Supreme Court overrules NV International verdict that held delay beyond 120 days for arbitration appeal under section 37 cannot be condoned

GENERAL OVERVIEW

• Supreme Court overruled its own judgement on Friday in the case of N.V International Vs State of Assam which held a delay more than 120 days in filing appeals under section 37 of Arbitration and Conciliation Act 1996 could not be condoned.
• The court has now ruled that a delay beyond 30, 60 or 90 days for appealing under section 37, depending on the forum can be condoned however such a condonation should be an exception and not the norm.

FURTHER DETAILS

• Section 37 of the Act provide appeals against orders under sections 9, 34, 16 and 17. Unlike section 34 there is no specific period for filing the appeal under section 37.
• Supreme Court in NV International judgement imported the time period for filing appeal under Section 34 to Section 37. The bench comprised of Justices RF Nariman and S Ravindra Bhat.
• According to the time period given under section 34(3) an appeal against the arbitration award should be filed within 3 months from the date of award, further a grace period of 30 days is also provided. This means that the appeal should be filed within 120 days.
• However, the judgement of NV International has now been overruled by the Apex court in a three judge bench comprising of Justices RF Nariman, BR Gavai and Hrishikesh Roy.
• The bench considered the interplay of Arbitration Act with Commercial Courts Act. According to section 13(1) of the Commercial Courts Act an appeal should be filed within 60 days however the period will be valid for arbitration matters in which the commercial value of transaction will be more than 3 lakhs.
• The court observed that articles 116 and 117 will apply to claims below the value of 3 lakhs and such arbitration cases will be rare and will governed by Commercial Courts Act.

WHY WAS THE JUDGEMENT OVERRULED?

• The provisions of Commercial Courts Act were not noticed in NV International and hence is per incuriam on that count.
• The limitation period under the Commercial Courts for filing the appeals is 60 days and not 90 days so the formula of (90+30) days and not thereafter mentioned in section 34(3), Arbitration Act now cannot be applied.
• The “body lifting” from section 34(3) to section 37 is unwarranted since section 13 of Commercial Court has no provision to reduce in extent the condonation of period of delay beyond a point.
• The court observed that the object of both Commercial Courts Act and Arbitration Act were speedy disposal of claims.

THE DICTUM

• Appeals filed under section 37of Arbitration Act which is governed by articles 116 and 117 of Limitation Act or under section 13(1A) of Commercial Courts Act, a delay beyond 30, 60 or 90 days respectively can be condoned by way of exception and not by way of rule.
• The court rejected the argument that the limitation period of 3 years under Article 137 of Limitation Act should apply to section 37 as the word “application” in article 137 cannot mean the same as the word “appeals”.
• The court said that even in the rare situation of arbitration cases with commercial value less than Rs 3 lakhs the object of speedy resolution would govern appeals which are mentioned in the articles 116 and 117 of Limitation Act.
• The judgement said, “Even in the rare situation in which an appeal under section 37 of the Arbitration Act would be of a specified value less than three lakh rupees,resulting in Article 116 or 117 of the Limitation Act applying,the main object of the Arbitration Act requiring speedy resolution of disputes would be the most important principle to be applied when applications under section 5 of the Limitation Act are filed to condone delay beyond 90 days and/or 30 days depending upon whether Article116(a) or 116(b) or 117 applies".

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