The conundrum regarding the limitation period of filing an appeal under section 37 of the Arbitration and Conciliation Act, 1996, seems to have been demystified with the Supreme Court’s verdict in the matter of Government of Maharashtra v M/s Borse Brothers Engineers & Contractors Pvt Ltd, in which it overruled its earlier judgments in Union of India v Varindera Constructions Ltd, and NV International v State of Assam.
In Borse Brothers, the court realised that the bench in NV International was erroneous to read the period of limitation contemplated under section 34(3) for an appeal filed under section 37 of the Arbitration Act, as it amounted to judicial legislation. In order to take cognisance, the court considered all related statutory provisions before carving out a rule for limitation for appeals under section 37 of the act.
Limitation shall apply
The court observed that by virtue of section 43 of the act, limitation prescribed under articles 116 and 117 of the Limitation Act – i.e., 90 days and 30 days, respectively – shall apply to appeals preferred under section 37 of the Arbitration Act. Further, by applying section 5 of the Limitation Act, the court observed that delay in filing an appeal under section 37 could be condoned if the aggrieved party justifies the same with “sufficient cause”.
The court also noted that the judgment in NV International was per incuriam (through lack of due regard to the law or the facts), as it did not consider provisions of the Commercial Courts Act. The Commercial Courts Act, through section 13(1A), provides for a limitation period of 60 days from the date of the judgment or order appealed against.
The court held that the limitation period of 60 days prescribed under section 13 would apply to section 37 appeals where the subject matter of the arbitration is of the “specified value,” i.e., more than INR300,000 (USD4,100). Where the subject matter of the dispute is less than the specified value, articles 116 and 117 of the Limitation Act shall apply.
The court further held that section 5 of the Limitation Act would be applicable to appeals that are covered under the Commercial Courts Act, in which there is no restriction on condonation of delay. The court, in order to justify such application, had drawn a negative comparison between section 13(1A) of the Commercial Courts Act to order 8, rule 1 of the Code of Civil Procedure, 1908 (CPC), and section 35-H of the Central Excise Act, and since there is no such limitation period prescribed under section 37, therefore the application of section 5 of the Limitation Act in filling the appeal in section 37, under section 13 of the Commercial Courts Act, would be valid. The court also noted that the bodily lifting of section 34(3), which places an embargo on allowing delayed appeals into section 37, would be unwarranted as the court does not have the power to make legislation.
Although the court has addressed many errors in the NV International judgment, there remains points of contention. The first is whether the court is correct in applying the limitation period on section 37 appeals as mentioned under article 116 of the Limitation Act, which deals with appeals under the CPC.
Second, the court, by allowing condonation of delay, will still have to hear the matter to appreciate the facts of the case and decide whether there is “sufficient cause”, which will to some extent burden the courts and defeat the purpose of the arbitration.
The court, through Borse Brothers, has to some extent controlled the storm of questions, however, with the growing scope of arbitration in India, we need an amendment in section 37 appeals to clarify the limitation period, which will provide stability in matters of arbitral dispute. Further, the court, while clearing the air on the issue of the condonation of delay under section 37, has left certain contentions unanswered.
Poojal Agarwal and Prateek Khandelwal
Chanakya National Law University