limitation Act?
The Supreme Court pointed out that Section 13 of the Commercial Court Act of 2015 differs from Section 34(3) of the Arbitration and Conciliation Act of 1996. Whereas Section 34(3) imposes a hard stop on the time limit for filing of applications under Section 34, there is no equivalent provision in Section 13 of the Commercial Court Act. Furthermore, the Supreme Court ruled that the non-obstante clause in Section 21 of the Commercial Court Act, 2015 cannot override the Limitation Act to prevent Section 5 of the Limitation Act from applying. As a result, the Supreme Court determined that applying Section 13 of the Commercial Court Act, 2015 did not preclude the application of Section 5 of the Limitation Act.
As a result, the Supreme Court underlined that any delay must be tolerated by the appellate court as an exception, not as a norm, and only in circumstances where:
- Where a party has otherwise acted honestly and not negligently.
- There is a little delay that extends beyond the required limit.
- When the other party’s rights in fairness and justice are not affected as a result of the erring party’s delay and negligence.
The Supreme Court reiterated its previous ruling that delay might not be condoned, depending on the facts of the case, even if the appellant has given a reason.
Whether NV International laid down the correct law on the issue?
In NV International, the Supreme Court ruled that due to the limitation in time to file an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, the limitation period for an appeal under Section 34 would be controlled by the term provided in Section 34 of the Arbitration and Conciliation Act, 1996, which is three months and can be extended by thirty days.
The Supreme Court found that N.V. International did not consider the requirements of the Commercial Court Act, 2015 while determining the limitation period for an appeal under Section 37 in this case. As a result, it was Per Incuriam (lack of care) on this point. The limitation period under Section 34 of the Arbitration and Conciliation Act, 1996, could not be extended into the appeal provision under Section 37 of the Act.
Analysis of the Judgment
The court has also limited the scope for excusing delays in filing an appeal under Section 37 of the Arbitration and Conciliation Act of 1996, allowing only ‘short delays’. This is consistent with the goal of speedy conflict settlement, as evident in the recent revisions in the Arbitration and Conciliation Act,1996, and the Commercial Court Act, 2015.
The Supreme Court correctly recognized that Section 13(1A) of the Commercial Court Act governs the majority of appeals under Section 37 of the Arbitration and Conciliation Act. As a result, for all appeals filed under Section 37 of the Arbitration and Conciliation Act involving a commercial dispute of Specified Value under the Commercial Court Act, 2015, a standard time of 60 days will apply. By establishing a uniform period of 60 days for filing all appeals under Section 37 of the Arbitration and Conciliation Act involving a commercial dispute of Specified Value, the court has also avoided the potential issue raised by N.V. International of applying different and continuing periods of limitation for original proceedings into appeal proceedings under Section 37.
The purpose of both the Arbitration and Conciliation Act and the Commercial Court Act, 2015, according to the Supreme Court, is to resolve conflicts quickly. In light of this, and as the court has decided, the provisions of both Acts must be read with the goal of rapid resolution in mind, and any construction that delays proceedings rather than contributing to an expedient conclusion must be avoided.
The law: before and after the judgment
The court was asked in N.V. International whether a delay of 189 days beyond the statutorily provided 90-day limitation period (under Article 116 of the Limitation Act) in filing an appeal under Section 37 against an order of rejection of a Section 34 application under the Arbitration Act should be tolerated. Based on the decision in Union of India v. Varindera Construction Ltd. (2018), Justice Nariman ruled that once the grace period of 30 days has expired (effectively increasing the limitation period for a Section 37 appeal to 120 days), no further delay can be tolerated, keeping in mind the “object of speedy resolution of all arbitral disputes.”
Surprisingly, Justice Nariman wrote the decision in Borse Brothers Engineers, in which the N.V. International decree was overturned. In Borse Brothers Engineers, the court held that the N.V. International order was per incuriam because it did not take into account the provisions of the Commercial Courts Act, which stipulates that the limitation period prescribed for Section 37 appeals differs from what is prescribed under Articles 116 and 117 of the Limitation Act.
The court ruled in favor of acceptance of delay for both sorts of appeals, those worth less than and those worth more than INR three lakhs, noting that Section 5 of the Limitation Act would apply to any one of them. The following is the court’s justification for its decision:
- The court decided that the limitation period for appeals involving amounts less than INR three lakhs is controlled by Articles 116 and 117 of the Limitation Act. Section 43 of the Arbitration Act, which makes the provisions of the Limitation Act applicable to proceedings under the Arbitration Act, and Section 29(2) of the Limitation Act, which states that the limitation periods provided for in any special law are treated the same as those provided for in the articles of the Limitation Act, the court ruled that Section 5 of the Limitation Act applied to such claims, allowing for a delay to be excused.
- The court remarked that the majority of appeals would be worth more than INR three lakhs, and their limitation period was set under section 13(1A) of the Commercial Courts Act. It was determined that Section 5 of the Limitation Act applied to such appeals primarily due to the structure of the Commercial Courts Act, which in the court’s judgment did not indicate a restriction on the acceptance of delay. The court contrasted Section 13(1A) of the Commercial Courts Act to Order 8 Rule 1 of the Code of Civil Procedure 1908 and Section 35H of the Central Excise Act, concluding that the wording of both sections differed significantly, with the latter not allowing for delay condonation. As a result, in the court’s judgment, there was no hindrance to accepting delay by applying Section 5 of the Limitation Act in bringing a Section 37 appeal under Section 13(1A) of the Commercial Courts Act.
While deciding whether the court should excuse the delay in filing Section 37 appeals filed under Section 13(1A) of the Commercial Courts Act, it was held that any attempt to incorporate Section 34(3), which sets a hard limit on the limitation period and prohibits further condonation of delay, into Section 37 of the Arbitration Act would be unwarranted since it would violate the spirit of that section.
Finally, after diluting the standard for limitation period in filing Section 37 appeals, the court has attempted to stitch a patchwork of sorts, by stating that any condonation of delay should only be allowed as an exception, wherein the ‘sufficient cause’ criterion is met, and not as a rule.
Conclusion
The court has offered essential clarification on the limitation time for submitting appeals under Section 37 of the Arbitration Act, as well as the acceptance of delays in filing such appeals, focusing on the underlying goal of quick resolution of disputes. The court has made comprehensive observations on the subject, taking into account the relevant legal rules as well as the importance of adhering to deadlines, particularly in business disputes. Furthermore, in keeping with the Dicean ideal of “equality before the law,” the court has tried to put all parties participating in commercial activity on an equal basis by adopting the same yardstick to postpone condonation in instances involving public sector businesses. The Supreme Court has made yet another commendable and forward-thinking effort in the area of arbitration and commercial disputes.
References
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