Time Spent Before An Incompetent Court Excluded Under Section 14 Of The Limitation Act When Calculating The Limitation Period Under Section 34 Of The Arbitration Act: Delhi High Court

Summary:

[1]In the matter of the parties, Incite Homecare Products Pvt. Ltd. and M/S R.K. Swamy BBDO Pvt. Ltd. were involved in an arbitration. The arbitral award was challenged by initially filing an application under Section 34 of the Arbitration and Conciliation Act, 1996, before the Hon’ble High Court of Delhi. Upon realizing that the appropriate forum was the District Court, the petitioner withdrew the application from the High Court and subsequently filed it before the appropriate district court. The respondent contended that this application was time-barred under Section 34(3) of the Act. The District Judge dismissed the application as barred by limitation, leading the petitioner to appeal this decision.

Facts:

• A dispute arose between the parties and was handled through arbitration, indicating a pre-existing agreement between the parties to resolve the conflict through arbitration.
• Incite Homes (petitioner) sought to challenge an arbitral award favoring R.K. Swamy BBDO Pvt. Ltd. (respondent).
• The petitioner initially filed the application under Section 34 before a court that was later determined to lack the proper jurisdiction. Subsequently, the petitioner refiled the application in the appropriate court.
• The respondent argued that the application under Section 34(1) was time-barred, while the petitioner contended that the time spent in the wrong court should be excluded under Section 14 of the Limitation Act.

Issue:

1. Whether the time spent by the petitioner in prosecuting the application before the wrong court could be excluded under Section 14 of the Limitation Act, 1963, when calculating the limitation period for filing under Section 34 of the Arbitration Act.

Held:

The Hon’ble High Court of Delhi held that Section 14 of the Limitation Act is applicable to applications under Section 34(1) of the Arbitration Act. Therefore, the time spent in prosecuting the case before a court lacking jurisdiction can be excluded from the limitation period, provided the proceedings were pursued bona fide and with due diligence.

Directions:

Upon finding that the Petitioner had genuinely mistaken the proper forum and had not engaged in any dilatory tactics, the Hon’ble Court directed that the period spent before the wrong court be excluded from the limitation period under Section 34(1) of the Arbitration Act.

Analysis:

The ruling ensures that parties are not unfairly disadvantaged due to procedural errors, such as filing in the wrong court. It balances procedural rigor with fairness, ensuring that parties are not unduly penalized for honest mistakes while maintaining the integrity of the arbitration process.

[1] BEFORE THE HON’BLE HIGH COURT OF DELHI

M/S Incite Homecare Products Pvt. Ltd. vs. M/S R.K. Swamy BBDO Pvt. Ltd.

(ARBTN No. 286/2018)

Judgment Dated: January 18, 2025