Allahabad High Court Directs State's Principal Law Secretary To Take Steps To Prevent Arbitration Appeal Delays

Allahabad High Court Directs State's Principal Law Secretary To Take Steps To Prevent Arbitration Appeal Delays

The Allahabad High Court has instructed the Principal Secretary (Law), Uttar Pradesh to take measures to prevent delays in the State Government's filing of arbitration appeals beyond statutory limits. The court has mandated a report on actions taken within six months.

In a case concerning an appeal under Section 37 of the Arbitration & Conciliation Act, 1996, filed by the Government of Uttar Pradesh after a delay of 224 days—exceeding the statutory period of 120 days—Justice Shekhar B. Saraf emphasized that governmental entities should not receive preferential treatment in legal matters. The court underscored the importance of adhering strictly to statutory timelines, regardless of their status or resources. Additionally, the court ruled that bureaucratic and procedural delays cited by the government cannot justify exceeding statutory deadlines.

The Court observed that

“The government often cites bureaucratic and procedural delays as reasons for not filing an appeal within the prescribed time limits. While these reasons might seem compelling due to the complex and often cumbersome nature of governmental operations, the law applies to all parties in the same manner, and any delay by the government cannot be treated as special or condoned beyond what is permissible under the Act. This principle is crucial for maintaining the rule of law, ensuring equality before the law, and preserving the integrity and efficiency of the arbitration process.”

The State of Uttar Pradesh entered into an agreement with M/s Harish Chandra India Limited for certain works in the Chambal Dal Project, Pinahat Agra. Upon encountering a dispute, the parties proceeded to arbitration, resulting in an award of Rs. 67,42,240/- in favor of Harish Chandra India on 19th July 2009.

On 17th May 2010, the State challenged the award along with a condonation application for delay under Section 5 of the Limitation Act, 1963, read with Article 137. The District Judge, Agra, rejected the condonation application on 1st August 2012. Subsequently, the State filed an appeal under Section 37 of the Arbitration & Conciliation Act before the High Court on 13th March 2013.

The State argued that any delay was unintentional and procedural in nature, therefore warranting condonation.

The Court noted that the appeal under Section 37 was filed after the expiration of 120 days from the date of the District Judge's order.

In the case of N.V. International v. State of Assam, the Supreme Court held that any delay exceeding 120 days in filing an appeal under Section 37 of the Act cannot be condoned. Additionally, the Court referred to State of Maharashtra v. Borse Bros. Engineers & Contractors (P) Ltd., where it was held that delays of 90 days, 30 days, or 60 days may be condoned in exceptional circumstances.

Emphasizing arbitration as a swift and efficient method of dispute resolution, Justice Saraf stated that delays can only be excused upon showing sufficient cause and as a rare exception. The Court underscored that failure to adhere to arbitration timelines undermines trust in the process and disrupts business operations.

“The principle that delays in arbitration matters under the Act can only be condoned on sufficient cause and as an exception is rooted in the very essence of why arbitration is chosen as a method of dispute resolution. The need for timely resolution is paramount in arbitration, especially given its primary objective to provide a faster and more efficient alternative to traditional litigation.”

The Court noted that "sufficient cause," although not explicitly defined in the Act, pertains to valid reasons beyond a party's control that prevent timely action within prescribed limits. In assessing applications for condonation of delay, courts consider reasons provided, parties' conduct, nature of delay, whether it was controllable by the party, and its impact on the arbitration proceedings.

The Court emphasized that delays exceeding 120 days cannot be excused even with sufficient cause, upholding the principles of finality and efficiency inherent in the arbitration process. It underscored that strict timelines prevent arbitrations from resembling prolonged disputes typical in traditional litigation.

“The 90-day period, followed by a maximum 30-day extension for condonation of delay, is thus a carefully calibrated timeframe that balances the need for promptness with a limited degree of flexibility to accommodate genuine hardships.”

The Court upheld that due to a delay of 224 days in filing the appeal on behalf of the State Government, condonation was not permissible. It affirmed the District Judge, Agra's decision to reject the Section 34 application as time-barred.

Justice Saraf referenced his previous ruling in Esha Agarwal and Ors. v. Ram Niranjan Ruia, where he ruled that under Section 34 of the Arbitration Act, condonation of limitation cannot extend beyond 30 days after the expiration of three months from receiving the arbitral award.

Consequently, the State Government's appeal was dismissed on account of the delay.

In closing, the Court directed the State Government to establish a protocol to mitigate procedural delays in filing appeals under the Arbitration and Conciliation Act, 1996. It emphasized that leniency towards delays by the State Government would set an undesirable precedent, undermining statutory timelines.