Supreme Court Clarifies Limitation for Section 37 Appeals under Arbitration Act: Government of Maharashtra vs. Borse Brothers (2021)

Case Background

The case involves multiple appeals against decisions of various High Courts regarding the condonation of delay in filing appeals under Section 37 of the Arbitration and Conciliation Act, 1996. The core issue revolved around whether the principles laid down in the Supreme Court’s previous judgment in N.V. International v. State of Assam, (2020) 2 SCC 109, which restricted the condonation of delay to a maximum of 30 days beyond the prescribed period, were correct.

The Government of Maharashtra (Water Resources Department) filed an appeal against the decision of the Bombay High Court, which had refused to condone a delay in filing an appeal under Section 37 of the Arbitration Act. Similarly, the Union of India appealed against a decision of the Delhi High Court, which had also rejected a condonation of delay application. In contrast, the High Court of Madhya Pradesh had condoned a delay, disagreeing with the N.V. International judgment and citing a conflict with the larger bench judgment in Consolidated Engg. Enterprises v. Irrigation Deptt., (2008) 7 SCC 169.

The parties involved included the Government of Maharashtra, the Union of India, M/s Borse Brothers Engineers & Contractors Pvt. Ltd., and M/s Swastik Wires, among others. The primary relief sought was the condonation of delay in filing appeals under Section 37 of the Arbitration Act.

Timeline

Course of Proceedings

The Bombay High Court dismissed the appeal filed by the Government of Maharashtra, refusing to condone the delay in filing the appeal under Section 37 of the Arbitration Act beyond 120 days. Similarly, the Delhi High Court dismissed the appeal filed by the Union of India on the same grounds. However, the Madhya Pradesh High Court refused to follow the N.V. International judgment, stating a conflict with the larger bench judgment in Consolidated Engg., and condoned the delay.

Legal Framework

The judgment primarily revolves around the interpretation of the following legal provisions:

✓ Section 37 of the Arbitration and Conciliation Act, 1996: This section provides for appeals from certain orders of the arbitral tribunal and the court. It states:

“37. Appealable orders.—(1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:— (a) refusing to refer the parties to arbitration under section 8; (b) granting or refusing to grant any measure under section 9; (c) setting aside or refusing to set aside an arbitral award under section 34.”

✓ Section 5 of the Limitation Act, 1963: This section allows for the extension of the prescribed period for appeals or applications if the appellant or applicant satisfies the court that they had sufficient cause for the delay. It states:

“5. Extension of prescribed period in certain cases.—Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.”

✓ Section 29(2) of the Limitation Act, 1963: This section deals with the application of the Limitation Act to special or local laws. It states:

“29. Savings.—(2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.”

✓ Section 13(1A) of the Commercial Courts Act, 2015: This section provides a limitation period of 60 days for appeals from the judgments or orders of a Commercial Court. It states:

“13. Appeals from decrees of Commercial Courts and Commercial Divisions.—(1A) Any person aggrieved by the judgment or order of a Commercial Court at the level of District Judge exercising original civil jurisdiction or, as the case may be, Commercial Division of a High Court may appeal to the Commercial Appellate Division of that High Court within a period of sixty days from the date of the judgment or order:”

✓ Articles 116 and 117 of the Schedule to the Limitation Act, 1963: These articles specify the limitation period for appeals to the High Court (90 days) and intra-High Court appeals (30 days).

These provisions are interpreted in the context of the constitutional mandate for speedy justice and the specific objectives of the Arbitration Act and the Commercial Courts Act, which aim to expedite dispute resolution.

Arguments

Arguments by the Government of Maharashtra:

• Argued that the Arbitration Act was primarily an alternate dispute resolution mechanism, not necessarily focused on speedy resolution.
• Contended that the 2015 Amendment to the Arbitration Act introduced time limits for arbitral awards and fast-track procedures, but the original objective remained.
• Submitted that the logic of N.V. International should only apply to appeals from Section 34 orders, not other orders under Sections 8, 9, 16, and 17 of the Arbitration Act.
• Stated that Section 33 of the Arbitration Act allows the arbitral tribunal to extend time for correcting awards without an outer limit.
• Relied on Section 29(2) of the Limitation Act, arguing that Article 137 of the Limitation Act, with a three-year limitation period, should apply uniformly to appeals under Section 37 of the Arbitration Act.
• Argued that applying the limitation period of Section 34(3) to Section 37 appeals amounts to judicial legislation.

Arguments by the Union of India:

• Highlighted the provisions of the Commercial Courts Act, 2015 and the Law Commission Reports that led to its enactment, emphasizing the need for speedy disposal of commercial disputes.
• Cited Kandla Export Corpn. v. OCI Corpn., (2018) 14 SCC 715 and BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234, regarding the interplay between Section 13 of the Commercial Courts Act and Section 37 of the Arbitration Act.
• Argued that while Section 13(1A) of the Commercial Courts Act lays down a 60-day limitation period, it does not bar the application of Section 5 of the Limitation Act.
• Referred to Section 12A of the Commercial Courts Act, which mentions the Limitation Act, and Section 16 of the Commercial Courts Act, which amends Order VIII Rule 1 of the CPC, to emphasize that the Commercial Courts Act does not exclude the application of Section 5 of the Limitation Act.
• Relied on judgments under the Insolvency and Bankruptcy Code, 2016 and the Electricity Act, 2003, where Section 5 of the Limitation Act is inapplicable due to the statutes’ schemes or “express exclusion” as per Section 29(2) of the Limitation Act.

Arguments by M/s Borse Brothers Engineers and Contractors Pvt. Ltd.:

• Pointed out the conduct of the Government of Maharashtra and argued that the appeal was delayed by 131 days, with no valid explanation.
• Argued that the rationale of N.V. International should apply to appeals against Section 34 orders, but not to appeals from other sections, as each appellate provision has its own rationale.
• Emphasized that the Arbitration Act aims for speedy disposal, citing specific timelines in Sections 9(2), 11(4), 11(13), 13(2)-(5), 29A, 29B, 33(3)-(5), and 34(3) of the Arbitration Act.
• Relied on the Commercial Courts Act, particularly Sections 13(1A) and 14, to argue that condoning long delays would defeat the object of speedy disposal.
• Supported the judgment in N.V. International, arguing that judges can supply a casus omissus to prevent arbitrary and unjust orders.

Arguments by M/s Swastik Wires:

• Supported the Madhya Pradesh High Court’s judgment, arguing that the three-judge bench judgment in Consolidated Engg. prevails over the two-judge bench judgment in N.V. International.
• Argued that once Section 5 of the Limitation Act applies, the court cannot impose limits on “sufficient cause.”
• Contended that the court could use Article 142 of the Constitution to do justice in individual cases.

Arguments by M/s Associated Construction Co.:

• Argued that Section 13 of the Commercial Courts Act excludes the application of Section 5 of the Limitation Act, citing Kandla Export Corpn and CCE & Customs v. Hongo India (P) Ltd., (2009) 5 SCC 791.
• Supported the logic of N.V. International, citing judgments that exclude other sections of the Limitation Act in the context of Section 34(3) of the Arbitration Act.
• Argued that sufficient cause had not been made out on the facts.

Table of Submissions

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether the judgment of a Division Bench of this Court in N.V. International v. State of Assam, (2020) 2 SCC 109 lays down the law correctly.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

Flowchart of Decision-Making Process

Conclusion

The Supreme Court’s judgment in Government of Maharashtra vs. Borse Brothers (2021) clarifies that while Section 5 of the Limitation Act applies to appeals under Section 37 of the Arbitration Act, the condonation of delay is not automatic. The Court emphasized that the principle of speedy resolution of disputes, which is the heart of the Arbitration Act and the Commercial Courts Act, must be kept in mind while deciding on condonation of delay applications. The Court overruled the previous judgment in N.V. International, which had imposed a hard and fast rule of 30 days for condonation. The High Courts are now required to consider each case on its own merits, taking into account the “sufficient cause” for the delay and the object of speedy resolution. This judgment provides much-needed clarity on the issue of limitation for appeals under Section 37 of the Arbitration Act and is a significant step towards ensuring a more efficient and effective dispute resolution mechanism.