Sec. 17 Limitation Act Can’t Be Invoked To Condone Delay In Filing Application To Set Aside Arbitration Award: SC [Read Judgment]

‘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 dispute.’

The Supreme Court has held that Section 17 of the Limitation Act cannot be invoked to condone the delay in preferring application to set aside the arbitration award.

In P Radha Bai vs. P Ashok Kumar, the bench comprising Justice NV Ramana and Justice S Abdul Nazeer examined the applicability of Section 17 of the Limitation Act, 1963 for condonation of a delay caused on the account of alleged fraud played on the objector (party challenging the award) beyond the period prescribed under Section 34 (3) of the Arbitration and Conciliation Act of 1996.

The bench observed that Section 17 of the Limitation Act does not extend or break the limitation period and it only postpones or defers the commencement of the limitation period. The court also observed that Section 17 does not defer the starting point of the limitation period merely because of the commission of fraud. “Section 17 does not encompass all kinds of frauds and mistakes. Section 17(1)(b) and (d) only 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,” the court added.

Would defeat the Arbitration Act’s objective of speedy resolution of disputes

The bench observed: “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. 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.”

The court further added that Section 17 of Limitation Act is inconsistent with scheme and object of the Arbitration Act. It said: “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.”

The court added that if there is any fraud in the delivery of Award, in such a scenario also, resort to Section 17 is not necessary, as the requirement of receipt of award under Section 34(3) itself is not satisfied as any receipt of award must be effective receipt.