S. 4 Limitation Act Can't Be Invoked Using 30-Day Extension For Arbitration Appeals Filed Beyond 3-Months From Award: Supreme Court

The Supreme Court reiterated that if an arbitral award is challenged beyond the three-month limitation, the benefit of section 4 of the Limitation Act will not be available. The Court held that the 30-day extension period mentioned in the proviso to Section 34(3) of the Arbitration and Conciliation Act 1996 cannot be included in the "prescribed period" in Section 4 of the Limitation Act 1963.

Section 4 of the Limitation Act provides relief in case the court is closed on the day of expiry of the "prescribed period" for instituting a suit, appeal or application.

A bench of Justice Abhay Oka and Justice Pankaj Mithal dismissed the State of West Bengal's appeal challenging Calcutta High Court's decision that dismissed its petition under Section 34 of the Arbitration and Conciliation Act, 1996.

The petition, filed against an arbitral award favouring Rajpath Contractors and Engineers Ltd., was deemed time-barred by the High Court. The Supreme Court upheld this view.

The last day of the 30-day extension was a holiday and the State filed the appeal on the next working day.

“the three months provided by way of limitation expired a day before the commencement of the pooja vacation, which commenced on 1st October 2022. Thus, the prescribed period within the meaning of Section 4 of the Limitation Act ended on 30th September 2022. Therefore, the appellants were not entitled to take benefit of Section 4 of the Limitation Act”, the court observed.

The State of West Bengal appointed Rajpath Contractors and Engineers Ltd. as a contractor for constructing a bridge. Disputes arose, leading the contractor to invoke the arbitration clause. The Arbitral Tribunal, on June 30, 2022, awarded Rs. 2,11,67,054 to the contractor with interest, while dismissing the counterclaim of the appellants. The appellants received the copy of award on the same day.

The Calcutta High Court was closed for pooja vacation from October 1, 2022, to October 30, 2022. The appellants filed a petition under Section 34 of the Arbitration Act on October 31, 2022, challenging the arbitral award.

The High Court dismissed this petition on May 4, 2023, citing the bar of limitation, stating the limitation period expired on September 30, 2022. The High Court ruled that the appellants were not entitled to the benefit of Section 4 of the Limitation Act, 1963. Aggrieved, the appellant approached the Supreme Court.

The appellant argued that the limitation period should be calculated from July 1, 2022, making October 1, 2022, the last day. Since this was the first day of pooja vacation, the petition filed on October 31, 2022, should be considered within limitation.

The State contended that e-filing during pooja vacation was restricted to urgent matters, making it impractical to file earlier.

The contractor argued that Section 4 of the Limitation Act only applies if the suit is filed within the prescribed period under section 34(3) of the Arbitration Act, i.e., within three months.

Under Section 34(3) of the Arbitration Act, the limitation period is three months from the receipt of the award. Excluding June 30, 2022 as per section 12 of the Limitation Act, the limitation period began on July 1, 2022, and ended on September 30, 2022, the court noted.

The court relied on Assam Urban Water Supply & Sewerage Board v. Subash Projects & Mktg. Ltd., clarifying that the “prescribed period” for filing under Section 34(3) does not include the 30-day extension provided under its proviso.

The maximum extension period of 30 days allowed by Section 34(3) expired on October 30, 2022. The petition filed on October 31, 2022, was therefore beyond the allowable period.

Thus, Section 4 of the Limitation Act did not apply as the prescribed period ended before the vacation commenced, the court held.

Case no. – Civil Appeal No. 7426 of 2023

Case Title – State of West Bengal & Ors. v. Rajpath Contractors and Engineers Ltd.

Citation : 2024 LiveLaw (SC) 454