In this blog post, Tresa Ajay, a student of National University of Advanced Legal Studies, Kochi, who is currently pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the problems of limitation under the Arbitration Act of 1996.

Every citizen is empowered by the right to constitutional remedies to address their grievances with regard to any violation of fundamental rights as guaranteed under Article 32 of the Constitution of India. Various statutes enacted for different purposes also specify the procedure and instances in which the parties can take matters to the Court.

Arbitration is another way of seeking justice without going to the courts. The dispute is settled by means of an arbitrator. This person is seen to be unbiased and is decided upon by the parties to help reach a middle ground in a dispute that might arise between them. It is a diplomatic method to resolve an issue to prevent further harm to both parties. It is commonly used for the resolution of commercial disputes.

However every statute or Act specifies the period within which the suit must be filed. In the case of maladministration, if it is a grievance it is given one year but if it is an allegation then five years is allotted. The limitation period for filing a complaint for an offence under section 406 of IPC is one year from the date of commission of the offence. The ‘Law of Limitation’ prescribes the time-limit for various suits for which an aggrieved can approach the court for delivery of justice.

Before the enactment of 1996 Act, under S.30 of Indian Arbitration Act of 1940 contained broad grounds to set aside an arbitral award whereas S.34(2) of the Act restricted the grounds for challenging an award. Procedures were specified to limit the scope of the powers of the arbitrator. There are many though who are of the opinion that there should not be provision that allows for the setting aside of the arbitral award and treated as final judgment. The Court cannot reassess the evidence even if the arbitrator committed error.[1] It is further stated that Arbitrators are judges of fact as well as law and has jurisdiction and authority to decide wrong as well as right, and thus, if they reach a decision fairly after hearing both sides, their award cannot be attacked.[2] However erroneous his decision may be, it cannot be interfered with by any Court.[3]

When the parties have decided the forum that should adjudicate the matter, then Court must be given the power to appraise the evidence. It is now a well-established principle that the decision of the arbitration tribunal is final and binding, it cannot be set aside on the ground that the facts/law is erroneous. This will be outside the scope of S.34 of the Act.

Unless the arbitrator disregards the principles of natural justice in the arbitration proceedings such as radically wrong or vicious in proceedings or disregarding the fundamental rules of evidence, the Court cannot interfere.[4]

Section 34(3) mentions a three month time-period within which an application must be made to set aside an award, the period begins from the date the applicant receives the award. The proviso states that if the applicant is able to show that that he had a reasonable cause for the delay in filing the application, the Court may further grant a period of 30 days to file it.

The issue arose in Union of India v. Popular Construction Company[5] of the provisions of Section 5 of the Limitation Act are applicable to an application that challenged an award under Section 34 of the Act. The Court looked at the history and objective of the Act and also the intention of the Legislature, one which is to minimise the Court’s intervention in the arbitral process. The words “but not thereafter” in the proviso to Section 34(3) were from which this intention of the Legislature was inferred. It was taken that this expression meant an express exclusion within what was mentioned under Section 29(2) of the Limitation Act and thus bars the application of Section 5.

However the above decision needs reconsideration. Though the Act was framed to expedite the process of justice delivery, one must not lose sight of the practicalities of life that may have hindered the litigant from approaching the Courts. Take for example when a person is prevented from challenging a blatantly wrong award in time for a bona fide reason like a terminal illness, is this proviso justified. Does the proviso to section 34(3) wholly shut out such persons from seeking justice?[6]

Suppose the limitation period expires on 10.5.2016 and the vacations of the Court begins from 28.5.2016 to 3.7.2016. If proceedings were initiated on 3.7.2016 there is no issue whether section 4 or 5 applies as the holidays will constitute sufficient cause. However, if the application was under section 34 of the Arbitration Act even if sufficient cause is shown, there will be no extension because of the proviso. Thus, while applying section 4, it is material whether ‘prescribed period’ includes extended period or is limited to the original period of limitation. This anomaly needs to be clarified.

Procedural law should not be allowed to defeat the right provided by substantive law. There is no doubt that that objective of the Act and the intention of the legislature should be given importance but the overall aim of the justice system should not be subverted in the process but that will be the case if a narrow definition is given to Section 34(3). The interpretation of the Act must be such that it furthers societal goals.

BIBLIOGRAPHY

Websites

1. The Problem of Limitation, visited on 29th November 2016 http://indiacorplaw.blogspot.in/2010/12/problem-of-limitation-under-arbitration.html
2. The Limitation of time under Section 34 of the Arbitration Act, visited on 30th No 2016 http://www.mondaq.com/india/x/452038/trials+appeals+compensation/Limitation+Of+Time+Under+Section+34+Of+The+Arbitration+And+Conciliation+Act+1996
3. Analysis of Section 34 of the Arbitration and Reconciliation Act, visited last on 30th Nov 2016 http://manupatra.com/roundup/326/Articles/Arbitration.pdf
4. The Arbitration and Reconciliation Act 1996, last visited on 30th Nov 2016 https://indiankanoon.org/doc/1306164/

[1] Eastern and Northern Frontier Railway Cooperative Bank Ltd. v. B. Guha & Co. AIR 1986 Cal 146

[2] Yeshwantrao Ganpatrao v. Dattarayarao Ramachandrao AIR 1948 Nag 162 (DB)

[3] Bharu Kure Jat v. Tara Lal AIR 1962 Punj 173

[4] Des Raj & Sons v. UOI 1984 Arb LR 156

[5] MANU/SC/0613/2001

[6] M.V. Soundaraman, “Finality of Domestic Arbitral Awards”, 3(2) Company Law Journal (2003), at 46.