Supreme Court clarifies the application of Section 14 of the Limitation Act in Arbitration Cases: Oriental Insurance Co. Ltd. vs. M/s Tejparas Associates & Exports Pvt. Ltd. (2019)

Introduction

Date of the Judgment: October 03, 2019

Citation: 2019 INSC 1033

Judges: R. Banumathi, J., A.S. Bopanna, J.

Can a delay in re-presenting a petition in the correct court, after it has been returned by a court lacking jurisdiction, be condoned? The Supreme Court of India addressed this question in a case involving an insurance claim and subsequent arbitration proceedings. The core issue revolved around whether the time spent pursuing the case in the wrong court could be excluded when calculating the limitation period for filing in the correct court. The Supreme Court, in this judgment, clarified the applicability of Section 14 of the Limitation Act, 1963, in such scenarios within the context of arbitration law. The judgment was delivered by a two-judge bench comprising Justice R. Banumathi and Justice A.S. Bopanna, with the opinion authored by Justice A.S. Bopanna.

Case Background

The case originated from a fire insurance policy issued by Oriental Insurance Co. Ltd. (the appellant) to M/s Tejparas Associates & Exports Pvt. Ltd. (the respondent) for their plant and machinery, insured for Rs. 70,00,000. A fire accident occurred on April 23, 2000, leading to an insurance claim. The insurance company initially offered Rs. 7,98,019, which was rejected by the respondent.

A subsequent meeting on September 20, 2001, resulted in a revised offer of Rs. 33,80,925, but the respondent did not accept this either. However, the insurance company paid Rs. 25,00,000 to the respondent through Vijaya Bank. Dissatisfied with the offered amount, the respondent approached the National Consumer Disputes Redressal Commission (NCDRC), which dismissed the complaint, stating that the matter involved complex legal questions and should be decided by a civil court.

The dispute was then referred to an Arbitral Tribunal. On June 28, 2004, two of the three arbitrators awarded Rs. 44,90,000 with 18% interest, totaling the insured amount of Rs. 70,00,000, considering the Rs. 25,00,000 already paid. The third arbitrator dissented, deeming the insurance company’s offer of Rs. 33,80,925 as fair.

The appellant filed an application under Section 33 of the Arbitration and Conciliation Act, 1996, seeking clarification on the award and the venue of arbitration, which was dismissed on December 17, 2004. Subsequently, on February 24, 2005, the appellant filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, before the District Judge, Jaipur, to challenge the award.

The respondent objected to the proceedings in Jaipur, arguing that the cause of action arose in Jodhpur. The District Judge, Jaipur, on March 12, 2008, ruled the petition non-maintainable and returned it to the appellant, directing them to present it before the District Judge, Jodhpur, on April 2, 2008. The appellant, however, presented the petition in Jodhpur only on April 10, 2008. The respondent then filed an application under Section 3 of the Limitation Act, arguing that the petition was time-barred.

The appellant filed an application under Section 14 of the Limitation Act, seeking exclusion of the time spent in the Jaipur court. The District Judge, Jodhpur, dismissed the application under Section 14 and allowed the respondent’s application under Section 3, dismissing the petition under Section 34 of the Arbitration and Conciliation Act, 1996. The High Court of Judicature for Rajasthan at Jodhpur upheld this decision. The appellant then appealed to the Supreme Court.

Timeline:

Legal Framework

The case primarily revolves around the interpretation and application of the following legal provisions:

• Section 33 of the Arbitration and Conciliation Act, 1996: This section allows a party to request the arbitral tribunal to correct any errors in the award or to give an interpretation of a specific point or part of the award.

• Section 34 of the Arbitration and Conciliation Act, 1996: This section provides the grounds for challenging an arbitral award. It also specifies the time limit for filing such a challenge. Specifically, Section 34(3) states:
  
  “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.”
• Section 37 of the Arbitration and Conciliation Act, 1996: This section provides for appeals against certain orders of the court.
• Order 7 Rule 10 of the Civil Procedure Code (CPC): This rule deals with the return of a plaint to be presented to the proper court.
• Order 7 Rule 10A of the Civil Procedure Code (CPC): This rule provides the procedure to be followed when a plaint is returned under Order 7 Rule 10. It mandates the court to fix a date for the appearance of the parties before the court where the plaint is to be presented.
• Section 3 of the Limitation Act, 1963: This section bars any suit, appeal, or application that is filed after the prescribed period of limitation.
• Section 5 of the Limitation Act, 1963: This section allows for the extension of the prescribed period of limitation if the appellant or applicant can show sufficient cause for not filing the suit, appeal, or application within such period.
• Section 14 of the Limitation Act, 1963: This section allows for the exclusion of time spent in prosecuting a civil proceeding in a court that lacks jurisdiction, provided the proceeding was pursued in good faith.
  
  “Exclusion of time of proceeding bona fide in court without jurisdiction.—(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same defendant for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.”
• Section 148 of the Civil Procedure Code (CPC): This section deals with the power of the court to enlarge time.

These provisions, when read together, establish the framework for challenging an arbitral award and the conditions under which delays in legal proceedings can be condoned. The Supreme Court’s interpretation of Section 14 of the Limitation Act, 1963, in the context of arbitration proceedings is central to this case.

Arguments

The arguments presented by both the appellant and the respondent are summarized below:

Appellant’s Arguments:

• The appellant contended that the petition under Section 34 of the Arbitration and Conciliation Act, 1996, was initially filed within the limitation period before the District Judge, Jaipur.
• The appellant argued that the time spent in the proceedings before the District Judge, Jaipur, should be excluded under Section 14 of the Limitation Act, 1963, as they had pursued the case in good faith, even if the court lacked jurisdiction.
• The appellant submitted that the delay in re-presenting the petition before the District Judge, Jodhpur, was only a matter of 8 days, and this delay should be condoned.
• The appellant relied on the decision in S. Ganesharaju (dead) through LRs. and Anr. vs. Narsamma (dead) through LRs. and Ors. [(2013) 11 SCC 341], arguing that the expression “sufficient cause” under Section 5 of the Limitation Act should be liberally construed to advance substantial justice.
• The appellant further contended that the rules of limitation are not meant to destroy or foreclose the rights of parties.
• The appellant argued that the re-presentation of the petition in Jodhpur should not be considered a fresh filing, given that the Jaipur court had directed the presentation in Jodhpur on a specific date.

Respondent’s Arguments:

• The respondent argued that the petition filed before the District Judge, Jodhpur, should be considered a fresh petition, and the entire period from the original limitation period should be considered for condonation of delay.
• The respondent contended that the decision in Shri Amar Chand Inami vs. Union of India [(1973) 1 SCC 115] supports the view that when a plaint is returned under Order 7 Rule 10 of the Civil Procedure Code (CPC) and presented in the court with jurisdiction, it is considered a fresh petition.
• The respondent argued that Section 5 of the Limitation Act, 1963, does not apply to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, as held in Union of India vs. Popular Construction Company [(2001) 8 SCC 470].
• The respondent relied on the decision in Simplex Infrastructure Ltd. vs. Union of India [(2019) 2 SCC 455] to argue that Section 5 of the Limitation Act has no application to a petition challenging an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.
• The respondent contended that even if Section 14 of the Limitation Act, 1963, is applicable, the exclusion of time can only be for proceedings initiated in good faith in a court without jurisdiction. They argued that the appellant had deliberately initiated proceedings in Jaipur, despite the cause of action arising in Jodhpur, and therefore, it was not a bona fide mistake.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the dismissal of the petition under Section 34 of the Arbitration and Conciliation Act, 1996, on the ground of limitation is justified.
2. Whether the presentation of the petition before the learned Judge, Jodhpur, should be considered as a fresh petition, or whether the consideration should be for the delay between the period 02.04.2008 to 10.04.2008.
3. Whether the time spent in the proceedings before the District Judge, Jaipur, should be excluded under Section 14 of the Limitation Act, 1963.

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

The Supreme Court analyzed the submissions and authorities as follows:

How each authority was viewed by the Court:

• Shri Amar Chand Inami vs. Union of India [(1973) 1 SCC 115]* The court distinguished this case, stating that the legal position had changed with the introduction of Order 7 Rule 10A of the Civil Procedure Code.
• Joginder Tuli vs. S.L. Bhatia and another [(1997) 1 SCC 502]* This case was used to support the view that proceedings can be continued from the stage they were at when transferred to the proper court.
• S. Ganesharaju (dead) through LRs. and Anr. vs. Narsamma (dead) through LRs. and Ors. [(2013) 11 SCC 341]* While the court acknowledged the liberal interpretation of “sufficient cause” under Section 5 of the Limitation Act, it clarified that Section 5 is not applicable to proceedings under Section 34 of the Arbitration Act.
• Union of India vs. Popular Construction Company [(2001) 8 SCC 470]* The court affirmed the position that Section 5 of the Limitation Act does not apply to proceedings under Section 34 of the Arbitration Act.
• Simplex Infrastructure Ltd. vs. Union of India [(2019) 2 SCC 455]* The court reiterated that Section 5 of the Limitation Act has no application to a petition challenging an arbitral award under Section 34 of the Arbitration Act, but Section 14 is applicable.
• M/s Consolidated Engineering Enterprises vs. The Principal Secretary, Irrigation Department & Ors. [(2008) 7 SCC 169]* The court relied on this case to reiterate that Section 14 of the Limitation Act is applicable to proceedings under Section 34 of the Arbitration Act.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Initial Filing within Limitation: The Court emphasized that the petition under Section 34 of the Arbitration and Conciliation Act, 1996, was initially filed within the limitation period before the District Judge, Jaipur.
• Order 7 Rule 10A of CPC: The Court noted that the introduction of Order 7 Rule 10A of the Civil Procedure Code (CPC) had changed the legal position. This rule mandates the court to fix a date for the appearance of the parties before the court where the plaint is to be presented, and therefore, the re-presentation of the petition cannot be considered a fresh filing.
• Bona Fide Proceedings: The Court observed that the proceedings before the District Judge, Jaipur, were not malafide, and the court had considered the issue of jurisdiction before returning the petition.
• Limited Delay: The Court highlighted that the delay in re-presenting the petition before the District Judge, Jodhpur, was only a matter of 8 days, and this delay should be condoned.
• Section 14 of the Limitation Act, 1963: The Court reiterated that Section 14 of the Limitation Act is applicable to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, and that the time spent in a court lacking jurisdiction can be excluded if the proceedings were pursued in good faith.

The sentiment analysis of the reasons given by the Supreme Court is as follows:

The ratio of fact to law in the Supreme Court’s decision is as follows:

Logical Reasoning:

Decision

The Supreme Court allowed the appeal, set aside the judgments of the District Judge, Jodhpur, and the High Court of Judicature for Rajasthan at Jodhpur, and held that the petition filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996, was within the prescribed period of limitation.

The court held that the time spent in the proceedings before the District Judge, Jaipur, should be excluded under Section 14 of the Limitation Act, 1963, and that the delay in re-presenting the petition before the District Judge, Jodhpur, was only a matter of 8 days, which should be condoned.

The Supreme Court also held that the re-presentation of the petition in Jodhpur should not be considered a fresh filing, and the proceedings should continue from the stage where they were when the petition was returned by the Jaipur court.

Implications

The implications of this judgment are significant for arbitration proceedings and the application of the Limitation Act:

• Applicability of Section 14: The Supreme Court has clarified that Section 14 of the Limitation Act, 1963, is applicable to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996. This means that the time spent pursuing a case in a court that lacks jurisdiction can be excluded when calculating the limitation period for filing in the correct court, provided the proceedings were pursued in good faith.
• Re-presentation of Petitions: The judgment clarifies that when a petition is returned by a court for lack of jurisdiction and a date is fixed for its presentation in the proper court, the re-presentation of the petition is not considered a fresh filing. The proceedings should continue from the stage at which they were when the petition was returned.
• Good Faith Requirement: The judgment emphasizes that the exclusion of time under Section 14 is contingent upon the proceedings being pursued in good faith. If the court finds that the proceedings were initiated in the wrong court deliberately or malafide, the benefit of Section 14 may not be available.
• Limitation Period: The judgment reiterates that the limitation period for challenging an arbitral award under Section 34 of the Arbitration Act is strict, and Section 5 of the Limitation Act does not apply to such proceedings. However, the court has clarified that Section 14 of the Limitation Act is applicable.
• Procedural Clarity: The judgment provides procedural clarity on how to deal with situations where a petition is initially filed in the wrong court due to a jurisdictional error.
• Substantial Justice: The judgment underscores that the rules of limitation should not be used to foreclose the rights of parties. The court emphasized the need to advance substantial justice while interpreting and applying the provisions of the Limitation Act.