Case Note & Summary
The appellant, E-Square Leisure Pvt. Ltd., challenged an arbitral award dated 12 October 2011 passed by the Micro and Small Enterprises Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), directing payment to the respondent, K.K. Dani Consultants and Engineers Pvt. Ltd. The appellant received a copy of the award on 12 December 2011 and initially filed a writ petition (No. 1057 of 2012) before the Bombay High Court instead of an arbitration application under Section 34 of the Arbitration and Conciliation Act, 1996. The High Court, by order dated 7 March 2012, permitted withdrawal of the writ petition with liberty to file an arbitration petition, observing that time spent in the writ petition could be excluded under Section 14 of the Limitation Act, 1963 as per the Supreme Court's decision in State of Goa v. Western Builders. The appellant then filed an application under Section 34 before the District Judge on 9 April 2012, along with an application for condonation of delay of 23 days. The respondent opposed the condonation, arguing that under Section 19 of the MSMED Act, the application could not be entertained without depositing 75% of the award amount. The learned District Judge rejected the condonation application by order dated 1 August 2012, holding that the delay was not properly explained and that the appellant had not deposited the required amount. The appellant appealed under Section 37 of the Arbitration Act. The High Court allowed the appeal, setting aside the District Judge's order and remanding the matter for fresh consideration of the condonation application on merits, without being influenced by the pre-deposit requirement under Section 19 of the MSMED Act. The court held that the issue of pre-deposit is separate from the issue of limitation and condonation of delay, and that the District Judge erred in mixing the two. The court also noted that the appellant had acted bona fide by filing a writ petition and that the time spent therein could be excluded under Section 14 of the Limitation Act.
Headnote
A) Limitation Act - Section 14 - Exclusion of time of proceeding bona fide in court without jurisdiction - The appellant filed a writ petition challenging an arbitral award under the MSMED Act, which was withdrawn with liberty to file an arbitration petition. The Supreme Court in State of Goa v. Western Builders held that Section 14 of the Limitation Act applies to proceedings under the Arbitration and Conciliation Act, 1996. The time spent in prosecuting the writ petition bona fide is liable to be excluded. (Paras 5-7) B) Arbitration and Conciliation Act - Section 34 - Condonation of delay - The learned District Judge rejected the application for condonation of delay of 23 days on the ground that the appellant had not deposited 75% of the award amount as required under Section 19 of the MSMED Act. However, the issue of pre-deposit goes to the maintainability of the Section 34 application, not to the condonation of delay. The court ought to have considered the delay application on merits first. (Paras 8-10) C) Micro, Small and Medium Enterprises Development Act - Section 19 - Pre-deposit requirement - Section 19 of the MSMED Act provides that no application under Section 34 of the Arbitration Act shall be entertained unless the applicant deposits 75% of the awarded amount. This requirement is a condition precedent for entertaining the application, but does not bar the court from considering an application for condonation of delay. The District Judge erred in mixing the two issues. (Paras 8-10)
Issue of Consideration
Whether the time spent by the appellant in prosecuting a writ petition in good faith can be excluded under Section 14 of the Limitation Act, 1963 for the purpose of computing limitation under Section 34 of the Arbitration and Conciliation Act, 1996, and whether the learned District Judge erred in rejecting the application for condonation of delay.
Final Decision
The High Court allowed the appeal, set aside the impugned order dated 1 August 2012, and remanded the matter to the learned District Judge for fresh consideration of the application for condonation of delay on its own merits, without being influenced by the requirement of pre-deposit under Section 19 of the MSMED Act. The court directed that the application be decided afresh within four weeks from the date of receipt of the order.
Law Points
- Section 14 of Limitation Act applies to proceedings under Arbitration and Conciliation Act
- 1996
- time spent in bona fide writ proceedings can be excluded
- Section 19 of MSMED Act requires pre-deposit of 75% for entertaining Section 34 application
