Why Section 5 of The Limitation Act doesn’t affect Section 34 of Arbitration Act’s applications
Vedant Mishra
4th Year, B.A. LL.B. (Hons.), National Law University Odisha
Introduction
The idea that “vigilantibus non dormientibus jura subveniunt“—that is, that the law benefits the watchful rather than the lazy—lays the foundation for the law of limitations. This is the concept behind why lawsuits can’t be pursued forever. Each type of lawsuit has a set time limit. An individual no longer able would be able to file the case after that period has passed. It can no longer be sustained after being “barred by limitation”. The Honourable Supreme Court in the case of Prashar v. Vasant Sen decision said that the statute of limitations is the law of repose, quiet, and justice. The Law of Limitations intends to enforce an existing right after a predetermined amount of time, rather than creating a right where none previously existed.
However, On the other hand, if there is an adequate explanation for the delay, Section 5 of the Limitation Act, 1963, permits late applications or appeals. Requests to set aside an arbitration ruling are covered by Section 34 of the Arbitration and Conciliation Act of 1996(hereinafter referred to as “the A&C Act”). You have three months to file an application under Section 34, according to Sub-section 3. The court may consider your application for an additional thirty days, but only if you can provide a compelling explanation for not applying within that time frame.
Is it possible to excuse a delay that exceeds 120 days, or three months and thirty days, is the question that has plagued the courts. Stated differently, does the applicability of Section 34 of the A&C Act apply to applications made under Section 5 of the Limitation Act?
Applicability of the Limitation Act, 1963, to the Arbitration & Conciliation Act, 1996 and courts’ approach
The Section 11 of A&C Act describes the arbitration process. It essentially addresses two issues: first, asking the court to choose an arbitrator; and second, laying forth the claim and supporting documentation.
Indian courts have consistently been concerned about whether the regulations from the 1963 Act and the 1996 Act are compatible. The 1963 Act’s first schedule, Article 137, should apply to the Arbitration & Conciliation Act of 1996, the Supreme Court decided in the matter of Grasim Industries v. The State of Kerala(2017) ibclaw.in 586 SC. This means that within three years of the date the cause of action arose, any application under section 11 of the A&C Act 1996 must be submitted. Article 137 functions as a fallback clause, imposing a three-year deadline on applications in the Limitation Act Schedule that do not have a defined limitation term. The clock begins to run from the moment the “right to reply” manifests itself.
Additionally, as the Supreme Court pointed out in the BSNL v. Nortel Networks Pvt. Ltd. case (2021) ibclaw.in 41 SC, the deadline for filing an application under Section 11 of the 1996 Act is governed by Article 137 of the First Schedule of the Limitation Act. This period of time begins when the arbitrator is not appointed. The court also decided that it might refuse to designate an arbitrator in extraordinary situations when the claims seem to be prima facie time-barred and there is no ongoing disagreement. Consequently, it was noted that Article 137 of the 1963 Act is consulted because the 1996 Act does not provide a deadline for submitting under Section 11.
There are two ways to start an arbitration: either file an application under section 8 or section 11 of the Act, 1996, or serve the opposite party a notice of invocation as described in section 21 of the Act. However, it’s vital to take into account that the deadline for filing an application for the appointment of an arbitrator is different from the period of limitations that applies to the actual claims made in a contract. The statute of limitations for bringing a claim for breach of contract is three years from the day the cause of action arose, according to Article 55 of the Schedule to the Act, 1963.
Additionally, under Art. 137 of the First Schedule of the Limitation Act, 1963, the time limit for filing an application under section 11 to appoint an arbitrator before a court is three years from either the refusal to appoint the arbitrator or the expiration of 30 days from receiving notice invoking arbitration from the other party, whichever occurs first.
Initially, in the Union of India v. Popular Construction case, the Supreme Court clearly resolved this issue by stating that an application made under Section 34 of the A&C Act could not use Section 5 of the Limitation Act. This position was later reaffirmed by the Apex Court in the BPDP/REO v. Scoot Wilson Kirpatrick case and stated that “There can be no quarrel with the proposition that Section 5 of the Limitation Act providing for condonation of delay is excluded by Section 34(3) of the A&C Act”
Two key points of contention are included in the court’s reasoning in the Popular Construction decision. First, it depends on how Section 34(3) of the A&C Act’s term “but not thereafter” is interpreted. Second, it revolves around the clause included in Section 34(1).
The first key point of contention “but not thereafter”
When a municipal or special legislation establishes a different statute of limitations than what is specified in the Act, Section 29 of the Limitation Act deals with those situations. In these cases, the Act’s provisions (sections 4 through 24) have effect to the degree that the special or municipal legislation does not specifically provide otherwise. Section 34(3) of the A&C Act’s interpretation of the term “but not thereafter” has been interpreted as an express exclusion falling under the jurisdiction of Section 29(2) of the Limitation Act.
The court stressed the crucial nature of the wording “but not thereafter” in the proviso to sub-section (3) of Section 34 of the Arbitration Act in the Popular Construction case. The court has interpreted this word to be a clear exclusionary marker under Section 29(2) of the Limitation Act, which prevents Section 5 of the Act from applying. The court reasoned that the proviso’s long period of time would make the term “but not thereafter” completely meaningless if it were decided that it would be acceptable to consider an application to set aside the award beyond that point. Based on its prior ruling in Hukumdev Narain Yadav v. Lalit Narain Mishra, the court used the exclusion by necessary implication principle where the court held that “If on an examination of the relevant provisions it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act”
Second key point of contention “Section 34(1) in accordance with subsection 2 and 3”
The A&C Act’s Section 34, Sub-section 1, offers a legal procedure for contesting an arbitral award. By making an application in accordance with Sections 34(2) and 34(3), this can be accomplished. The application does not satisfy Sub-section 1 requirements if the delay beyond the amount of time that can be excused under Section 34(3).
It was noted by Justice Ruma Pal J in Popular Construction case that “section 34(1) explicitly states that the only way to challenge an arbitral award in court is to apply to have the award set aside “in accordance with” Sub-sections (2) and (3). However, an application submitted beyond the deadline specified in Section 34(3), would not be considered to be submitted “in accordance with” that subsection. Consequently, by virtue of Section 34(1), recourse to the court against an arbitral award cannot be made beyond the period prescribed.” Consolidated Engineering Department and Chintels India Ltd. also emphasized on this point.
Conclusion
The ambiguity arising from different sections of the AC Act and the Limitation Act about the applicability of Section 5 of the Limitation Act to applications under Section 34 of the Arbitration Act has been cleared up. In a 2021 decision, the Supreme Court made it clear that Section 5 of the Limitation Act does not apply and that there is no justification for any delay more than 120 days. The meaning established in the Popular Construction case has been generally accepted with little to no controversy, according to a survey of relevant decisions.
The statute of limitations for starting arbitration proceedings has been set by the Supreme Court at three years. Furthermore, the ruling in the Nortel Network case establishes how the Arbitration Act and the Limitation Act apply to each other and answers a number of open-ended problems. Notably, the Court decided that the three-year window for submitting an application under Section 11 once the right to do so arose was too lengthy. The Arbitration & Conciliation Act, 1996, which strives for the prompt and efficient resolution of disputes, loses its efficacy in the absence of a specified filing deadline under Section 11. In addition, the Act’s Section 29-A establishes an 18-month window for concluding arbitration procedures and rendering a decision. Additionally, Section 11 mandates that the petition be resolved within 30 days of the opposing party being served with notice.
