Supreme Court: Delayed Appeals filed u/s 37 Arbitration Act be Condoned as Exception Only
The Supreme Court (SC) on 19 March 2021, held in the case titled Government of Maharashtra v. Borse Brothers Engineers and Contractors Pvt. Ltd. for appeals filed under Section 37 of the Arbitration Act that is governed by Articles 116 and 117 of the Limitation Act or Section 13(1A) of the Commercial Courts Act, a delay beyond 90 days, 30 days or 60 days, respectively, is to be condoned by way of exception and not by way of rule.
The SC bench comprising of Justices RF Nariman, BR Gavai, and Hrishikesh Roy overruled the judgment passed in the NV International v. State of Assam wherein the Court had said that a delay beyond 120 days for filing an appeal under Section 37 cannot be condoned.
The SC bench in the instant matter took into account the interplay of the Commercial Courts Act with the Arbitration Act. Section 13(1) of the Commercial Courts Act says that the appeals should be filed within 60 days, without providing an outer-limit for condonation of delay (unlike Section 34(3). This period will apply to arbitration matters above the specified commercial value (above Rupees 3 Lakhs).
According to Section 37 of the Arbitration Act appeals filed against orders passed under Sections 9, 34, 16, and 17 of the Act. No specific period for filing the appeal is provided under Section 37, unlike Section 34 of the Arbitration Act.
In the NV International case (supra), a two-judge bench comprising Justices RF Nariman and S Ravindra Bhat imported the time-period given for filing an appeal under Section 34 (which deals with an appeal against arbitration award) to Section 37.
As per Section 34(3) of the Arbitration Act, an appeal filed against the arbitration award has to be filed within three months from the date of the award. It further provided that a grace period may be awarded of thirty days, based on which delay can be condoned. Hence, an appeal can be filed within 120(90+30) days. In NV International Case, the timeline of 120 days for appeal against arbitration award was applied to appeals against orders under Section 37.
The Top Court noted that the Limitation Act 1963 provides different time-periods for filing of appeals against orders, depending on the forum. It was observed that the power to condone delay under Section 5 of the Limitation Act applies to all the above scenarios, by Section 43 of the Arbitration Act and Section 29(2) of the Limitation Act.
The Court rejected the argument that the scheme of the Commercial Courts Act excludes the application of Section 5 of the Limitation Act. It stated, "In a fit case in which a party has otherwise acted bona fide and not in a negligent manner, a short delay beyond such period can, in the discretion of the court, be condoned, always bearing in mind that the other side of the picture is that the opposite party may have acquired both in equity and justice, what may now be lost by the first party's inaction, negligence or laches."
The judgment authored by Justice Nariman listed the following reasons for overruling NV International-
- The case did not notice the provisions of the Commercial Courts Act and hence is per incuriam on that count.
- As the limitation period for filing of appeals under the Commercial Courts Act is 60 days and not 90 days, the plus 30 days and not thereafter mentioned in Section34(3) of the Arbitration Act cannot now apply.
- Since Section 13 of the Commercial Court has no provision curtailing the condonation of a period of delay beyond a certain point, the 'bodily lifting' of Section 34(3) to Section 37 is unwarranted.
The SC held that "For all these reasons, given the illuminating arguments made in these appeals, we are of the view that N.V. International (supra) has been wrongly decided and hence overruled."
It concluded, "Even in the rare situation in which an appeal under section 37 of the Arbitration Act would be of a specified value less than three lakh rupees, resulting in Article 116 or 117 of the Limitation Act applying, the main object of the Arbitration Act requiring speedy resolution of disputes would be the most important principle to be applied when applications under Section 5 of the Limitation Act are filed to condone delay beyond 90 days and/or 30 days depending upon whether Article 116(a) or 116(b) or 117 applies."