Benefit Of S.14 Of Limitation Act Extends To Delayed Filing Of Petition U/S 34 Of A&C Act Due To Prosecution In Good Faith In Another Court: Bombay HC

Brief Facts:

Disputes and differences had arisen between the parties under the purchase order dated 9 March, 2013. The respondent accordingly approached the Facilitation Council making a claim of an amount of Rs. 4,50,92,587/-. There were attempts to bring about a settlement.

A Settlement Agreement date 16 May 2016 was entered into between the parties, however the respondent raised claims for certain dues which led to Arbitration. The Facilitation Council adjudicated the dispute and rendered an arbitral award on 5 February 2020.

After the Single Judge allowed to withdraw the Writ Petition, the petitioner filed an application under section 34 of the Arbitration Act before the District Judge on March 17 2023 along with a request for condonation of a 66 days.

The Respondent opposed the delay condonation application stating that just because the petitioner had filed the writ petition which had later been withdrawn, the benefit of condonation cannot be given on the ground that the delay was only of 66 days.

The learned District Judge considering the rival contentions has held that Section 34 application was filed beyond the limitation as prescribed under Section 34(3) and has rejected the delay condonation application by the impugned order. It is on such backdrop the parties are before the Court.

Contentions:

The Appellant submitted that Section 34 proceedings were filed within the prescribed limitation and there was no delay in filing of the said proceedings. Even the language of the delay condonation application would indicate that the same was filed merely as a formality, as the appellant clearly believed that the proceedings under Section 34 were filed within the prescribed period of limitation.

It was further argued that this is a case where the provisions of Section 14 of the Limitation Act had clearly become applicable for the Court to condone the delay in filing Section 34 application, for the reason that the appellant was bonafide pursuing Writ Petition No. 9317 of 2021 filed by it on 24 December, 2020 till the same was withdrawn on 11 January, 2023.

Per contra, the Respondent submitted that even assuming that the period of limitation stood extended considering the orders passed by the Supreme Court in Re : Cognizance for Extension of Limitation (2020), the limitation as prescribed under sub-section (3) of Section 34 was required to be reckoned from 30 May, 2022, which would be the period of three months plus 30 days, i.e. upto 30 September, 2022.

It was further submitted that the Section 34 application was admittedly filed on 17 March, 2023, which is after a period of 5 months and 17 days, from the limitation having expired even considering the order of the Supreme Court.

It was also argued that the Section 34 proceedings were clearly time barred, being filed beyond the prescribed limitation of 3 months and the extended period of 30 days, under the proviso to sub-section (3) of Section 34 of the Arbitration Act.Section 14 cannot be invoked as the appellant was not bona fide pursuing the present proceedings.

Observations:

After referring to relevant materials, the court observed that It clearly appears that the appellant was pursuing the writ petition considering the legal position as laid down by the Division Bench of this Court in Gujarat State Petronet Ltd. vs. Micro and Mine Enterprises Facilitation Council (2018) that the Facilitation Council would not have jurisdiction to enter arbitration and it would have jurisdiction only of conciliation, hence a Writ Petition challenging the orders of the Facilitation Council was maintainable.

The court noted that the Appellant's basis for pursuing the writ petition was nullified when the Supreme Court in Gujarat State Civil Supplies Corporation Ltd. vs. Mahakali Foods Pvt. Ltd. & Anr (2023) partially reversed the Division Bench decision of the Bombay High Court in Gujarat State Petronet Ltd by holding that a facilitation council initiating conciliation under section 18(2) of the Micro, Small and Medium Enterprises Development Act (MSMED Act) could act as an arbitrator despite bar in section 80 of the Arbitration Act.

The court also said that the decision in Gujarat State Civil Supplies Corporation Ltd. vs. Mahakali Foods Pvt. Ltd. & Anr. (supra) was declared by the Supreme Court on 31 October, 2022. Considering such legal position, on 11 January 2023 , the learned Single Judge permitted the petitioner to withdraw Writ Petition No.9317 of 2021, so as to pursue such appropriate remedy as available in law. Thereafter, the appellant filed the Section 34 proceedings before the District Judge on 17 March 2023.

The court held that the petitioner was justified in filing the writ petition as the Division Bench decision in Gujarat State Petronet Ltd (supra) was still in operation at the time of filing the petition where it was held that the facilitation council had no jurisdiction to render an arbitral award therefore making the writ petition maintainable.

Based on the above, the court observed that even assuming that there is a delay in filing of Section 34 proceedings, the same would be required to be condoned applying the provisions of Section 14 of the Limitation Act.

The court further added that the appellant would also be correct in its contention that in fact, if the limitation as prescribed under Section 34(3) is to be applied from the date the Court permitted withdrawal of the proceedings of Writ Petition No. 9317 of 2021 on 11 January, 2023, Section 34 proceedings were filed within the limitation as prescribed under Section 34(3) of Arbitration Act. This clear position, not only on facts but also in law, has been completely overlooked and/or missed by the learned District Judge in passing the impugned order.

The Supreme Court in Consolidated Engineering Enterprises vs. Principal Secretary, Irrigation Department & Ors.(2008) held that having regard to the legislative intent, the provisions of Section 14 of the Limitation Act would be applicable to an application submitted under Section 34 of the Arbitration Act for setting aside an arbitral award.

The Supreme Court in Deena (Dead) through LRs. vs. Bharat Singh (Dead) through LRs. and Ors (2002) held that the benefit of section 14 of the Limitation Act can be taken by those litigants who prosecuted prior proceedings in good faith and due care. A party litigating in a court lacking jurisdiction is entitled to an exclusion of that period if good faith defined as exercise of due care and attention is established.The finding as to good faith or the absence of it, is a finding of fact.

The court noted that in a situation when orders of the Supreme Court extending the period of limitation during Covid were in operation and legal position as laid down by the Bombay High Court in Gujarat State Petronet Ltd. that the facilitation council had no jurisdiction to enter arbitration, the petitioner filed the writ petition to challenge the arbitral award in good faith passed by the council.

The court concluded that under section 34(3) of the Arbitration Act which allows a three months time period to challenge an award which may further be extended by 30 days, the delay condonation application filed by the petitioner should not have been rejected given the peculiar facts of the case.

Accordingly, the present appeal was allowed and the impugned order was set aside.

Case Title: NTPC BHEL Power Projects Pvt. Ltd. Versus Shree Electricals & Engineers (India) Pvt. Ltd

Citation: 2025 LiveLaw (Bom) 112

Mr. Akash Menon a/w. Mr. Kalash Bakliwal for the appellant.

Mr. Mandar Limaye a/w. Mr. S.C. Wakankar, Mr. Vedant Bende for the respondent.

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