2010 (10) TMI 941 - SC - Companies Law

Whether the appellants were bona fide and diligently pursuing the remedy before a wrong forum? Whether the application under Section 34 of the Act had to be filed in the District Court only after the withdrawal of appeal under Section 34 of the Act before the High Court? Held that - Appeal allowed. The application under Section 34 of the Act was filed in time, by excluding the time spent before the wrong forum. As appellants demonstrated their diligence and bona fides by filing the application under Section 34 of the Act on 19.10.2009 itself immediately on reopening of court, without waiting for a formal order of withdrawal of the appeal under Section 34 before the wrong forum. Therefore, it cannot be said that filing of the application under Section 34 of the Act on 19.10.2009 was belated. Further if the period spent before wrong forum is excluded, the application is filed within three months and there is no question of explaining any delay. The filing of an application for condonation under a wrong provision of law will not vitiate the application. In fact though the application for condonation of delay was initially filed under Section 5 of Limitation Act, that was subsequently replaced by an application under Section 34(3) of the Act, and again by an application under Section 34(3) of the Act read with Section 14 of the Limitation Act.

Summary

Issues:
1. Application under Section 34 of the Arbitration and Conciliation Act, 1996 filed before the wrong forum.
2. Delay in filing the application and the need for condonation.
3. Interpretation of Section 34(3) of the Act regarding the limitation period.
4. Bona fide and diligent pursuit of remedy before the wrong forum.

Analysis:

1. The case involved a dispute between the first respondent and the appellants, leading to the appointment of an arbitrator who issued an Award on 6.2.2009. The appellants mistakenly filed an 'appeal' under Section 34 of the Act before the Guwahati High Court, realizing later that it was an original application to be filed before the District Court. Due to court holidays, they filed the correct application on 19.10.2009, seeking condonation of delay under Section 5 of the Limitation Act, which was later corrected to an application under Section 34(3) of the Act. The District Judge dismissed the delay condonation application, leading to an appeal before the High Court, ultimately challenged in the Supreme Court.

2. Section 34(3) of the Act sets a three-month limit for filing an application to set aside an award, with a provision for a further 30 days under sufficient cause. The Supreme Court, in a previous case, clarified that Section 14 of the Limitation Act applies to applications under Section 34, allowing exclusion of time spent bonafide before a wrong court. In this case, the appellants filed the correct application within three months if the time spent pursuing the remedy before the wrong forum is excluded.

3. The key issue was whether the appellants diligently pursued the remedy before the wrong forum. The first respondent argued inconsistencies in the appellants' explanations for delay. However, the Court found no inconsistency and noted that the appellants, being a Corporation, acted through its Board of Directors. The appellants displayed diligence by filing the correct application immediately upon realizing the mistake, without waiting for the formal withdrawal of the appeal before the wrong forum. The filing of the application within three months, excluding time spent before the wrong forum, demonstrated the appellants' bona fides.

4. The Supreme Court allowed the appeal, setting aside the High Court's judgment and the District Court's order. It held that the application under Section 34 was timely filed after excluding the time spent before the wrong forum. The District Court was directed to consider the application on its merits, following the law.

This detailed analysis highlights the procedural errors, legal interpretations, and the Court's reasoning in determining the timely filing of the application under Section 34 of the Arbitration and Conciliation Act, 1996.