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Limitation Act: A foster parent to section 37 of the arbitration and conciliation act 1996 and its limitation by the Supreme Court

This article examines the nexus between Section 37 of the Arbitration and Conciliation Act with Article 116 and Section 5 of the Limitation Act with the object of determining the period of appeal under Section 37 of the Arbitration and Conciliation Act.

The author also provides his views on the upper cap of 120 days placed by the Supreme Court in N.V. International v. State of Assam & Ors while determining the period of appeal under Section 37 of the Arbitration and Conciliation Act.

James Thurber is widely attributed for authoring the quote ‘There is no exception to the rule that every rule has an exception’. Perhaps, this is truer in law. The law of Limitation is the general rule to be applied to all statutes and yes, its applicability has more than one exception. -The law of limitation plays a significant role in the dispute resolution process. It remains a valid threshold to segregate litigants who have gone into long slumber over their rights[2].

It is the law governing limitation in India. It is an act to consolidate and amend the law of limitation of suits and other proceedings and for purposes connect therein.[3] However there are some special statutes, which expressly provide for their own time frame to avail legal recourses. The Arbitration and Conciliation Act 1996 is one such special statute.
The Arbitration and Conciliation Act 1996 falls in a peculiar class of special statutes, wherein the said Act itself stipulates timeframes to some legal recourses provided by the said Act and for some, where Arbitration and Conciliation Act does not provide a time frame, the Limitation Act is to be pressed into service, like a foster parent. Since, the Limitation Act was drafted to meet the needs of all legislations in general, sometimes, its applicability causes confusion or misinterpretations, when applied to a special statute.
There is no doubt that limitation act is applied while adjudicating claims by the Arbitrator. However, when it comes to challenging an award, the Arbitration and Conciliation Act provide its own period of limitation. Section 34(3) of the Arbitration and Conciliation Act stipulates that an award can be challenged within a period of three months from receipt of the Arbitral Award.

A further period of thirty days is also given to a party to challenge the award, subject to the party satisfying the Court that it had sufficient cause, which prevented the party to approach the court earlier.[4] Although, unlike a regular appeal, the challenge is very limited to the grounds raised under Section 34 of the Arbitration and Conciliation Act, the parties are never shy of raising all grounds under the Application under Section 34 of the Arbitration and Conciliation Act. An appeal under Section 37 of the Arbitration and Conciliation Act is provided to parties to challenge the order passed in the Application under Section 34 of the Arbitration and Conciliation Act.
Despite the nomenclature of Section 37 of the Act reads as ‘appealable orders’, the scope of Section 37 is not as broad as a regular appeal under the provisions of the Code of Civil Procedure 1908. In fact the Supreme Court, in MMTC Ltd. v. Vedanta Limited [5] has held that interference under Section 37 of the Arbitration and Conciliation Act cannot travel beyond the restrictions laid down under Section 34 of the Arbitration and Conciliation Act. Hence, the scope of Section 37 of the Arbitration and Conciliation Act is intertwined with the scope of Section 34 of the Arbitration and Conciliation Act. Despite the scope of interference being same, the period of limitation and the applicability of the limitation act is completely contrast.
Unlike Section 34 of the Arbitration and Conciliation Act, Section 37 does not provide a time frame to file an appeal. Interestingly, there have been arguments put forth that since there is no time frame mentioned in Arbitration and Conciliation Act 1996, there is no time period to file an appeal under Section 37 of the Arbitration and Conciliation Act and that Limitation Act will not be applicable to a special statute like Arbitration and Conciliation Act. Such position was even accepted by some high courts[6]. The Supreme Court in Consolidated Engineering Enterprises and Ors v. Principal Secretary Irrigation Department and Ors[7] laid to rest this argument and held that Limitation Act, more specifically Article 116 in the said Act, is applicable to appeals under Section 37 of the Arbitration and Conciliation Act.
Under Article 116 of the Limitation Act, the time period for preferring an appeal is 90 days. Section 5 of the Limitation Act permits admission of the appeal even after the expiry of the prescribed period, in the event party is able to show sufficient cause for not preferring the appeal within the prescribed period. Thus, the Limitation Act becomes the foster parent to Section 37 of the Arbitration and Conciliation Act and provides with time frame to prefer an appeal.
The Supreme Court in N.V. International v. State of Assam & Ors[8], being currently the latest judgment on this point, has placed an upper cap limit of 30 days to be granted under Section 5 of the Limitation Act. Hence a total period of 120 days, from the date of the Order under Section 34 of the Arbitration and Conciliation Act, is to be granted to a party showing sufficient cause while preferring an appeal under Section 37 of the Arbitration and Conciliation Act, when accompanied with an application under Section 5 of the Limitation Act. Coincidently, the time granted for preferring an application under Section 34 is also 120 days. However, this time period is mentioned in Section 34 itself unlike its stark absence in Section 37 of the Arbitration and Conciliation Act and in Section 5 of the Limitation Act. The Limitation Act, a preverbal legislation to the Arbitration and Conciliation Act, has been limited by this decision of the Supreme Court.
The decision of the Supreme Court to limit the period of admitting the appeal to 120 days is not a party friendly approach. Usually, section 37 appeals lie in the High Court, while section 34 applications are before the District Court. For a litigant from a rural district which does not have a bench of the High Court, a time period of 120 days to prefer an appeal may not be sufficient to approach the High Court.
There are several sufficient genuine causes including accidents, death of relatives, disability, misinformation, miscommunication, droughts, natural disasters which can effectually prevent a party from approaching the High Court under Section 37 of the Arbitration and Conciliation Act within a period of 120 days.
Section 5 of the Limitation Act does not distinguish parties based on the date of filing of the appeal. The only ingredient the party has to prove under section 5 of the limitation act is that it had sufficient cause which prevent him/her/it from filing the appeal. However, the Supreme Court in N.V. International v. State of Assam & Ors discriminates a party having sufficient cause who has approached court on the 121st day from a party who has approached prior to the said date. It leads to such a precarious situation wherein a party who satisfies all the ingredients of section 5 of the Limitation Act is barred from availing the benefit of section 5 of the limitation act.
Appeal under Section 37 is the final stage of appeal provided under the Arbitration and Conciliation. Post this stage, there would be quietus in the litigation and hence an upper cap of further 30 days will hinder the scope and purpose of the Section 5 of the Limitation Act. The decision in N.V. International v. State of Assam & Ors of laying an upper cap of 30 reads contrary to Section 5 of the Limitation Act. Had the legislature intended to prescribe an upper cap, it would have expressively mentioned it in the said section. By the said decision, the purport, intent of section 5 of the Limitation Act has been culled to a great extent.

The reason for fixing the upper limit of 30 days, by the Supreme Court in N.V. International v. State of Assam & Ors, is to ensure speedy resolution of all arbitral disputes[9]. While there can be no dispute that arbitral disputes should be speedily resolved, it must not be at the expense of a genuine litigant who has suffered an illegal award by the Arbitral Tribunal. Keeping in mind, that an appeal under Section 37 of the Arbitration and Conciliation Act is the final opportunity to challenge an arbitral award, the Supreme Court, by placing a upper cap of 30 days, has limited the right to challenge an impugned award, even in genuine and bona fide cases which satisfy the ingredients of Section 5 of the Limitation Act, but only fail to file the appeal under Section 37 of the Arbitration and Conciliation Act, within the upper cap of 120 days (90+30).
With the zeal of providing finality to Arbitral Awards, the Supreme Court has inadvertently legislated on a section, which required no interpretation. There were other ways to ensure speedy disposal of arbitration cases, applications and appeals. The Supreme Court could have laid down a tougher screening process when it comes to accepting appeal memos under Section 37 or applications under section 34 of the Arbitration Act.

When the appeal/ application is presented, the Supreme Court could have made it mandatory for the High Court and District courts, while receiving Appeals under Section 37 and Application under Section 34 of the Arbitration and Conciliation Act, to suo moto decide on maintainability/ admissibility of the appeal/application, prior to issuance of notice.

This would drastically root out frivolous applications and appeals at the preliminary stage and reduce the burden of numerous proceedings. In the longer run, it would dissuade improper filings, frivolous application and appeals from approaching the court to try their luck. While the above referred decision of the Supreme Court is welcome, a conscious effort is to be put in reading in to sections and limiting their scope when the section is quite clear. As such, law always being evolving, we can expect such limitation placed by the Supreme Court in the future, if it would help in achieving finality to arbitral awards.

End-Notes:

*
Law of Limitation, R.D.Sharma, https://timesofindia.indiatimes.com/home/education/news/Law-of-Limitation/articleshow/1012807.cms
Statement of objects and reasons –Limitation Act 1963
Application of Law of Limitation in Computing Time Period Under Section 34(3) of the Arbitration & Conciliation Act, 1996, Devash Mohta, (http://arbitrationblog.kluwerarbitration.com/2019/01/08/application- of-law-of-limitation-in-computing-time-period-under-section-343- of-the-arbitration-conciliation-act-1996/)
(2019)4SCC163
Union of India v. Radha Krishna Seth 2006(63) ALR 92
(2008)7SCC 169
(2020)2SCC109
Paragraph 4 of N.V. International v. State of Assam & Ors , (2020)2SCC109

Written By: Nikit Bala - Advocate and associated as a Senior Associate with ALMT Legal, Bangalore