Condonation of Delay under Arbitration and Conciliation Act and Commercial Courts Act

By Ashish Kumar and Trishit Kumar Satpati, Students at NMIMS School of Law, Bangalore

Introduction

The apex court in the case of Government of India vs M/s Borse Brothers Engineers & Contractors Pvt Ltd (“Borse) held that the delay in the filing of an appeal under section 37 of the Arbitration and Conciliation Act,1996 (“Act”) can be condoned if a sufficient cause is being provided. The earlier limitation of 120 days for filing an appeal was overruled but if a party exceeds the 90 days, then it must give sufficient reasons for such delay in accordance with section 5 of the Limitation Act(“LA”).

Facts

The appeals filed by the Govt of Maharashtra and Union of India arising out of the judgement by Bombay High Court and Delhi High Court respectively refused to condone the delay in the filing of the appeal under 37 of the Act beyond the 120 days. The appeal arising out of the judgement by the High court of Madhya Pradesh refused to follow the N V International vs State of Assam (“N.V. International”) because of the conflict with the judgement of the court in Consolidated Engg. Enterprises v Irrigation Dept. (Consolidated Eng”)

In the case of N.V. International,the Hon’ble Court held that a grace period of 30 days was added to the period of 90 days which is duly prescribed by the statute for filing of an appeal. When a reference was made to the judgment of the Apex Court in the matter of Consolidated Engineeringwhere the court held that Section 5 of the LA concerning extending the specified period of limitation for any request or appeal does not impose any external cap on an extension period, and the authority to add a fixed time limit is clearly missing. The case of  N.V. Internationalwas decided by a two-judge bench and on the other side, the Consolidated Engineeringwas decided by a three bench. Due to which the High Court of Madhya Pradesh refused to follow N.V. International.

Issues

The Honourable Supreme Court of India clarified three significant issues raised in Borse. The three significant issues or questions of law raised are as follows:

  1. Whether Section 5 of the Limitation Act, 1963 applies to Section 37 of the Arbitration and Conciliation Act, 1996?
  2. Whether the period of limitation as prescribed under Section 13 of the Commercial Courts Act 2015 applies to Section 37 of the Arbitration and Conciliation Act, 1996?
  3. Can a delay in filing an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 be condoned or not?

Arguments Advanced

The major arguments which were raised in the apex court by the counsel for the appellants, the limitation period for filing an appeal for Article 37 of the LA is prescribed by Article 137 LA The rationale or logic raise in N V International would be applicable to appeals pertaining to Section 34 orders, but it would not apply to orders of Section 8,9, 16, 17 and there is no specific law which specify 120-day limitation period. They also raised the argument that the courts can apply Section 5 of the LA to relax the period of limitation in deserving cases. It was further raised the argument that the court can condone the delay in filing the appeal when a sufficient cause is given, and the counsel also referred to Section 5 of LA and Article 142 of the Indian Constitution.

The respondents coherently relied upon sections 9(2), 11(4), 11(13), 13(2)-(5), 29A, 29B, 33(3)-(5) and 34(3) of the Act and Section 13(1A) and 14 of the Commercial Courts Act to point out that reason for the enactment of these acts were for speedy disposal of cases.  It was also pointed out that if such delay condonation is permitted then it will affect the appeal process wholly, because the whole appeal needs to be decided within a span of six months therefore a delay of more than 30 days if allowed will destroy the legislation itself, as the reason for making such legislation was to dispose off the cases in a speedy manner.

The respondents also submitted that Section 13 of the Commercial Courts Act which talks about the disposal of cases within 6 months doesn’t take into consideration Section 5 of the LA which gives power to the court to examine “sufficient cause” for allowing to file appeal beyond the prescribed time period. To fit their case, the respondents cited N.V International wherein it was held that appeals are to be filed within 120 days, this was overruled by the supreme court on the grounds that:

  1. It created a judicial bar of 30 days under section 5 of the limitation act which is a form of creating a law and not declaring a law.
  2. The judgement failed to take into consideration the commercial courts act.
  3. The period of 90 days in addition to the 30 (thirty) days grace period provided in Section 34(3) of the Arbitration Act cannot apply to the Appeals filed under Section 37, since the prescribed period of limitation for filing of Appeals under Section 13(1A) of the Commercial Courts Act is provided as 60 (sixty) days and not 90(ninety) days.
  4. The absence of a provision curtailing the condonation of delay beyond the period prescribed under Section 13 of the Commercial Courts Act, bodily lifting the same from the last part of Section 34(3) into Section 37 of the Arbitration Act cannot be warranted.  

Ratio Decidendi

While overruling the N.V International case, the supreme court started discussing the aspects of the time period of condonation of delay, after overruling the N.V International judgement, the court removed the bar of 120 days that was applicable to all appeals arising out of arbitration verdicts but the court pointed out that section 5 of LA Act can be used to grant appeals which are delayed more than 60 days provided “sufficient cause “ is proved in the court.    

The court had two options, either they could have stuck with the 30 days grace period as per the N.V International case or go for a full condoning with sufficient reason under section 5 of the Limitation act. The court decided to go forward with the open interpretation of section 5 of the limitation act but the cause for such must be good and sufficient so as to not beat the crux of the arbitration and conciliation act which was enacted for speedy disposal of cases.     

The word “sufficient cause” has been explained in Basawaraj v. Land Acquisition officer , wherein it was explained that sufficient means enough and the cause must be bona fide and not some excuse to hide a mistake or negligence.   

In the case of Arjun Singh v. Mohinder Kumar, it was held that there is merely no difference between words “sufficient cause” and “good cause”, every good cause is a sufficient cause however, if any difference exists it can only be that the requirement of good cause is complied with on a lesser degree of proof than that of “sufficient cause”. 

The court also mentioned that just because a state or a government is asking for a condonation order it cannot be granted so without having a “sufficient cause”, the court embarked upon the judgment of Postmaster general v. Living media India limited, wherein it was held that merely because the government is involved, a different yardstick for condonation of delay cannot be laid down. This means everyone must prove that there was “sufficient cause” for the delay in filing an appeal and therefore a condonation needs to be given.  

In Ramlal v. Rewa coalfields, it was held that condonation of delay is not a matter of right, it’s a discretion and can only be granted if the court wishes to or realises that if not granted will cause a great amount of injustice to the party concerned. It must be remembered that merely because sufficient cause has been made out in the facts of a given case, there is no right in the appellant to have the delay condoned. It was finally held that cases under the arbitration act and commercial courts act will get condonation beyond 90, 30 or 60 as a matter of exception (sufficient cause needs to be proved) and not as a matter of right.

The court went ahead to dismiss the single leave petition filed by the Maharashtra Government as lacking “sufficient cause” and was found that it was not bona fide. The government had delayed for 131 days for which a suitable explanation was not given and thus it was dismissed.

The court also set aside the order of Hon’ble Madhya Pradesh High Court for not following the N.V International (supra) as in then it was a suitable supreme court case and could have been used as a precedent as it was binding of the court by virtue of Article 141 of the constitution. The appeal against the Delhi High Court was also dismissed as the appellant couldn’t prove sufficient cause for delay.       

Analysis

When we see this judgement from a more liberal point of view, we can understand that the court once again has created a line or a bar between the legislature and the judiciary, when one goes through the reasoning for overruling the N.V International case it is clearly mentioned that the judiciary can only declare the law and not make it, thereby making a law can be a form of judicial activism which the supreme court from time and again tries to avoid.
While overruling the N.V International judgement the court also mentioned that it understands why a bar of 30 days was given as a grace period under section 5 of the limitation act, the reason was to make a strict rule so that no one can go out of the bounds because a casual reading of section 5 of limitation act actually gives an open hand to a court to grant condonation without any limit on delay and such practice can be harmful, but this court while overruling mentioned that a strict interpretation of the word “sufficient cause[1]” will be required while accepting such condonation.  

The court did lift the bar of 120 days for filing the appeal in arbitration matters but it made sure that appeals beyond statutory delay will only be accepted if there’s sufficient and strict reason to do so.

The court while setting aside the Hon’ble Madhya Pradesh verdict in the S.L.P mentioned that the reason for such setting aside was because the High Court should have followed the N.V International judgement because that time it was not overruled, and the High Court was bound to follow it as per Art 141.

What is more interesting is that the court set aside a judgement of the lower court by using a judgement which it had overruled few Paragraphs above, this might be because the court wanted to assert the fact that High Courts will have to follow the Supreme Court’s order even if that order is wrong or not correct in the eyes of law, but either way it seems that The Hon’ble Madhya Pradesh High   Court actually made the correct decision by not following the Supreme Court judgement in N.V International because, eventually it was overruled, but to assert the Supreme Courts dominance over other courts, the Supreme Court decided to set aside the Hon’ble Madhya Pradesh High Court judgement.

During the covid-19 period, the supreme court on 23rd March 2020 temporarily suspended the application of the limitation act because courts were only taking up matters which were urgent and required immediate attention. The explanation was that the suspension will be treated as “closure” within the meaning of section 4 of the limitation act. On the 8th of March 2021, the supreme court lifted the suspension keeping in view that the lockdowns were over, and the economy was opening up, but on 27th April 2021, the supreme court again restored the suspension until further orders in view of the rising covid cases. All the above orders were applicable to the filing of all cases under various laws/acts irrespective of whether the acts or laws were enacted by state or centre.

All the above orders regarding suspension were given under the inherent powers of the supreme court Article 142 read with Article 141 of the constitution.    

The period of suspension of the limitation act and similar acts does provide more time to the parties to file an appeal.  

Conclusion

The condonation of delay has been very different in many countries, like for example United states has a limitation of 3 months within which one has to appeal (section 12, Federal Arbitration Act), however, the law doesn’t talk about condonation, similarly, United kingdom has an appeal period of 28 days( section 70(3) Arbitration Act, 1996 within which one has to file an appeal but without any delays, Singapore also has an appeal period of 28 days ( section 50 Arbitration act)  after which appeal is not allowed.

Institutional arbitration is very common and they usually do not have an appeal clause within them, for example, UNCITRAL rules don’t have an appeal provision, ICC also doesn’t provide an appeal provision but the ICC court must review the award before it is passed and it may recommend modifications, LCIA also lacks an appeal clause as in it doesn’t allow appeals, ICDR rules also don’t provide for an appeal.


[1] In Parimal vs Veena @ Bharti, the Supreme Court of India explained Sufficient Cause as an expression which has been used in large number of Statutes. The meaning of the word “sufficient” is “adequate” or “enough”, in as much as may be necessary to answer the purpose intended. Therefore, word “sufficient” embraces no more than that which provides a platitude which when the act done suffices to accomplish the purpose intended in the facts and circumstances existing in a case and duly examined from the view point of a reasonable standard of a cautious man. In this context, “sufficient cause” means that party had not acted in a negligent manner or there
 was a want of bona fide on its part in view of the facts and circumstances of a case or the party cannot be alleged to have been “not acting diligently” or “remaining inactive”. However, the facts and circumstances of each case must afford sufficient ground to enable the Court concerned to exercise discretion for the reason that whenever the court exercises discretion, it has to be exercised judiciously.