2018 (4) TMI 1571 - HC - Indian Laws

Time Limitation - Section 34(3) of the Arbitration & Conciliation Act, 1996 - whether non-compliance of notice contemplated under section 34(5) by the petitioner before lodging the Arbitration Petition No. 400 of 2017 and withdrawal of the said arbitration petition on 31st August, 2017? Held that - It cannot be said that the petitioner had not prosecuted the petition bonafide, in good faith and with due diligence. The petitioner thus has made out a case for exclusion of time under section 14(2) of the Limitation Act, 1963 in view of the petitioner having prosecuting the said arbitration petition bonafide in good faith and with due diligence. The notice under section 34(5) is not mandatory but is directory. In this case the petitioner cannot be held guilty of negligence for not giving prior notice under section 34(5) - the petitioner has made out a case for exclusion of time under section 14(2) of the Limitation Act, 1963 for a period from 26th July, 2017 to 31st August, 2017. There is thus no delay in filing arbitration petition by the petitioner. Petition dismissed being barred by limitation.

Issues Involved:
1. Limitation period for filing the petition under Section 34 of the Arbitration & Conciliation Act, 1996.
2. Compliance with Section 34(5) of the Arbitration & Conciliation Act, 1996.
3. Applicability of Section 14(2) of the Limitation Act, 1963 for exclusion of time.

Detailed Analysis:

1. Limitation Period for Filing the Petition under Section 34 of the Arbitration & Conciliation Act, 1996:
The petitioner received a signed copy of the arbitral award on 30th April 2017 and lodged the initial arbitration petition on 26th July 2017, within the three-month period prescribed under Section 34(3) of the Arbitration & Conciliation Act, 1996. The subsequent petition was lodged on 1st September 2017 after the initial petition was withdrawn on 31st August 2017.

2. Compliance with Section 34(5) of the Arbitration & Conciliation Act, 1996:
Section 34(5) requires a prior notice to be issued before filing a petition under Section 34, accompanied by an affidavit of compliance. The petitioner did not issue this notice before lodging the initial petition but did so on 27th July 2017, one day after filing the petition. The respondents raised an objection on 18th August 2017 regarding non-compliance with Section 34(5), leading to the withdrawal of the initial petition and the subsequent filing of a new petition with the required notice and affidavit.

3. Applicability of Section 14(2) of the Limitation Act, 1963 for Exclusion of Time:
The petitioner argued that the time taken to prosecute the initial petition should be excluded under Section 14(2) of the Limitation Act, 1963, as the initial petition was prosecuted in good faith and with due diligence. The court considered whether the non-compliance with Section 34(5) could be seen as a defect falling under "other cause of a like nature" as per Section 14(1) of the Limitation Act, 1963. The court noted that there was a reasonable and bona fide doubt regarding whether the notice under Section 34(5) was mandatory or directory, as clarified later by the court in the case of Global Aviation Services Private Limited v. Airport Authority of India.

Reasons and Conclusions:
The court concluded that the petitioner had prosecuted the initial petition in good faith and with due diligence, given the bona fide doubt regarding the mandatory nature of Section 34(5). The time from 26th July 2017 to 31st August 2017 was excluded under Section 14(2) of the Limitation Act, 1963, making the subsequent petition filed on 1st September 2017 within the limitation period. The court rejected the respondents' preliminary objection regarding the petition being barred by limitation and directed the parties to make submissions on the merits of the arbitration petition.

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