The Supreme Court in a recent judgment delivered in Commissioner, M.P. Housing Board and Others v. M/s. Mohanlal and Company [judgment reproduced below], while interpreting Section 14 of the Limitation Act, 1963 held that there is a clear distinction between an application under Section 11 of the Arbitration and Conciliation Act 1996 (hereinafter referred to as the ‘said Act’) and an Application under Section 34(2) of the said Act. A bench comprising of Justice Dipak Misra and Justice Rohington F. Nariman held that the above two applications do not relate to the ‘same matter in issue’, which is an essential condition to be fulfilled while invoking the provisions of S. 14 of the Limitation Act and therefor delay in filing S. 34(2) cannot be condoned.
In this case the parties had referred a dispute to an arbitrator appointed in accordance with the arbitration clause contained in a contract entered into between them. The decision passed by the arbitrator turned out to be against M/s Mohanlal and Company i.e. the Respondent. Finding a way to avoid such an award passed by the arbitrator, Mohanlal and Company filed an application before the High Court under section 11 of the said Act, challenging the very appointment of the Arbitrator and sought a fresh appointment of an Arbitrator in terms of Section 11. Finding no merit in the said Application the same was dismissed by the High Court upholding the arbitration clause in the said contract.
Finding no other way to defeat the award already passed, the Respondent filed an application under Section 34(2) of the Arbitration Act for setting aside of the award. However, since Mohanlal and Company had already wasted its time in the application filed under Section 11, the application under section 34, so filed was barred by limitation by virtue of Section 34(3) which reads as follows:
“34. Application for setting aside arbitral award. –
…..
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award, or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months if may entertain the application within a further period of thirty days, but not thereafter.”
Due to the fact that Mohanlal and Company were late in approaching the court under Section 34(2) they took reprieve under Section 14 of the Limitation Act asking for condonation of delay by exclusion of the time taken in the proceedings under Section 11 of the Arbitration Act.
Section 14 of the Limitation Act reads as follows:
“14. Exclusion of time of proceeding bona fide in court without jurisdiction.– (1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.”
The District Court deciding the application, condoned the delay. The same was affirmed by the High Court in appeal. This matter came up before the Supreme Court.
Although the Supreme Court affirmed and reiterated the principle that Section 14 of the Limitation Act applies to Section 34(3) of the Arbitration Act, however it held that Section 14 would not come to the rescue under Section 34(3) when the previous litigation is under Section 11 of the Act. It observed as follows:
“17. …. However, it has also been laid down that it would be applicable in cases of mistaken remedy or selection of a wrong forum. As per the conditions enumerated, the earlier proceeding and the latter proceeding must relate to the same matter in issue. It is worthy to mention here that the words “matter in issue” are used under Section 11 of the Code of Civil Procedure, 1908. As has been held in Ramadhar Shrivas v. Bhagwandas the said expression connotes the matter which is directly and substantially in issue. We have only referred to the said authority to highlight that despite liberal interpretation placed under Section 14 of the Act, the matter in issue in the earlier proceeding and the latter proceeding has to be conferred requisite importance. That apart, the prosecution of the prior proceeding should also show due diligence and good faith.
18. ….. Filing of an application under Section 11 of the 1996 Act for an appointment of arbitrator is totally different than an objection to award filed under Section 34 of the 1996 Act. To put it differently, one is at the stage of initiation, and the other at the stage of culmination. By no stretch of imagination, it can be said that the proceedings relate to “same matter in issue”. Additionally, the respondent had participated in the arbitral proceeding and was aware of passing of the award. He, may be, by design, invoked the jurisdiction of the High Court for appointment of an arbitrator. We are absolutely conscious that liberal interpretation should be placed on Section 14 of the Act, but if the fact situation exposits absence of good faith of great magnitude, law should not come to the rescue of such a litigant. We say so because the respondent instead of participating in the arbitration proceedings, could have immediately taken steps for appointment of arbitrator as he thought appropriate or he could have filed his objections under Section 34(2) of the Act within permissible parameters but he chose a way, which we are disposed to think, an innovative path, possibly harbouring the thought that he could contrive the way where he could alone rule. Frankly speaking, this is neither diligence nor good faith. On the contrary, it is absence of both.”
Thus it was held that though Section 14 of Limitation Act calls for a liberal interpretation, however two important ingredients must be fulfilled i.e. that the previous proceedings must relate to the ‘same matter in issue’ and that the previous proceedings were prosecuted in good faith and due diligence. Without the fulfilment of these two conditions, section 14 cannot be invoked. Therefore, while interpreting Section 14 of the Limitation Act, the Supreme Court drew a clear line of difference between – an application filed under Section 11 of the Arbitration Act for the purpose of avoiding an award already passed in which the both parties had participated in the arbitral proceedings and – the filing of an Application under Section 34(2) of the said Act, which is filed pursuant to an unsuccessful attempt under Section 11. As, the two applications filed are not for the same ‘matter in issue’ and was definitely not pursued in good faith.
Read the full judgment:
