S.5 Limitation Act Does Not Apply To Application U/S 34 Arbitration Act, Timeline Provided To Be Adhered Strictly: Allahabad High Court

The Allahabad High Court has held that Section 5 of the Limitation Act does not apply to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 and the timeline provided in Section 34(3) for challenging an arbitral award must be strictly adhered to.

Section 34(3) of the Arbitration and Conciliation Act, 1996 provides a period of 3 months for challenging an arbitral award. Proviso to Section 34(3) empowers Court to condone a delay of 30 days if sufficient cause for delay is show, “but not thereafter.”

The Court held that “but not thereafter” in Section 34(3) has been placed to imply the legislative intent behind “strict and non-negotiable timelines” for challenging arbitral awards. The Court held that usage of the phrase excludes discretion which may be exercised by the Courts in condoning the delays in filing of applications under Section 34.

“The language of Section 34(3) of the Act is clear and unambiguous, leaving no room for discretionary interpretation. This language reflects a deliberate policy decision to impose a rigid temporal constraint, emphasizing the importance of adherence to statutory timelines in the arbitration regime. Allowing indefinite delays in challenging awards would undermine the efficiency and credibility of arbitration, eroding trust in the process and detracting from its efficacy as a viable alternative to traditional litigation,” held Justice Shekhar B. Saraf.

Factual Background

An arbitration award was made under Section 20F(6) of The Railways Act, 1989 by the Arbitrator/Commissioner, Saharanpur in 2018 for an acquisition made in 2015. A writ petition challenging the award was filed in 2020 which was disposed of directing the petitioner to avail remedy under Section 34 of the 1996 Act.

Application under Section 34 was rejected on grounds of delay of 120 days from the order of High Court in the writ petition. It was held that Section 5 of the Limitation Act will not apply.

High Court Verdict

The Court observed that the arbitration award was passed on 15.03.2018, the writ petition was filed on 21.11.2019, after a delay of 18 months which was dismissed on 20.02.2020 and thereafter the application under Section 34 was filed on 17.07.2020 after a delay of 5 months.

The Court relied on Union of India v. Popular Construction Co. where the Supreme Court held that the timeline provided in Section 34(3) is non-negotiable and Section 5 of the Limitation Act cannot be applied to such applications to condone delay. The Apex Court held that extending period of limitation between the period prescribed under Section 34(3) would render “but not thereafter” otiose.

Further, the Court relied on Bhimashankar Sahakari Sakkare Karkhane Niyamita v. Walchandnagar Industries Limited where following Popular Construction Co., the Apex Court held that though by virtue of Section 43(1) of the 1996 Act, Limitation Act applies to proceedings under the Arbitration and Conciliation Act 1996, but where express timeline is prescribed under Section 34(3), application of Limitation Act is excluded.

Justice Saraf placed reliance on his earlier decision in Esha Agarwal and Ors. v. Ram Niranjan Ruia, where he had held that delay cannot be condoned beyond a period of 30 days as prescribed under Section 34(3) of the Act.

“The courts can condone the delay within a further period of thirty days, provided sufficient cause is present, but not 'thereafter'. I believe the term 'thereafter' used in the section does not need any further interpretation. A plain reading of the said section and the proviso makes it as clear as the sky on a summer morning that courts cannot condone a delay beyond the extendable period of thirty days provided in the section,” held Justice Saraf in Esha Agarwal and Ors.

The Court held that despite giving the appellant benefit of Section 14 of the Limitation Act, the application under Section 34 was time barred. Accordingly, the appeal under Section 37 of the Act was dismissed.

While parting, the Court observed that arbitration is a more streamlined and time-effective mechanism of dispute resolution, where it is necessary for the parties to adhere to the timelines.

“Delay in challenging arbitral awards can prejudice the rights for the parties involved, particularly the party seeking to enforce the award. When disputes are resolved expeditiously, parties can obtain closure and move forward with their lives, rather than being mired in prolonged legal battles. Moreover, timely resolution reduces the burden on the court system, allowing courts to focus their resources on cases that require judicial intervention.”

Case Title: Sh. Dharmveer Tyagi And Others vs. Competent Authority, Dfcc, Special Land Acquisition (Joint Officer Organization) And Others 2024 LiveLaw (AB) 325 [APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 257 of 2024]

Citation: 2024 LiveLaw (AB) 325

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