2025 (4) TMI 171 - SC - Indian Laws

Time Limitation for filing application under Section 34 of the Arbitration and Conciliation Act 1996 (ACA) - HELD THAT - The respondent s application under Section 34 which was filed on 11.07.2022 i.e. the next working day of the court must be considered as being filed within the limitation period. Consequently there was no delay in filing the application and sufficient cause need not be shown for condonation of delay. The High Court therefore rightly allowed the Section 37 appeal and held that the respondent s Section 34 application was filed within the limitation period. It is not required to interfere with the High Court s direction to stay the execution of pending recovery till the matter is adjudicated on merits since the same is interim in nature and the appellant has already withdrawn 50% of the arbitral sum that was deposited by the respondent. In this view of the matter the present appeal is dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the application under Section 34 of the Arbitration and Conciliation Act, 1996 (ACA) was filed within the prescribed limitation period.

2. The applicability of Section 12 and Section 4 of the Limitation Act, 1963 to the proceedings under Section 34 of the ACA.

3. Whether the High Court was justified in directing the respondent to deposit only 50% of the arbitral sum.

ISSUE-WISE DETAILED ANALYSIS

1. Limitation Period for Filing Section 34 Application

Relevant Legal Framework and Precedents: Section 34(3) of the ACA stipulates a limitation period of three months from the date on which the party receives the arbitral award, with a possible extension of 30 days upon showing sufficient cause. The Court referenced its decision in Himachal Techno Engineers and My Preferred Transformation & Hospitality Pvt Ltd v. Faridabad Implements Pvt Ltd to clarify the application of the Limitation Act to Section 34 proceedings.

Court's Interpretation and Reasoning: The Court emphasized that the statutory language of Section 34(3) specifies "three months" as opposed to "90 days," indicating the legislative intent for a calendar month calculation. The Court rejected the appellant's argument that the limitation should be read as 90 days.

Key Evidence and Findings: The arbitral award was received by the respondent on 09.04.2022. The application to set aside the award was filed on 11.07.2022, which was the next working day after the expiration of the three-month period on a court holiday.

Application of Law to Facts: The Court applied Section 12(1) of the Limitation Act to exclude the date of receipt of the award, starting the limitation period from 10.04.2022 and expiring on 09.07.2022, a court holiday. Therefore, Section 4 of the Limitation Act applied, allowing the application to be filed on the next working day.

Treatment of Competing Arguments: The appellant argued that the limitation expired on a working day, making the application late by three days. The respondent contended that Section 12 of the Limitation Act excludes the date of receipt, and Section 4 allows filing on the next working day after a holiday.

Conclusions: The Court concluded that the application was filed within the limitation period as per the combined application of Sections 12 and 4 of the Limitation Act.

2. Deposit of Arbitral Sum

Relevant Legal Framework and Precedents: The Court referred to the High Court's discretion in directing the deposit of the arbitral sum pending the outcome of the Section 34 application.

Court's Interpretation and Reasoning: The Court noted that the High Court's interim order to stay execution of recovery and direct a 50% deposit was within its discretion and interim in nature.

Key Evidence and Findings: The respondent deposited 50% of the arbitral sum, which the appellant withdrew after providing a bank guarantee.

Application of Law to Facts: The Court found no reason to interfere with the High Court's direction, as the appellant had already benefited from the deposit.

Treatment of Competing Arguments: The appellant sought a 100% deposit, arguing insufficient reasoning for the 50% deposit. The respondent pointed to the appellant's earlier acceptance of a 60% deposit request.

Conclusions: The Court upheld the High Court's direction, finding no error in its interim order.

SIGNIFICANT HOLDINGS

The Court established several core principles regarding the calculation of limitation periods under Section 34 of the ACA:

1. The limitation period is calculated as three calendar months, not 90 days.

2. Section 12(1) of the Limitation Act applies, excluding the date of receipt of the arbitral award in calculating the limitation period.

3. Section 4 of the Limitation Act applies when the limitation period expires on a court holiday, allowing filing on the next working day.

Verbatim Quote: "Section 4 of the Limitation Act benefits a party only when the 'prescribed period', i.e., the 3-month limitation period under Section 34(3) expires on a court holiday."

Final Determination: The Court dismissed the appeal, affirming the High Court's decision that the Section 34 application was filed within the limitation period and that the interim order regarding the deposit of the arbitral sum was appropriate.

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