Supreme Court's Interpretation Of 'Three Months' As 90 Days In Section 34(3) Of Arbitration Act As Obiter Dicta, Not Ratio Decidendi: Calcutta High Court

The bench held that the period of limitation must be computed based on calendar months, therefore, the period of limitation in Section 34(3) would be three months excluding the date of receipt of the arbitral award.

Brief Facts:

Future Market Networks Ltd., the Petitioner, approached the Calcutta High Court to set aside an arbitral award passed by a sole arbitrator. Laxmi Pat Surana, Respondent No. 1, raised a point of limitation before the court stating that the application under Section 34 of the Arbitration and Conciliation Act, 1996 was barred by limitation as per the provision of Section 34(3) of the Arbitration Act. He contended that the award was both passed and received on May 19, 2016, and the application under Section 34 was filed on August 17, 2016. According to him, this amounted to a filing after 91 days from the date of receiving the award, whereas Section 34(3) mandates that such an application can only be filed within 90 days from the date of delivery of the award. Hence, he argued that the application was barred by limitation and should be dismissed.

In response, the Petitioner argued that the application was within the prescribed period under Section 34(3) of the Arbitration Act. It contended that the computation of the three-month period should exclude the date of receipt of the award, meaning the period would start from May 20, 2016, and expire on August 19, 2016. It also pointed out that a further period of 30 days could be allowed by the court if sufficient cause is shown.

Observations by the High Court:

The High Court held that the golden rule of statutory interpretation mandates that a statute should be read and interpreted in its plain meaning to determine the exact intention of the legislature. This rule requires the court to consider what the statute actually says rather than what it might mean, giving the words in the statute their literal meaning, i.e., their plain ordinary everyday meaning, even if this produces an outcome that might be considered unjust or undesirable. The High Court held that if courts are permitted to give non-literal meanings to the words of parliamentary law, the will of parliament and thereby the people would be contradicted.

The High Court noted that in Section 34(3) the proviso is set out as follows: "An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months, it may entertain the application within a further period of thirty days, but not thereafter."

It noted that an application for setting aside an award may not be made after three months have elapsed from the date on which the party making the application had received the arbitral award. The proviso allows for a further period of 30 days to be granted if the court is satisfied, on a specific application, that the applicant was prevented by sufficient cause.

The bench noted that the statute specifies that an application for setting aside the arbitral award must be filed within three months. While it is true that the Supreme Court, in various judgments, has construed 'three months' as 90 days, it noted that understanding the true purpose and meaning of a Supreme Court judgment involves considering certain rules of precedence.

The bench noted that the Rule of Precedence has been adopted from English jurisprudence into the Indian Constitution. Article 141 of the Constitution stipulates that "the law declared by the Supreme Court shall be binding on all courts within the territory of India." To understand the context of the term "the law declared by the Supreme Court" in a specific case, it noted that there are some acceptable views of the Apex Court.

In State of Rajasthan Vs. Ganeshilal AIR 2008 Supreme Court 690, the Supreme Court held that Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. The Supreme Court held that the disposal of cases by blindly placing reliance on a decision is not proper. Lord Denning's words on the matter of applying precedents have become locus classicus: "Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases by matching the colour of one case against the colour of another. To decide on which side of the line a case falls, broad resemblance to another case is not decisive."

The High Court noted that the law decided in a particular case based on its specific facts and circumstances is called the ratio decidendi of the case, while other opinions of the court that are not directly connected with the merits of the case are considered obiter dicta.

The High Court held that the Supreme Court's observations regarding the interpretation of "three months" in Section 34(3) as 90 days in various cases were not the ratio decidendi but obiter dicta.

The High Court referred to its decision in State of West Bengal represented through Secretary and Ors. Vs. Rajpath Contractors and Engineers Limited 2023 LiveLaw (Cal) 125 where it was held that the period of limitation must be computed based on calendar months and the provisions of the General Clauses Act and Limitation Act apply. The period starts from the day following the receipt of the award, excluding the date of receipt.

The High Court held that the application under Section 34 filed on 17th August 2016 to set aside the arbitral award dated 19th May 2016 was within the statutory period of limitation. The application was timely, excluding the date of receipt, thus falling within the three-calendar-month period. Consequently, the objection regarding limitation was dismissed.

Case Title: Future Market Networks Ltd. Vs Laxmi Pat Surana & Anr

Case Number: AP-COM/135/2024 (Old Case No. AP/698/2016)

Advocate for the Petitioner: Mr. Rishad Medora, Adv. Ms. Arti Bhattacharyya, Adv. Ms. Debomita Sadhu, Adv. Mr. Naman Chowdhury, Adv.

Advocate for the Respondent: Mr. L. P. Surana Adv.

Date of Judgment: 11.07.2024

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