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Commercial Courts May Also Dismiss Appeal Under Section 37(1)(c) of the Arbitration Act to Set Aside an Award: Delhi High Court

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This case concerns whether the appeal under Section 37(1)(c) of the Arbitration is maintainable against the order refusing to condone the delay in applying Section 34 of the Arbitration Act. 

Brief Facts

This appeal was filed by the appellant (Chintels India Ltd.) because a Certificate was issued under Article 133 read with Article 134A of the Constitution of India by the High Court of Delhi in the impugned judgment dated 04.12.2020. 

The question which was raised in this appeal was whether a learned single Judge’s order refusing to condone the Appellant’s delay in applying Section 34 of the Arbitration and Conciliation Act, 1996 ( Arbitration Act) is an appealable order under Section 37(1) (c) of the said Act. 

The Single Judge of the High Court dismissed the application for condonation of delay in an application filed under Section 34 of the Arbitration Act to set aside an award dated 03.05.2019 vide its judgment dated 04.06.2020, and subsequently dismissed the Section 34 application itself. 

Appellant’s Arguments 

The Counsel relied on the judgment of Essar Constructions v. N.P. Rama Krishna Reddy, it was argued that section 39 of the Arbitration Act, 1940 is in pari materia with Section 37 of the Arbitration Act, in that appeal the Single Judge refused to condone the delay, resulting in an order refusing to set aside an arbitral award. The ratio of Essar Construction would apply to all the provisions of Section 37. Relying on this ratio, it was argued that refusal to condone the delay, would result in refusal to set an award, and appeal against such order is maintainable under Section 37. 

He further argued that an order refusing to condone delay is different from the order which condones delay, as the latter order cannot be said to impart any finality to the proceedings, as, when an order to condones delay, it cannot be said that the Court refused to set aside an award as it may ultimately set aside the aforesaid award under Section 34(2) of the Arbitration Act. 

He also argued that where the right of appeal is granted by statute, a dismissal on the preliminary grounds is, all the same, a dismissal of the appeal, as it cannot be heard after that. The right of appeal, once granted, ought not to be limited by statutory interpretation where the words used are capable of wider construction. Especially, referring to the language of Section 37(1)(c) of the Arbitration Act, it was contended that there must be a refusal to set aside the arbitral award under Section 34 including section 34(3), under which the condonation of delay can be refused by the Court. 

Based on the Judgment of the State of Maharashtra and Anr. vs. M/s. Ramdas Construction Co. & Anr., it was contended that the maintainability aspect was not discussed by the Court, but at last dismissed the civil appeals on the ground that the District Judge, Nagpur, held that the period of delay being beyond four months, the Court had no jurisdiction to entertain the application for condonation of delay or the application on merits under Section 34. 

Respondent’s Arguments 

It was argued that Section 39 of the 1940 Act is not pari materia to section 37 of the Arbitration Act. According to him, Section 39 of the 1940 Act is significantly different and relates to the grounds mentioned under Section 30 of the Act, which is different from the grounds under Section 34(2) and (2A) of the 1996 Act. Thus, Section 37 needs to be interpreted in its terms, and that consequently, Essar Construction’s judgment would not be applicable. 

Strong reliance was placed on Section 5 of the Arbitration Act, by which it was made clear that judicial intervention is to be minimal in the arbitration process. For this purpose, he even referred to the Statement of Objects and Reasons for enacting the Arbitration Act. It was also stated that Section 37 also carries out this object. 

Further, he stressed that the aforesaid object was reinforced first, by the non-obstante clause contained in Section 37(1) and another by the fact that the grounds of appeal contained in section 37 are exhaustive, makes it clear that the appeal shall lie only from following orders “and not from others”. The word “namely”, also makes it explicit that it is only from the orders made in Section 37 that an appeal can be filed. 

According to the Counsel, Section 37(1)(c) is clear and without any ambiguity and the expression “under Section 34” has to be read with the preceding words “setting aside or refusing to set aside an arbitral award”, and when read together, it is clear that the refusal to set aside the award can only be on merits and not on some preliminary grounds which would result in refusal to set aside the award. 

Relying on the Judgment in Union of India v. Simplex Infrastructure Ltd., it was held that whether the delay is condoned or not, the same result ensues and it cannot be said that by condoning the delay or refusing the condonation, an arbitral award either gets or does not get set aside. Lastly, it was submitted that in the Ramdas Construction Co. case, the correct enunciation of law was made and thus, should be accepted. 

Observation by the Court

A reading of Section 34(1) makes it clear that the application must be within the time, and if not within three months, must be accompanied with an application for condonation of delay, provided it is within a further period of 30 days. The Supreme Court also made it clear that Section 5 of the Limitation Act, 1963 does not apply and no delay beyond 120 days cannot be condoned- State of Himachal Pradesh v. Himachal Techno Engineers and Anr. 

It was observed that the expression “under section 34” used in Section 37(1)(c) refers to the entire section and not only Section 34(2), and the fact that an arbitral award can be refused to be set aside for refusal to condone the delay under Section 34(3). 

In Essar Constructions, a judgment rendered under Section 39 of the 1940 Act, the Supreme Court face the same question, it was concluded that “ Reading Section 39(1)(vi) and Section 17 together, it would therefore follow that an application to set aside an award which is rejected on the ground that it is delayed and that no sufficient cause has been made out under Section 5 of the Limitation Act would be an appealable order”.  Section 39(1)(vi) of the 1940 Act is in pari materia to Section 37(1)(c) of the 1996 Act. 

The Court agreed that no material difference between section 37 of the Arbitration Act and Section 39 of the 1940 Act, but Section 39 of the 1940 Act is not vis-à-vis Section 50 of the 1996 Act. 

In either case i.e., whether the preliminary 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 no merits-the Court finding that the prima facie no valid agreement exist- an appeal lies under Section 37(1)(a). 

It was, further, observed that under Section 37(2)(a), if it is made out that the preliminary ground of the arbitrator having the jurisdiction to continue with the proceedings, then the proceedings before the arbitrator will 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.

 In the Judgment of Simplex Infrastructure Ltd., it was held that a single judge’s judgment condoning the delay in applying section 34 was within the jurisdiction conferred by the Statute. However, this judgment cannot be considered an authority for the proposition that, as the converse position to the facts contained in the present appeal before we have been held to be not appealable, it must follow that even where the delay is not condoned, the same position obtains. 

In the case of Ramdas Construction Co., the law was not correctly stated because it does not advert to the decision of the Supreme Court in Essar Construction and is against the interpretation of Section 37(1)(c) of the Arbitration Act. 

The decision of the Court 

An appeal under Section 37(1)(c) of the Arbitration Act would be maintainable against an order refusing to condone the delay in applying Section 34 of the Arbitration Act, to set aside an award. 

The appeal was accordingly allowed. The impugned judgment of the Division Bench was set aside, and the matter was remitted to the Division Bench of High Court of Delhi to decide whether the Single Judge’s refusal to condone delay is correct or not. 

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