Delhi High Court: Time From Filing Section 34 Petition To 2015 Amendment Excluded From Limitation Period For Arbitral Award Enforcement

Delhi High Court: Time From Filing Section 34 Petition To 2015 Amendment Excluded From Limitation Period For Arbitral Award Enforcement

The Delhi High Court bench, led by Justice Jasmeet Singh, ruled that the time period from the filing of a petition under Section 34 of the Arbitration Act until the 2015 amendment to the Act should be excluded when calculating the limitation period for enforcing an arbitral award. The court clarified that the period from filing the Section 34 application until the amendment of Section 36 is excluded from the limitation period.

The 2015 amendment to Section 36 of the Arbitration Act altered the enforceability of arbitral awards. Before the amendment, filing a petition under Section 34, which challenges the arbitral award, automatically stayed the enforcement of the award. Post-amendment, Section 36 specifies that filing an application under Section 34 does not automatically make the award unenforceable.

Section 34 permits a party to file an application to set aside the award on specific grounds, while Section 36 outlines the process through which an arbitral award is enforced as if it were a court decree.

Growth Techno Projects Limited (“Petitioner”), the decree holder, argued that Ishwar Industries Limited (“Respondent”), the judgment debtor, had not made any payments toward the arbitral award. Consequently, the petitioner approached the High Court under Section 36 of the Arbitration and Conciliation Act, 1996, seeking to compel the respondent to pay the awarded amount along with 12% interest per annum.

The judgment debtor contested the maintainability of the petition on multiple grounds. Firstly, it claimed the petition was barred by limitation, asserting that under Article 136 of the Limitation Act, 1963, the time period to seek execution of a decree is twelve years.

The judgment debtor further relied on the Supreme Court's judgments in Hindustan Construction Company Limited v. Union of India and Board of Control for Cricket in India v. Kochi Cricket Private Limited to argue that the 2015 amendment to Section 36 did not create a fresh period of limitation for pre-amendment awards. It maintained that the doctrine of merger does not apply, as the Section 34 petition was still pending, and contended that the enforcement petition should not be considered until the petition under Section 34 is resolved.

The Delhi High Court faced the issue of determining whether the limitation period for enforcing an arbitral award should commence from the date of the award's issuance or from the date of the amendment to Section 36 of the Arbitration and Conciliation Act in 2015.

Growth Techno Projects Limited (“Petitioner”), the decree holder, argued that Ishwar Industries Limited (“Respondent”), the judgment debtor, had failed to make payments toward the arbitral award. Consequently, the petitioner approached the High Court under Section 36 of the Arbitration and Conciliation Act, 1996, seeking to compel the respondent to pay the awarded amount along with 12% interest per annum. The judgment debtor contested the maintainability of the petition on the grounds of limitation, referencing Article 136 of the Limitation Act, 1963, which prescribes a twelve-year period for decree execution.

The High Court reviewed the legislative and judicial landscape, noting the pre-amendment Section 36, which, as interpreted by the Supreme Court in cases such as National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. and Fiza Developers and Inter Trade Private Ltd. v. Amci (India) Private Limited, resulted in an automatic stay on the enforcement of an arbitral award upon the filing of a Section 34 application. The 2015 amendment to Section 36 eliminated this automatic stay, specifying that the filing of a Section 34 application does not render the award unenforceable.

The High Court also noted the insertion of Section 26 through the Arbitration and Conciliation (Amendment) Act of 2015 and its subsequent interpretation by the Supreme Court in Kochi Cricket. The Supreme Court had determined that while the 2015 amendments were prospective, the amended Section 36 applied to Section 34 petitions filed prior to the amendment's commencement. The subsequent deletion of Section 26 and the insertion of Section 87 by the Arbitration and Conciliation (Amendment) Act of 2019 were struck down by the Supreme Court in Hindustan Construction, which found the changes arbitrary and violative of Article 14 of the Constitution.

In this context, the High Court observed that the judgment debtor had filed an objection under Section 34 on October 30, 2007. The award was thus unenforceable under the unamended Section 36 until the amendment took effect on October 23, 2015. Accordingly, the Court held that the decree holder was legally barred from enforcing the arbitral award before this date.

The High Court further supported its conclusion by referencing Section 15(1) of the Limitation Act, which excludes the period during which the execution of a decree was stayed by an injunction or order from the limitation period for executing the decree. Given that the enforceability of the arbitral award was stayed by the pre-amendment Section 36, the period from the filing of the Section 34 application until the amendment came into effect was excluded from the limitation period. Consequently, the limitation period for enforcing the arbitral award commenced on October 23, 2015.

The Court clarified that the 2015 amendment did not restart the limitation period for pre-2015 awards but merely removed the stay on their enforcement upon the filing of a Section 34 petition. The limitation period resumed on October 23, 2015, continuing rather than starting anew.

In conclusion, the High Court directed the judgment debtor to deposit a sum of Rs. 8,90,79,455/-, along with the awarded interest, with the Registrar General. This decision underscores the significance of legislative amendments and judicial interpretations in determining the enforceability and limitation periods of arbitral awards.