Madhya Pradesh High Court: A Single bench comprising of Vivek Rusia,* J., while signifying the important filing applications properly, explained the calculation of limitation period under Section 34(3) of the Arbitration and Conciliation Act, 1996 (the Act) in the light of Section 14 of the Limitation Act. The Court reverted back the matter for fresh adjudication on the issue of limitation.
In the instant matter, the appellant, a proprietorship firm engaged in the business of supplying cotton bales and other materials, received a purchase order from the respondent for the supply of 600 cotton bales. The purchase order contained an arbitration clause, stating that all disputes would be settled amicably or referred to arbitration in accordance with the Rules and By-laws of the Cotton Association of India, with the contract subject to Indore jurisdiction.
The appellant failed to supply the specified quantity of cotton bales within the agreed time and the respondent initiated arbitration proceedings under the Cotton Association of the India rules. The Sole Arbitration was appointed who passed an award in favour of respondent directing the appellant to pay Rs. 18,89,677/- with interest at 15% per annum.
The appellant later came to know about the ex-parte award after receiving a notice of execution from the Court and subsequently filed an application to set aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) with an application under Section 14 of the Limitation Act. However, the application to set aside the arbitral award was dismissed as time-barred, citing a delay of 4 days beyond the prescribed limitation period. Aggrieved by the impugned award passed by the District Court, appellant preferred the present appeal before this Court challenging the same.
The appellant contended that they were not aware of the arbitration proceedings and the ex-parte award until they received notice from a Court in Guntur, Andhra Pradesh, where the properties of the appellant are situated.
The Court observed the appellant claimed that the letter sent by the Secretary of the Cotton Association of India did not disclose whether the copy of the award had previously been sent to them, raising an issue to be considered by the court regarding the date from which the limitation period should be calculated.
The Court observed that the date from which the limitation period should be calculated was a disputed fact and should have been properly adjudicated and the trial court had failed to consider this issue.
The Court emphasized the significance of properly filing two applications, one under Section 14 of the Limitation Act and the other under the proviso to Section 34(3) of the Act, in order to seek relief from the limitation period for setting aside an arbitral award. The Court stated that in the present matter “the appellant was required to file two applications, first u/s. 14 of the Limitation Act for exclusion of time spent in the proceedings bona fide in the Court without jurisdiction; and another application under the Proviso to sub-section (3) of Section 34 of the Act of 1996 for further extension of one month.”
The Court allowed the arbitration appeal and set aside the impugned order of the District Court. The Court remitted the matter back to the District Court for fresh adjudication on the issue of limitation after recording evidence. The Court further ordered the appellant to pay Rs. 10,000 as the cost of litigation to the Sole Arbitrator.
[Noumla Brothers v. Ruchi World Wide Ltd., 2023 SCC OnLine MP 1916, order dated 06-07-2023]
*Judgment by Justice Vivek Rusia
Advocates who appeared in this case:
Mr. Chetan Jain, Counsel for the Appellant
Mr. Kshitij Vyas, Counsel for the Respondent No. 1
Mr. Romesh Dave, Counsel for the Respondent No. 2