Limitation Period U/s 34(3) Absolute; Condonation Of Delay Impermissible Unless Party Shows Diligence And Bona Fide Reasons: Delhi High Court

Brief Facts:

The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 has been filed by the Petitioners-National Research Development Corporation (NRDC) and the Department of Scientific and Industrial Research (DSIR) under the Ministry of Science and Technology, Government of India. NRDC, an enterprise of DSIR, is engaged in the Technology Development and Demonstration Programme (TDDP).

The director of Chromous Biotech Pvt Ltd. (“Respondent”) approached the Petitioners, National Research Development Corporation (“NRDC”) Department of Scientific and Industrial Research (“DSIR”) and proposed to develop a rapid molecular diagnostics kit for malaria detection. A royalty agreement dated 18th October 2011, was entered into between the Petitioners and the Respondent, outlining the development of the malaria diagnostics kit, including design, standardization, validation, and expense estimation. As per the agreement, the Respondent was liable to transfer the 'know-how document' and other improvements if it failed to commercialize the technology within the specified timeframe. Additionally, the Respondent was obligated to pay interest and royalties as per the agreement. The DSIR was informed by the Respondent that the project was completed on 17th October 2014. Subsequently, the Respondent admitted in a letter dated 29th March 2017, their inability to pay the royalty at that time but made no efforts to return the technology developed under the project. Finally, on 17th March 2021, the Respondent offered to return the technology after seven years, which was declined by the Petitioners, leading to the constitution of the Arbitral Tribunal in December 2021. The Delhi High Court (“High Court”) appointed a sole arbitrator in the matter. The Award has been pronounced by the arbitrator. The arbitrator held that the Petitioners were not entitled to any amount against the Respondent, either on account of royalty, damages, interest, or cost as claimed by them in the SOC. Therefore, their claims were rejected by the arbitrator. Aggrieved by the award, the Petitioners filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) challenging the decision of the arbitrator and seeking condonation of 54 days delay in filing the application. According to Section 34(3) of the Arbitration and Conciliation Act, 1996, the period of ninety-plus thirty days expires on 9th April, 2023.

Observations by the High Court:

The High Court referred to the decision of the Supreme Court in Union of India v. Popular Construction [(2001) 8 SCC 470], and noted the absolute nature of the time limit prescribed under Section 34 of the Act. The High Court noted that the use of the phrase 'but not thereafter' in the proviso to sub-section (3) of Section 34 serves as an express exclusion within the meaning of Section 29(2) of the Limitation Act, rendering any extension beyond the specified period impermissible. This interpretation is further supported by the historical context and the scheme of the Arbitration Act, which emphasizes minimizing the supervisory role of courts in the arbitral process.

Drawing from the Supreme Court's decision in Simplex Infrastructure Ltd. v. Union of India [(2019) 2 SCC 455], the High Court reiterated the limited scope for extending the statutory period for challenging an arbitral award. It noted that the proviso to Section 34(3) allows for an extension of up to thirty days, but not beyond, upon showing sufficient cause. Emphasizing the importance of adherence to statutory timelines, the High Court highlighted that even in Section 14 of the Limitation Act, the courts cannot condone delays exceeding the prescribed limits. Further, it held that the court has the jurisdiction to condone delay in re-filing even if the party extends beyond the time specified in Section 34(3) of the Arbitration Act, however, the party has to demonstrate diligence and bona fide reasons beyond its control for the delay.

The High Court held that the Petitioners didn't provide any reasonable explanation for the delay in filing the petition. Consequently, the petition was dismissed as being time-barred under Section 34(3) of the Arbitration Act.

Case Title: National Research Development Corporation & Anr vs Chromous Biotech Pvt Ltd.

Citation: 2024 LiveLaw (Del) 155

Case Number: O.M.P. (COMM) 238/2023, I.As. 12522/2023, 12523/2023 & 12524/2023

Advocate for the Petitioners: Rama Shankar

Advocate for the Respondent: Balaji Subramanian

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