Limitation for filing of appeals under Section 37 of Arbitration and Conciliation Act

Section 37 of the Arbitration and Conciliation Act, 1996 (‘Act’) provides for an appeal against orders passed under Sections 9, 34, 16 and 17 of the Act. The Act does not provide any specific limitation for filing such appeals, however, Section 43 of the Act provides that the Limitation Act, 1963 (‘Limitation Act’) shall apply to arbitrations as it applies to proceedings in Court.

Articles 116 and 117 of the Schedule of the Limitation Act provide for a limitation period of 90 days for filing an appeal from any other Court to a High Court and a period of 30 days for filing an intra-High Court appeal, respectively. Further, Section 5 of the Limitation Act provides for extension of the prescribed limitation period in cases where the applicant satisfies the Court that there was a ‘sufficient cause’ for such delay.

Prior to the enactment of the Commercial Courts Act, 2015 (‘Commercial Courts Act’), the Supreme Court, in Consolidated Engineering Enterprises v. Irrigation Department^[1] (‘Consolidated Engg.’), held that where the Limitation Act prescribes a period of limitation for appeals or applications to any Court, and the special act does not prescribe any period of limitation, then the limitation prescribed in the Limitation Act will be applicable along with Sections 4 to 24 thereof unless they are expressly excluded by the special act.

Thereafter, the Commercial Courts Act was enacted. Section 10 of the Commercial Courts Act provides that Commercial Courts shall decide all applications and appeals which arise out of arbitrations other than international commercial arbitrations, where the subject matter is a commercial dispute of the specified value. This ‘specified value’ as defined under Section 2(1)(i) cannot be less than INR 3,00,000. Further, Section 13(1A) provides that an appeal under Section 37 of the Act would lie before the Commercial Court and such appeal must be filed within 60 days.

However, in 2020, when faced with the same issue in the case of Union of India v. Virendera Constructions Ltd^[2] (‘Virendra Constructions’), the Supreme Court did not take into account the Commercial Courts Act and the decision in Consolidated Engg. The Supreme Court judicially engrafted a limitation period of 120 days from the date of passing of the order and held that any further delay beyond 120 days cannot be allowed. The Supreme Court noted that since a Section 34 application has to be filed within a maximum period of 120 days including a grace period of 30 days, therefore, an appeal filed from the same should also be covered by the same drill.

Thereafter, in N. V. International v. State of Assam and Ors.^[3] (‘N. V. International’), the Supreme Court reiterated the position as stated in Virendra Constructions. The Supreme Court also placed emphasis upon the main object of the Act, i.e. speedy disposal of arbitral disputes and held that, any delay beyond 120 days cannot be condoned.

However, neither Virendra Constructions nor N.V. International case, referred to the provisions of Commercial Courts Act which deal with the limitation period for filing of appeals under Section 37. It must also be noted that neither the Act nor the Commercial Courts Act, provide for this cap of 120 days or limit the period up to which an application for condonation of delay can be allowed.

In Government of Maharashtra v. Borse Brothers Engineers & Contractors Pvt. Ltd, ^[4] the Supreme Court noted the conflicting position. The Supreme Court relied on Consolidated Engg. and held that, if the specified value of the subject matter is INR 3,00,000 or more, then an appeal under Section 37 of the Act must be filed within 60 days from the date of the order as per Section 13(1A) of the Commercial Courts Act. However, in those rare cases when the specified value is for a sum less than INR 3,00,000 then the appeal under Section 37 would be governed by Articles 116 and 117 of the Limitation Act, as the case may be.

Regarding the applicability of the Limitation Act, the Supreme Court overruled its decision in N. V. International case and held that Section 37 when read with Section 43 of the Act and Section 29(2) of the Limitation Act, makes it clear that Section 5 of the Limitation Act will apply to the appeals filed under Section 37. However, the Supreme Court also noted that condonation of delay, although allowed, cannot be seen in complete isolation of the main objective of the Act, i.e. speedy disposal of disputes. In the light of the same, the Supreme Court observed that the expression ‘sufficient cause’ under Section 5 of the Limitation Act is not elastic enough to cover long delays and merely because sufficient cause has been made out, there is no right to have such delay condoned. The Supreme Court further held that only short delays, can be condoned only by way of an exception and not by the way of rule, and that too only when the party acted in a bona fide manner and not negligently.

Thus, the applicable limitation period may be summarized as under:

The delay in all the above cases is condonable provided that:

• The period of delay is short;
• Sufficient cause has been made out for such delay;
• The actions of the appellant were bona-fide; and
• No prejudice is caused to the other party.

The Supreme Court in this judgment has not only provided the much-needed clarification on an important point of law but has also re-emphasised the main objective of speedy disposal of disputes under the Act. The Supreme Court went a step ahead and also observed that be it a private party or a public sector company, the same yardstick will be applicable for condonation of delay, and no special treatment can be afforded merely because the government is involved.

[The authors are Associate and Joint Partner, respectively, in the Commercial Litigation practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]

[1] Consolidated Engineering Enterprises v. Irrigation Department [(2008) 7 SCC 169].

[2] Union of India v. Varindera Constructions Ltd. [(2020) 2 SCC 111].

[3] NV International v. State of Assam, [(2020)2SCC109].

[4] Government of Maharashtra v. Borse Brothers Engineers & Contractors Pvt. Ltd, [2021 SCC OnLine 233].