Section 34(3) of the Arbitration Act and Limitation
Written by Gautam // January 7, 2011 // Corporate Law and Business // 19 Comments
Recently, the Delhi High Court was called upon to adjudicate upon a few interesting issues arising out of the interpretation of Section 34 of the Arbitration Act in general, and its relationship with the Limitation Act in particular. In Union of India v. Microwave Communication Ltd., the question before the Court was whether, in the event that the specified period for filing an application for setting aside an arbitral award under S. 34 has expired, S. 4 of the Limitation Act can be applied to nevertheless render the application admissible.
S. 34(3) of the Arbitration Act 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
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.”
S. 4 of the Limitation Act states:
When the prescribed period for any suit, appeal or application expires on a day when the court is closed, the suit, appeal or application may be instituted, preferred or made on the day when the court reopens.
In order to assess the applicability of S. 4 of the Limitation Act notwithstanding the specified period under S. 34(3), the Court was called upon to consider the 2001 decision of the Apex Court in Union of India v. M/s Popular Construction Company. In that case, it was held that S. 5 of the Limitation Act, which provided for a general extension of the limitation period provided that sufficient cause was shown to the Court, could not be used to save an application that was in breach of both the three-month period under S. 34(3), as well as the extended time period of thirty days under the proviso. While admittedly the Supreme Court’s decision was limited to S. 5, its observations were “so sweeping that most of the High Courts treated it as sacrosanct and took the view that… S. 4 [was] not applicable” to an issue involving S. 34(3). Thus, the term “and not thereafter” at the end of the proviso to S. 34(3) was interpreted by the High Courts to mean that the specified time under S. 34 was “absolute and unextendable”.
In 2008, however, the Supreme Court in Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Dep., noted that the provisions of S. 5 were impliedly excluded by the proviso to S. 34(3). This is because S. 5 provides for a general extension of the limitation period where sufficient cause is shown, while S. 34 specifically provides for a thirty-day extension for the very same reason. In accordance with the well accepted principle of specific statutes overriding general ones in cases of overlap, S. 34(3) would therefore exclude the operation of S. 5. This, in effect, was the holding of the Court.
The Delhi High Court then noted that, in contradistinction with the object of S. 5, S. 4 “does not enlarge the period of limitation but it only enables the party to file any suit, application, etc. on the reopening day of the Court if the Court is closed on a day when limitation expires.” As there was no overlap of any sort between S. 4 and S. 34(3) – indeed, the two dealt with completely different issues – the Court held that S. 4 was not excluded, and would continue to apply in cases where there was neither any inaction, nor a lack of due diligence on the part of the applicant. Interestingly, the Court also held that S. 4 was applicable even to situations where the proviso to S. 34(3) was attracted – i.e., the thirty-day condonation period. In the present case, bureaucratic delays between departments were the main reasons for the delay, and were therefore held to constitute sufficient cause for attracting both the thirty-day extension period, as well as consequently necessitating the application of S. 4.
The Court also had occasion to deal with another point of interest, i.e., the meaning of “the party… [who had] received the arbitral award” under S. 34(3). Under S. 2(h) of the Arbitration Act, the word “party” means a “party to an arbitration agreement”. An argument was raised that, in light of a recent Supreme Court decision (Teccho Trichy Engineers), “in the context of a huge organization like Railways the copy of the Award has to be received by the person who has knowledge of the proceedings and who would be the best person to understand and appreciate the arbitral Award and also to take a decision in the matter of moving an application.” Rejecting this contention, the Court held that supervision of the day-to-day working under the contract, as well as being in-charge of all correspondence thereto was irrelevant in determining who the “party” to the arbitration agreement was. Rather, it was the signatory to the arbitration agreement who was deemed to be the requisite party, as defined under the Arbitration Act. While that was the determining factor, other aspects such as the party in whose name the application for setting aside the arbitral award was filed, or a subsequent appeal, were also relevant aspects that needed to be taken into account.
In my submission, the Court is correct on both counts. It correctly identified that the rationale of the Popular Construction Company was not the overriding or absolute nature of S. 34(3), but rather, the fact that it excluded the operation of S. 5 due to their overlapping nature. As S. 4 and S. 34(3) deal with two very different types of exceptions to limitations, it is reasonable to give both their full effect. Secondly, while the argument that an effectual, or purposive interpretation should be given to the word “party”, it must be remembered that “party” is a term of art that has a specific legal definition. The Court was bound both by the provisions of the Arbitration Act as well as Teccho Trichy Engineers in rejecting the contention.
19 Comments on "Section 34(3) of the Arbitration Act and Limitation"
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A very well written article very lucid and clear. The differentiation has been cleraly put.
Sory typo mistake. it should have been ‘clearly’
At the end the conclusion should have been given too. whether the Limitation Act is applicable or not?
Neha, Obviously sec. 4 will only be applicable and not sec. 5 of limitation act. This whole article was all about the contradistinction between applicability of Sec. 4 which saves the litigants from rigours of 120 days maximum period. Therefore if the 120th day ends during vacation of the court, by providing him an opportunity to file it on 1st opening day. while sec. 5 could have enlarged the limitation period beyond 120 days for sufficient reasons. As it happens in usual appeal under C.P.C. and Cr.P.C. But S. 5 could not be made applicable to arbitration appeal in view of Sec. 34(3).
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