2021 (2) TMI 510 - SC - Indian Laws

Condonation of delay in filing an application u/s 34 of the Arbitration Act, 1996 - appealable order or not - 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? HELD THAT - The effect doctrine referred to in ESSAR CONSTRUCTIONS VERSUS NP. RAMA KRISHNA REDDY 2000 (5) TMI 1062 - SUPREME COURT is statutorily inbuilt in section 37 of the Arbitration Act, 1996 itself. For this purpose, it is necessary to refer to sections 37(1)(a) and 37(2)(a). So far as section 37(1)(a) is concerned, where a party is referred to arbitration under section 8, no appeal lies. This is for the reason that the effect of such order is that the parties must go to arbitration, it being left to the learned Arbitrator to decide preliminary points under section 16 of the Act, which then become the subject matter of appeal under section 37(2)(a) or the subject matter of grounds to set aside under section 34 an arbitral award ultimately made, depending upon whether the preliminary points are accepted or rejected by the arbitrator. It is also important to note that an order refusing to refer parties to arbitration under section 8 may be made on a prima facie finding that no valid arbitration agreement exists, or on the ground that the original arbitration agreement, or a duly certified copy thereof is not annexed to the application under section 8. In either case, i.e. whether the preliminary ground for moving the court under section 8 is not made out either by not annexing the original arbitration agreement, or a duly certified copy, or on merits the court finding that prima facie no valid agreement exists an appeal lies under section 37(1)(a). Likewise, under section 37(2)(a), where a preliminary ground of the arbitrator not having the jurisdiction to continue with the proceedings is made out, an appeal lies under the said provision, as such determination is final in nature as it brings the arbitral proceedings to an end. However, if the converse is held by the learned arbitrator, then as the proceedings before the arbitrator are then to carry on, and the aforesaid decision on the preliminary ground is amenable to challenge under section 34 after the award is made, no appeal is provided. 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 - 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. Appeal allowed.

Summary

Issues Involved:
1. Whether an order refusing to condone the Appellant’s delay in filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 is appealable under Section 37(1)(c) of the said Act.

Detailed Analysis:

Issue 1: Appealability of an Order Refusing to Condon Delay under Section 37(1)(c) of the Arbitration Act, 1996

Background and High Court's Decision:
- The High Court of Delhi, in its judgment dated 04.12.2020, held that an appeal against an order refusing to condone delay in filing an application under Section 34 of the Arbitration Act, 1996 is not maintainable under Section 37(1)(c). The High Court relied on the Supreme Court's decisions in BGS SGS Soma JV and Ramdas Construction Co., which led them to conclude that they were bound by these precedents.

Arguments by the Appellant:
- The Appellant, represented by Shri Rajshekhar Rao, argued that Section 37(1)(c) of the Arbitration Act, 1996 is in pari materia with Section 39 of the Arbitration Act, 1940. He cited the Supreme Court's judgment in Essar Constructions v. N.P. Rama Krishna Reddy, which held that an appeal lies where a single judge refuses to condone delay resulting in an order refusing to set aside an arbitral award. He also referenced several High Court judgments supporting this view and contended that the refusal to condone delay should be appealable as it results in a refusal to set aside the award.

Arguments by the Respondent:
- The Respondent, represented by Shri Mukul Rohatgi, argued that Section 37 of the Arbitration Act, 1996 is not in pari materia with Section 39 of the 1940 Act. He emphasized that Section 37 should be interpreted on its own terms, stressing the object of minimal judicial intervention in the arbitration process as outlined in Section 5 of the Arbitration Act, 1996. He contended that Section 37(1)(c) should be read narrowly, allowing appeals only from orders that set aside or refuse to set aside an arbitral award on merits, not on preliminary grounds like condonation of delay.

Supreme Court's Analysis and Conclusion:
- The Supreme Court examined Section 37 of the Arbitration Act, 1996, and Section 34, concluding that the language of Section 37(1)(c) includes orders refusing to condone delay under Section 34(3). The Court found that the expression "setting aside or refusing to set aside an arbitral award under Section 34" includes all grounds under Section 34, not just those under Section 34(2). The Court also referenced the "effect doctrine" from Essar Constructions, which implies that an order refusing to condone delay effectively refuses to set aside the award and is thus appealable.

- The Court distinguished its own decisions in BGS SGS Soma and Simplex Infrastructures, noting that these cases dealt with different contexts and did not directly address the issue of appealability under Section 37(1)(c) for refusal to condone delay.

- The Supreme Court overruled the judgments of the Bombay High Court in Ramdas Construction Co. and the Allahabad High Court in Radha Krishna Seth, which had held that such orders were not appealable. The Court emphasized that the legislative intent and the language of the statute supported a broader interpretation allowing appeals against orders refusing to condone delay.

Final Judgment:
- The Supreme Court held that an appeal under Section 37(1)(c) of the Arbitration Act, 1996 is maintainable against an order refusing to condone delay in filing an application under Section 34 to set aside an arbitral award. The appeal was allowed, and the matter was remitted to the Division Bench of the High Court of Delhi to decide on the merits of the Single Judge’s refusal to condone the delay.