P. Radha Bai and Ors. vs P. Ashok Kumar and Anr.

Words & Phrases – “the period of limitation shall not begin to run”, “may not be made”, “express exclusion” in context of s.17, Limitation Act and ss.34(3) and 29(2) of the 1996 Act – Meaning of – Limitation Act, 1963 – s.17 – Arbitration and Conciliation Act, 1996 – s.34(3) & 29(2).

Allowing the appeals, the Court

HELD: 1.1 Section 29(2), Arbitration and Conciliation Act, 1996 is divided into 2 limbs. This is evident from the conjunctive “and” in the said provision. The first part stipulates that the limitation period prescribed by the special law or local law will prevail over the limitation period prescribed in the Schedule to the Limitation Act. In this case, the Arbitration Act is a “special law” which prescribes a specific period of limitation in Section 34(3) for filing objections to an arbitral award passed under the 1996 Act and consequently the provisions of 1996 Act would apply. There is no provision under the Limitation Act, 1963 dealing with challenging an Award passed under the Arbitration Act. The second part mandates that Sections 4 to 24 of the Limitation Act will apply for determining the period of limitation “only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.” Thus the extent of the application of Sections 4 to 24 of Limitation Act will apply for determining the limitation period under the Arbitration Act only if they are not expressly excluded by Arbitration Act. [Paras 20, 21 and 22] [157-A-D]

1.2 Section 17, Limitation Act, 1963 does not extend or break the limitation period. It only postpones or defers the commencement of the limitation period. This is evident from the phrase “the period of limitation shall not begin to run”. [Para 32] [160-G]

1.3 Characteristics of Section 34(3) are:

(a) Section 34 is the only remedy for challenging an award passed under Part I of the Arbitration Act. Section 34(3) is a limitation provision, which is inbuilt into the remedy provision. One does not have to look at the Limitation Act or any other provision for identifying the limitation period for challenging an Award passed under Part I of the Arbitration Act.

(b) The time limit for commencement of limitation period is also provided in Section 34(3) i.e. the time from which a party making an application “had received the Arbitral Award” or disposal of a request under Section 33 for corrections and interpretation of the Award.

(c) Section 34(3) prohibits the filing of an application for setting aside of an Award after three months have elapsed from the date of receipt of Award or disposal of a request under Section 33. Section 34(3) uses the phrase “an application for setting aside may not be made after three months have elapsed”. The phrase “may not be made” is from the UNCITRAL Model Law and has been understood to mean “cannot be made”.

(d) The limitation provision in Section 34(3) also provides for condonation of delay. Unlike Section 5 of Limitation Act, the delay can only be condoned for 30 days on showing sufficient cause. The crucial phrase “but not thereafter” reveals the legislative intent to fix an outer boundary period for challenging an Award.

(e)

Once the time limit or extended time limit for challenging the arbitral award expires, the period for enforcing the award under Section 36 of the Arbitration Act commences. This is evident from the phrase “where the time for making an application to set aside the arbitral award under Section

34 has expired”. There is an integral nexus between the period prescribed under Section 34(3) to challenge the Award and the commencement of the enforcement period under Section 36 to execute the Award. [Para 34] [161-C-G; 162-A-G]

1.4 If Section 17 of the Limitation Act were to be applied for determining the limitation period under Section 34(3), it would have the following consequences-

(a) In Section 34(3), the commencement period for computing limitation is the date of receipt of award or the date of disposal of request under Section 33 (i.e correction/additional award). If Section 17 were to be applied for computing the limitation period under Section 34(3), the starting period of limitation would be the date of discovery of the alleged fraud or mistake. The starting point for limitation under Section 34(3) would be different from the Limitation Act.

(b) 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. The phrase “but not thereafter” would be rendered redundant and otiose. 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. [Para 35] [162-F-G; 163-A-D]

1.5 The express exclusion can be inferred either from the language of the special law or it can be necessarily implied from the scheme and object of the special law. The aforesaid inconsistencies with the language of Section 34(3) of Arbitration Act tantamount to an “express exclusion” of Section 17 of Limitation Act. Further, the exclusion of Section 17 is also necessarily implied when one looks at the scheme and object of the Arbitration Act. [Paras 25, 36 and 38] [158-B-C; 163-E; 164-B]

1.6 First, the purpose of Arbitration Act was to provide for a speedy dispute resolution process. The Statement of Objects and Reasons reveal that the legislative intent of enacting the Arbitration Act was to provide parties with an efficient alternative dispute resolution system which gives litigants an expedited resolution of disputes while reducing the burden on the courts. Article 34(3) reflects this intent when it defines the commencement and concluding period for challenging an Award. Finality is a fundamental principle enshrined under the Arbitration Act and a definitive time limit for challenging an Award is necessary for ensuring finality. If Section 17 were to be applied, an Award can be challenged even after 120 days. This would defeat the Arbitration Act’s objective of speedy resolution of disputes. The finality of award would also be in a limbo as a party can challenge an Award even after the 120 day period. Second, extending Section 17 of Limitation Act to Section 34 would do violence to the scheme of the Arbitration Act. Section

36 enables a party to apply for enforcement of Award when the period for challenging an Award under S.34 has expired. However, if Section 17 were to be extended to Section 34, the determination of “time for making an application to set aside the arbitral award” in Section 36 will become uncertain and create confusion in the enforcement of Award. This runs counter to the scheme and object of the Arbitration Act. Third, Section 34(3) reflects the principle of unbreakability. Extending Section 17 of the Limitation Act would go contrary to the principle of ‘unbreakability’ enshrined under Section 34(3) of the Arbitration Act. [Paras 39-42] [164-B-H; 165-A-C]

International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions, 2 nd Ed. by Dr. Peter Binder - referred to.

1.7 Section 17 does not defer the starting point of the limitation period merely because the Appellants has committed fraud. Section 17 does not encompass all kinds of frauds and mistakes. Section 17(1)(b) and (d) encompasses only those fraudulent conduct or act of concealment of documents which have the effect of suppressing the knowledge entitling a party to pursue its legal remedy. Once a party becomes aware of the antecedent facts necessary to pursue a legal proceeding, the limitation period commences. In the context of Section 34, a party can challenge an award as soon as it receives the award. Once an award is received, a party has knowledge of the award and the limitation period commences. The objecting party is therefore precluded from invoking Section 17(1)(b) & (d) once it has knowledge of the Award. Section 17(1)(a) and (c) of Limitation Act may not even apply, if they are extended to Section 34, since they deal with a scenario where the application is “based upon” the fraud of the respondent or if the application is for “relief from the consequences of a mistake”. Section 34 application is based on the award and not on the fraud of the respondent and does not seek the relief of consequence of a mistake. [Paras 44, 47] [165-E-G; 166-E-F]

1.8 The fraudulent conduct where Section 17 of the Limitation Act would have helped the objecting party is where there was a fraud in the delivery of the award. However, in such a scenario, resort to section 17 is not necessary. If there is any fraud in the delivery of Award, the requirement of receipt of Award under Section 34(3) itself is not satisfied. Any receipt of Award must be effective receipt. [Para 48] [166-G]

1.9 Once the party has received the Award, the limitation period under Section 34(3) of the Arbitration Act commences. Section 17 of the Limitation Act would not come to the rescue of such objecting party. In the present case, the Respondents had a right to challenge the Award under Section 34 the moment they received it. In this case, Respondents received the Award on 21.02.2010. The alleged MoU was executed on 09.04.2010. Once the Respondents received the Award, the time under Section 34(3) commenced and any subsequent disability even as per Section 17 or Section 9 of Limitation Act is immaterial. Merely because the Appellant had committed some fraud, it would not affect the Respondents right to challenge the Award if the facts entitling the filing of a Section 34 Application was within their knowledge. The moment the Respondents have received the Award, the three months period prescribed under Section 34(3) begins to commence. It was incumbent on the Respondents to have instituted an application under Section 34 challenging an award. Therefore, there would not have been any point for meaningful remand as the question of law is answered against the Respondents herein. The judgment and order of the High Court and also the order condoning the delay of 236 days in filing the objections are set aside. [Paras 50, 51] [167-F-H; 168-A-C]

Vidyacharan Shukla v. Khubchand Baghel AIR 1964 SC 1099 : [1964] 6 SCR 129 - followed.

Union of India v. Popular Construction Co.

(2001) 8 SCC 470 : [2001] 3 Suppl. SCR 619 ; Hukumdev Narain Yadav v. Lalit Narain Mishra (1974) 2 SCC 133 : [1974] 3 SCR 31 ; Commissioner of Customs and Central Excise v. Hongo India (P) Ltd. (2009) 5 SCC 791 ; State of Himachal Pradesh v. Himachal Techno Engineers & Anr. (2010) 12 SCC

210 : [2010] 8 SCR 1025 ; Assam Urban Water Supply & Sewerage Board v. Subash Projects & Marketing Ltd. (2012) 2 SCC 624 : [2012] 1 SCR 403 ; Anil kumar Jinabhai Patel (D) through LRs v. Pravinchandra Jinabhai Patel & Ors. (2018) SCC Online SC 276 ; Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari [1950] SCR 852 ; Pallav Sheth v. Custodian, (2001) 7 SCC 549 : [2001] 1 Suppl. SCR 387 – relied on.

Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department (2008) 7 SCC 169 : [2008] 5 SCR 1108 ; State of Goa v. Western Builders (2006) 6 SCC 239 : [2006] 3 Suppl. SCR 288 ; Coal India Ltd. v. Ujjal Transport Agency (2011) 1 SCC

117 ; M.P. Housing Board v. Mohanlal& Co. (2016) 14 SCC 199 ; Chhattisgarh State Electricity Board v. Central Electricity Regulatory Commission (2010) 5 SCC 23 : [2010] 4 SCR 680 ; Gopal Sardar v. Karuna Sardar (2004) 4 SCC 252 : [2004] 2 SCR 826 ; Union of India v. Tecco Trichy Engineers & Contractors (2005)

4 SCC 239 : [2005] 2 SCR 983 – referred to.

ABC Co. Ltd. v. XYZ Co. Ltd. [2003] SGHC 107 (High Court of Singapore) – referred to.