S. 4 Limitation Act Can’t Be Invoked Using 30-Day Extension For Arbitration Appeals Filed Beyond 3-Months From Award

Summary:

[1]In the recent development, The Hon’ble Supreme Court of India comprising Justice Abhay S. Oka and Justice Pankaj Mithal dismissed the State of West Bengal’s appeal challenging Calcutta High Court’s decision that dismissed its petition under Section 34 of the Arbitration and Conciliation Act, 1996. The Supreme Court reiterated that if an arbitral award is challenged beyond the three-month limitation, the benefit of Section 4 of the Limitation Act will not be available. The Court held that the 30-day extension period mentioned in the proviso to Section 34(3) of the Arbitration and Conciliation Act 1996 cannot be included in the “prescribed period” in Section 4 of the Limitation Act 1963. Section 4 of the Limitation Act provides relief in case the court is closed on the day of expiry of the “prescribed period” for instituting a suit, appeal or application.

Facts:

The State of West Bengal appointed the Respondent as a contractor for the construction of a bridge. As there was a dispute between the parties, the respondent invoked the arbitration clause in the contract, and a sole arbitrator was appointed. On 30th June 2022, the Arbitral Tribunal passed an award directing the appellants to pay a sum of Rs.2,11,67,054.00 (Two Crores Eleven Lakhs Sixty-seven Thousand Fifty-four Rupees Only) to the Respondent with interest thereon, as directed. The Appellants filed a Petition under Section 34 of the Arbitration Act, to challenge the award. The last day of the 30-day extension was a holiday and the State filed the appeal on the next working day. The High Court dismissed the petition under Section 34 of the Arbitration Act filed by the appellants on the ground of bar of limitation. The High Court held that the period of limitation for filing a petition under Section 34 expired on 30th September 2022. Therefore, the appellants are not entitled to the benefit of Section 4 of the Limitation Act. Being aggrieved by the view taken by the High Court, the State filed an appeal in the Supreme Court.

Issue:

Whether S. 4 Limitation Act can be invoked using 30-Day Extension for Arbitration Appeals filed beyond 3-Months from the Award?

Judgement:

The Hon’ble Supreme Court observed that if an arbitral award is challenged beyond the three-month limitation, the benefit of section 4 of the Limitation Act will not be available. The Hon’ble Court held that the 30-day extension period mentioned in the proviso to Section 34(3) of the Arbitration and Conciliation Act 1996 cannot be included in the “prescribed period” in Section 4 of the Limitation Act 1963. Section 4 of the Limitation Act provides relief in case the court is closed on the day of expiry of the “prescribed period” for instituting a suit, appeal or application.

Additionally, as per Section 12(1) of the Limitation Act, the day from which the limitation period is to be reckoned must be excluded. In this case, the period of limitation for filing a petition under Section 34 will have to be reckoned from 30th June 2022, when the Appellants received the Award. In view of Section 12(1) of the Limitation Act, 30th June 2022 will have to be excluded while computing the limitation period. The court also mentioned that “We may note here that Section 43 of the Arbitration Act provides that the Limitation Act shall apply to the arbitrations as it applies to proceedings in the Court”. Additionally, the court observed that the consistent view taken by this Court right from the decision in the case of Union of India v. Popular Construction Co. is that given the language used in proviso to subsection (3) of Section 34 of the Arbitration Act, the applicability of Section 5 of the Limitation Act to the Petition under Section 34 of the Arbitration Act has been excluded. Additionally, In the case of Assam Urban Water Supply & Sewerage Board v. Subash Projects & Mktg. Ltd., in paragraphs nos. 13 and 14, the law has been laid down on the subject of the period of 30 days mentioned in the proviso that follows subsection (3) of Section 34 of the 1996 Act is not the “period of limitation” and, therefore, not the “prescribed period” for the purposes of making the application for setting aside the arbitral award.

Analysis:

The Hon’ble Supreme court verdict specified that S. 4 Limitation Act can’t be invoked using 30-Day Extension for Arbitration Appeals filed beyond 3-months from Award. The maximum extension period of 30 days allowed by Section 34(3). Thus, Section 4 of the Limitation Act did not apply as the prescribed period ended before the vacation commenced.

[1]  https://webapi.sci.gov.in/supremecourt/2023/25627/25627_2023_6_1507_53522_Judgement_08-Jul-2024.pdf

BEFORE THE HON’BLE SUPREME COURT

State of West Bengal & Ors. v. Rajpath Contractors and Engineers Ltd.

CIVIL APPEAL NO. 7426 OF 2023

Judgement dated 8th July, 2024