Saturday, December 4, 2010

The Problem of Limitation under the Arbitration Act

In Union of India v. Microwave Communication, the Delhi High Court was called on to consider a very important issue relating to the relationship between the Arbitration Act and the Limitation Act. In a remarkably clear decision, involving the interpretation of decisions of the Supreme Court and conflicting dicta from High Courts, the Court concluded that all provisions of Limitation Act, except section 5, apply to applications under section 34 of the Arbitration Act.

Section 34(3) of the Arbitration Act provides that-

An application for setting aside may not be made after three months have elapsed from the date on which die party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had bow disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. [emphasis supplied]

The Supreme Court in Union of India v. Popular Construction, had held that this provision was absolute, and there was no scope for a further extension of the limitation period under section 5 of the Limitation Act (which allows a Court to extend the limitation period for sufficient causes). In arriving at this decision, the Court observed (¶¶ 12, 14),

As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are 'but not thereafter' used in the proviso to sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of section 5 of that Act. Parliament did not need to go further. To hold that the Court could entertain an application to set aside the Award beyond the extended period under the proviso, would render the phrase 'but not thereafter' wholly otiose. No principle of interpretation would justify such a result.

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Here by history and scheme of the 1996 Act support the conclusion that the time limit prescribed under Section 34 to challenge an Award is absolute and unextendable by Court under Section 5 of the Limitation Act.

Now, these passages and the rest of the decision make it clear that the Court was dealing only with section 5 of the Limitation Act. It did not deal with other provisions like section 4 (which provides that when the limitation period expires on a day when the Court is closed, the proceedings may be initiated on the day when the Court reopens).

However, several High Courts interpreted the Supreme Court’s dictum and especially the mention of ‘absolute and unextendable’ literally, holding that section 4 could not be invoked even when the limitation period expired during Court holidays. Taking the opposite view was one decision of the Andhra Pradesh High Court in Durga Enterprises v. Union of India, and a couple of decisions of the Supreme Court which had held that Popular Constructions should be read as applying only to section 5 of the Limitation Act.

The Delhi High Court in Microwave Communication concluded, it is submitted rightly, that the stance in Durga Enterprises was to be preferred. They observed (¶ 8),

Section 4 of the Limitation Act has been enacted not to enlarge the period of limitation but on the maxim lex non cogit ad impossibilia. When any party is prevented from doing a thing in Court on a particular day not by his own act but by the act of the Court he/she is entitled to do at the first available opportunity. As stated above, Section 4 does not enlarge the period of limitation but it only enables the party to file any suit, application, etc. on the reopening day of the Court if the Court is closed on a day when limitation expires.

This decision does not permit of any disagreement. However, an additional matter which arose on the facts was not addressed by the Court explicitly, which leaves small question unanswered. The limitation period in question in Microwave Communication, was not the period of three months provided in the body of section 34, but the discretionary period of 30 days mentioned in the proviso. Thus, it was the extended period of limitation that was ending in the Court holidays. Section 4 of the Limitation Act however, applies only for the expiry of the ‘prescribed period’ when the Court is closed. Does ‘prescribed period’ included the period extended for sufficient cause? The language of section 5 suggests that it does not, since it provides that when sufficient cause is shown, the proceedings may be initiated ‘after the prescribed period’. It is true that the marginal heading refers to ‘extension of prescribed period’. Nevertheless, it is atleast arguable that section 4 applies only to an expiry of the original ‘prescribed period’ and not the extended period. This interpretation is also arguably affirmed by the fact that section 4 precedes the extension provision in section 5.

Under the Limitation Act, since there is no limit on the period of extension under section 5, reading section 4 narrowly will not lead to any anomalies. Let us assume that the limitation period in a said action expires on 10.5.2010. The Court vacations can be assumed to date from 28.5.2010 to 3.7.2010. In that situation, if the proceedings are initiated on 3.7.2010, there is no issue of whether section 4 or section 5 applies, since the Court holidays will be considered sufficient cause, so long as the petitioner can show that there was sufficient cause for the period between 10.5.2010 and 28.5.2010. However, let us now assume that this was an application under section 34 of the Arbitration Act. Even if sufficient cause is shown, the limitation period under the proviso to section will not allow an extension of the limitation period beyond 10.6.2010, which will fall within the Court holidays. Hence, in applying section 4, it would be material whether ‘prescribed period’ includes the extended period, or is limited to the original period of limitation.

While this promises to be a fascinating issue of statutory interpretation, it is almost certain that ‘prescribed period’ will be read as referring to the extended period, and not only the original interpretation. It would have been ideal however, if the Delhi High Court had specifically addressed this issue. It is hoped that should this matter go up on appeal to the Apex Court, it affirms the High Court, and also considers the slight anomaly created due to the language of section 4.

7 comments:

Renganath said...

In fact, S. 29(2) [i.e. the portion which speaks of deeming the special statutory period as the period prescribed by the Schedule] r/w S.2(j) furthers the case for the interpretation that "prescribed period" ought only to mean the original period.

However it could be quite successfully argued, as you too suggest, that where a special statute expressly (as here) excludes S.5, such exclusion per force necessitates reading the extended period as part of the prescribed period (such that the prescribed period in this case is 3m+30d).

Avijit Roy, Corporate Law Group, New Delhi said...

Although Sec 34 of Arb Act is a Special Act but the legislative intent of proviso of Sec 34(3) was not to debar any person to approach the Court if he is genuinely prevented from approach the Court due holidays in court. There need to be harmoneous construction of Sec 5 of Limitation Act and Sec 34(3) of Arb Act. it is an established law that if out of two interpretation , one interpretation is beneficial to the aggrieved oerson then same be applicable to him. Therefore, I feel that above Sec 5 and Sec 34(3) is not mutually exclusive to each other and benefit of limitation can even be availed by the person in such circumstances.

Shantanu Naravane said...

Thank you for your comments.

Mr. Roy, while it seems most reasonable to interpret the provisions in the way you are suggesting, I doubt one can extrapolate from that a general principle of statutory interpretation. The principle you are relying on is I believe limited to penal and tax statutes, for reasons which would render them inapplicable to the Limitation Act or the Arbitration Act.

Anonymous said...

Will the Limitation Act also apply to enforcement of an arbitral award? For instance, if a party wants to apply to the Court for execution of an arbitral award will it be bound by the provisions under the limitation act for execution?

Renganath said...

To add to my comments above, I suppose 2 arguments may be employed to contend that the expiry of extended period during court vacations would not prejudice the potential applicant - 1. Art. 14: To contend that causes whose extended period expire during the vacation cannot be initiated upon reopening, would be discriminatory without the differentia having a rational relation to the object sought to be achieved by the Act. 2 Actus curiae neminem gravabit.

saurendra said...

I guess my learned friend has give a good example of limitation period and application under section 5 of limitation act would surely come into play but only for that period of 30 days time not beyond that and if during extension of that 30 days comes in bewteen court holidays then section 5 application ought to be filed along with section 34 application on the opening of the court on the first day itself explaining the delay.Court Would accept the same.

I shall put a diffrent preposition what if an application is filed on the first day of reopning of a court holiday and in that case time period so spent in filing section 34 is around 3 months and 16 days but the filing is done in a wrong forum. Then parties take the matter uptil apex court where they are given liberty to file in the proper forum.

The filing in the proper court is done after expiry of 44 days from the apex court order that too without any application under section 5 or section 14 of limitation act. I think that we can be undermined such laxaity as court can allow without any such application.

But my point is the filing is barred by limitation if we add 3 months and 16 days and add up 44 days after apex courts order and all the summing up to be beyond 3 months and 30 days excluding the time period used during the wrong forum.

Please advice and do let me know if we have ny such caase law on this point. i already have taken the plea of limitation. Do advice can send me a mail at titu24@hotmail.com.
Thanks Saurendra Rautray

Misha Talwar said...

Slightly digressing from the topic at hand, can the plea of limitation be raised pre-trial or as a preliminary issue? The rationale behind this is that if there is no prospect of success, shouldn't such a claim should be raised prior to the proceedings? Basically, address the issue of limitation before the entire proceedings because if the claim is to be barred by limitation, then there's no point in continuing with the entire proceedings.
And are there case laws to this effect?