Allahabad High Court: In an appeal filed by the State under Section 37 of the Arbitration and Conciliation Act, 1996 (‘the Act’) filed along with an application under Section 5 read with Article 137 of the Limitation Act, 1963 (‘Limitation Act’), for condonation of delay of more than 120 days in filing the appeal, Shekhar B. Saraf, J., dismissed the appeal being time barred, and issued directions to the Principal Secretary (Law), Uttar Pradesh, to take necessary steps for implementation of guidelines in Government departments to avoid the filing of appeals beyond the statutory time limits.
Background
An agreement was entered between the State and the respondent for excavation of foundation of supporting structures of second stage pump house at Agra. Disputes arose between the parties in relation to the agreement which were referred to arbitration. The Arbitrator passed an award for a sum of Rs. 67,42,240/- in favour of the respondent on 19-07-2009, with a stipulation that if the award remained unpaid by the State, it would carry simple interest at16% from the date of the award to the date of actual payment.
The State filed an application under Section 34 of the Act challenging the award passed by the arbitrator along with an application for condonation of delay under Section 5 read with Article 137 of the Limitation Act, which was dismissed by the District Judge, Agra. Therefore, aggrieved by the order the State filed the present appealunder Section 37 of the Act.
The State contended that the delay caused in filing the said application was beyond its control and was not deliberate and prayed that the Court ought to condone such delay in the interest of justice.
Decision and Analysis
Upon hearing the parties and examining the records, the Court noted that the instant appeal had been filed by the State on 13-03-2013, which was after a delay of more than 120 days.
The Court referred to the decision in N.V. International v. State of Assam (2020) 2 SCC 109 that dealt with the period of limitation for filing an appeal under Section 37 of the Act, wherein it was held that since an application under Section 34 had to be filed within a maximum period of 120 days, including the grace period of 30 days, an appeal filed from the same proceeding under Section 37 should be covered by the same drill i.e. 120 days.
The Court also referred to State of Maharashtra v. Borse Bros. Engineers & Contractors (P) Ltd. (2021) 6 SCC 460 and noted that the Act being a legislation for speedy disposal, delay could only be condoned only if sufficient cause was made out, and not otherwise.
The Court further noted that by setting strict timelines, the Act sought to prevent the arbitration process from becoming as protracted as court cases, however, there could be genuine circumstances wherein such delay could be condoned upon showing “sufficient cause”. The Court said that since term “sufficient cause” had not been defined in the Act, based on judicial interpretation, in general, sufficient cause would refer to a legitimate reason that prevented a party from acting within the prescribed time limits.
The Court noted that even the application under Section 34 of the Act was filed beyond the beyond the statutory limitation period of 3 months plus extendable period of 30 days, and could not have been admitted by the District Judge, therefore the State did not have a case before the Court.
The Court remarked,“while the government may face certain administrative and procedural challenges, it must take adequate measures to ensure that appeals are filed within the prescribed time limits. Private parties, who often operate with fewer resources and less bureaucratic infrastructure than government entities, are required to comply with the same strict timelines. If the government were allowed to bypass these timelines due to internal delays, it would place private parties at a distinct disadvantage, undermining the principle of fairness that is central to the arbitration process. This would also create an environment where private parties might lose faith in the arbitration process, viewing it as biased in favor of the government.”
To tackle the aforementioned problem of delay, the Court recommended the following:
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Specialized legal teams within the government departments should be created, who could monitor legal matters, ensuring all necessary actions, including the filing of appeals, were taken within the prescribed time limits.
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Implementation of robust tracking and monitoring systems to oversee the progress of legal cases, which could help identify any potential bottlenecks or delays in the process, allowing for swift corrective action to be taken
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Establishing clear guidelines and protocols for the handling of legal matters outline the steps that need to be taken at each stage of the process, including the filing of appeals, and should provide clear instructions on how to comply with statutory timelines.
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Regular training and capacity-building programs for government officials involved in legal matters, ensuring that they are fully aware of their responsibilities and the importance of adhering to statutory deadlines.
The Court, therefore, dismissed the appeal as time barred, and issued directions to the Principal Secretary (Law), Government of Uttar Pradesh, to take necessary steps, to avoid the filing of appeals beyond the statutory time limits, by the Government. The Court further directed that a report be submitted before the Court regarding the action taken within 6 months from the date of this judgment, with liberty to the Principal Secretary (Law) to take assistance of a committee of experts.
The Court further directed the Registrar (Compliance) to communicate this order to the Principal Secretary (Law).
[State of U.P. v. Harish Chandra India Limited, 2024 SCC OnLine All 3218, decided on 02-07-2024]
Advocates who appeared in this case :
Advocates for the State: Rishi Kumar, Additional Chief Standing Counsel
Advocates for the Respondent: Mohd. Arish, on behalf of Ashish Mishra, Advocate
Buy Arbitration and Conciliation Act, 1996 HERE
