Mahindra and Mahindra Financial Services Ltd. vs Maheshbhai Tinabhai Rathod and Others

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11477 OF 2014

Mahindra and Mahindra Financial .…Appellant(s) Services Ltd. Versus

Maheshbhai Tinabhai Rathod & Ors. …. Respondent(s)

WITH CIVIL APPEAL NO. 11478 OF 2014

JUDGMENT

A.S. BOPANNA, J.

1. The appellant in these appeals is assailing the order dated

24.09.2012 passed by the learned Division Bench of the High

Court of Judicature at Bombay in Appeal Nos.526 and 525 of

2012 in NM No.925/2012, NM No. 923/2012 in AP

No.209/2012 and APNo.212 of 2012 respectively. By the said Signature Not Verified Digitally signed by Vishal Anand Date: 2022.01.04 16:21:48 IST Reason: order the learned Division Bench has allowed the appeals,

1 condoned the delay and directed to place the Arbitration

Petition No.209 of 2012 and 212 of 2012 filed under Section 34

of the Arbitration and Conciliation Act, 1996 (“Act 1996” for

short) for admission hearing before the learned Single Judge for

consideration on merits.

2. The brief facts leading to the above appeals is that the

respondent availed loan facility for purchase of tractors and an

agreement No. 366533 dated 24.10.2005 was entered into

between the parties in respect of the transaction. The further

details relating to the transaction on merit is unnecessary to be

adverted for the purpose of disposal of these appeals. However,

it is noted that due to non­adherence to the terms of contract,

dispute arose between the parties and the same was referred to

arbitration by invoking the arbitration clause contained in the

agreement. The learned Arbitrator passed the award dated

28.02.2011 and allowed the claim made by the appellant. The

learned Arbitrator is stated to have dispatched the copy of the

award to both the parties through Registered Post

acknowledgment due. The appellant herein thereafter filed an

execution petition on 27.06.2011 to execute the award and

2 recover the amount due and payable by the respondent. The

notice of execution petition from the court of the Civil Judge,

District Court, Bhavnagar was issued to the respondent.

3. The respondent, at that stage, on 04.01.2012 assailed the

arbitral award dated 28.02.2011 by filing the petition under

Section 34 of the Act 1996. By such time there was delay of 185

days beyond the time period allowed under Section 34 (3) of the

Act 1996. Hence along with the petition, the respondent moved

Notice of Motion No.925 of 2012 in Arbitration Petition No.209

and Notice of Motion No.923 of 2012 in Arbitration Petition

No.212 of 2012 under Section 5 of the Limitation Act seeking

condonation of delay contending that the respondent had

knowledge of the proceedings only when summons was received

from the execution court on 15.11.2011. The appellant herein

filed their objection to the Notice of Motion. The learned Single

Judge while considering the Notice of Motion in the petition

under Section 34 of Act 1996 noted that the respondent refused

to accept the registered post containing the award and, in that

view, declined to condone the delay. The respondent therefore

filed an appeal before the learned Division Bench, which has by

3 a cryptic order condoned the delay against the statutory

provision and the law enunciated by this Court. The appellant

is therefore aggrieved and is seeking that the order passed by

the learned Division Bench be set aside, consequently the

petition filed by the respondent under Section 34 of Act 1996 be

dismissed as barred by time.

4. We have heard Mr. Prashant Kumar, learned counsel for

the appellant, Mr. V.N. Raghupathy, learned counsel for the

respondents and perused the material available on record.

5. Having noted the sequence, the only aspect which arises

for consideration in these appeals is as to whether the petition

filed under Section 34 of the Act 1996 was within the period of

limitation provided therein. If not, whether the delay is

condonable by exercise of power under Section 5 of Limitation

Act? In that regard whether the action of the learned Division

Bench in condoning the delay by applying Section 5 of

Limitation Act to a proceeding under Section 34(3) of Act 1996

in the manner it has done in the instant case justified?

4 6. To appreciate the matter in its correct perspective it is

necessary at the threshold to take note of Section 34 (3) of Act

1996 providing for the period of limitation, which is as

hereunder: ­

“Section 34 (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 it may entertain the application within a further period of thirty days, but not thereafter.”

7. The scope available for condonation of delay being self­

contained in the proviso to Section 34(3) and Section 5 of

Limitation Act not being applicable has been taken note by this

Court in its earlier decisions, which we may note. In Union of

India vs. Popular Construction Co. (2001) 8 SCC 470 it has

been held as hereunder: ­

“12. As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are “but not thereafter” used in the proviso to sub­section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the

5 Limitation Act, and would therefore bar the application of Section 5 of that Act. Parliament did not need to go further. To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose. No principle of interpretation would justify such a result.

14. Here the history and scheme of the 1996 Act support the conclusion that the time­limit prescribed under Section 34 to challenge an award is absolute and unextendible by court under Section 5 of the Limitation Act. The Arbitration and Conciliation Bill, 1995 which preceded the 1996 Act stated as one of its main objectives the need “to minimise the supervisory role of courts in the arbitral process” This objective has found expression in Section 5 of the Act which prescribes the extent of judicial intervention in no uncertain terms:

“5. Extent of judicial intervention.— Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”

16. Furthermore, Section 34(1) itself provides that recourse to a court against an arbitral award may be made only by an application for setting aside such award “in accordance with” sub­section (2) and sub­ section (3). Sub­section (2) relates to grounds for setting aside an award and is not relevant for our purposes. But an application filed beyond the period mentioned in Section 34, sub­section (3) would not be an application “in accordance with” that sub­section. Consequently by virtue of Section 34(1), recourse to the court against an arbitral award cannot be made beyond the period prescribed. The importance of the period fixed under Section 34 is emphasised by the provisions of Section 36 which provide that “where the time for making an application to set aside the arbitral award under Section 34 has expired … the award shall be enforced under the Code of Civil Procedure, 1908 in the

6 same manner as if it were a decree of the court”.

This is a significant departure from the provisions of the Arbitration Act, 1940. Under the 1940 Act, after the time to set aside the award expired, the court was required to “proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow” (Section 17). Now the consequence of the time expiring under Section 34 of the 1996 Act is that the award becomes immediately enforceable without any further act of the court. If there were any residual doubt on the interpretation of the language used in Section 34, the scheme of the 1996 Act would resolve the issue in favour of curtailment of the court's powers by the exclusion of the operation of Section 5 of the Limitation Act.

7.1 Further, in State of Himachal Pradesh & Anr. vs.

Himachal Techno Engineers & Anr. (2010) 12 SCC 210 it

was noted and held as hereunder: ­

“2. A petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”, for short) was filed by the appellant on 11­3­2008, challenging the arbitral award. The petition was accompanied by an application under sub­section (3) of Section 34 of the Act, for condonation of delay of 28 days in filing the petition. The respondent resisted the application contending that the petition under Section 34 was filed beyond the period of 3 months plus 30 days and therefore, was liable to be rejected.

5. Having regard to the proviso to Section 34(3) of the Act, the provisions of Section 5 of the Limitation Act, 1963 will not apply in regard to petitions under Section 34 of the Act. While Section 5 of the Limitation Act does not place any outer limit in regard to the period of delay that could be condoned, the proviso to sub­section (3) of Section 34 of the Act places a limit on the period of condonable delay by

7 using the words “may entertain the application within a further period of thirty days, but not thereafter”. Therefore, if a petition is filed beyond the prescribed period of three months, the court has the discretion to condone the delay only to an extent of thirty days, provided sufficient cause is shown. Where a petition is filed beyond three months plus thirty days, even if sufficient cause is made out, the delay cannot be condoned.”

7.2 The same view was taken by this Court in P. Radha Bai

vs. P. Ashok Kumar (2019) 13 SCC 445 wherein this Court

held as follows­

“33.2. The proviso to Section 34 (3) enables a court to entertain an application to challenge an award after the three months’ period is expired, but only within an additional period of thirty dates, “but not thereafter”. The use of the phrase “but not thereafter” shows that the 120 days’ period is the outer boundary for challenging an award. If Section 17 were to be applied, the outer boundary for challenging an award could go beyond 120 days. This Court has consistently taken this view that the words “but not thereafter” in the proviso of Section 34 (3) of the Arbitration Act are of a mandatory nature, and couched in negative terms, which leaves no room for doubt. [State of H.P. vs. Himachal Techno Engineers (2010) 12 SCC 210], Assam Urban Water Water Supply & Sewerage Board vs. Subash Projects & Mktg. Ltd. (2012) 2 SCC 624 and Anil Kumar Jinabhai Patel

8 vs. Pravinchandra Jinabhai Patel (2018) 15 SCC 178]”

7.3 The observations of this Court in different decisions

relating to non­applicability of Section 5 of the Limitation Act in

condoning the delay and extending the limitation prescribed

under Section 34 (3) of Act 1996 was taken note of by a bench

of three Hon’ble Judges of this Court with approval, in

Chintels India Limited vs. Bhayana Biuilders Private

Limited (2021) 4 SCC 602.

8. In the above backdrop, a perusal of the order passed by

the learned Single Judge indicates that as per the explanation

put­forth by the respondent herein, it was their case that the

Arbitration Petition under Section 34 of Act 1996 filed on

04.01.2012 was on having knowledge of the award, which

according to the respondent was on 15.11.2011 when notice in

the execution petition was received. The affidavit in reply was

noted by the learned Single Judge, as per which it was brought

on record that the learned Arbitrator had dispatched the award

dated 28.02.2011 on 15.03.2011 by making an inscription,

‘AWARD’, on the envelope, by Regd. Post Acknowledgment due.

9 The refusal to receive was endorsed by the postal authority on

23.03.2011. The postal remark in Gujarati “Lenavi Na Pade

Che” (refused to accept) was noted by the learned Single Judge.

In para 9 and 10 of the order, the learned Single Judge has

ascertained the factual position of the refusal made by the

respondent and there being no denial on that front. In that

light, the learned Single Judge concluded as hereunder: ­

“The envelopes forwarded by the learned Arbitrator to the Petitioners, which are returned by the postal authorities to the Arbitrator on the ground that the Petitioners have refused to accept service of the same, are opened in Court and it is noted that the learned Arbitrator had forwarded signed copies of the award to the Petitioners. As stated hereinabove, the Petitioners have admitted the fact that they have refused to accept service of the envelopes containing copies of the Arbitral Award. Refusal of service is good service in law. In view thereof, the Petitioners are deemed to have been served with the signed copy of the award on 23rd March, 2011. The Petitioners have filed the Petition only on 02­04 January, 2012 i.e. after delay of about 197 days. The issue as to whether the provision of Section 34(3) of the Act, has the effect of excluding Section 5 of the Limitation Act, 1963, came up for consideration before the Hon'ble Supreme Court in the case of Consolidated Engineering Enterprises Versus Principal Secretary, Irrigation Department and Ors. wherein the Hon'ble Supreme Court has in paragraph 53 of its decision, categorically held that the provisions of Section 34(3) of the Act, has the effect of excluding Section 5 of the Limitation Act, 1963.”

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9. The learned Single Judge in that view took note of the

legal position and declined to condone the delay. The Notice of

Motion was accordingly dismissed.

10. In contradistinction, a perusal of the order passed by the

learned Division Bench ex­facie indicates that it has proceeded

at a tangent. On referring to the contention that the respondent

was a farmer and that no amount is due, has relied on the

decision of this Court in Collector, Land Acquisition,

Anantnag and Another vs. Mst. Katiji and Others AIR 1987

SC 1353 out of context and has made the same as the basis to

allow the appeal. No­doubt the delay of 197 days may not seem

too inordinate. In appropriate cases the delay is to be condoned

so as not to defeat the meritorious case. However, that would

arise only when the power under Section 5 of Limitation Act is

available to be exercised. The case of Katiji (supra) is one

where such power was available to be exercised as it was not

excluded. In the instant case where limitation is prescribed, the

extent to which it can be condoned is circumscribed and it has

been held by this Court that Section 5 of Limitation Act is not

applicable to condone the delay beyond the period prescribed

11 under Section 34(3) of Act 1996, the learned Division Bench

was not justified in condoning the delay in a casual manner.

The order dated 24.09.2012 is not sustainable, the same is

therefore set aside and the order of learned Single Judge is

restored.

11. The appeals are accordingly allowed with no order as to

costs.

12. All pending applications, if any, shall stand disposed of.

...….………………CJI.

(N.V. RAMANA)

.……………………….J. (A.S. BOPANNA)

........………………J. (HIMA KOHLI) New Delhi, December 16, 2021

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