P Radhabai v Ashok Kumar, 2018,

Supreme court of India

BRIEF DISCIPTION OF CASE

In this case, parties to the case who are Appellants and the Respondents, this were the legal heirs
of one Mr. P. Kishan Lal who have entered into disputes regarding distribution of property after
his death. The dispute was referred to arbitration. The group of 5 arbitrators passed a unanimous
award dividing the properties and businesses. According to the Respondents, the Appellants
entered into a Memorandum of Understanding (‘MOU’) with them agreeing to give certain
additional properties to them which were more than what was provided in the Award. This MOU
was agreed to be preceded by Gift and Release Deeds to give effect to MOU. The signing of Gift
and Release Deeds were intentionally delayed by the Appellants to make sure that the legal time
period stipulated for assailing an award (three months period and the extended period of 30 days)
under Section 34(3) of the Act expires. After the expiry of the limitation period, the Respondents
filed the execution petition for the execution under trial court and then it was turned down by the
Trial Court as non-maintainable. The Trial Court decision was set aside by the High Court
directing the Trial Court to decide the execution petition on merits. Meanwhile the Respondent
moved an application to set aside an award under Section 34(3) of the Act with a delay of 236
days. This application was accompanied by an application for condonation of delay under
Section 5 of the Limitation Act. Aggrieved by the Trial Court Order, the Respondent filed four
civil revision petitions before the High Court of Andhra Pradesh (High Court) under Article 227
of the Constitution of India. The High Court remanded the matter back to the Trial Court on the
sole point, i.e. to determine whether section 17 of the Limitation Act would be applicable to
condoning delay in the filing of an application under section 34 of the Arbitration Act.
The Appellant appealed against this order given by the High Court to the Supreme Court.

FACTS OF THE CASE

A dispute in relation to the division of properties and businesses between eight heirs of Mr. P.
Kishan Lal was referred to arbitration. An award was subsequently passed by the arbitral tribunal
to appellant. The Respondent contended that subsequent to the award, the Appellant entered into
a Memorandum of Understanding (MOU) with the Respondent, where under the Appellant
agreed to give properties in addition to those set out in the Award to Respondent No.1. In terms
of the MOU, while the Appellant was required to execute a ‘gift deed’ and a ‘release deed’ in
favour of the Respondent, the Respondent alleged that the Appellant intentionally delayed the
execution of the said deeds. In the meanwhile, the limitation period for the Respondent to file an
application to set aside the Award under section 34(3) of the Arbitration Act expired. The
Appellant proceeded to file an execution petition for the execution of the Award. While the trial
court held that the execution petition was not maintainable, on appeal, the High Court set aside
the order of the trial court and directed the trial court to determine the petition on merits.
Considering the conduct of the Appellant and the delay in the execution of the gift deed
envisaged under the memorandum of understanding, the Respondent alleged fraud.
Subsequently, the Respondent filed an application under section 34(3) of the Arbitration Act to
set aside the Award, along with an application seeking condonation of the delay of 236 days,
before the Trial Court. The Trial Court subsequently dismissed the application saying that the
court is devoid of power to condone the delay beyond the maximum period prescribed in section
34 of the Arbitration Act i.e. three months and 30 days.

 LEGAL ISSUE INVOLVED

Whether section 17 of the Limitation Act, 1963 (Limitation Act), which provides that the period
of limitation shall begin to run when fraud played on the award debtor is discovered or could
have been discovered with reasonable diligence, can cure the delay in filing an application to set
aside an award under section 34(3) of the Arbitration and Conciliation Act, 1996 (Arbitration
Act).

ANALYSIS OF COURT

The Respondents in their arguments relied upon Section 17 of the Limitation Act. They
contended that since the operation of the section had not been specifically excluded under the
Arbitration Act, the benefit of Section 17 should not be denied to the Respondents. In dealing
with this argument, the Supreme Court looked at Section 29(2) of the Limitation Act, which
provides: “Where any special law prescribes for any suit, appeal or application a period of
limitation different from the period prescribed by the Schedule, the provisions 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”

The Court observed that there existed a contradiction in the language of Section 17 and Section
34(3). The Supreme Court, inter alia, observed as follows. First, Section 17 of the Limitation Act
does not extend or break the limitation period. It only postpones commencement of the limitation
period till the applicant has discovered the fraud. Besides, Section 34(3) of the Arbitration Act
has a limitation provision built in itself. It provides that the limitation period commences from
the when a party making an application had received the arbitral award, or from the disposal of a
request under Section 33 of the Arbitration Act for correction and interpretation of the Award.
Section 17 of the Limitation Act directly clashes with Section 34 (3) of the Arbitration Act on
the point of start of limitation period. secondly, the proviso of Section 34(3) provides for
condonation of delay in certain cases, where the applicant can challenge the award within a
period of 30 days from the expiry of three months but not thereafter. The Court observed that the
highlighted words would be rendered moot by the application of Section 17 of Limitation Act.
The Court also addressed the importance of time-bound disposal of proceedings connected with
arbitration, noting that the Arbitration Act has within its objectives the speedy resolution of
disputes. A further observation in relation to the factual matrix of the case was made that the
application of Section 17 was ruled out because the fraud in question did not pertain to the
delivery of the award. Since the award had been received by the Respondents, the application of
Section 17 was unlawful, and limitation period under Section 34(3) of the Arbitration Act would
run from the date of receipt of the award.

REASONING OF COURT FOR DRIVING ON CERTAIN CONCLUSION

The Court saw that there existed a logical inconsistency in the language of Section 17 and
Section 34(3). The Supreme Court, entomb alia, saw as follows. In the first place, Section 17 of
the Limitation Act doesn't expand or break the limitation time frame. It just defers beginning of
the limitation time frame till the candidate has found the misrepresentation. Also, Section 34(3)
of the Arbitration Act has a limitation arrangement built in itself. It gives that the limitation
period begins from the when a gathering making an application had gotten the arbitral honor, or
from the removal of a solicitation under Section 33 of the Arbitration Act for adjustment and
translation of the Award. Section 17 of the Limitation Act straightforwardly conflicts with
Section 34 (3) of the Arbitration Act on the purpose of beginning of limitation period.
Furthermore, the stipulation of Section 34(3) accommodates approbation of deferral in specific
cases, where the candidate can challenge the honor inside a time of 30 days from the expiry of a
quarter of a year however not from that point. The Court saw that the featured words would be
delivered disputable by the utilization of Section 17 of Limitation Act. The Court likewise
tended to the significance of time-bound removal of procedures associated with intervention,
noticing that the Arbitration Act has inside its destinations the expedient goal of questions. A
further perception according to the factual lattice of the case was made that the utilization of
Section 17 was precluded in light of the fact that the misrepresentation being referred to didn't
relate to the conveyance of the honor. Since the honor had been gotten by the Respondents, the
utilization of Section 17 was unlawful, and limitation period under Section 34(3) of the
Arbitration Act would run from the date of receipt of the honor.

DECISION OF COURT
The Respondents submitted that since application of Section 17 of the Limitation Act had not
been specifically excluded under the Arbitration Act, the benefit of Section 17 should not be
denied to the Respondents. The Supreme Court, in this regard, took note of Section 29(2) of the
Limitation Act, which provides ,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 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 any law In any case, the Court observed, that the application of Section 17 was ruled
out because the fraud in question did not pertain to the delivery of the award. This conclusion
was drawn from a body of case laws which all gave the same ratio: Section 17 comes to the
rescue of a party for failing to adapt legal proceedings when the facts or material   necessary for
him to do so have been willfully concealed from him. Since the award had been received by the
Respondents, the application of Section 17 was unlawful, and limitation period under Section
34(3) of the Arbitration Act would run from the date of receipt of the award.

ANALYSIS OF DECISION

This decision is a welcome step towards the clarification of how the Limitation Act operates in
relation to arbitration. The interpretation of Section 29(2) of the Limitation Act has been made
without falling foul of the relevant legal precedent. The fact that the Court has been careful to not
apply Section 17 of the Limitation Act for condonation of the delay simply because Sections 12
and 14 have been so applied in previous decisions, and that it has gone into why such an
approach would not apply to Section 17, reflects a clear application of judicial mind.

A very commendable aspect of the decision is that the Supreme Court has upheld the Statement
of Objects and Reasons of the Arbitration Act, which reflects that the intent behind the 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. It is pertinent
to note that relying on the decision in Union of India v. Popular Construction Co. The Supreme
Court observed that time lines are extremely essential to the Arbitration Act. The Court held, by
referring to Dr. Peter Binder’s observations in International Commercial Arbitration and
Conciliation in UNCITRAL Model Law Jurisdictions, 2nd Ed., that the period of limitation
under Section 34(3) was meant to be unbreakable and to run continuously, and applying Section
17 of the Limitation Act would be repugnant to this principle. This is extremely encouraging
because it shows the willingness of the judiciary to regard the time of the arbitrating parties as
paramount, something that is integral to the very nature of arbitration.

The only difficulty that remains is identifying the remedy that the Respondents would have in
such a situation, when there has been a genuine fraud committed against them, but in the larger
interests of justice, they cannot be redressed. In this regard, all that the court had to say was that
the Respondents should, if they were unsatisfied with the award from the beginning, have
challenged it within the three months that they were legally guaranteed. Perhaps this decision
will serve a cautionary tale for parties seeking to challenge awards in similar circumstances.

CONCLUSION
The Supreme Court inspected the target of the Arbitration Act and legal precedents to reason that area 17
of the Limitation Act would not act anything like to rescue a party looking to challenge an award under
section 34 of the Arbitration Act, when there was no fraud explicit to the conveyance of the award and
where receipt of the award is conceded. This judgment has settled the issue on application of Sections 4 to
24 of the Limitation Act to an award passed under the Arbitration Act. Owing to finality of arbitral
awards being the crux of the Arbitration Act, this judgment of the Supreme Court will help in ensuring
finality and speedy disposal of cases under the Arbitration Act.