India: Refusal To Condone Delay In Filing A Challenge To An Arbitral Award Under §34 Of The Arbitration & Conciliation Act 1996 Is Appealable: Chintels India Ltd V Bhayana Builders Pvt Ltd

Refusal To Condone Delay In Filing A Challenge To An Arbitral Award Under §34 Of The Arbitration & Conciliation Act 1996 Is Appealable: Chintels India Ltd v Bhayana Builders Pvt Ltd¹

The Issue

• 34 of the Act permits a challenge to an arbitral award on limited grounds within 3 months from the date on which the award is received. A 30 day extension can be sought on showing "sufficient cause". §37(1)(c) permits an appeal from orders "setting aside or refusing to set aside" an award under §34. In BGS SGS Soma², the Supreme Court had held that an order condoning delay in filing a §34 challenge is a preliminary order and so not appealable.

Facts

A challenge was filed under §34 after the prescribed period of 3 months. The Delhi High Court refused to condone the delay and dismissed the challenge. This decision was appealed to a Division Bench but, because it was bound by BGS SGS Soma, it dismissed the appeal holding that an order refusing to condone delay is not appealable under §37(1)(c). However, the Division Bench granted leave to appeal to the Supreme Court.

Decision

The Supreme Court distinguished BGS SGS Soma saying that, in that case, the delay was condoned and this did not amount to a final decision on the challenge. However, a refusal to condone delay would be a final decision since it results in the challenge being dismissed. Such orders are therefore appealable under §37(1)(c). The Court said that §37(1)(c) says "setting aside...an arbitral award under section 34". This would include the dismissal of a challenge not only on the merits but also on the ground of delay.

The Court also reaffirmed the settled position that §5 of the Limitation Act 1963 does not apply to §34 challenges and, therefore, no delay beyond 3 months and 30 days can be condoned.

Conclusion

While the decision may cause delays in the award attaining finality, the decision provides checks and balances to ensure that a party has a right to appeal if its remedy of challenging an award is shut out on account of delays.

Footnotes

1. Decision dated 11 February 2021 passed by the Supreme Court in Civil Appeal No 4028 of 2020

2. BGS SGS Soma JV v NHPC Limited (2020) 4 SCC 234

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