Appeal against refusal to condone delay under S.34 is maintainable under S.37(1)(c) of the Act: SC

Consequently, the question of law is answered by stating that an appeal under section 37(1)(c) of the Arbitration Act, 1996 would be maintainable against an order refusing to condone delay in filing an application under section 34 of the Arbitration Act, 1996 to set aside an award. (Para 37)

Chintels India Ltd. V/S Bhayana Builders Pvt. Ltd

Civil Appeal No. 4028 Of 2020

Decided on 11th February, 2021

Counsel for Appellants: Shri Rajshekhar Rao

Counsel for Respondents: Shri Mukul Rohatgi

A Three-Judge Bench of the Supreme Court consisting of Justice R. F. Nariman, Justice Navin Sinha and Justice K.M. Joseph in the present matter observed to maintainable an appeal against an order refusing to condone the delay in filing an application in an Arbitration matter .

This appeal arises out of a certificate issued under Article 133 read with Article 134A of the Constitution of India by the High Court of Delhi in the impugned judgment dated 04.12.2020. The question raised in this appeal is whether a learned single Judge’s order refusing to condone the Appellant’s delay in filing an application under section 34 of the Arbitration and Conciliation Act, 1996 is an appealable order under section 37(1)(c) of the said Act.

Learned Advocate appearing on behalf of the Appellant, has relied strongly upon the judgment of this Court in Essar Constructions v. N.P. Rama Krishna Reddy (2000) 6 SCC 94, which was a judgment delivered under section 39 of the Arbitration Act, 1940. He argued that: (i) Since section 39 of the 1940 Act is in pari materia with section 37 of the Arbitration Act, 1996, in that an appeal lies where a single Judge refuses to condone delay, resulting in an order refusing to set aside an arbitral award, the ratio of Essar Constructions (supra) would apply on all fours to the same provision contained in section 37. (ii) It is clear that refusal to condone delay would result in a refusal to set aside an award, an appeal against such order being maintainable under section 37 of the Arbitration Act, 1996. (iii) Strong reliance was placed upon the judgments of this Court in Chief Engineer of BPDP/REO Ranchi v. Scoot Wilson Kirpatrick India (P.) Ltd. (2006) 13 SCC 622 and Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2011) 8 SCC 333 to buttress his submission that section 39 of the 1940 Act was a pari materia provision to section 37 of the Arbitration Act, 1996.

Learned Senior Advocate appearing on behalf of the Respondent, strongly refuted the fact that section 37 of the Arbitration Act, 1996 is in pari materia with section 39 of the 1940 Act. According to him, section 39 of the 1940 Act is materially different and concerns itself with grounds that were made out under section 30 of the said Act, which grounds were completely different from the grounds that could be made out under section 34(2) and (2A) of the 1996 Act. He argued that (i) Section 37 needs to be interpreted on its own terms and that consequently, this Court’s judgment in Essar Constructions (supra) would not be applicable. He relied strongly upon section 5 of the Arbitration Act, 1996, by which it was statutorily made clear that judicial intervention is to be minimal in the arbitration process. (ii) That this object was reinforced first, by the non-obstante clause contained in section 37(1); and second, by the fact that the grounds of appeal contained in section 37 are exhaustive, and makes explicit that an appeal shall lie only from the following orders “and from no others”. (iii) The fact that the word “namely” makes it clear that it is only from the orders set out in section 37 that an appeal can be filed. He went on to argue that an appeal, being a creature of statute, has to be read as the statute provides without expanding any of the words used. (iv) That this Court did not go into the maintainability aspect at all, but ultimately dismissed the Civil Appeals on the ground that the District Judge, Nagpur had held that the period of delay being beyond four months, the court had no jurisdiction to entertain the application for condonation of delay or the application on merits under section 34 of the Arbitration Act, 1996.

Referring to section 37(1)(c) of the Act, the Court observed:

A literal reading of the provision would show that a refusal to set aside an arbitral award as delay has not been condoned under sub-section (3) of section 34 would certainly fall within section 37(1)(c). The aforesaid reasoning is strengthened by the fact that under section 37(2)(a), an appeal lies when a plea referred to in sub-section (2) or (3) of section 16 is accepted. (Para 9)

Distinguishing the [resent case from the earlier cases, the Court observed:

The order of this Court does not in any manner touch upon the reasoning of the Bombay High Court. On the contrary, this court refers to the judgment of this Court in Himachal Pradesh Techno Engineers (supra), which as has been held by us hereinabove, makes it clear that Section 5 of the Limitation Act is excluded by section 34(3) of the Arbitration Act, 1996 and that no condonation of delay can take place beyond the period of 120 days. It is on this ground, citing the learned District Judge’s order, that this Court did not interfere. Consequently, it cannot be said that this Court approved of the judgment of the Division Bench of the Bombay High Court. Likewise, the reasoning contained in Radha Krishna Seth (supra), does not commend itself to us. Both these judgments therefore do not state the law correctly and stand overruled. (Para 33)

Further, answering the question of law, the Court observed:

Consequently, the question of law is answered by stating that an appeal under section 37(1)(c) of the Arbitration Act, 1996 would be maintainable against an order refusing to condone delay in filing an application under section 34 of the Arbitration Act, 1996 to set aside an award. (Para 37)

Concluding, the Court held:

The appeal is accordingly allowed. The impugned judgment of the Division Bench under appeal is set aside, and the matter is remitted to a Division Bench of the High Court of Delhi to decide whether the Single Judge’s refusal to condone delay is or is not correct. (Para 38)

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