Union Of India vs M/S S.K.B. (P) Ltd

Per: Justice Pradeep Mittal

This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 is directed against the order dated 02.02.2023 passed by the Commercial Court in MJC No. 1300014/2015 whereby the application under S.34 Arbitration and Conciliation Act, 1996 has been rejected as time barred.

The short facts leading to the filing of the present appeal is that the appellant floated Tender No. CEZ/GOS/17 of 2005–06 for construction of OTM accommodation for AD Arty Centre Phase-I at GOS, valued at Rs.2,15,88,909.52, with a completion period of nine months. The respondent/claimant was declared the successful bidder and was awarded the contract on 12.09.2005. Disputes arose during execution of the work, leading the respondent/claimant to invoke arbitration. The disputes were referred to a Sole Arbitrator, who, vide award dated 14.09.2011, partly allowed the claims of the respondent/claimant. Aggrieved, the appellant filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge, Ganjam. The same was dismissed on 29.11.2014 for lack of jurisdiction, with liberty to file before the competent court at Jabalpur within one month. The appellant thereafter filed the Section 34 application at Jabalpur on 29.12.2014 during court vacation, along with an application for vacation filing. The matter was subsequently assigned to the Court of the Learned 10th Additional District Judge, Jabalpur. However, the Commercial Court, by order dated 02.02.2023, dismissed the application as time-barred.

It is stated by the learned counsel for the appellant that the Commercial Court erred in dismissing the application as time-barred, as the appellant had filed the application within the prescribed period of limitation, which was duly accepted by the filing department. The Commercial Court failed to consider that the filing was made during court vacation and that, in terms of Section 10 of the General Clauses Act, the filing on the next working day is deemed to be within time.

It is further stated that the finding that the application ought to have been filed on 28.12.2014 is erroneous, as the said date was a non-working day. The Commercial Court also overlooked the order dated 06.01.2015 directing administrative transfer of the case, which clearly indicates that the delay, if any, was procedural and not attributable to the appellant. Further, the Commercial Court failed to appreciate that the limitation under Section 34(3) of the Arbitration and Conciliation Act, 1996, including the extended period, was complied with. The impugned order has caused grave prejudice by depriving the appellant of the valuable right to challenge the arbitral award.

The respondent/claimant has filed a cross objection before this court stating that the appellant and the respondent/claimant entered a contract dated 11.10.2005 for construction of OTM Accommodation for AD Arty Centre (Phase-I) at Gopalpur-on-Sea, valued at Rs. 21,58,89,097.52. During execution, disputes arose, and the Respondent invoked arbitration. The Learned Sole Arbitrator, vide Award dated 14.09.2011, partly allowed the claims of the respondent/claimant. Aggrieved by the award, the appellant filed an application under Section 34 before the District Judge, Ganjam, which was dismissed on 29.11.2014 for lack of jurisdiction, with liberty to file before the competent Court at Jabalpur within one month. However, the appellant filed the application only on 07.01.2015, beyond the permitted period, and thus the same was rightly held to be barred by limitation.

It is further submitted that the appellant failed to establish any valid grounds under Section 34 of the Arbitration and Conciliation Act, 1996. The challenge is based on conjectures and seeks re-appreciation of evidence, which is not permissible under the limited scope of Section 34. The arbitral award does not suffer from any illegality or violation of public policy. The Commercial Court correctly dismissed the application both on limitation and on merits. Even otherwise, settled law as laid down by the Hon’ble Supreme Court makes it clear that arbitral awards cannot be interfered with merely on the basis of an alternative interpretation of the contract and therefore, prays for dismissal of the appeal upholding the arbitral award.

The following issues are framed by us for consideration in this appeal.

Whether the present application is barred by limitation?

Whether the cross objection of respondent is maintainable in present appeal?

Relief and cost?

While adjudicating Issue No. 1, the Commercial Court observed that before examining the merits of the case, it is essential to determine whether the application has been filed within the prescribed period of limitation under Section 34(3) of the Arbitration and Conciliation Act, 1996. The said provision mandates that an application for setting aside an arbitral award must be filed within three months from the date of receipt of the award, with a further grace period of thirty days permissible only upon showing sufficient cause, but not thereafter.

The respondent raised a preliminary objection that the application is barred by limitation, placing reliance on settled legal principles which provide that the limitation period under Section 34(3) cannot be extended beyond a total period of 120 days and that Section 5 of the Limitation Act, 1963, is not applicable.

Upon perusal of the record, the Commercial Court noted that although the appellant stated that the arbitral award was passed on 14.09.2011. The material on record indicates that a copy of the arbitral award was delivered to the appellant on the same day. In view of the settled legal position, the limitation period is to be computed from the date of receipt of the signed copy of the award.

The Commercial Court further observed that the appellant had been granted liberty by the District Judge, Ganjam, to file the application before the competent court at Jabalpur within a period of one month, i.e., on or before 28.12.2014. The present petition was filed during the winter vacation on 29.12.2014 before the 8th District Judge, Jabalpur. However, the trial court apparently erred in mentioning that the petition was filed on 07.01.2015, beyond the stipulated period. It is clear from the record that the petition was filed before the Commercial Court on 29.12.2014, which was not considered while passing the impugned order.

The learned counsel for the appellant heavily placed reliance on the case of Kirpal Singh Vs. Government of India, New Delhi & Ors , reported as 2024 Supreme (SC) 1153 wherein the Hon'ble Supreme Court held that Section 14 of the Limitation Act applies to Section 34 applications under the Arbitration Act, allowing for the exclusion of certain periods in computing limitation. Applying Section 14 of the Limitation Act, we hold that there is sufficient cause for excluding the period commencing from 14.09.2011 to 29.11.2014 . In view of the fact that this Arbitration and Conciliation Act, 1996 period is excluded, the appellant will be entitled to the statutory remedy under Section 34 of the Act. The appellant argued that the learned Commercial Court failed to apply the provision of 14 of the Limitation Act to exclude the period consumed in wrong form.

It is evident from the record that the award was passed on 14.09.2011, and a petition under Section 34 was filed before the Principal District Judge, Ganjam, Berhampur, on 13.12.2011. The petition was returned on 29.11.2014 with a direction to file it before the competent Commercial Court at Jabalpur. After its return, the application was re-filed on 29.12.2014. Therefore, the period during which the matter was prosecuted before the wrong forum, i.e., from 14.09.2011 to 29.11.2014, ought to be excluded while computing the limitation period for filing the petition. Accordingly, the petition was within time, and the learned Commercial Court erred in holding that it was time-barred.

Having heard the learned counsel for the parties and upon perusal of the record, this Court is of the considered opinion that the cross-objection filed by the respondent/claimant is not maintainable in the present case.

A perusal of Order XLI Rule 22 of the Code of Civil Procedure makes it clear that a respondent is entitled to file a cross-objection to the decree, or to challenge any adverse finding, provided such finding forms the basis of the decree under challenge. The provision enables the respondent to support the decree or assail findings which operate against him, even without filing a separate appeal.

In such circumstances, there exists no adjudication on merits giving rise to any adverse finding against the respondent so as to warrant the filing of a cross-objection under Order XLI Rule 22 CPC. The right to file cross-objection is contingent upon the existence of a finding or decree arising from a substantive determination of the dispute, which is absent in the present case.

A cross objection is not maintainable if there is no decree against the respondent and no adverse finding recorded against them. The provisions of Order 41 Rule 22 of the Civil Procedure Code, 1908, allow a respondent to file cross objections only when they seek to challenge a part of the decree that goes against them. If the respondent has not filed an appeal against the decree, they can still object to it by filing cross objections within the appeal already instituted by the other party. However, if the respondent has not filed an appeal or cross objection, they cannot file one under this rule. A cross-objection under Order 41 Rule 22 of the Civil Procedure Code (CPC), 1908, is maintainable only when a respondent seeks to challenge a portion of the decree that is adverse to them. It allows the respondent to object to a decree without filing a separate appeal, acting as a cross-appeal. As per the 1976 Amendment to Order 41 Rule 22 CPC, a respondent may file a cross-objection against a finding in the judgment, even if the final decree is in their favour. However, if the court did not decide the matter on merits (as it was dismissed on the ground of limitation), there are no adverse findings on merits for the claimant to challenge by way of a cross-objection. Accordingly, since the controversy has not been adjudicated on merits by the Commercial Court, the cross-objection filed by the respondent is held to be not maintainable.

Having heard the learned counsel for the parties and upon careful consideration of the material available on record, this Court finds that the Commercial Court has wrongly held that the application under Section 34 of the Arbitration and Conciliation Act, 1996 was filed beyond the prescribed period of limitation, including the extended period permissible under law. The appellant has demonstrated sufficient cause for the delay. The findings recorded on the issue of limitation are erroneous and bad in law.

In view of the above, the Commercial Court wrongly held that the application was not filed within the prescribed period of limitation, including the extended period permissible under law. Hence, this appeal is allowed, and the order dated 02.02.2023 passed by the learned Commercial Court, Jabalpur in MJCAV No. 1300014 of 2015 is set aside. The matter is remitted back for fresh adjudication on merits in accordance with law. The parties shall bear their own costs of the appeal.