Maintainability of an Appeal u/s 37(1)(c) of the Arbitration and Conciliation Act

A limited right of appeal has been granted under Sec. 37 of the Arbitration and Conciliation Act 1996, but the Court is not liable to further limit such right by excluding appeals that are provided for by the Act.

What is the provision under Section 34 of the Arbitration and Conciliation Act?

Recently, a 3-judge bench of the Supreme Court comprising of Justices RF Nariman, Navin Sinha and KM Joseph, held that an appeal under section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (Act) would be maintainable against an order refusing to condone delay in filing an application under section 34 of the Arbitration Act, 1996 to set aside an award.

The provision under Section 34 of the Act refers to the grounds to challenge the arbitral award made under Sec. 31 of the Act. The challenge to the award is subject to a limitation period of three months from the receipt of the award.

The extension of the limitation period can be awarded for 30 days if the applicant is able to show cause for the delay in filing the petition.

Section 34 provides for the calculation of the limitation period from the date of receipt of the award, however, it is important to note that there is a gap between delivery and receipt of the Act.

There is a limitation of time under Sec.34 following the provision of Sec. 34(3) of the Act an application can be made for setting aside an award that shall not be accepted by Court if it is made after three months from the date on which the applicant had received the arbitral award.

The proviso to this Section also says that only if the Court is satisfied with the reasons for the inability make an application within the prescribed time, then only the matter shall be accepted.

What are the conditions to file an application under Section 34 of the Arbitration and Conciliation Act?

To support the order refusing to the condonation of delay amounting to refusal to set aside the award under Sec. 34 of the Act, the Supreme Court has observed that in the context of the "effect test", the order refusing the parties to arbitration has the effect of applying brakes to the entire arbitration proceeding. Therefore, an appeal is provided only against order refusing to refer parties to arbitration, and not against order referring parties to arbitration, which will not bring the arbitration proceeding to a halt. Interestingly, an appeal is provided against orders refusing to refer parties to arbitration under section 8, both, on the preliminary ground- by not annexing the original arbitration agreement, or a duly certified copy- and on merits.

Also, where the effect of the order is to bring arbitration proceeding to an end, an appeal is provided under section 37(2)(a) of the Act.

Therefore, it is clear that legislature intended to provide appeal under section 37 of the Act against such order which prevents the arbitration proceeding or against such order which stops the aggrieved party to challenge the arbitral award by way of an application under section 34 of the Act.

Moreover, the legislature did not envisage providing an appeal under section 37 against the order which does not bring the arbitration proceeding to a halt. In such cases, the remedy is not extinguished, but merely deferred till an award is made and challenged under section 34 of the Act.

Can an appeal be filed when a party is aggrieved by an order refusing condonation of delay in filing an application under Section 34 of the Arbitration and Conciliation Act 1996?

Interpreting Section 37(1)(c), the Supreme Court noted that the expression "setting aside or refusing to set aside an arbitral award" under Section 34 is not limited to grounds being made out under section 34(2).

As per section 34(1) of the Act, an application made to set aside an award has to be in accordance with both sub-sections (2) and (3). Such application would not only have to be within the limitation period prescribed by sub-section (3) for setting aside such award. It is necessary to0 note that the application itself must be within time, and if not within a period of three months, must be accompanied with an application for condonation of delay, provided it is within a further period of 30 days.

Further, so far as section 37(1)(a) is concerned, where a party is referred to arbitration under section 8, no appeal lies. This is for the reason that the effect of such order is that the parties must go to arbitration, it is left to the learned Arbitrator to decide preliminary points under section 16 of the Act, which then becomes the subject matter of appeal under section 37(2)(a) or the subject matter of grounds to set aside under section 34 an arbitral award ultimately made, depending upon whether the preliminary points are accepted or rejected by the arbitrator.