“Sufficient Cause" Under Section 5 Of The Limitation Act, 1963 Is Not Elastic; No Vested Right With Party To Have Delay Condoned

Introduction

The High Court of Allahabad in the matter of National Highways Authority of India & Ors Vs. Sampata Devi and Ors. [2023 SCC Online All 2463] has reiterated that the expression ''sufficient cause" in an application for condonation of delay filed under Section 5 of the Limitation Act, 1963 (“Limitation Act”) is not elastic enough to cover long delays and merely because sufficient cause has been made out, there is no right to have such delay condoned.

In the present case, the appeals under Section 37 of the Arbitration & Conciliation Act, 1996 (“Arbitration Act”) were filed by National Highways Authority of India (“NHAI” or “Appellant”) beyond the expiry of the limitation period wherein the Appellant had challenged the judgment and order passed by the learned Additional District and Sessions Judge, Barabanki in an application under Section 34 of the Arbitration Act against the award dated 20.05.2015 (“Award”). The said Award had been passed in connection with compensation granted to owners for land acquisition for the construction of NH-28 from Km. 9 to Km. 360.57 (Lucknow to U.P Bihar Border) (“Project”) to the various land owners under the National Highways Act, 1956 (“NH Act”).

Brief Facts

The Appellant had issued a notification under Section 3A of the NH Act for acquisition of land for the construction of the Project. After disposing the objections under Section 3C of the NH Act, a notification under Section 3D was issued and thereafter, vide order dated 24.03.2005, the Prescribed Authority (Special Land Acquisition Officer, Barabanki) proceeded to determine the compensation in terms of Section 3(g) of the NH Act. The entire amount of compensation as awarded was deposited with the said authority by the Appellant under Section 3(H) of the NH Act and all the owners accepted the compensation without protest.

Subsequently, the Respondents filed an arbitration application under Section 3(g)(5) of the NH Act, after a lapse of about five years, on the ground that land was of commercial use and as such the compensation must be enhanced. The Appellant objected to such application, stating that the arbitration application was highly belated and that the determination of compensation by the Prescribed Authority was in accordance with law.

However, the learned arbitrator/the District Magistrate appointed by the Central Government, decided the arbitration application against the Appellant and passed the Award dated 20.05.20 l 5. The Appellant challenged the Award under Section 34 of the Arbitration Act as being contradictory to the fundamental policy of Indian Law and being patently illegal. However, the objection filed by the Appellant under Section 34 was dismissed by the Additional District Judge, which had been sought to be challenged in the present case.

Arguments on behalf of the Parties

The Counsel on behalf of the Appellant argues that no limitation period was provided under Section 37 of the Arbitration Act, however as per Section 43, the Limitation Act would apply to arbitration as it applied to proceedings in court. Moreover, there had been no delay or deliberate latches on part of the Appellant in filing the appeals as they were filed immediately upon approval from the Regional Office of NHAI at Lucknow. Placing reliance on various judgements¹, the Counsel for the Appellant submitted that when substantial justice and technical considerations were pitted against each other, then the cause of substantial justice deserved to be preferred, for the other side could not claim to have vested right in injustice being done because of a non-deliberate delay and accordingly, prayed for condonation of delay in filing the appeals as it was not deliberate. The learned Counsel also placed reliance on the judgements of the Apex Court in State of West Bengal Vs. Somdeb Bandyopadhyay² and Ashwani Kumar Dhingra Vs. State of Punjab³.

Per contra, the Counsel on behalf of the Respondents argued that unlike Section 34 of the Arbitration Act, Section 37 did not include Section 5 of the Limitation Act, as a consequence of which even if the period of 90 days was over, and if an application had been made under Section 5 of the Limitation Act, it should be decided on merits, notwithstanding the length of the delay. He argued that the appeals be dismissed on account that the delays in filing of appeals were deliberate on part of the Appellant and that they had been negligent in filing the appeals. Moreover, the entire affidavit in support of application for condonation of delay did not show any reasonable or satisfactory or sufficient cause which prevented them from filing the appeals within the limitation period.

The learned Counsel placed reliance on N.V. International Vs. State of Assam⁴ (“N.V. International”) to argue that in this case, the Apex Court had placed reliance on the decision of Union of India Vs. Virendra Construction Ltd.⁵ (“Virendra Constructions”) and had dismissed the appeal on the ground that it was filed beyond 120 days and accordingly, prayed for dismissal of the appeal on ground of latches.

Analysis and Findings of the Hon’ble High Court

The Court first analysed the judgement of Nusli Neville Wadia Vs. Ivory Properties⁶ wherein the issue before the Apex Court was whether the issue of limitation could be determined as a preliminary issue under Order XIV Rule 2 of the Code of Civil Procedure, 1908 or not. It was held in this case that if the issue of limitation was based on an admitted fact, it could be decided as a preliminary issue under Order XIV Rule 2 (b) of the Code of Civil Procedure, 1908, and if the facts surrounding the issue of limitation were disputed, it could not be decided as a preliminary issue. Based on the aforesaid, the Hon’ble Court observed that the facts surrounding the issue of limitation in the present case were not disputed.

The Court then observed that as far as the limitation for filing the present appeals were concerned, there had been no endeavour by the Appellant to explain the cause of delay and only a cryptic application had been sought to be filed, which was neither satisfactory nor did it come within the periphery of “sufficient cause” as had been propounded by the Apex Court in a catena of judgements. Further, the Court held that none of the judgements relied upon by the Appellants could come to their rescue.

While explaining the legal position around Section 37 of the Act, the Court observed that the Arbitration Act does not provide for any specific limitation for filing such appeals, however Section 43 of the Act provides that the Limitation Act shall apply to arbitrations as it applies to proceedings in court. Articles 116 and 117 of the Schedule of the Limitation Act provide for a limitation period of 90 days for filing an appeal from any other Court to a High Court and a period of 30 days for filing an intra-Court appeal, i.e., order passed by a Single Bench to the Division Bench, provided the law provides for such an appeal before the Division Bench.

The Court further relied upon the judgement of the Apex Court in the case of Consolidated Engineering Enterprises Vs. Irrigation Department⁷ (“Consolidated Engg.”) to hold that the period of limitation for preferring an appeal under Section 37 of the Arbitration Act ought to be 90 days as per Article 116 of the Schedule of the Limitation Act. However, the Court noted that with the advent of the Commercial Courts Act, 2015, Commercial Courts have the power to decide all applications and appeals which arise out of arbitrations other than international commercial arbitrations, where the subject matter is a commercial dispute of the specified value. Further, the proviso to Section 13(1A) of the Commercial Courts Act, 2015 specifically provides that an appeal under Section 37 of the Act would lie before the Commercial Court and such appeal must be filed within 60 days. Based on the aforesaid position of law, the Court observed that the limitation for preferring of an appeal under Section 37 of the Arbitration Act, in view of the Commercial Court Act, is 60 days only.

The Court then delved into the judgment of Consolidated Engg. (supra) wherein the Apex Court had held that the limitation period under Section 37 of the Arbitration Act ought to be 120 days. Since the Section 34 application had to be filed within a maximum period of 120 days including a grace period of 30 days, therefore, an appeal filed from the same should also be covered by the same drill. Accordingly, the Apex Court did not condone a delay of 142 days in filing the appeal under Section 37 of the Arbitration Act. The Court also referred to N. V. International (supra.), wherein the Apex Court had refused to condone a delay of 189 days from the 90 days in filing an appeal under Section 37 of the Arbitration Act.

Subsequently, the Court noted that both these judgments were considered b ya three-judge bench of the Apex Court in Government of Maharashtra Vs. Borse Brothers Engineers & Contractors Pvt. Ltd.⁸ (“Borse Brothers Engineers & Contractors”), wherein the Apex Court had relied upon the judgement of Consolidated Engg. (supra.) and held that if the specified value of the subject matter was INR 3,00,000.00 or more, then an appeal under Section 37 of the Arbitration Act must be filed within 60 days from the date of the order as per Section 13 (1A) of the Commercial Courts Act, 2015.In this case, the Apex Court had overruled the judgement of N.V. International (supra.) and held that Section 37 of the Arbitration Act, when read with Section 43 thereof and Section 29(2) of the Limitation Act, made it clear that Section 5 of the Limitation Act would apply to the appeals filed under Section 37 of the Arbitration Act and in holding that applicability, the Apex Court noted with affirmative that Section 13 (1A) of the Commercial Courts Act, 2015 did not contain any provision akin to Section 34(3) of the Act and merely provided for a limitation period of 60 days from the date of the judgment or order appealed against, without going into whether delay beyond this period could or could not be condoned. The Apex Court had further observed that the expression “sufficient cause” under Section 5 of the Limitation Act was not elastic enough to cover long delays and merely because sufficient cause had been made out, there was no right to have such delay condoned. The Apex Court further held that only short delay could be condoned by way of an exception and not by the way of rule, and that too, only when the party acted in a bona fide manner and not negligently. Further, the Apex Court went a step ahead and also observed that be it a private party or a public sector company, the same yardstick would be applicable for condonation of delay, and no special treatment could be afforded merely because the government was involved.

Therefore, relying on the aforesaid observations of the Apex Court, the Court found that there was delay in filing of the appeal beyond 60 days' time as provided under Section 13 (1) A of the Commercial Courts Act, 2015.There was no explanation provided in the supporting affidavit of the application for condonation of delay. Neither any record nor averment had been made as to what ailment and as to how the learned Counsel or the Appellant had been trying to diligently pursue the filing of the appeal in question. The Court held that in the facts of the present bunch of appeals, no “sufficient cause” or rather no cause had been made out by the Appellant to condone the delay in filing of the appeals under Section 37 of the Arbitration Act.

Conclusion

In view of the judgement of the Apex Court in Borse Brothers Engineers & Contractors (supra.), the High Court held that the impugned order of the Additional District Judge was sought to be challenged by the Appellant by filing a belated appeal under Section 37 of the Arbitration Act beyond the permissible 60 days without any sufficient cause, hence, they were time barred and were accordingly dismissed. Consequently, the application for condonation of delay was also rejected and all appeals were dismissed on the point of limitation.

Analysis

The Courts have time and again emphasized on the importance of limitation in filing an application under Section 34 of the Arbitration Act and held that not a day beyond 120 days from the date of receipt of the Award can be condoned by the Court⁹.The need for adherence to timelines prescribed in a statute is the very essence of speedy disposal of matters, and the primary objective of the Arbitration and Conciliation Act, 1996 (as amended). In this regard, the same yardstick has to be applied to condonation of delay in cases where public sector companies are involved and they have been placed on equal footing as a private litigant.

A conjoint reading of Section 34(3) of the Act along with its proviso makes the position emphatically clear that challenge against an arbitral award beyond 4 months cannot be entertained, as the said claim is barred by limitation. Therefore, the remedy by way of challenge provided under Section 34 of the Act is time- barred and the challenge against dismissal of the original petition filed under Section 34 being time barred is liable to fail. Therefore, an appeal filed challenging dismissal of the delay petition filed beyond the period provided under Section 34(3) read with its proviso and the delay in filing the arbitration appeal cannot be condoned.¹⁰

While dealing with an application for condonation of delay in re-filing of a petition beyond the time prescribed under Section 34(3) of the Act, though the Court is empowered to condone delay beyond the extended period of limitation of three months and thirty days, it is requisite for the party seeking the condonation to show that despite his diligence, the rectification of defects and re-filing could not be carried out within the limitation period, for bonafide reasons beyond its control.¹¹ While three months is given as time for filing the objection as a matter of right, a concession of thirty more days is given but it is circumscribed by the condition that sufficient cause has to be shown.¹²

To this effect, recently, the Delhi High Court refused to condone delay beyond three months plus one month, especially when no reasonable explanation had been provided by the Petitioner.¹³ In another case¹⁴, it was held that the limitation period under Section 34 cannot be stretched by parties through dummy filings which cannot be construed as valid as they are non-est. The Court further observed that the object of providing a narrow limitation period under Section 34 was to ensure the expeditious enforcement of Arbitral Awards. If such dummy filings are legitimised, then the whole object of providing a strict limitation period is defeated.¹⁵ In another case before the Kerala High Court, it was held that “even after sufficient cause has been shown a party may not be entitled to the condonation of delay as a matter of right. The proof of a sufficient cause is a condition precedent for the exercise of the discretionary jurisdiction vested in the Court by Section 5. When sufficient cause is established the application for condonation of delay has to be dismissed on that ground alone. However, if sufficient cause is shown, then the Court has to enquire whether in its discretion it should condone the delay. In such circumstances, the Court considers all relevant facts especially diligence of the parties or its bona fides. However, the scope of enquiry while exercising the discretionary power after sufficient cause is shown would naturally be limited only to such facts as the Court may regard as relevant.”¹⁶

To sum up, the law has been crystallised that the requirement of the strict timeline has to be adhered to by the parties. In case there is a delay, cogent reasons have to be disclosed by the party for their inability to file the petition within a period prescribed under the statute, in order to ensure expeditious enforcement of arbitral awards and thus, non-adherence of the timelines would defeat the object and purpose of speedy resolution of disputes between parties, as envisaged in the scheme of arbitration law in India.

Disclaimer: This article was first published in the S&A Law Offices - 'Indian Legal Impetus' newsletter in May 2024.