Absence Of Arbitration Agreement Make Article 137 Of Limitation Act Inapplicable To Arbitration Under Bihar PWCD Arbitration Tribunal Act, 2008: SC

The Division Bench of Justice Abhay S. Oka and Justice Ajay Rastogi also observed that in absence of an arbitration agreement, the Arbitration Act 1996 will also have no application and the reference to the Arbitration Tribunal and the arbitral proceedings will be governed by the 2008 Act.

The Court held that the 2008 Act provides for a specific period of limitation, therefore, A. 137 of the Limitation Act, 1963 will have no application. However, the Court also observed that since the 2008 Act also allows the Tribunal to condone the delay, the Tribunal is well within its power to admit the reference beyond the period provided under S. 9 of the 2008 Act when sufficient reason for delay was given.

Facts

The appellant invited tender to carry out drainage work in an industrial area. The respondent submitted its bid and was awarded the work. Accordingly, the parties entered into an agreement. There was a delay in the execution of the project work, consequently, the appellant terminated the contract and forfeited the security deposit.

The respondent filed a reference before the Arbitral Tribunal constituted under the Act and the tribunal allowed the claims of the Respondent. Aggrieved by the award, the appellants filed a revision petition before the High Court of Patna invoking the provision of S. 13 of the 2008 Act on the ground that the reference to the Arbitral Tribunal was made beyond the period of limitation stipulated in the 2008 Act.

Vide the impugned order, the HC dismissed the revision petition observing that the tribunal was right in holding that the reference to the Arbitral Tribunal was not barred by limitation in view of A. 137 of the Limitation Act, 1963.

Aggrieved by the order of the HC, the Appellant preferred the present SLP.

Contention of the Parties

The Appellant challenged the award of the tribunal and the order of the High Court on the following grounds:

• That the reference to the arbitral tribunal was barred by limitation in view of S. 9 of the 2008 Act which provides that the reference to the arbitral tribunal must be made within one year after the dispute has arisen.
• That there was no arbitral agreement between the parties, therefore, the Arbitration and Conciliation Act, 1996 will not apply and the reference shall be made in accordance with S. 9 of the 2008 Act.
• That when the Arbitration Act 1996 does not apply, A. 137 of the Limitation Act would also not apply and the reference must be made within one year as provided under S. 9 of the Act.

The Respondent countered the contention of the appellants on the following grounds:

• That S. 18 of the 2008 Act permits the Arbitral Tribunal to condone the delay, therefore, the exercise of power by the Arbitral tribunal to extend the period of limitation for making a reference is justified.

Analysis by the Court

The Court referred to S.8 of 2008 which provides that this Act is in addition to the Arbitration & Conciliation Act, 1996 and in case of any conflict between the two Acts, the provision of the 1996 Act shall prevail and then S. 9 which provides that a reference to Arbitration Tribunal must be made within a year after the dispute has arisen.

In cases where there is an arbitration agreement between the parties, the provisions of the Arbitration Act, 1996 would apply for all purposes, consequently, A. 137 of the Limitation Act would also apply. However, since there is no arbitration agreement between the parties, therefore, in view of S. 8 and 9 of 2008, the provisions of the Arbitration Act, 1996 will not apply to these proceedings.

The Court further observed that S. 22 of 2008 provides the overriding effect to the Act, therefore, A. 137 of the Limitation Act would have no application. The reasoning of the arbitral tribunal to the extent of applying A. 137 was held to be erroneous. However, since S. 18 of 2008 provides for condonation of delay, the arbitral tribunal was well within its power to condone the delay when sufficient reason was given. Therefore, there is no illegality in the action of the Arbitral Tribunal in admitting the reference of the respondent beyond the period stipulated in S. 9 of the Act.

Case Title: Bihar Industrial Area Development Authority & Ors. v. Rama Kant Singh

Date: 15/03/2022

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