Supreme Court Highlights Strict Limitation Provisions Hindering Arbitration Appeals, Calls For Parliamentary Action

Summary:

[1]The Hon’ble Supreme Court expressed concern over the rigid application of limitation laws in arbitration cases, noting that such strictness might undermine the limited remedy available under Section 34 of the Arbitration and Conciliation Act, 1996, to challenge arbitral awards. Though the Court dismissed an appeal against a Delhi High Court judgment that rejected a challenge to an arbitral award as time-barred, it emphasized that provisions of Limitation Act should facilitate the exercise of remedies, not restrict them. It suggested legislative intervention to address these procedural constraints.

Facts:

• The appellants received a scanned copy of the arbitral award on 04.02.2022 and a signed hard copy on 14.02.2022, from which the limitation period started.
• The 3-month limitation period under Section 34(3) of the Arbitration and Conciliation Act expired on 29.05.2022.
• The 30-day condonable period expired on 28.06.2022, during the High Court’s summer vacation (04.06.2022 to 03.07.2022).
• The appellants filed the petition under Section 34, along with an application for condonation of delay, on 04.07.2022, the date the court reopened after vacation.
• Both the single judge under Section 34 and the division bench under Section 37 dismissed the petition as barred by limitation.

Issues:

1. Do the provisions of the Limitation Act apply to Section 34 proceedings, and to what extent?
2. Does Section 4 of the Limitation Act apply to Section 34(3) as per an analysis of the statutory scheme as well as precedents of this Court on the issue? If Section 4 applies, 13 does it apply only to the 3-month limitation period or also the 30-day condonable period?

Judgment:

1. Limitation Period under Section 34(3)

The Supreme Court reiterated that the limitation period to file an application for setting aside an arbitral award under Section 34(3) of the Arbitration and Conciliation Act is three months, with a maximum 30-day extension for sufficient cause. Beyond this, no further extension is permitted.

• Applicability of Section 4 of the Limitation Act

Section 4 of the Limitation Act, which allows filings on the next working day if the prescribed period ends on a holiday, applies only to the initial three-month limitation period. It does not extend to the additional 30-day condonable period provided under Section 34(3).

• Precedent Analysis

The Court upheld previous judgments in Assam Urban Water Supply v. Subhash Projects, (2012) 2 SCC 624 and Bhimashankar Sahakari Sakkare Karkhane Niyamita, (2023) 8 SCC 453, affirming that the 30-day extension under Section 34(3) is absolute and cannot be further extended under any provision.

• Exclusion of Other Legal Provisions

The Court clarified that provisions like Section 10 of the General Clauses Act (GCA) do not apply to proceedings under the Act. The scheme of the Act expressly limits the applicability of the Limitation Act and other general laws to ensure procedural strictness.

• Outcome of the Case

Since the appellant’s application to set aside the arbitral award was filed after the extended 30-day period (28.06.2022) and the court holiday did not permit further extension, the application was deemed time-barred. The appeal was dismissed accordingly.

• Recommendation for Legislative Action

The Court recognized that the rigid interpretation of limitation laws may lead to hardships and recommended that Parliament should revisit the provisions to balance procedural strictness with fairness.

Analysis:

The Supreme Court’s judgment reinforces the strict time-bound nature of Section 34(3) proceedings under the A&C Act. By restricting the applicability of Section 4 of the Limitation Act to only the three-month limitation period, the Court underscores the legislative intent to prioritize finality in arbitral awards and minimize delays in dispute resolution. By recommending legislative intervention for relaxing the limitation period in S. 34 applications, the Court signals the need for a balanced framework that accommodates exceptional circumstances without diluting the Act’s objectives. This judgment serves as an important precedent on the interplay between the Limitation Act and the A&C Act, emphasizing the importance of adhering to procedural timelines while also advocating for reforms to address systemic challenges.

[1]  https://api.sci.gov.in/supremecourt/2024/15925/15925_2024_12_1502_58501_Judgement_10-Jan-2025.pdf

BEFORE THE HON’BLE SUPREME COURT OF INDIA

CIVIL APPEAL NO. 336 of 2025

My Preferred Transformation & Hospitality Pvt. Ltd. & Anr. v. M/S Faridabad Implements Pvt. Ltd.

Judgment Dated: January 10, 2025