Arbitration | Section 34 Application Must Be Filed Within 90 Days Limitation To Claim Exclusion Of Period When Court Remain Closed : Supreme Court

The Supreme Court has held that an application under Section 34 of Arbitration and Conciliation Act, 1996 must be filed within “prescribed period” of limitation i.e. 90 days, for seeking benefit of exclusion of period during which the Court remained closed from computation of limitation period. If the application is filed by invoking Proviso to Section 34(3) of Arbitration Act, which extends the limitation period to further 30 days on the Court’s discretion, then benefit of such exclusion would not be available to the applicant(Bhimashankar Sahakari Sakkare Karkhane Niyamita v Walchandnagar Industries Ltd. (WIL)).

The Bench comprising of Justice M.R. Shah and Justice Krishna Murari further held that the Proviso to Section 10 of the General Clauses Act, 1897, specifically excludes the application of Section 10 to any act or proceeding to which the Indian Limitation Act, 1877 (now Limitation Act, 1963) applies. Since Limitation Act, 1963 is applicable to arbitration proceedings, Section 10 of General Clauses Act cannot be pressed into service to seek condonation of delay in filing of application on the ground that the last day of condonable period falls on a Court holiday.

BACKGROUND FACTS

An arbitral award was passed against Bhimashankar Sahakari Sakkare Karkhane Niyamita (“Appellant”) on 24.08.2016. The Section 34(3) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) prescribes a period of 90 days for filing an application to challenge the arbitral award. The Proviso to Section 34(3) extends the 90 days period to further 30 days, if the applicant was prevented by sufficient cause from filing the application within 90 days.

For the Appellant, the period of 90 days to file the application under Section 34 expired on 24.11.2016 and the further extended period of 30 days expired on 24.12.2016.

Since the Trial Courts were closed for winter/Christmas vacations from 19.12.2016 to 01.01.2017, the last day to file the application as per extended 30 days period fell on a court holiday i.e. 24.12.2016. Therefore, the Appellant filed the 02.01.2017 when the court reopened, alongwith an application for condonation of delay.

The Trial Court declined to condone the delay and dismissed the Section 34 application, while holding that the delay beyond 120 days is not condonable under the Arbitration Act. The Appellant preferred an appeal before the High Court and contended that as per Section 4 of the Limitation Act, 1963 when the ‘prescribed period’ of filing an application expires on a day when court is closed, then such application can be filed on the day when court reopens. Further, Section 10 of the General Clauses Act, 1897 also provides that when court is closed on the last day of ‘prescribed period’ for filing an application then the same can be filed on the day when court reopens.

On 23.02.2022 the High Court held that the expression “prescribed period” in Section 4 of the Limitation Act, 1963 does not mean anything other than the period of limitation. Therefore, any period beyond the prescribed period, during which the Court or Tribunal has the discretion to allow a person to institute the proceeding, cannot be taken to be “prescribed period”. Accordingly, the appeal was dismissed. The Appellant filed an appeal before the Supreme Court.

ISSUE

When the last day of condonable period of 30 days (under Section 34(3) of the Arbitration Act) falls on holiday or during the Court vacation, would the benefit of Section 10 of the General Clauses Act, 1897 be available?

SUPREME COURT VERDICT

Exclusion of period during which the Court was closed from computation of limitation only available when application for setting aside award is filed within “prescribed period” of limitation

The Bench placed reliance on the judgment in Assam Urban Water Supply and Sewerage Board v Subash Projects and Marketing Limited, (2012) 2 SCC 624, wherein it was held that the benefit of exclusion of period during which Court is closed is available only when application for setting aside the award is filed within ‘prescribed period of limitation’ and it is not available in respect of period extendable by the Court in exercise of its discretion.

On the issue of applicability of Section 10 of General Clauses Act, 1897, the Bench observed that the Proviso to Section 10 specifically excludes the application of Section 10 to any act or proceeding to which the Indian Limitation Act, 1877 applies. Reference to 1877 Act will now have to be read as reference to Limitation Act, 1963 in view of Section 8 of the General Clauses Act, 1897. Since Limitation Act applies to arbitration proceedings, Section 10 of General Clauses Act cannot be pressed into service for seeking condonation of delay.

It was observed as under:

“Therefore, in light of the application of Limitation Act, 1963 to the proceedings under the Arbitration Act and when Section 10 of the General Clauses Act, 1897 specifically excludes the applicability of Section 10 to any act or proceeding to which Indian Limitation Act, 1963 applies and in light of the definition of “period of limitation” as defined under Section 2(j) read with Section 4 of the Limitation Act and as observed and held by this Court in the case of Assam Urban (Supra), benefit of exclusion of period during which the Court is closed shall be available when the application for setting aside award is filed within “prescribed period of limitation” and shall not be available in respect of period extendable by Court in exercise of its discretion.”

The Court has ruled that the benefit of exclusion of period during which the Court is closed shall be available when the application for setting aside award is filed within “prescribed period of limitation” i.e. 90 days. The benefit shall not be available in respect of period extendable by Court in exercise of its discretion, such as under Proviso of Section 34(3) of Arbitration Act which extends the limitation to further 30 days on the Court’s discretion.

The Bench has upheld the High Court’s decision of refusing to condone the delay. The appeal has been dismissed.

Case Title: Bhimashankar Sahakari Sakkare Karkhane Niyamita v Walchandnagar Industries Ltd. (WIL)

Citation : 2023 LiveLaw (SC) 288

Arbitration and Conciliation Act 1996 - Section 34- An application under Section 34 of Arbitration and Conciliation Act, 1996 must be filed within “prescribed period” of limitation i.e. 90 days, for seeking benefit of exclusion of period during which the Court remained closed from computation of limitation period. If the application is filed by invoking Proviso to Section 34(3) of Arbitration Act, which extends the limitation period to further 30 days on the Court’s discretion, then benefit of such exclusion would not be available to the applicant- followed Assam Urban Water Supply and Sewerage Board v Subash Projects and Marketing Limited, (2012) 2 SCC 624.

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