Court : Supreme Court of India
Brief : The Court can pronounce judgment according to the
award (1) if the time for making an application to set aside
the award has expired or (2) such application having been
made, after refusing it. Because of the applicability of
Section 5 of the Limitation Act, 1963, if the Court has not
pronounced judgment for whatever reason, although the time
prescribed for making the application has expired and an
application for setting aside the award is made with a
prayer for condonation of delay, the Court cannot pronounce
judgment until the application is rejected. Even after a
decree is passed under Section 17 an application under
Section 30 can be entertained provided sufficient cause is
established. In either case the rejection of the
application would be a refusal to set aside the award. It
is to be emphasized that under Section 17 the grounds of
refusal are not specified nor is there any limitation on the
word refusal to mean only a refusal on merits. Reading
Section 39 (1)(vi) and Section 17 together, it would
therefore follow that an application to set aside an award
which is rejected on the ground that it is delayed and that
no sufficient cause has been made out under Section 5 of the
Limitation Act would be an appealable order.
Citation : PETITIONER:
M/S ESSAR CONSTRUCTIONS
Vs.
RESPONDENT:
N.P. RAMA KRISHNA REDDY
, 2000( 3 )SCR 923, 2000( 6 )SCC 94, 2000( 4 )SCALE328 , 2000( 5 )JT 505
DATE OF JUDGMENT: 03/05/2000
BENCH:
D.P.Wadhwa, Ruma Pal
JUDGMENT:
RUMA PAL, J
Leave granted.
The litigants, in this case, have traversed unknown
procedural paths crossing legal barriers to present us with
a case which has no simple solution. The cause for
complaint before us is an order passed by the High Court of
Andhra Pradesh under Section 115 of the Code of Civil
Procedure condoning the delay in filing an application under
Section 30 of the Arbitration Act, 1940 and remanding the
matter to the Trial Court for a decision on merits.
According to the petitioners the High Court had wrongly
interfered with the order dated 28th April, 1999 by which
the Principal Senior Civil Judge Kakinada had dismissed the
respondents application under Section 5 of the Limitation
Act, 1963 on the ground that the cause shown for the delay
was insufficiently explained. Had the issue been so
straightforward, unquestionably the High Courts order would
have had to be set aside, because it had re-appraised the
cause shown by the respondent and condoned the delay under
Section 5 of the 1963 Act. There is ample authority to hold
that this could not be done under Section 115 of the Code
[See: D.L.F. Housing & Construction Company Private Ltd.,
New Delhi vs. Sarup Singh & Others 1970 (2) SCR 368
Manindra Land and Building Corporation Ltd. vs. Bhutnath
Banerjee and Others 1964 (3) SCR 495 and Pandurang Dhoni
Chougule vs. Maruti Hari Jadhav 1966 (1) SCR 102.] But was
the Civil Judges order dismissing the respondents
application under Section 5 at all revisable under Section
115 of the Code or did an appeal lie from it under Section
39 of the Arbitration Act, 1940? The answer is of moment as
the powers of an appellate Court are wider than those
available under Section 115. Section 39 (1) (vi) of the
Arbitration Act, 1940 says that an appeal shall lie inter
alia from an order refusing to set aside an award. To
arrive at a conclusion as to whether the order passed by the
Senior Civil Judge, Kakinada was an order refusing to set
aside the award, we have to consider the facts. Disputes
between the parties were referred to three arbitrators in
terms of an arbitration agreement. There was no unanimity
among the Arbitrators. Two arbitrators passed an award in
favour of the appellant before us and the third decided in
favour of the respondent. The respondent made an abortive
attempt to set aside the award and to have the minority
award made a rule of Court before the award was filed. The
award was filed on 27.8.97. Notice under Section 14(2) of
the Act was issued to the respondent on the same date.
According to the respondent, it never received the notice.
The appellant filed a suit to make the majority award a rule
of Court under Section 17 of the Act. The respondent has
filed a written statement in the suit. In addition, the
respondent filed two suits one for making the minority
award a rule of Court and another for setting aside the
majority award. Along with the second suit (OSSR 3098/98),
the respondent filed an application under Section 5 of the
Limitation Act (I.A No. 1394/98). A few days later, the
respondent filed a second application (I.A. No. 1395/98)
in which it was contended that the second suit was not a
suit at all but an application which had been wrongly
numbered as a suit. It was, therefore, prayed that the
Court should convert the said application i.e. petition to
set aside the Award as OP. The Principal Senior Civil
Judge by his order dated 28th April 1999 disposed of the
application under Section 5 treating OSS 3098/98 as an
application for setting aside the award. This is what he
said: 13. Now coming to the explanation of petitioner for
condonation of delay of 331 days in filing application to
set aside Award, the petitioner states that as notice was
sent by Court to Bombay Port Trust even though it is
addressed to Kakinada Port under Dis. No. 8994, Dt.
30.8.1997 and actually the said notice was despatched by
Court on 1.9.1997, therefore the petitioner states that
after excluding 30 days time from 1.9.1997 the delay in
filing application for setting aside Award is 331 days i.e.
from 1.10.1997 to 2.9.1998.
14. In the affidavit of the petitioner, petitioner
only refers to their filing a suit which was rejected on
21.3.1997 and did not refer to respondent herein filing O.S.
445/97 against petitioner herein and petitioner herein
receiving summons in that suit on 19.1.1998 and thereafter
petitioner herein entering appearance through A.G.P. on
1.2.1998 and filing written statement in O.S. 445/97 on
17.7.1998. The above circumstances go to show that
petitioner is not willing to state that particulars referred
to above, as the same will go against the petitioner and it
will amount to service of notice of Arbitrators filing Award
into Court. In the present circumstances of the case and as
the explanation of petitioner is not sufficient explanation,
I am of the view that delay as claimed by petitioner cannot
be condoned. Accordingly, this petition is dismissed, but
under the circumstances of the case no costs.
The outcome of the order in effect was that the prayer
for setting aside the award was refused on the ground of
delay.
The effect-test was applied by the High Court of
Andhra Pradesh in Babumian & Mastan and Anr. V. Smt. K.
Seethayamma and Others AIR 1985 AP 135 which said: In
the light of the rulings in Gopalaswamy v. Navalgaria (AIR
1967 Mad 403) (supra) and the decision of the Bench in CMA
No. 612 of 1977 dated 3.4.1978, the legal position may be
enunciated as follows: The order refusing to condone the
delay in filing the claim petition has the effect of finally
disposing of the original petition. Such an order can,
therefore, be treated as an award and hence it is
appealable.
Again a Division Bench of the Assam High Court in
Mafizuddin v. Alimuddin AIR 1950 Ass 191 has said:
Whether objections to an award are dismissed on the merits
or they are dismissed on the ground that they are filed
beyond time, the Court by dismissing them in effect refuses
to set aside the award, and an order refusing to set aside
is clearly appealable under S. 30.
In some High Courts, no separate application is filed
under Section 5 of the Limitation Act and the prayer for
condonation of delay is included along with the prayers made
for substantive relief. Courts have entertained appeals
from an order dismissing an application on the ground of
limitation. Thus, in State of West Bengal V. M/s A.
Mondal AIR 1985 Cal 12 DB where an application under Section
30 of the Arbitration Act was dismissed on the ground of
limitation, an appeal was entertained. [See also Damodaran
V. Bhaskaran 1988 (2) KLT 753] The procedure appears to
have been approved by the Supreme Court in the case of Union
of India V. Union Building AIR 1985 Cal 337 (DB), where on
an appeal to the Supreme Court from an order dismissing an
application under Section 30 on the ground of delay, the
appeal was remanded to the High Court to be disposed of.
The position should be no different in Courts where a
separate application under Section 5 of the Limitation Act
is required to be filed. If the various High Courts
decisions noted earlier are correct, then the application
under Section 5 being dismissed, the application under
Section 30 would consequently also have to be dismissed
although this might be a mere formality. The end result
would be the same. None of the High Courts in the decisions
noted, have spelt out the underlying reasons why an order
rejecting an application on the ground of limitation
tantamounts to a rejection of the application itself. In
our view, the unspoken major premise is based on the
Limitation Act. As observed by the Privy Council in
Harinath Chatterjee vs. Mathurmohan Goswami ( 1894) ILR 21
Cal. 18, the statute of limitations assumes the existence
of a cause of action and does not define or create one. The
cause of action in this case is the alleged impropriety of
the award. The application to set aside the award may be
and was resisted by the defence of limitation. This is not
a technical plea but one that is given by Section 3 of the
Limitation Act, 1963 which inter alia provides that:
Subject to the provisions of Sections 4 to 24 of the Act
every suit instituted, appeal preferred, and application
made, after the prescribed period shall be dismissed,
although limitation has not been set up as a defence
The section makes it clear that limitation may be a
ground for rejecting a suit already instituted, an appeal
preferred and, in the context of this case, most
importantly, an application already made. What is before
the Court is the substantive application when the question
of limitation is decided. Limitation, like the question of
jurisdiction may be provided for in a separate statute but
it is a defence available in the suit, appeal or
application. When the defence is upheld it is the suit or
the appeal or the application itself which is dismissed. Of
course, the question as far as appeals are concerned may be
debatable having regard to the provisions of Order 41 of the
Code of Civil Procedure relating to admission of appeals as
an appeal may not be admitted at all because it is barred by
limitation. We express no final view in the matter. But
there is no corresponding requirement for admission of
applications or suits after overcoming the barriers of
limitation. A suit which is dismissed on the ground of
limitation may be appealed against as a decree. By the same
token an application under Section 30 which is dismissed on
the ground of limitation is a refusal to set aside the
award. Section 39 (1)(vi) of the Arbitration Act, 1940 does
not indicate the grounds on which the court may refuse to
set aside the award. There is nothing in its language to
exclude a refusal to set aside the award because the
application to set aside the award is barred by limitation.
By dismissing the application albeit under Section 5, the
assailability of the award is concluded as far as the Court
rejecting the application is concerned. Ultimately
therefore, it is an order passed under Section 30 of the
Arbitration Act though by applying the provisions of the
Limitation Act. Section 17 of the Arbitration Act, 1940
provides: Judgment in terms of award.- Where the Court
sees no cause to remit the award or any of the matters
referred to arbitration for reconsideration or to set aside
the award, the Court shall, after the time for making an
application to set aside the award has expired, or such
application having been made, after refusing it, proceed to
pronounce judgment according to the award, and upon the
judgment so pronounced a decree shall follow, and no appeal
shall lie from such decree except on the ground it is in
excess of, or not otherwise in accordance with, the award.
The Court can pronounce judgment according to the
award (1) if the time for making an application to set aside
the award has expired or (2) such application having been
made, after refusing it. Because of the applicability of
Section 5 of the Limitation Act, 1963, if the Court has not
pronounced judgment for whatever reason, although the time
prescribed for making the application has expired and an
application for setting aside the award is made with a
prayer for condonation of delay, the Court cannot pronounce
judgment until the application is rejected. Even after a
decree is passed under Section 17 an application under
Section 30 can be entertained provided sufficient cause is
established. In either case the rejection of the
application would be a refusal to set aside the award. It
is to be emphasized that under Section 17 the grounds of
refusal are not specified nor is there any limitation on the
word refusal to mean only a refusal on merits. Reading
Section 39 (1)(vi) and Section 17 together, it would
therefore follow that an application to set aside an award
which is rejected on the ground that it is delayed and that
no sufficient cause has been made out under Section 5 of the
Limitation Act would be an appealable order. This brings us
to the decisions of this Court relied on by the appellant to
contend that the order of the Principal Senior Civil Judge
was not an appealable one and could only be revised under
Section 115 of the Code of Civil Procedure. The first
decision cited is Nilkantha Shidramappa Ningashetti versus
Kashinath Somanna Ningashetti : 1962 (2) SCR 551. In that
case there was no application to set aside the award at all
and no question of rejection of such an application arose.
After the award was filed, the defendant No.1 filed his
say about the arbitrators award. He subsequently withdrew
his say. Later, a guardian of a party who was a minor,
filed a written statement claiming that the award was null
and void on the ground that the award was without
jurisdiction. This objection was not pressed before the
Trial Court. The Trial Court, therefore, passed a decree in
terms of the award. The appeal to the High Court was
dismissed as not maintainable. The further appeal to this
Court was dismissed saying: When no party filed an
objection praying for the setting aside of the award, no
question of refusing to set it aside can arise and therefore
no appeal was maintainable under Section 39(1)(vi) of the
Arbitration Act which allows an appeal against an order
refusing to set aside an award."
The case is not an authority for the proposition that
where an application under Section 30 is made and is
rejected, no appeal is maintainable. It does not apply to
the facts of this case. The second decision cited was Madan
Lal versus Sunderlal 1967 (3) SCR 147. In that case the
question of appealability of an order rejecting an
application under Section 30 of the Arbitration Act, 1940
was neither raised nor decided. On the contrary, the High
Court in Madanlals case had dismissed the appeal from the
order of the Trial Court which had held that the application
under Section 30 was barred by limitation, not on the ground
that the appeal was not maintainable but because it upheld
the Trial Courts decision. The Supreme Court affirmed the
High Courts order. On facts therefore, the decision really
supports our conclusions. The editorial comment in Justice
Bachawats Law of Arbitration & Conciliation (3rd edn.) at
p.902 that Mafizuddins case (supra) has been overruled by
the decisions of Nilkantha vs. Kashinath (supra) and Madan
Lal vs. Sunder Lal (supra) is, for the reasons stated,
erroneous. Besides Madanlals case was decided in the
context of the Indian Limitation Act, 1908 when the
provisions of Section 5 were inapplicable to applications
under Section 30 of the Arbitration Act. The period
prescribed under Article 158 of the 1908 Act for challenging
an award was absolute. It was therefore held that an
objection filed more than 30 days after the notice could
not be treated as an application for setting (aside?) the
award (sic) for it would be then barred by limitation. The
position thus is that in the present case there was no
application to set aside the award as grounds mentioned in
Section 30 within the period of limitation. It was also
observed that even the Court could not set aside an award
suo motu under Section 30 beyond the period of limitation
for if that were so the limitation provided under Article
158 of the Limitation Act would be completely negatived.
Apart from the decision not being relevant to the issue
before us, it is entirely distinguishable in law. Section 5
of the Limitation Act, 1963 is now applicable to all
applications under the Arbitration Act. Provided that the
delay is sufficiently explained, there is no such compulsion
on the Court to reject an application filed beyond the
prescribed period of limitation nor is there any question of
the prescribed period of limitation being negatived by
entertaining an application under Section 30 beyond the
period of limitation. We therefore conclude that the order
of the Senior Civil Judge rejecting the application of the
respondent under Section 5 was appealable under the 1940
Act. The application under Section 115 of the Code
therefore did not lie. Despite the fact that this issue was
neither raised before nor considered by the High Court, we
cannot take a blinkered view of the situation in law. Had
the issue been raised, it would have been open to the High
Court to have converted the revision petition into an
appeal. To set aside the order of the High Court on this
technical ground and to remand it for a reconsideration of
the sufficiency of the cause shown by the respondent, would
be an unnecessary exercise. In the view we have taken, the
High Court had the jurisdiction to reappraise the evidence
and condone the delay. It has given its reasons for doing
so. It cannot, in the circumstances, take a different view
on the merits of the respondents case on the question of
delay if the matter were to be remanded. In our opinion,
this would be an appropriate case for us to exercise our
powers under Article 142 of the Constitution and decide on
the merits of the sufficiency cause shown. The High Court
gave three reasons for setting aside the order of the Trial
Court after considering several decisions cited before it.
The first, to use its own words, that there was a total
negligence and it is on the part of the counsel who appeared
for the State in the Trial Court. The second reason was
that high-stakes were involved in the matter. The third
reason was that no prejudice would be caused to the
Contractor because the issue of the validity of the award
was yet to be decided in its suit. It is a moot point
whether the second and third reasons are relevant.
Nevertheless, the first ground should have been and, in our
opinion, was sufficient to excuse the delay and to remand
the matter back to the Trial Court for a decision on the
merits of the application
under Section 30. It would be an euphemism to
describe the ineptitude of the advocates advice to the
respondent in connection with the proceedings before the
Trial Court as negligence. As he holds the post of Govt.
Pleader it could reasonably be assumed by the respondent
that he possessed the required legal expertise to advise
them correctly. His lack of this is borne out by the
several wholly misconceived proceedings filed by the
respondent before the Senior Civil Judge on his advice.
That the respondents objection to the award is not the
laggardly response of a frivolous litigant appears from the
fact that an objection to the award was made even before the
award was filed.
The appeal is accordingly dismissed. There will be no
order as to costs.
