Case Note & Summary
The appellant, Mahindra and Mahindra Financial Services Ltd., had provided a loan to the respondent, Maheshbhai Tinabhai Rathod, for purchase of tractors under an agreement dated 24.10.2005. Disputes arose and were referred to arbitration. The arbitrator passed an award on 28.02.2011 in favor of the appellant, dispatching copies to both parties by registered post on 15.03.2011. The respondent refused to accept the postal article, which was endorsed by the postal authority on 23.03.2011. The appellant filed an execution petition on 27.06.2011 to enforce the award. The respondent received notice of the execution petition on 15.11.2011 and thereafter filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 on 04.01.2012 to set aside the award, along with applications under Section 5 of the Limitation Act seeking condonation of delay of 185 days. The learned Single Judge declined to condone the delay, noting that the respondent had refused to accept the registered post containing the award. The respondent appealed to the Division Bench of the Bombay High Court, which condoned the delay in a cryptic order. The appellant appealed to the Supreme Court. The Supreme Court considered whether the petition under Section 34 was within limitation and whether Section 5 of the Limitation Act could be applied. The Court held that Section 34(3) provides a period of three months from receipt of the award, extendable by a further thirty days only, and the phrase 'but not thereafter' is mandatory, excluding the application of Section 5 of the Limitation Act. The Court relied on Union of India v. Popular Construction Co., State of H.P. v. Himachal Techno Engineers, P. Radha Bai v. P. Ashok Kumar, and Chintels India Limited v. Bhayana Biuilders Private Limited. The Court found that the respondent had refused to accept the award sent by registered post, and thus the limitation period started from the date of refusal. The petition filed on 04.01.2012 was beyond the prescribed period of three months plus thirty days, and the delay could not be condoned. The Supreme Court set aside the order of the Division Bench and dismissed the respondent's petition under Section 34 as barred by time.
Headnote
A) Arbitration Law - Limitation for Setting Aside Award - Section 34(3) of Arbitration and Conciliation Act, 1996 - The period for filing an application to set aside an arbitral award is three months from receipt of award, extendable by a further thirty days only if sufficient cause is shown, but not thereafter. The phrase 'but not thereafter' is mandatory and excludes application of Section 5 of Limitation Act. (Paras 6-7)
B) Arbitration Law - Condonation of Delay - Section 5 of Limitation Act, 1963 - Section 5 of the Limitation Act is not applicable to proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, as the proviso to Section 34(3) is a self-contained code for condonation of delay with an outer limit of 30 days. Delay beyond 120 days (3 months + 30 days) cannot be condoned even if sufficient cause is shown. (Paras 7-7.3)
C) Arbitration Law - Knowledge of Award - Section 34(3) of Arbitration and Conciliation Act, 1996 - The limitation period runs from the date the party receives the arbitral award, not from the date of knowledge. Refusal to accept registered post containing the award amounts to deemed service. (Paras 8-9)
Issue of Consideration
Whether the petition under Section 34 of the Arbitration and Conciliation Act, 1996 was within limitation; if not, whether delay is condonable under Section 5 of the Limitation Act; whether the Division Bench was justified in condoning delay by applying Section 5 of Limitation Act to a proceeding under Section 34(3) of the Act.
Final Decision
Appeals allowed. Order dated 24.09.2012 passed by the Division Bench of the Bombay High Court is set aside. Consequently, the petitions filed by the respondent under Section 34 of the Arbitration and Conciliation Act, 1996 are dismissed as barred by time.
Law Points
- Limitation period for setting aside arbitral award is absolute
- Section 5 of Limitation Act not applicable to Section 34(3) of Arbitration and Conciliation Act
- 1996
- delay beyond 30 days cannot be condoned
- phrase 'but not thereafter' is mandatory
Case Details
2021 LawText (SC) (12) 24
Civil Appeal No. 11477 of 2014 with Civil Appeal No. 11478 of 2014
Mr. Prashant Kumar for appellant, Mr. V.N. Raghupathy for respondents
Mahindra and Mahindra Financial Services Ltd.
Maheshbhai Tinabhai Rathod & Ors.
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Nature of Litigation
Civil appeals against order of Division Bench of Bombay High Court condoning delay in filing petition under Section 34 of Arbitration and Conciliation Act, 1996 to set aside arbitral award.
Remedy Sought
Appellant sought setting aside of High Court order condoning delay and dismissal of respondent's Section 34 petition as barred by time.
Filing Reason
Respondent filed petition under Section 34 of Arbitration Act to set aside arbitral award dated 28.02.2011, with delay of 185 days, seeking condonation under Section 5 of Limitation Act.
Previous Decisions
Learned Single Judge of Bombay High Court declined to condone delay; Division Bench allowed appeal and condoned delay.
Issues
Whether the petition under Section 34 of the Arbitration and Conciliation Act, 1996 was filed within the period of limitation prescribed under Section 34(3)?
Whether the delay in filing the Section 34 petition can be condoned by applying Section 5 of the Limitation Act?
Whether the Division Bench of the High Court was justified in condoning the delay beyond the extended period of 30 days under the proviso to Section 34(3)?
Submissions/Arguments
Appellant argued that the award was dispatched on 15.03.2011 by registered post and respondent refused to accept, thus deemed service; petition filed on 04.01.2012 was beyond 3 months plus 30 days; Section 5 of Limitation Act not applicable; Division Bench order was against statutory provision and Supreme Court precedents.
Respondent contended that they had knowledge of award only on 15.11.2011 when summons from execution court was received; delay was due to lack of knowledge; delay should be condoned under Section 5 of Limitation Act.
Ratio Decidendi
The period of limitation for filing an application to set aside an arbitral award under Section 34(3) of the Arbitration and Conciliation Act, 1996 is three months from receipt of the award, extendable by a further thirty days only if sufficient cause is shown, but not thereafter. The phrase 'but not thereafter' is mandatory and expressly excludes the application of Section 5 of the Limitation Act. Delay beyond the prescribed period of three months plus thirty days cannot be condoned, even if sufficient cause is shown.
Judgment Excerpts
Section 34 (3): An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award... Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
In Union of India vs. Popular Construction Co. (2001) 8 SCC 470 it has been held... the crucial words are 'but not thereafter' used in the proviso to subsection (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act.
The same view was taken by this Court in P. Radha Bai vs. P. Ashok Kumar (2019) 13 SCC 445 wherein this Court held... the use of the phrase 'but not thereafter' shows that the 120 days' period is the outer boundary for challenging an award.
Procedural History
Arbitral award dated 28.02.2011 was passed in favor of appellant. Appellant filed execution petition on 27.06.2011. Respondent filed petition under Section 34 of Arbitration Act on 04.01.2012 with delay of 185 days, along with applications for condonation of delay under Section 5 of Limitation Act. Learned Single Judge of Bombay High Court dismissed the condonation application on merits. Respondent appealed to Division Bench, which allowed the appeal and condoned the delay on 24.09.2012. Appellant filed civil appeals in Supreme Court against the Division Bench order.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34, Section 34(3), Section 5, Section 33, Section 36
- Limitation Act, 1963: Section 5, Section 29(2)
