Arbitration Act- Section 34(3) of Arbitration Act tantamount to an “express exclusion” of Section 17 of Limitation Act- Supreme Court

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September 28, 2018

In this case, the seminal issue that fell for consideration before the Two-Judge Bench of the Supreme Court was whether the text or the scheme and object of the Arbitration Act excludes the application of Section 17 of Limitation Act while determining the limitation period?

Case name: P. Radha Bai and Ors. v. P. Ashok Kumar and Anr.

The two statutory provisions in conflict in the case were Section 17 of the Limitation Act and Section 34(3) of the Arbitration Act.

Section 17 of the Limitation Act essentially enumerates that where the suit is based upon the fraud of the defendant then the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake.

Section 34(3) prohibits the filing of an application for setting aside of an Award after three months have elapsed from the date of receipt of Award or disposal of a request under Section 33.

Bench’s Verdict

The Supreme Court Bench after scrutinizing the statutory provisions in question concluded that Section 34(3) of Arbitration Act tantamount to an “express exclusion” of Section 17 of Limitation Act and inter alia made the following observations in the case:

  • That inconsistencies with the language of Section 34(3) of Arbitration Act tantamount to an “express exclusion” of Section 17 of Limitation Act.
  • That the purpose of Arbitration Act was to provide for a speedy dispute resolution process. The Statement of Objects and Reasons reveal that the legislative intent of enacting the Arbitration Act was to provide parties with an efficient alternative dispute resolution system which gives litigants an expedited resolution of disputes while reducing the burden on the courts.
  • That Article 34(3) reflects this intent when it defines the commencement and concluding period for challenging an Award.
  • The Apex Court also made reference to judgment in the case of Union of India v. Popular Construction Co.[1], whereby the Supreme Court highlighted the importance of the fixed periods under the Arbitration Act. The Court also remarked that the finality is a fundamental principle enshrined under the Arbitration Act and a definitive time limit for challenging an Award is necessary for ensuring finality.
  • That if Section 17 were to be applied, an Award can be challenged even after 120 days. This would defeat the Arbitration Act’s objective of speedy resolution of disputes. The finality of award would also be in a limbo as a party can challenge an Award even after the 120 day period.
  • That extending Section 17 of Limitation Act to Section 34 would do violence to the scheme of the Arbitration Act. As Section 36 enables a party to apply for enforcement of Award when the period for challenging an Award under S.34 has expired. However, if Section 17 were to be extended to Section 34, the determination of “time for making an application to set aside the arbitral award” in Section 36 will become uncertain and create confusion in the enforcement of Award.
  • In view of the aforesaid observations, the Supreme Court has held in the case that once the party has received the Award, the limitation period under Section 34(3) of the Arbitration Act commences. Section 17 of the Limitation Act would not come to the rescue of such objecting party.

The entire case can be accessed here.

[1] (2001) 8 SCC 470