Consolidated Engg.Enterprises Vs. Principal Secy. Irrigation Deptt. & Ors.
[2008] INSC 567 (3 April 2008)
CJI K.G. BALAKRISHNAN & J.M. PANCHAL
(Arising out of SLP(C) No.10311 of 2005) With CIVIL APPEAL NO. 2462 OF 2008
(Arising out of SLP(C) No.15619 of 2005) HATTI GOLD MINES COMPANY LTD. ..
APPELLANTS Versus J.M. PANCHAL, J.
Civil Appeal No.2461 of 2008 @ SLP(C) NO.10311/2005 Leave granted.
2. The instant appeal is directed against judgment dated April 4, 2005
rendered by the Division Bench of the High Court of Karnataka at Bangalore in
Misc. First Appeal No.4465 of 2003, by which, decision dated October 24, 2002
passed by the learned District Judge, Bangalore Rural District, Bangalore in
A.S. No.2 of 2000 dismissing the application submitted by the appellant under
Section 34 of the Arbitration and Conciliation Act, 1996 (the Act for
short) as time barred has been set aside and the matter is remanded to the
District Court with a direction to proceed further with the matter in
accordance with law.
3. The appellant is an enterprise engaged in civil engineering construction
as well as development of infrastructure. It entered into an agreement dated
January 20, 1989 with the respondent for construction of earthen bund, head
sluices and the draft channel of the Y.G. Gudda tank. During the subsistence of
the contract, disputes arose between the parties. Therefore, the appellant
invoked Arbitration clause No.51 of the agreement pursuant to which the
disputes were referred to the sole arbitrator for adjudication. The sole
arbitrator made his award on April 10, 1999 in favour of the appellant. Feeling
aggrieved by the said award, the respondents preferred an application dated
July 5, 1999 to set aside the award as contemplated by Section 34 of the Act in
the court of learned Civil Judge (Senior Division), Ramanagram, Bangalore Rural
District. The said application was registered as A.C. No.1 of 1999. It was
realized by the respondents that an application for setting aside the award
should have been filed before the learned Principal District Judge, Bangalore
District (Rural). Therefore, the respondents submitted an application on July
26, 2000 in the Court of learned Civil Judge (Senior Division), Ramanagaram
with a request to transfer the application made for setting aside the award to
the court of learned Principal District Judge (Rural), Bangalore. The learned
Civil Judge (Senior Division), Ramanagaram passed an order directing return of
the suit records for presentation before the proper court. The respondents collected
the papers from the court of learned Civil Judge (Senior Division), Ramanagaram
and presented the same in the court of learned Principal District Judge,
Bangalore (Rural) on August 21, 2000. The present application for setting aside
the award, filed by the respondents, was numbered as A.S. No.2 of 2000. The
District Court framed preliminary issue for determination which was as under:
Whether the defendant proves that the present suit is barred by the
limitation under Section 34(3) of the Arbitration and Conciliation
Act, 1996.
The respondents examined one witness and produced certain documents whereas
on behalf of the appellants one witness was examined. After appreciating the
evidence and hearing the learned counsel for the parties, the learned District
Judge held that the suit /application for setting aside the award, was time
barred and dismissed the same by his judgment dated October 24, 2002.
4. Thereupon the respondents invoked appellate jurisdiction of the High
Court of Karnataka at Bangalore by filing Misc. First Appeal No.4465 of 2003
under Section 37 of the Act. The issue, namely, whether the provisions of
Sections 12 and 14 of the Limitation Act,
1963 are applicable to an application filed under Section 34 of the Act was
pending for consideration in other matters also. The appeal filed by the
respondents was, therefore, taken up for hearing with other matters. The
Division Bench of the High Court of Karnataka was of the view that the learned
District Judge, Bangalore Rural District, Bangalore committed an error in
holding that Section 14 of the Limitation Act
was not applicable to an application submitted under Section 34 of the Act and,
therefore, the time taken during which the respondents had been prosecuting in
the court of learned Civil Judge (Senior Division), Ramanagaram was not
excludable. On facts, the High Court held that there was no lack of bona fide
on the part of the respondents and that the respondents had diligently
prosecuted the matter before the other court. In view of these conclusions, the
High Court by Judgment dated April 4, 2005 set aside the decision dated October
24, 2002 rendered by the learned District Judge Bangalore (Rural) in A.S. No.2
of 2000 and has directed the learned District Judge to proceed further with the
matter in accordance with law, giving rise to the instant appeal.
Civil Appeal No.2462 of 2008 @ SLP(C) NO.15619/2005 5. Leave granted.
6. This appeal is directed against the judgment dated April 4, 2005 rendered
by the Division Bench of the High Court of Karnataka in W.P. No.7089 of 2003 by
which it is held that Sections 12 and 14 of the Limitation Act
are applicable to and application submitted under Section 34 of the Act, but
the appellant is not entitled to exclusion of time as contemplated by Section
14 of the Limitation
Act, because the appellant had not prosecuted application for setting aside
the award made by the arbitrator, in other courts, with due diligence and in
good faith.
7. The appellant is a public sector undertaking of the Government of
Karnataka. It had invited tenders by way of public notification for mining and
transporting ore from Ajjanahalli mine to Ingaldal. The tender submitted by the
respondent was accepted on May 10, 1999 and an agreement was entered into
between the parties. The respondent was directed to commence the work from May
26, 1999 and to deploy required number of vehicles etc. The respondent did not
follow the instructions given by the appellants and, therefore, disputes arose
between the parties. The appellant and the respondent mutually agreed to
terminate the contract as per the clause mentioned in the contract. The
respondent made claim with respect to the works done by it during the
subsistence of the contract. The claim was not accepted by the appellant.
Therefore the dispute was referred to the sole arbitrator for adjudication as
stipulated by the contract. The arbitrator made his award on March 15, 2002.
The appellant filed an application on June 6, 2002 in the court of learned
Civil Judge (Senior Division), Chitradurga to set aside the award made by the
arbitrator on the footing that the court of learned Civil Judge (Senior
Division) was the Principal Civil Court of original jurisdiction in the
District and that two other cases, namely, Arbitration Case No.1/97 and 1/2001
were also pending in the court of learned Civil Judge (Senior Division),
Chitradurga. After sometime, the appellant realized that the appropriate court
before which an application for setting aside the award should have been made
was the court of learned District Judge, Chitradurga. Therefore, the appellant
filed an application under order VII Rule 10A seeking prayer to return the
application to it for presentation before the District Court, Chitradurga. The
learned Civil Judge (Senior Division), Chitradurga after hearing the learned
counsel for the parties directed the appellant to present the application made
under Section 34 of the Act before the District Court, Chitradurga by an order
dated October 29, 2002 and directed the parties to appear before the learned
District Judge on November 21, 2002. In view of the directions given by the learned
Civil Judge (Senior Division), Chitradurga the appellant presented the
application filed under Section 34 of the Act before the District Court
Chitradurga on November 21, 2002. The respondent raised a preliminary objection
regarding jurisdiction of the learned District Judge, Chitradurga to entertain
the application submitted under Section 34 of the Act on the ground that the
agreement was entered into between the parties within the jurisdiction of city
of Bangalore and, therefore, the City Civil Court, Bangalore had jurisdiction
to entertain the application filed by the appellant. The learned District
Judge, Chitradurga by an order dated February 3, 2003 held that he had no
jurisdiction to entertain the application submitted by the appellant and accordingly
returned the application, for presentation before the appropriate court. The
appellant thereafter presented the application for setting aside the award,
before the VIth Additional City Civil Court, Bangalore on February 10, 2003
which was registered as an appeal.
Along with the appeal, the appellant also filed an application under Section
14 read with Section 5 of the Limitation Act
and prayed to exclude the time taken in prosecuting the proceedings bona fide
before the two courts which had no jurisdiction. The learned Judge of City
Civil Court, Bangalore dismissed the application, as time barred, by an order
dated July 17, 2003. Thereupon the appellant invoked extra- ordinary jurisdiction
of the High Court of Karnataka under Article 226 of the Constitution by filing
Writ Petition No.7089 of 2003. The questions posed for consideration of the
High Court was, whether the provisions of Sections 12 and 14 of the Limitation Act
were applicable to an application filed under Section 34 of the Act and whether
the appellant had prosecuted the matter in other courts with due diligence and
in good faith. After hearing the learned counsel for the parties, the High
Court by Judgment dated April 4, 2005 held that the provisions of Sections 12
and 14 of the Limitation
Act are applicable to a proceeding under the Act. However, on appreciation
of facts the High Court held that the appellant had not prosecuted the matter
in other courts, with due diligence and in good faith. In view of the
above-mentioned conclusion the High Court has dismissed the writ petition filed
by the appellant vide Judgment dated April 4, 2005, giving rise to the instant
appeal.
8. This Court has heard the learned counsel for the parties at length and in
great detail as well as considered the documents submitted by the parties.
9. The question posed for consideration before the Court is whether the
provision of Section 14 of the Limitation Act would be
applicable to an application submitted under Section 34 of the Act of 1996 for
setting aside the award made by the arbitrator. In order to resolve the
controversy it would be advantageous to refer to certain provisions of the Limitation Act and Section
34 of the Act of 1996. Section 14 and relevant part of 29(2) of the Limitation Act,
necessary for the purpose of deciding the issue, read as under:
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 or of a 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.
(2) In computing the period of limitation for any application, the time
during which the applicant has been prosecuting with due diligence another
civil proceeding, whether in a court of first instance or of appeal or
revision, against the same party for the same relief shall be excluded, where
such proceeding 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.
(3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code
of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall
apply in relation to a fresh suit instituted on permission granted by the court
under rule 1 of that Order, where such permission is granted on the ground that
the first suit must fail by reason of a defect in the jurisdiction of the court
or other cause of a like nature.
ExplanationFor the purpose of this section,-- (a) in excluding the time
during which a former civil proceeding was pending, the day on which that
proceeding was instituted and the day on which it ended shall both be counted.
(b) a plaintiff or an applicant resisting an appeal shall be deemed to be
prosecuting a proceeding.
(c) misjoining of parties or of cause of action shall be deemed to be a
cause of a like nature with defect of jurisdiction. 29(2) Where any
special or local law prescribes for any suit, appeal or application a period of
limitation different from the period prescribed by the Schedule, the provision
of section 3 shall apply as if such period were the period prescribed by the
Schedule and for the purpose of determining any period of limitation prescribed
for any suit, appeal or application by any special or local law, the provisions
contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to
the extent to which, they are not expressly excluded by such special or local
law. However, Section 34 of the Arbitration and
Conciliation Act, 1996 reads as
under:
34. Application for setting aside arbitral award.- (1) Recourse to a
Court against an arbitral award may be made only by an application for setting
aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if- (a) the party
making the application furnishes proof that- (i) a party was under some
incapacity; or ii) the arbitration agreement is not valid under the law to
which the parties have subjected it or, failing any indication thereon, under
the law for the time being in force; or (iii) the party making the application
was not given proper notice of the appointment of an arbitrator or of the
arbitral proceedings or was otherwise unable to present his case; or (iv) the
arbitral award deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration, or it contains decisions on matters
beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be
separated from those not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to arbitration may be set
aside; or (v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the parties, unless such
agreement was in conflict with a provision of this Part from which the parties
cannot derogate, or, failing such agreement, was not in accordance with this
Part; or (b) the Court finds that (i) the subject-matter of the dispute is not
capable of settlement by arbitration under the law for the time being in force,
or (ii) the arbitral award is in conflict with the public policy of India.
Explanation Without prejudice to the generality of sub-clause (ii) of clause
(b), it is hereby declared, for the avoidance of any doubt, that an award is in
conflict with the public policy of India if the making of the award was induced
or affected by fraud or corruption or was in violation of section 75 of section
81.
(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.
(4) On receipt of an application under sub-section (1), the Court may, where
it is appropriate and it is so requested by a party, adjourn the proceedings
for a period of time determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take such other action as
in the opinion of arbitral tribunal will eliminate the grounds for setting
aside the arbitral award.
10. A bare reading of sub-section (3) of Section 34 read with the proviso
makes it abundantly clear that the application for setting aside the award on
the grounds mentioned in sub-section (2) of Section 34 will have to be made
within three months. The period can further be extended, on sufficient cause
being shown, by another period of 30 days but not thereafter. It means that as
far as application for setting aside the award is concerned, the period of
limitation prescribed is three months which can be extended by another period
of 30 days, on sufficient cause being shown to the satisfaction of the Court.
Section 29(2) of the Limitation Act,
inter alia provides that where any special or local law prescribes for any
suit, appeal or application a period of limitation different from the period of
limitation prescribed by the schedule, the provisions of Section 3 shall apply
as if such period was the period prescribed by the schedule and for the purpose
of determining any period of limitation prescribed for any suit, appeal or
application by any special or local law, the provisions contained in Sections 4
to 24 shall apply only insofar as, and to the extent, they are not expressly
excluded by such special or local law. When any special statute prescribes
certain period of limitation as well as provision for extension upto specified
time limit, on sufficient cause being shown, then the period of limitation
prescribed under the special law shall prevail and to that extent the
provisions of the Limitation
Act shall stand excluded. As the intention of the legislature in enacting
sub-section (3) of Section 34 of the Act is that the application for setting
aside the award should be made within three months and the period can be
further extended on sufficient cause being shown by another period of 30 days
but not thereafter, this Court is of the opinion that the provisions of Section
5 of the Limitation Act would
not be applicable because the applicability of Section 5 of the Limitation Act
stands excluded because of the provisions of Section 29(2) of the Limitation Act.
11. However, merely because it is held that Section 5 of the Limitation Act
is not applicable to an application filed under Section 34 of the Act for
setting aside an award, one need not conclude that provisions of Section 14 of
the Limitation
Act would also not be applicable to an application submitted under Section
34 of the Act of 1996.
12. Section 14 of the Limitation Act
deals with exclusion of time of proceeding bona fide in a court without
jurisdiction.
On analysis of the said Section, it becomes evident that the following
conditions must be satisfied before Section 14 can be pressed into service:
-
Both the prior and subsequent
proceedings are civil proceedings prosecuted by the same party;
-
The prior proceeding had been
prosecuted with due diligence and in good faith;
-
The failure of the prior proceeding
was due to defect of jurisdiction or other cause of like nature;
-
The earlier proceeding and the latter
proceeding must relate to the same matter in issue and;
-
Both the proceedings are in a
court.
The policy of the Section is to afford protection to a litigant against the
bar of limitation when he institutes a proceeding which by reason of some
technical defect cannot be decided on merits and is dismissed. While
considering the provisions of Section 14 of the Limitation Act,
proper approach will have to be adopted and the provisions will have to be
interpreted so as to advance the cause of justice rather than abort the
proceedings. It will be well to bear in mind that an element of mistake is
inherent in the invocation of Section 14.
In fact, the section is intended to provide relief against the bar of
limitation in cases of mistaken remedy or selection of a wrong forum. On
reading Section 14 of the Act it becomes clear that the legislature has enacted
the said section to exempt a certain period covered by a bona fide litigious
activity. Upon the words used in the section, it is not possible to sustain the
interpretation that the principle underlying the said section, namely, that the
bar of limitation should not affect a person honestly doing his best to get his
case tried on merits but failing because the court is unable to give him such a
trial, would not be applicable to an application filed under Section 34 of the
Act of 1996. The principle is clearly applicable not only to a case in which a
litigant brings his application in the court, that is, a court having no
jurisdiction to entertain it but also where he brings the suit or the
application in the wrong court in consequence of bona fide mistake or law or
defect of procedure. Having regard to the intention of the legislature this
Court is of the firm opinion that the equity underlying Section 14 should be
applied to its fullest extent and time taken diligently pursuing a remedy, in a
wrong court, should be excluded.
13. At this stage it would be relevant to ascertain whether there is any
express provision in the Act of 1996, which excludes the applicability of
Section 14 of the Limitation Act. On
review of the provisions of the Act of 1996 this Court finds that there is no
provision in the said Act which excludes the applicability of the provisions of
Section 14 of the Limitation
Act to an application submitted under Section 34 of the said Act. On the
contrary, this Court finds that Section 43 makes the provisions of the Limitation Act,
1963 applicable to arbitration proceedings. The proceedings under Section
34 are for the purpose of challenging the award whereas the proceeding referred
to under Section 43 are the original proceedings which can be equated with a
suit in a court.
Hence, Section 43 incorporating the Limitation Act
will apply to the proceedings in the arbitration as it applies to the
proceedings of a suit in the court. Sub-section (4) of Section 43, inter alia,
provides that where the court orders that an arbitral award be set aside, the
period between the commencement of the arbitration and the date of the order of
the court shall be excluded in computing the time prescribed by the Limitation Act,
1963, for the commencement of the proceedings with respect to the dispute
so submitted. If the period between the commencement of the arbitration
proceedings till the award is set aside by the court, has to be excluded in
computing the period of limitation provided for any proceedings with respect to
the dispute, there is no good reason as to why it should not be held that the
provisions of Section 14 of the Limitation Act
would be applicable to an application submitted under Section 34 of the Act of
1996 more particularly where no provision is to be found in the Act of 1996,
which excludes the applicability of Section 14 of the Limitation Act,
to an application made under Section 34 of the Act. It is to be noticed that
the powers under Section 34 of the Act can be exercised by the court only if
the aggrieved party makes an application. The jurisdiction under Section 34 of
the Act, cannot be exercised, suo motu. The total period of four months within
which an application, for setting aside an arbitral award, has to be made is
not unusually long. Section 34 of the Act of 1996 would be unduly oppressive,
if it is held that the provisions of Section 14 of the Limitation Act
are not applicable to it, because cases are no doubt conceivable where an
aggrieved party, despite exercise of due diligence and good faith, is unable to
make an application within a period of 4 months. From the scheme and language
of Section 34 of the Act of 1996, the intention of the Legislature to exclude,
the applicability of Section 14 of the Limitation Act,
is not manifest. It is well to remember that Section 14 of the Limitation Act
does not provide for a fresh period of limitation but only provides for the
exclusion of a certain period. Having regard to the legislative intent, it will
have to be held that the provisions of Section 14 of the Limitation Act,
1963 would be applicable to an application submitted under Section 34 of
the Act of 1996 for setting aside an arbitral award.
14. We may notice that in similar circumstances the Division Bench of this
Court in State of Goa vs. Western Builders 2006 (6) SCC 239 has taken a similar
view. As observed earlier the intention of the legislature in enacting Section
14 of the Act is to give relief to a litigant who had approached the wrong
forum. No canon of construction of a statute is more firmly established than
this that the purpose of interpretation is to give effect to the intention
underlying the statute. The interpretation of Section 14 has to be liberal.
The language of beneficial provision contained in Section 14 of the Limitation Act
must be construed liberally so as to suppress the mischief and advance its
object. Therefore, it is held that the provisions of Section 14 of the Limitation Act
are applicable to an application submitted under Section 34 of the Act of 1996
for setting aside an arbitral award.
15. The plea that in view of the decision rendered by three Judge Bench of
this Court in Commissioner of Sales Tax, Uttar Pradesh vs. Parson Tools and
Plants, Kanpur 1975 (3) SCR 743 the provisions of Section 14 of the Limitation Act
should not be held to be applicable to an application filed under Section 34 of
the Act, has no substance. The question determined in the Commissioner of Sales
Tax, Uttar Pradesh (supra) was whether under the circumstances of the
case, Section 14 of the Limitation Act
extended the period for filing of the revisions by the time during which the
restoration application remained pending as being prosecuted bona fide. In
the said case, Sales-Tax Officer had made two assessment orders. The assessee
had filed appeals before the Appellate Authority. The appeals were dismissed in
default as the assessee did not remain present on the specified date. The
assessee filed two applications for setting aside such dismissal, under Rule
68(6) of the U.P.
Sales Tax Rules. During the pendency of the application a Single Judge of
Allahabad High Court declared Rule 68(5) of the Rules ultra vires under which
the appeals were dismissed for default. In view of the ruling of High Court,
the Appellate Authority dismissed the appeals. The assessee, therefore, filed
two revision petitions. They were filed more than 18 months after the dismissal
of the appeals. The revisions were accompanied by two applications in which the
assessee had prayed for exclusion of time spent by him in presenting the
aborting proceedings under Rule 68(6) for setting aside the dismissal of his
appeals. The revisional authority excluded the time spent in those proceedings
from computation of limitation by applying Section 14 of the Limitation Act.
The High Court dismissed the Reference made on the motion of the Commissioner
of Sales-Tax. In appeal, this Court held that (1) if the legislature in a
special statute prescribes a certain period of limitation, then the Tribunal
concerned has no jurisdiction to treat within limitation, an application, by
excluding the time spent in prosecuting in good faith, on the analogy of
Section 14(2) of the Limitation Act
and (2) the Appellate Authority and Revisional Authority were not
courts but were merely administrative Tribunals and, therefore,
Section 14 of the Limitation
Act did not, in terms, apply to the proceedings before such Tribunals. From
the judgment of the Supreme Court in Commissioner of Sales Tax, U.P. (supra),
it is evident that essentially what weighed with the Court in holding that
Section 14 of the Limitation
Act was not applicable, was that the Appellate Authority and Revisional
Authority were not courts. The stark features of the revisional
powers pointed out by the court, showed that the legislature had deliberately
excluded the application of the principles underlying Sections 5 and 14 of the Limitation Act.
Here in this case, the Court is not called upon to exmine scope of
revisional powers. The Court in this case is dealing with Section 34 of the Act
which confers powers on the Court of the first instance to set aside an award
rendered by an arbitrator, on specified grounds. It is not the case of the
contractor that the forums before which the Government of India undertaking had
initiated proceedings for setting aside the arbitral award are not
courts. In view of these glaring distinguishing features, this Court
is of the opinion that the decision rendered in the case of Commission of Sales
Tax, Uttar Pradesh, Lucknow (supra) did not decide the issue which falls for
consideration of this Court and, therefore, the said decision cannot be
construed to mean that the provisions of Section 14 of the Limitation Act
are not applicable, to an application submitted under Section 34 of the Act of
1996.
16. The contention that in view of the decision of Division Bench of this
Court in Union of India vs. Popular Constructions Co. 2001 (8) SCC 470 the
Court should hold that the provisions of Section 14 of the Limitation Act
would not apply to an application filed under Section 34 of the Act, is devoid
of substance. In the said decision what is held is that Section 5 of the Limitation Act
is not applicable to an application challenging an award under Section 34 of
the Act.
Section 29(2) of the Limiation Act inter-alia provides that where any
special or local law prescribes, for any application, a period of limitation
different from the period prescribed by the schedule, the provisions contained
in Sections 4 to 24 shall apply only in so far as, and to the extent to which,
they are not expressly excluded by such special or local law. On introspection,
the Division Bench of this Court held that the provisions of Section 5 of the Limitation Act
are not applicable to an application challenging an award. This decision cannot
be construed to mean as ruling that the provisions of Section 14 of the Limitation Act
are also not applicable to an application challenging an award under Section 34
of the Act.
As noticed earlier, in the Act of 1996, there is no express provision
excluding application of the provisions of Section 14 of the Limitation Act
to an application filed under Section 34 of the Act for challenging an award.
Further, there is fundamental distinction between the discretion to be
exercised under Section 5 of the Limitation Act
and exclusion of the time provided in Section 14 of the said Act. The power to
excuse delay and grant an extension of time under Section 5 is discretionary
whereas under Section 14, exclusion of time is mandatory, if the requisite conditions
are satisfied. Section 5 is broader in its sweep, than Section 14 in the sense
that a number of widely different reasons can be advanced and established to
show that there was sufficient cause in not filing the appeal or the
application within time. The ingredients in respect of Section 5 and 14 are
different. The effect of Section 14 is that in order to ascertain what is the
date of expiration of the prescribed period, the days excluded from
operating by way of limitation, have to be added to what is primarily the
period of limitation prescribed. Having regard to all these principles, it is
difficult to hold that the decision in Popular Construction Co. (supra) rules
that the provisions of Section 14 of the Limitation Act
would not apply to an application challenging an award under Section 34 of the
Act.
17. As this Court holds that Section 14 of the Limitation Act, 1963 is
applicable to an application filed under Section 34 of the Act, 1996 for
setting aside an award made by an arbitrator, the appeal arising from Special
Leave Petition (C) No.10311 of 2005 will have to be dismissed because the
Division Bench of the High Court of Karnataka has in terms held that there was
no lack of bona fide on the part of the respondents and that the respondents
had diligently prosecuted the matter before the other court and had also
immediately after coming to know the lack of jurisdiction of the court had
filed the memo seeking withdrawal of the appeal and presented the same before
the lower court which had the jurisdiction.
18. As far as the appeal arising from Special leave Petition (C) No.15619 of
2005 is concerned, this Court finds that the view taken by the High Court of
Karnataka that the provisions of Sections 12 and 14 of the Limitation Act,
1963 are applicable to the proceedings under the Arbitration and Conciliation
Act, 1996 is eminently just and is hereby upheld.
However, this Court finds it difficult to uphold the finding recorded by the
Division Bench of the High Court that the appellant had not prosecuted the
matter in other courts with due diligence and in good faith and was, therefore,
not entitled to exclusion of time taken in prosecuting the matter in wrong
courts.
19. To attract the provisions of Section 14 of the Limitation Act,
five conditions enumerated in the earlier part of this Judgment have to
co-exist. There is no manner of doubt that the section deserves to be construed
liberally. Due diligence and caution are essentially pre-requisites for
attracting Section 14. Due diligence cannot be measured by any absolute standards.
Due diligence is a measure of prudence or activity expected from and ordinarily
exercised by a reasonable and prudent person under the particular
circumstances. The time during which a court holds up a case while it is
discovering that it ought to have been presented in another court, must be
excluded, as the delay of the court cannot affect the due diligence of the
party. Section 14 requires that the prior proceeding should have been
prosecuted in good faith and with due diligence. The definition of good faith
as found in Section 2(h) of the Limitation Act
would indicate that nothing shall be deemed to be in good faith which is not
done with due care and attention.
It is true that Section 14 will not help a party who is guilty of
negligence, lapse or inaction. However, there can be no hard and fast rule as
to what amounts to good faith. It is a matter to be decided on the facts of
each case. It will, in almost every case be more or less a question of degree.
The mere filing of an application in wrong court would not prima facie show
want of good faith. There must be no pretended mistake intentionally made with
a view to delaying the proceedings or harassing the opposite party. In the
light of these principles, the question will have to be considered whether the
appellant had prosecuted the matter in other courts with due diligence and in
good faith. As is evident from the facts of the case, initially the appellant
had approached the court of learned Civil Judge, Senior Division, Chitradurga
for setting aside the award made by the arbitrator. On direction dated October
29, 2002 issued by the learned Civil Judge (Senior Division), Chitradurga, the
appellant had presented the application for setting aside the award before the
learned District Judge, Chitradurga. Before the learned District Judge,
Chitradurga an objection was raised by the respondent that the application was
not maintainable before the said court and that the application was
maintainable before the learned Judge, City Civil Court, Bangalore. The
District Judge, Chitradurga by an order dated February 3, 2003 held that it had
no jurisdiction to entertain the application submitted by the applicant and
accordingly returned the application for presentation before the appropriate
court. The question of jurisdiction was seriously contested between the parties
not only before the court of learned Civil Judge (Senior Division), Chitradurga
but also before the learned District Judge, Chitradurga. The question of
jurisdiction had to be considered by the courts below because of establishment
of City Civil Court, Bangalore under a special enactment and in view of the
definition of the word court as given in Section 2(e) of the Arbitration and Conciliation
Act, 1996 which means the principal civil court of original jurisdiction in
a district. The record does not indicate that there was pretended mistake
intentionally made by the appellant with a view to delaying the proceeding or
harassing the respondent. There was an honest doubt about the court competent
to entertain the application for setting aside the award made by the
arbitrator. The mere fact that the question of jurisdiction is an arguable one
would not negative good faith because the appellant believed bona fide that the
court in which it had instituted the proceeding had jurisdiction in the matter.
By filing the application in the courts which had no jurisdiction to entertain
the same, the appellant did not achieve anything more particularly when the lis
was never given up. Under the circumstances this Court is of the opinion that
the Division Bench of the High Court of Karnataka was not justified in
concluding that the appellant had not prosecuted the matter in other courts
with due diligence and in good faith. The said finding being against the weight
of evidence on record, is liable to be set aside and is hereby set aside. We,
therefore, hold that the appellant had prosecuted the matter in other courts
with due diligence and in good faith and, therefore, is entitled to claim
exclusion of time in prosecuting the matter in wrong courts. Therefore, the
appeal arising from SLP(C) No.15619 of 2005 will have to be allowed.
20. For the foregoing reasons civil appeal arising from SLP(C) No.10311 of
2005 fails and is dismissed. The judgment rendered by the Division Bench of the
High Court of Karnataka on April 4, 2005, in W.P. No. 7089 of 2003 dismissing
the application filed by the appellant under Section 34 of the Arbitration and
Conciliation Act, 1996 for setting aside the award of the arbitrator, is
set aside, and civil appeal arising from SLP(C) No.15619 of 2005, is allowed.
The Division Bench of the High Court of Karnataka is directed to proceed
further with the matter in accordance with law. There shall be no order as to
costs in both the appeals.
Back
Pages: 1 2 3
