Section 14 Of Limitation Act Applicable To Proceedings U/S 34 Of Arbitration And Conciliation Act: Delhi High Court Reiterates

The bench of Justice Jyoti Singh excluded 1239 days spent in prosecuting the petition under Section 34 petition before a Court not having the pecuniary jurisdiction. The Court observed that a party prosecuting its case with due diligence, in good faith and under a bonafide mistake before a Court not having the jurisdiction would get the benefit of Section 14 of the Limitation Act and the time consumed in such proceedings would stand excluded from the purview of limitation.

Facts

The present petition was filed by the Petitioners to challenge an award dated 08.06.2018 issued by the learned sole Arbitrator. This award stemmed from reference No.8N/CHD/(6)/17/LS 6508, concerning a contract order dated 05.06.2013 placed on the Respondent by the Petitioners. The contract pertained to the construction of a Seed Store with a capacity of 35,000 quintals, which encompassed the construction of boundary walls, roads, and electrical works, among other components.

In the impugned award, the learned sole Arbitrator partially allowed claim Nos.1, 3, 4, 7, 8, 9, and 10 of the Respondent. In response, the Petitioners contested the award by filing a petition identified as ARBTN. No.5043/2018 under Section 34 of the 1996 Act before the District Judge. It's worth noting that this petition was submitted within the prescribed statutory time limit of three months specified by Section 34(3) of the 1996 Act.

However, nearly three years later, precisely on 25.09.2021, the petition was dismissed on grounds of non-maintainability due to a lack of pecuniary jurisdiction. The dismissal was based on the assertion that the Statement of Claim presented by the Respondent indicated claims exceeding Rs.2 Crores. The petitioner was under a bonfide belief that under Section 12(2) of the Commercial Courts Act, only the principal amount is to be counter for the purpose of determining the pecuniary jurisdiction, therefore, the petitioner had filed the petition before the District Court as the principal amount was Rs. 1.92 Crores approximately. Interestingly, the respondent had also filed its objections to the award before the same court.

Challenging this decision, the Petitioners filed an appeal with this Court, denoted as FAO(COMM.) No.200/2021 under Section 37(1)(b) of the 1996 Act. The Court, in an order dated 14.12.2021, upheld the dismissal, finding no flaws in the impugned order. However, the Court clarified that this dismissal would not prevent the Petitioners from initiating a petition under Section 34 of the 1996 Act in accordance with the law, provided it is presented before a Court of competent jurisdiction.

Pursuant to the liberty granted by the High Court, the Petitioners filed the present petition on 31.01.2022 along with an application under Section 14 of the Limitation Act r/w Section 151 of CPC.

Contention of the Parties

The petitioner made the following submissions in favour of the application:

• Petitioners promptly initiated a Section 34 petition on 06.09.2018 before the learned District and Sessions Judge at Patiala House Courts. This was within the stipulated three-month limitation period.
• The Petitioners believed that the Respondent's interest claims were not to be included under Section 12(2) of the Commercial Courts Act, 2015, leading to a total claim value of Rs.1,92,49,235/-, thereby establishing the District Court's pecuniary jurisdiction.
• The issue of lacking pecuniary jurisdiction only emerged on 07.08.2021. The petition was ultimately dismissed on 25.09.2021, after a three-year period. Subsequently, the Petitioners challenged this order by appealing on 06.12.2021 under Section 37(1)(b) of the 1996 Act. Although the appeal was dismissed, the Division Bench observed that such dismissal wouldn't hinder the Petitioners from filing a Section 34 petition before a Court of competent jurisdiction.
• In view of the Covid-19, the Supreme Court directed the exclusion of the period from 15.03.2020 to 28.02.2022.
• An alternative perspective was presented: the initial Section 34 petition was filed with a balance period of 2 days remaining within the three-month limitation period prescribed by Section 34(3). Benefiting from Section 14, the period from 06.09.2018 to 14.12.2021 could be excluded. This exclusion, coupled with the extension of 2 days until 28.02.2022 per the Supreme Court's order, validated the petition filed on 31.01.2022 as within limitation.

The respondent made the following counter-arguments against the application:

• The respondent contested the Section 14 application, arguing that the Section 34 petition was filed after a 1334-day delay from the award's date (08.06.2018). The application lacked specific details about the duration sought to be condoned and omitted explanation for daily delay.
• The District Court highlighted jurisdiction issues on 07.08.2021, yet the petitioners delayed proceedings till 25.09.2021, wasting 49 days. Subsequent delays in filing the appeal and the present petition (46 days and 31.01.2022 respectively) added up to a total unexplained delay of 1334 days.
• Even with Section 14 benefit, the petition could still be time-barred. Section 34(3) of the 1996 Act allows a 3-month window, extendable by 30 days under the proviso, but no further. The respondent contended that the statute doesn't permit discretion beyond this 30-day period. The delay in this case (28 days) exceeded this allowable extension.
• The respondent cited 'Sagufa Ahmed and Others v. Upper Assam Polywood Products Private Limited and Others, (2021) 2 SCC 317' and 'Union of India v. Rama Contractor, 2021 SCC OnLine Del 4350' to clarify that the Supreme Court's order only extended the period of limitation, not the discretion to condone delay.

Analysis by the Court

The Court thoroughly analyzed the case in light of relevant Supreme Court judgments. It acknowledged the undisputed chronology of events, wherein the petitioners challenged the award through a Section 34 petition within the stipulated 3-month period. The Court then examined the diligence displayed by the petitioners in their pursuit of legal remedies. Notably, the petitioners' initial filing was under the genuine impression that the jurisdictional threshold was met. The Court observed that this filing was done well within the statutory period.

Considering the arguments put forth by both parties, the Court addressed the respondent's contention about the exclusion of the limitation period under Section 14 of the 1963 Act. The Court found that the petitioners fulfilled the conditions set by the Supreme Court in 'Suryachakra Power Corporation Limited v. Electricity Department Represented by its Superintending Engineer, Port Blair and Others, (2016) 16 SCC 152', establishing their diligent and good faith efforts.

The respondent's opposition to the Section 14 benefit was countered by the Court, which emphasized that the petitioners' actions were not indicative of unnecessary delay. The Court also examined the respondent's arguments concerning the condonable period under the proviso to Section 34(3). The Court clarified that the petitioners' reliance on the Supreme Court's exclusion order (Re: Cognizance for Extension of Limitation) and Section 14 allowed their filing to be well within the extended limitation period.

The Court refuted the respondent's claim that the extension only applied to the limitation period and not the condonable period, stating that irrespective of this interpretation, the petitioner's filing on 31.01.2022 was within the extended period (28.02.2022). In conclusion, the Court held that the present petition was filed within the limitation period and granted the application, disposing of the matter.

Case Title: NATIONAL SEEDS CORPORATION LTD v. RAM AVTAR GUPTA

Citation: 2023 LiveLaw (Del) 771

DATE: 25.08.2023

COUNSEL FOR THE PETITIONER: Mr. Yashvardhan, Ms. Smita Kant, Mr. Kritika Nagpal and Ms. Priyanka Raj, Advocates.

COUNSEL FOR THE RESPONDENT: Ms. Bharti Tyagi and Mr. Vikash Kumar, Advocates.

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