[Arbitration Act] For Condonation Of Delay In Filing Section 34, Party Is Obligated To Reveal Bonafidies Coupled With Plausible Reasons: Himachal Pradesh High Court

Section 34(3) of the Arbitration and Conciliation Act, 1996, deals with the time limit for filing an application to set aside an arbitral award.

"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."

Brief Facts:

The Petitioners approached the Himachal Pradesh High Court (“High Court”) requesting condonation of delay in filing an application under Section 34 of the Arbitration and Conciliation Act (“Arbitration Act”) against an award dated 11.11.2022, issued by the Arbitrator. The Petitioners received a copy of the award on the same day it was passed. However, the application under Section 34 of the Arbitration Act was not presented to the Registry until 13.3.2023. Subsequently, on 27.3.2023, the Petitioners filed the application seeking condonation of delay, stating that the decision to challenge the award was delayed due to the general elections conducted by the Election Commission until 8.12.2022, followed by delays in the formation of the government.

Opposing the prayer for condonation of delay, the Respondent contended that under the Arbitration Act, the application under Section 34 must be filed within 120 days. According to the Respondent's calculation, the Petitioners' application under Section 34 was filed after 122 days. Additionally, it argued that any extension beyond three months, as provided in Section 34(3) of the Arbitration Act, is permissible only if the Court is satisfied that there was sufficient cause preventing the applicant from filing within the initial three months. It argued that the Petitioners failed to demonstrate any sufficient cause for the extension of time.

Decision of the High Court:

The High Court, referring to Section 34(3) of the Arbitration Act, observed that the Petitioners must file their application within three months of receiving the arbitral award. This period can be extended by an additional 30 days if the Court is satisfied that the delay was due to sufficient cause. However, it held that any application filed after the initial three months and the extended 30 days cannot be entertained. It noted that since the petitioners received the copy of the award on 11.11.2022, the initial three-month period expired on 11.2.2023. The Application, filed on 13.3.2023, falls within the additional 30-day period following the expiration of the three-month deadline.

Addressing the Respondent's contention that the application was filed 122 days after receiving the award, the High Court clarified that such a calculation based on 90 days instead of three months, as prescribed in the Arbitration Act, was incorrect. The period of three months is defined as the expiration of three calendar months, which, in this case, would be on 11.2.2023. Therefore, the delay sought to be condoned by the Petitioners amounts to 30 days, and the High Court found no impediment to consider the application for condonation of delay.

However, scrutinizing the reasons provided by the Petitioners for the delay, the High Court found them to be vague and lacking in detail. The Petitioners attributed the delay to the conduct of elections until 8.12.2022 and subsequent delays in government formation. Yet, they failed to provide specifics regarding who was responsible for the decision to file the application and how these events affected their ability to act promptly.

The High Court held that it was for the Petitioners to demonstrate sufficient cause for the delay, they were required to provide genuine reasons coupled with evidence of their good faith. Since the Petitioners failed to do so and the delay appeared unjustified, the High Court held that the application for condonation of delay could not be upheld. Therefore, the High Court dismissed the petition.

Case Title: State of H.P. & another vs M/s Jagson International Ltd.

Citation: 2024 LiveLaw (HP) 21

Case Number: OMP(M) No. 89 of 2023

Advocate for the Petitioner: Mr. Y.P.S. Dhaulta & Mr. Amandeep Sharma, Addl. A.Gs.

Advocate for the Respondent: Mr. R. K. Bawa, Sr. Advocate with Mr. Y.P. Sood, Advocate.

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