Supreme Court: The 3-judge bench of RF Nariman*, Navin Sinha and KM Joseph, JJ has held that an appeal under section 37(1)(c) of the Arbitration and Conciliation Act, 1996 would be maintainable against an order refusing to condone delay in filing an application under section 34 of the Arbitration Act, 1996 to set aside an award.
The Court was hearing an appeal arising out of a certificate issued under Article 133 read with Article 134A of the Constitution of India by the High Court of Delhi thereby giving rise to the question as to whether a learned single Judge’s order refusing to condone the Appellant’s delay in filing an application under section 34 of the Arbitration Act, 1996 is an appealable order under section 37(1)(c) of the said Act.
Interpreting Section 37(1)(c), the Court took note of the fact that the expression “setting aside or refusing to set aside an arbitral award” has to be read with the expression that follows – “under section 34”. Section 34 is not limited to grounds being made out under section 34(2).
As per section 34(1), an application made to set aside an award has to be in accordance with both sub-sections (2) and (3). Such application would not only have to be within the limitation period prescribed by sub-section (3), but would then have to set out grounds under sub-sections (2) and/or (2A) for setting aside such award. What follows from this is that the application itself must be within time, and if not within a period of three months, must be accompanied with an application for condonation of delay, provided it is within a further period of 30 days, this Court having made it clear that section 5 of the Limitation Act, 1963 does not apply and that any delay beyond 120 days cannot be condoned.
“Obviously, therefore, a literal reading of the provision would show that a refusal to set aside an arbitral award as delay has not been condoned under sub-section (3) of section 34 would certainly fall within section 37(1)(c). The aforesaid reasoning is strengthened by the fact that under section 37(2)(a), an appeal lies when a plea referred to in sub-section (2) or (3) of section 16 is accepted.”
The Court, hence, highlighted that the Legislature, when it wished to refer to part of a section, as opposed to the entire section, did so.
“Contrasted with the language of section 37(1)(c), where the expression “under section 34” refers to the entire section and not to section 34(2) only, the fact that an arbitral award can be refused to be set aside for refusal to condone delay under section 34(3) gets further strengthened.”
Further, so far as section 37(1)(a) is concerned, where a party is referred to arbitration under section 8, no appeal lies. This is for the reason that the effect of such order is that the parties must go to arbitration, it being left to the learned Arbitrator to decide preliminary points under section 16 of the Act, which then become the subject matter of appeal under section 37(2)(a) or the subject matter of grounds to set aside under section 34 an arbitral award ultimately made, depending upon whether the preliminary points are accepted or rejected by the arbitrator.
It is also important to note that an order refusing to refer parties to arbitration under section 8 may be made on a prima facie finding that no valid arbitration agreement exists, or on the ground that the original arbitration agreement, or a duly certified copy thereof is not annexed to the application under section 8.
“In either case, i.e. whether the preliminary ground for moving the court under section 8 is not made out either by not annexing the original arbitration agreement, or a duly certified copy, or on merits – the court finding that prima facie no valid agreement exists – an appeal lies under section 37(1)(a).”
Likewise, under section 37(2)(a), where a preliminary ground of the arbitrator not having the jurisdiction to continue with the proceedings is made out, an appeal lies under the said provision, as such determination is final in nature as it brings the arbitral proceedings to an end. However, if the converse is held by the learned arbitrator, then as the proceedings before the arbitrator are then to carry on, and the aforesaid decision on the preliminary ground is amenable to challenge under section 34 after the award is made, no appeal is provided.
The Court, hence, concluded,
“Undoubtedly, a limited right of appeal is given under section 37 of the Arbitration Act, 1996. But it is not the province or duty of this Court to further limit such right by excluding appeals which are in fact provided for, given the language of the provision as interpreted by us hereinabove.”
[Chintels India Ltd. v. Bhayana Builders Pvt. Ltd., 2021 SCC OnLine SC 80, decided on 11.02.2021]
*Judgment by: Justice RF Nariman
Appearances before the Court by:
For Appellant: Advocate Rajshekhar Rao
For Respondent: Senior Advocate Mukul Rohatgi