Take Steps To Avoid Delays In Filing Arbitration Appeals: Allahabad High Court To State's Principal Law Secretary

The Allahabad High Court has directed the Principal Secretary (Law), Uttar Pradesh to take steps to avoid delays in filing arbitration appeals beyond statutory limitations by the State Government and submit a report on the actions taken in this regard within 6 months.

While deciding an appeal under Section 37 of the Arbitration & Conciliation Act, 1996 filed by the Government of Uttar Pradesh with a delay of 224 days, beyond the statutory period of 120 days, Justice Shekhar B. Saraf held that government must not be given preferential treatment in litigation and must adhere strictly to the timelines provided in the statute, irrespective of their status or resources. Further, the Court held that the bureaucratic and procedural delays cited by the Government cannot be accepted as valid reasons for condoning delays beyond statutory prescriptions.

The Court observed that

“The government often cites bureaucratic and procedural delays as reasons for not filing an appeal within the prescribed time limits. While these reasons might seem compelling due to the complex and often cumbersome nature of governmental operations, the law applies to all parties in the same manner, and any delay by the government cannot be treated as special or condoned beyond what is permissible under the Act. This principle is crucial for maintaining the rule of law, ensuring equality before the law, and preserving the integrity and efficiency of the arbitration process.”

Factual Background

The State of Uttar Pradesh entered into an agreement with M/s Harish Chandra India Limited for certain works in Chambal Dal Project, Pinahat Agra. Upon dispute, the parties entered arbitration where an award of Rs. 67,42,240/- was made in favour of the Harish Chandra India on 19^th July 2009.

The State challenged the award on 17^th May, 2010 along with a delay condonation application under Section 5 read with Article 137 of the Limitation Act, 1963. The delay condonation application was rejected by the District Judge, Agra on 1^st August, 2012. State filed an appeal under Section 37 of the Act before the High Court on 13^th March 2013.

State argued that delay, if any, was unintentional and procedural in nature. Thus, it ought to be condoned.

High Court Verdict

The Court observed that the appeal under Section 37 had been filed after period of 120 days from the date of the order of the District Judge.

In N.V. International v. State of Assam, where the Supreme Court held that any delay beyond 120 days in filing appeal under Section 37 of the Act cannot be condoned. Further, the Court relied on State of Maharashtra v. Borse Bros. Engineers & Contractors (P) Ltd., where the Supreme Court held that delay beyond 90 days, 30 days or 60 days can be condoned by way of exception.

Observing that arbitration is a faster and efficient way of dispute resolution, Justice Saraf held that delay can only be condoned where sufficient cause is shown and only as a matter of exception. The Court held that not following the timelines prescribed in arbitration undermines the trust in arbitration and also disrupts business operations.

“The principle that delays in arbitration matters under the Act can only be condoned on sufficient cause and as an exception is rooted in the very essence of why arbitration is chosen as a method of dispute resolution. The need for timely resolution is paramount in arbitration, especially given its primary objective to provide a faster and more efficient alternative to traditional litigation.”

The Court observed that “sufficient cause”, though not defined in the Act, refers to legitimate reasons which are beyond the control of the party preventing him/her from acting within the prescribed limitation. It was observed that while dealing with delay condonation applications, the Courts look at the reasons provided for delay, conduct of parties, nature of delay, whether the delay was beyond the control of the party, and its impact on the arbitration process.

The Court held that delay beyond 120 days cannot be condoned even if sufficient cause is shown due to principle of finality and efficiency attached to arbitration process. The Court held that stringent timelines prevent arbitrations from becoming like protracted cases in traditional litigation.

“The 90-day period, followed by a maximum 30-day extension for condonation of delay, is thus a carefully calibrated timeframe that balances the need for promptness with a limited degree of flexibility to accommodate genuine hardships.”

The Court held that since there was a delay of 224 days in filing the appeal on behalf of the State Government, the same cannot be condoned. The Court held that the application under Section 34 was rightly rejected by the District Judge, Agra as being barred by limitation.

Justice Saraf relied on his earlier judgment in Esha Agarwal and Ors. v. Ram Niranjan Ruia, where he had held that under Section 34 of the Arbitration Act, limitation cannot be condoned beyond a period of 30 days after the expiry of 3 months from the date on which the arbitral award is received by the party.

Accordingly, the appeal filed by the State Government was dismissed on grounds of delay.

Before parting, the Court directed the State Government to devise a procedure to prevent procedural delays in filing of appeals under the Arbitration and Conciliation Act, 1996. The Court observed that taking a lenient view of delays by the State Government would set a bad precedence for other parties thereby eroding the statutory timelines.

Case Title: State Of U.P. And Others vs. M/S Harish Chandra India Limited 2024 LiveLaw (AB) 418 [FIRST APPEAL FROM ORDER DEFECTIVE No. – 425 of 2013]

Case Citation: 2024 LiveLaw (AB) 418

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