Administrative Lethargy Of Government Machinery Not Valid Ground For Delay Condonation In Arbitration Appeals: Delhi High Court

Brief Facts:

Union of India filed an application before the High Court for condonation of delay in submitting an appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996. The appeal was against an interim order issued by the arbitral tribunal. The Union sought to condone a delay of 156 days in filing the appeal, although the counsel later clarified that the actual delay amounted to 132 days.

The dispute revolved around the arbitral tribunal's decision on two applications filed under Section 17 of the Arbitration Act. Rishabh Constructions Pvt Ltd (Respondent) requested the release of a performance bank guarantee and an advance bank guarantee. The tribunal allowed this request in part. Conversely, the Union of India applied for an extension of the bank guarantee but this application was rejected by the tribunal. The Union's appeal against this decision was delayed which prompted the application before the High Court for condonation of delay.

Observations by the High Court:

The High Court noted that the period of limitation for filing such an appeal, as set out in the Supreme Court's decision in State of Maharashtra v. Borse Brothers Engineers & Contractors (P) Ltd., is 60 days. The appeal was therefore to be filed by March 8, 2024, but was only filed on July 19, 2024, well beyond the prescribed period.

The High Court noted that the Supreme Court in Borse Brothers accepted that Section 5 of the Limitation Act, 1963, which allows for the condonation of delay, applies to appeals under Section 37. However, it also emphasized that the goal of the Arbitration Act is the speedy resolution of disputes. The Supreme Court was clear that while the Government could invoke Section 5, it could not expect a different standard of leniency merely because it was a government entity.

In applying the principles from Borse Brothers, the High Court held that the delay of 132 days was far beyond the allowed 60 days and noted that the Union of India approached the Legal Advisor only after 45 days was already passed. The Legal Advisor then took an additional 25 days to provide his opinion. The appeal was not filed immediately after receiving this advice but only after an order was passed in enforcement proceedings. The High Court observed that this delay was attributed to the erstwhile counsel, who has since been replaced, but questioned why no action had been taken sooner.

The High Court further remarked that the limitation period for filing an appeal is independent of any enforcement proceedings. It was the Union's responsibility to ensure timely action, including replacing counsel if necessary. The High Court held the explanation provided by Union as indicative of administrative lethargy which does not constitute sufficient cause for condoning such a long delay.

Considering the importance of the objective of the Arbitration Act, and the insufficient justification for the delay, the High Court found no grounds to condone the delay.

Case Title: Union Of India Vs Rishabh Constructions Pvt Ltd

Citation: 2024 LiveLaw (Del) 959

Case Number: ARB. A. (COMM.) 44/2024 & I.As. 36469-71/2024

Advocate for the Petitioner: Mr. R.P. Singh, Mr. Anant Vijay, Mr. Yash Aggarwal, Mr. Aman Sinha, Advocates.

Advocate for the Respondent: Mr. D.K. Mishra, Advocate.

Date of Judgment: 14.08.2024

Click HereTo Read/Download Order or Judgment