Annual Arbitration Review- 2017,  Arbitration

Union of India v. Simplex Infrastructure: Applicability of Section 37 of the Arbitration and Conciliation Act, 1996

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This case comment is a part of our Annual Arbitration Review of the year 2017.

CITATION/ORDER: (2017) 14 SCC 225

COURT: SUPREME COURT OF INDIA

CORAM: JUSTICE DIPAK MISRA and JUSTICE A.M. KHANWILKAR

DATE: 13.04.17

This is a landmark case about the application of Section 37 of the Arbitration and Conciliation Act of 1996 (herein referred to as the “statute”). It clarified the position of law that an appeal could be allowed only against the setting aside of an arbitral award or refusal to set it aside under Section 37(1)(c). However, there was no appeal against an order of condonation of delay by a court of competent jurisdiction under Section 34. Thus, no intra-court appeal against condonation of delay by a Single Judge in an application to set aside an arbitral award is allowed.

FACTS: A reconstruction contract was allotted to the Respondent by the Appellant through an agreement dated October 5, 2006. As per the Appellant, the Respondent issued a show cause notice for rescission under clause 3 of the Agreement, for his failure to comply with the dates for the completion of the work. Repeated non-compliance by the Appellants led to the Appellants sending subsequent notices as well. Only then did the Respondent begin arbitration proceedings. The arbitral award passed directed the Appellant to pay the Respondent due to the invalidity of the rescindment order passed by the Appellant. The District Court at Port Blair stayed the execution of the arbitral award. The Calcutta High Court subsequently heard an appeal against the award under Section 34 along with an application for condoning the delay, which was allowed. The Division Bench of the same court, however, reversed the order of the Single Judge due to the matters falling beyond the provisions of the statute. Using its Letters Patent Appeal jurisdiction, the court dismissed the application. Hence, this appeal to the apex court.

ISSUE/S: Whether an intra-court letters patent appeal can be filed against an order of a Single Judge on account of condonation of delay along with a petition under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside an arbitral award?

DECISION AND ANALYSIS: The court allowed the appeal. Citing the case of P.S. Sathappan v. Andhra Bank Ltd.[1], it held that the Arbitration Act since its inception in 1940 had been a “self-contained code”. The court read Section 34 and 37 and held that the remedy of appeal only applies to cases of setting aside of an award and not of condoning delays. It then cited Fuerson Day Lawson Ltd. v. Jindal Exports Ltd[2], opining that a prayer for condonation of delay is a question well within the jurisdiction of the court to decide. The argument of the Respondent that the order of the Single Judge was wrong and legally unsustainable did not convince the judges. However, it took note of the amount deposited by the Appellant and allowed the appeal. This decision is particularly important since it makes it clear that the Respondent could challenge the discretion exercised by the Single Judge by way of a Special Leave Petition but not through a Letters Patent Appeal.

CONCLUSION: This case interpreted Section 34 and 37 of the statute and held that one can appeal not to pardon delays, but only to set aside arbitral awards. Holding that it had the jurisdiction to decide this question, it sought the answer from the statute itself.

[This case comment has been contributed by Dushyant Kishan Kaul, a 4th year law student of Jindal Global Law School, Sonipat.]

REFERENCES:

[1] (2004) 11 SCC 672

[2] (2011) 8 SCC 333

 

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