Arbitral award challenges must be filed on time

By Ranbir Krishan and Krrishan Singhania, Singhania & Co
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While filing a petition to set aside an arbitral award, it is imperative to adhere to the time limits set out in the Arbitration and Conciliation Act, 1996. This was highlighted in a recent judgment of the Calcutta High Court in the case of State of West Bengal v Afcons Infrastructure Ltd.

Late petition

The state of West Bengal filed a petition to set aside the arbitral award. The period of 90 days for filing the petition, as stipulated under section 34(3) of the Arbitration Act, expired on 14 June 2007.

Ranbir Krishan Partner Singhania & Co
Ranbir Krishan
Partner
Singhania & Co

However, the petition was filed in the trial court on 19 June 2007. As the application was filed within the period of one month after the expiry of 90 days from the date of the award, the trial court granted liberty to the petitioner to file an application seeking condonation of delay for the period between the time when 90 days expired (14 June) and the date when the petition was filed (19 June).

It was directed that the liberty so granted would remain in effect for a period of two weeks from the date of the order.

This direction was not complied with by the state. On the next date, the trial court observed that because the liberty granted by the order had been spurned, the petition stood dismissed.

Appeal for unfair dismissal

In an appeal before the Calcutta High Court, the state of West Bengal argued that it had filed the arbitration petition within the extended period of expiry of the initial period of 90 days, and therefore the trial court ought not to have dismissed the petition. The appellant further argued that if the petition was to be dismissed on the ground that it was beyond limitation, it would cause injustice to the state as a huge amount, Rs30 million (US$600,000), was involved.

The respondent submitted that, strictly speaking, no application for condonation of delay is permissible under section 34(3) of the act. The wording of subsection 34(3) is such that applicability of section 5 of the Limitation Act is clearly excluded.

In this assertion, the respondents’ counsel relied on a judgment of the Supreme Court in the case of Union of India v Popular Construction Co, 2001. In that case, the Supreme Court observed that the act is indisputedly a special law, and that section 34 provides for a period of limitation different from that prescribed under the Limitation Act.

Had the proviso to section 34 merely provided for a period within which the court could exercise its discretion, that would not have been sufficient to exclude the applicability of section 5 of the Limitation Act. The crucial words under section 34(3) of the act are, “but not thereafter”.

‘Arrogant attitude’

The high court stated that the relevant facts indicated an arrogant attitude on the part of the state of West Bengal. Even though, strictly speaking, the appellant could not have been granted any further time for filing an application under section 5 of the Limitation Act, the trial court had still granted an opportunity to file such an application.

Krrishan Singhania Attorney Singhania & Co
Krrishan Singhania
Attorney
Singhania & Co

However, this direction was not complied with by the state leaving the trial court with little alternative but to dismiss the arbitration petition.

The court held that the liberty to file the application for condonation of delay was not contemplated in the act. Section 34(3) of the act excluded applicability of section 5 of the Limitation Act.

The high court was unable to accept the submission of the appellant that the statutory provisions of law should be waived merely because a huge liability would otherwise be borne by the state by reason of dismissal of the arbitration petition. Accordingly the appeal was dismissed.

No extension guarantee

This case highlights the importance of filing any petition to challenge an award within 90 days of the award, and of not relying on the proviso to section 34 which provides that the court may entertain the petition within a further period of 30 days but not thereafter.

Relying on this further period of 30 days is a risky proposition, as the applicant has to make out a case that he was prevented by sufficient cause from making the application within the prescribed period of 90 days.

It may be pointed out that in the case of Consolidated Engineering Enterprises v Principal Secretary, 2008, the Supreme Court, while computing limitation, excluded the period during which the applicant was prosecuting an application under section 34(1) before the wrong court, on the grounds that proceeding in the wrong court was done in good faith and with due diligence.

Thus the “sufficient cause” ground is available provided the court can be satisfied with such a cause.

Krrishan Singhania is the managing partner and Ranbir Krishan is an attorney at Singhania & Co, a Mumbai-based law firm. Singhania has 20 years of experience in some of the firm’s core practice areas, which include arbitration, litigation and dispute resolution, aviation, and intellectual property.

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