Holding

An order rejecting an application for condonation of delay under Section 5 of the Limitation Act is an appealable 'refusal to set aside the award' under Section 39(1)(vi) of the Arbitration Act, 1940, rendering a revision petition under Section 115 of the CPC not maintainable.

Summary

Essar Constructions appealed a Supreme Court order dismissing its appeal against a High Court decision that had condoned delay in filing an application under Section 30 of the Arbitration Act, 1940. The dispute arose from three arbitrators where two awards favored Essar and one favored the respondent, who sought to set aside the majority award and filed an application for condonation of delay under Section 5 of the Limitation Act, 1963. The trial court rejected the condonation application, and the respondent appealed. The Supreme Court held that the trial court’s order refusing to condone delay amounted to a refusal to set aside the award and was therefore appealable under Section 39(1)(vi) of the Arbitration Act, making a revision petition under Section 115 of the CPC untenable. Consequently, the appeal was dismissed. The Court also exercised its powers under Article 142 to decide the merits of the sufficiency of cause shown for delay.

Issues considered

Whether an order of the trial court dismissing an application for condonation of delay under Section 5 of the Limitation Act, in the context of an application under Section 30 of the Arbitration Act, 1940, is appealable under Section 39(1)(vi) of the Arbitration Act or only revisable under Section 115 of the Code of Civil Procedure.
Whether the limitation defence transforms the order into a 'refusal to set aside the award' within the meaning of Section 39(1)(vi).

Legislation cited

Arbitration Act, 1940s. 17, s. 30, s. 39
Code of Civil Procedure, 1908s. 115
Constitution of Indias. 142
Limitation Act, 1963s. 3, s. 5

Subjects

ArbitrationLimitationCondonation of delaySection 39(1)(vi)Section 115 CPCAppeal vs RevisionArticle 142Civil ProcedureAward setting aside

Judgment

'
MIS. ESSAR CONSTRUCTIONS A
v.
N.P. RAMA KRISHNA REDDY

MAY3, 2000

[D.P. WADHWAAND RUMA PAL, JJ.] B

Arbitration Act, 1940-Sections 30, 39( 1)(vi) & ( 17)-Arbitration-
Award-Application for setting aside the award along with application for
condonation of delay-Trial Court dismissing the application for condonation
of delay-Revision petition under Section 115 of the Code-High Court C
condoning the delay and remitting the matter to trial Court-Validity of-
Held, an order dismissing an application for condonation of delay amounts
to refusal to set aside award-71ius, appealable under Section 39(l)(vi)-
Revision Petition under Section 115 of the Code not maintainable-Code of
Civil Procedure, 1908-Section 115-Limitation Act 1963-Sections 3 & 5.
D
Constitution of India-Article 142-High Court entertaining a revision
petition where appeal was proper remedy-Held, an appropriate case for
exercising powers under Article 142.

Dispute between the parties were referred to three arbitrators in E
terms of Arbitration agreement. Two of them passed an order in favour of
appellant and the third in favour of respondent. Respondent filed a suit for
making the minority award rule of the Court and also a petition for setting
aside the majority award, along with an application for condonation of
delay under Section 5(5) of the Limitation Act, 1963. Trial Court holding
that the delay could not be condoned, dismissed the petition. On revision F
under Section 115 of the Code, High Court condoned the delay and re-
manded the matter to the trial Court. Hence the present appeal.

In the appeal, the question that arose for consideration was whether
an order of the trial court dismissing an application for condonation of G
delay under Section 5 of the Limitation Act 1964 for filing an application
under Section 3 of the Arbitration Act, 1940 was revisable under Section
• .1 115 of the Code of Civil Procedure or did an appeal lie under Section 39 of
the Arbitration Act.

Dismissing the appeal, the Court H
923
924 SUPREME COURT REPORTS [2000] 3 S.C.R.
A HELD : 1.1. Order of the Trial Court rejecting the application of
respondent under Section 5 of the Limitation Act, 1963 was appealable
under Section 39 of the Arbitration Act, 1940. Consequently, the revision
petition under Section 115 of the Code of Civil Procedure, 1908 would not
lie. [932-F]
B 1.2. Section 39(1)(vi) of the Arbitration Act, 1940 does not indicate
the grounds on which the court may refuse to set aside the award. There is
nothing in its language to exclude a refusal to set aside the award because
the application to set aside the award is barred by limitation. By dismissing
the application albeit under Section 5, the assailability of the award is
c concluded as far as the Court rejecting the application is concerned. Ulti·
mately therefore, it is an order passed under Section 30 of the Arbitration
Act though by applying the provisions of the Limitation Act. Similarly,
under Section 17, the grounds of refusal are not specified nor is there any
limitation on the word 'refusal' to mean only a refusal on merits. Thus,
reading Section 39(1)(vi) and Section 17 together, it would follow that an
D
application to set aside an award which is rejected on the ground that it is
delayed and that no sufficient cause has been made out under Section 5 of
the Limitation Act would be an appealable order. [930-A-C; G-H; 931-A]

Privy Council in Harinath Chatterjee v. Mathurmohan Goswam4 (1894)
E ILR 21, referred to.

Babumian & Mastan and Am: v. Smt. K. Seethavamma and Others, AIR
(1985) AP 135; Mafizuddin v. Alimuddin, AIR (1950) Ass. 191; State of West
Bengal v. Mis. A. Monda4 AIR (1985) Cal. 12 DB and Damodaran v.
Bhaskaran, (1988) 2 KLT 753, approved.
F
Nilkantha Shidramappa Ningaslzetti v. Kaslzinatlz Somanna Ningashett4 ')-
[1962) 2 SCR 551 and Madan Lal Sunderla4 [1967) 3 SCR 147, distin·
guished.

2. Section 3 of the Limitation Act makes it clear that limitation may
G be ground for rejecting a suit already instituted an appeal preferred and,
in the context of the instant case, most importantly, an application already
made. Limitation like the question of jurisdiction may be provided for in a
separate statute but it is a defence available in the suit, appeal or applica·
tion. When the defence is upheld it is the suit or the appeal or the applica-
H tion itself which is dismissed. A suit which is dismissed on the ground of
'
ESSAR CONSTRUCTIONS v. N.P. RAMA KRISHNA REDDY [RUMA PAL, J.] 925
limitation may be appealed against as a decree. By the same token an A
application under Section 30 which is dismissed on the ground of limita-
tion is a refusal to set aside the award. [929-F-H; 930-A]

3.1. In the instant case, the issue whether an appeal or revision could
lie ag_~nst an order rejecting an application under section 5 was neither
raised nor considered by the High Court. Had the issue been raised, it would B
have been open to the High Court to have converted the revision petition
~ ~ into an appeal. However, to set aside the order of the High Court on this
technical ground and to remand it for a reconsideration of the sufficiency of
the cause shown by the respondent would be an unnecessary exercise. The
High Court had the jurisdiction to reappraise the evidence and to condone c
the delay. It has given its reasons for doing so. It cannot in the circum-
stances take a different view on the merits of the respondent's case on the
question of delay if the matter were to be remanded. Thus, this is an appro-
~ priate case to exercise powers under Article 142 of the Constitution and
decide on the merits of the sufficiency cause shown. [932-G-H; 933-A-B]
D
3.2. The reason given by the High Court for setting aside the order of
the trial court, that there was a total negligence on the part of the counsel
who appeared for the State in the trial Court, was sufficient to excuse the
delay and to remand the matter back to the trial Court for a decision on
y
the merits of the application under S. 30. (933-B-DJ E
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3179 of 2000.

From the Judgment and Order dated 16.7.99 of the Andhra Pradesh
High Court in R.P. No. 2362 of 1999.
F
·1 R.P. Nariman, E.R. Kumar, (Rohit Mammen Alex) for P.H. Parekh for
the Appellant.

Harish N. Salve, Solicitor General, K. Ram Kumar, Y. Subba Rao and
B . Sridhar for the Respondent. r
G
The Judgment of the Court was delivered by
... ;!
RUMA PAL, J. Leave granted.

The litigants, in this case, have traversed unknown procedural paths
crossing legal barriers to present us with a case which has no simple solution. H
926 SUPREME COURT REPORTS [2000] 3 S.C.R.
A The cause for complaint before us is an order passed by the High Court
of Andhra Pradesh under Section 115 of the Code of Civil Procedure
condoning the delay in filing an application under Section 30 of the Arbi-
tration Act, 1940 and remanding the matter to the Trial Court for a decision
on merits. According to the petitioners the High Court had wrongly interfered
with the order dated 28th April, 1999 by which the Principal Senior Civil
B
Judge Kakinada had dismissed the respondent's application under Section 5
of the Limitation Act, 1963 on the ground that the cause shown for the delay
was insufficiently explained.

Had the issue been so straightforward, unquestionably the High Courts'
c order would have had to be set aside, because it had re-appraised the cause
shown by the respondent and condoned the delay under Section 5 of the 1963
Act. There is ample authority to hold that this could not be done under
Section 115 of the Code [See: D.LF. Housing & Construction Company
Private ltd., New Delhi v. Sarup Singh & Others, [1970] 2 SCR 368
Manindra Land and Building Corporation Ltd. v. Bhutnath Banerjee and
D Others, [1964] 3 SCR 495 and Pandurang Dhoni Chougule v. Maruti Hari
Jadhav, [1966] 1 SCR 102.

But was the Civil Judge's order dismissing the respondent's application
under Section 5 at all revisable under Section 115 · of the Code or did an
E appeal lie from it under Section 39 of the Arbitration Act, 1940? The answer
is of moment as the powers of an appellate Court are wider than those
available under Section 115. Section 39 (1) (vi) of the Arbitration Act, 1940
says that an appeal shall lie inter alia frqm an order "refusing to set aside
I
an award".

F To arrive at a conclusion as to whether the order passed by the Senior
Civil Judge, Kakinada was an order "refusing to set aside the award'', we have
to consider the facts.

Disputes between the parties were referred to three arbitrators in terms
of an arbitration agreement. There was no unanimity among the Arbitrators.
G
} .
Two arbitrators passed an award in favour of the appellant before us and the
third decided in favour of the respondent.

The respondent made an abortive attempt to set aside the award and
to have the minority award made a rule of Court before the award was filed.
H The award was filed on 27.8.97. Notice under Section 14(2) of the Act was
ESSAR CONSTRUCTIONS v. N.P. RAMA KRISHNA REDDY [RUMA PAL, J.] 927

- ). issued to the respondent on the s~e date. According to the respondent. it
never received the notice.
A

The appellant filed a suit to make the majority award a rule of Court
under Section 17 of the Act. The respondent has filed a written statement in
the suit. In addition, the respondent filed two suits - one for making the
minority award a rule of Court and another for setting aside the majority B
award. Along with the second suit (OSS 3098/98), the respondent filed an
~ ~ application under Section 5 of the Limitation Act (I.A No. 1394/98). A few
days later, the respondent filed a second application (I.A. No. 1395/98) in
which it was contended that the second suit was not a suit at all but an
application which had been wrongly numbered as a suit. It was, therefore, c
prayed that the Court should "convert the said application i.e. petition to set
aside the Award as OP".

The Principal Senior Civil Judge by his order dated 28th April, 1999

"' disposed of the application under Section 5 treating OSS 3098/98 as an
application for setting aside the award. This is what he said: D
"13. Now coming to the explanation of petitioner for condonation of
delay of 331 days in filing application to set aside Award, the
petitioner states that as notice was sent by Court to Bombay Port Trust
.., even though it is addressed to Kakinada Port under Dis. No. 8994,
E
Ot. 30.8.1997 and actually the said notice was despatched by Court
on 1.9.1997, therefore the petitioner states that after excluding 30
,days time from 1.9.1997 the delay in filing application for setting
aside Award is 331 days i.e., from 1.10.1997 to 2.9.1998.

14. In the affidavit of the petitioner, petitioner only refers to their
F
filing a suit which was rejected on 21.3.1997 and did not refer to
respondent herein filing O.S. 445/97 against petitioner herein and
petitioner herein receiving summons in that suit on 19.1.1998 and
thereafter petitioner herein entering appearance through A.G.P. on
1.2.1998 and filing written statement in O.S. 445/97 on 17.7.1998.
The above circumstances go to show that petitioner is not willing to G
_.... state that particulars referred to above, as the same will go against the
~ petitioner and it will amount to service of' notice of Arbitrators filing
Award into Court. In the present circumstances of the case and as the
explanation of petitioner is not sufficient explanation, I am of the view
that delay as claimed by petitioner cannot be condoned. Accordingly, H
928 SUPREME COURT REPORTS [2000] 3 S.C.R.
A this petiti~n is dismissed, but under the circumstances of the case no
costs." '

Tue outcome of the order in effect.was that the prayer for setting aside
the award was refused on the ground ~f delay.

B Tue "effect-test" was applied by the High Court of And.bra Pradesh in
Babumian & Mastan and Am: v. Smt. K. Seethayamma and Others, AIR
(1985) AP 135 which said:

" ......... In the light Of the rulings in Gopalaswamy v. Navalgaria, AIR
c (1967) Mad 403 (supra) and the decision of the Bench in CMA No.
612 of 1977 dated 3.4.1978, the legal position may be enunciated as
follows: Tue order refusing to condone the delay in filing the claim
petition bas the effect of fmally disposing of the original petition.
Such an order can, therefore, be treated as an award and hence it is
appealable".
D
Again a Division Bench of the Assam High Court in Mafizuddin v.
Alimuddin~ AIR (1950) Ass 191 has said:

"Whether objections to an award ar.e-dismissed on themerits or they
are dismissed on the ground that they are filed beyond time, the Court
E
by dismissing them in effect refuses to set aside the award, and an
order refusing to'set aside is clearly appealable under S. 30."

In some High Courts, no separate application is filed under Section 5
.of the Limitation Act and the prayer for condonation of delay is included
F along with the prayers made for substantive relief. Courts have entertained
appeals from an order dismissing an application on the ground of limitation.
Thus, in State of West bengal v. Mis A. Monda[, AIR (1985) Cal 12 DB where
an application under Section 30 of the Arbitration Act was dismissed on the
ground of limitation, an appeal was entertained. [See also Damodaran v.
Bhaskaran, (1988) 2 KLT 753.
G
Tue procedure appears to have been approved by the Supreme Court
in the case of Union of India v. Union Building, AIR (1985) Cal 337 (DB),
where on an appeal to the Supreme Court from an order dismissing an
application under Section 30 on the ground of delay, the appeal was remanded
H to the High Court to be disposed of.
•
ESSAR CONSTRUCTIONS v. N.P. RAMA KRISHNA REDDY [RUMA PAL, J.] 929
The position should be no different in Courts where a separate appli- A
,, ' cation under Section 5 of the Limitation Act is required to be filed. If the
various High Courts decisions noted earlier are correct, then the application
under Section 5 being dismissed, the application under Section 30 would
consequently also have to be dismissed although this might be a mere
formality. The end result would be the same.
B
None of the High Courts in the decisions noted, have spelt out the
underlying reasons why an order rejecting an application on the ground of
limitation tantamounts to a rejection of the application itself. In our view, the
unspoken major premise is based on the Limitation Act.
c
As observed by the Privy Council in Harinath Chatterjee v.
Mathurmohan Goswami, ( 1894) ILR 21 Cal. 18, the statute of limitations
assumes the existence of a cause of action and does not define or create one.
~ The cause of action in this case is the alleged impropriety of the award. The
application to set aside the award may be and was resisted by the defence
of limitation. This is not a technical plea but one that is given by Section D
3 of the Limitation Act, 1963 which inter alia provides that:

"Subject to the provisions of Sections 4 to 24 of the Act every
suit instituted, appeal preferred, and application made,· after the
prescribed period shall be dismissed, although limitation has not been
set up as a defence."
E

The section makes it clear that limitation may be a ground for rejecting
a suit already instituted, an appeal preferred and, in the context of this case,
most importantly, an application already made. What is before the Court is
the substantive application when the question of limitation is decided. F

Limitation, like the question of jurisdiction may be provided for in a
separate statute but it is a defence available in the suit, appeal or application.
When the defence is upheld it is the suit or the appeal or the application itself
which is dismissed. Of course, the question as far as appeals are concerned
may be debatable having regard to the provisions of Order 41 of the Code G
of Civil Procedure relating to admission of appeals as an appeal may not be
admitted at all because it is barred by limitation. We express no final view
in the matter. But there is no corresponding requirement for admission of
applications or suits after overcoming the barriers of limitation. A suit which
is dismissed on the ground of limitation may be appealed against as a decree. H
930 SUPREME'; COURT REPORTS [2000] 3 S.C.R.
A By the same token an application under Section 30 which is dismissed on
the ground of limitation is a refusal to set aside the award.
~ ......
Section 39 (l)(vi) of the Arbitration Act, 1940 does not indicate the
grounds on \l{hich the court may refuse to set aside the award. There is
nothing in its language to exclude a refusal to set aside the award because
B the application to set aside the award is barred by limitation. By dismissing
the application albeit under Section 5, the assailability of the award is
concluded as far. as the Court rejecting the applic,ation is concerned. Ulti- ¥ ,...-
mately therefore, it is an order passed under Section 30 of the Arbittation Act
though by applying the provisions of the Limitation Act.
c Section 17 of the Arbitration Act, 1940 provides:
'
"Judgment in tenns of award.- Where the Court sees no cause to remit

D
the. ~ward or any of the matters referred to arbittation for reconsid-
eration or to set aside the award, the Court shall, after the time for
making an application to set aside the award has expired, or such
}. -
application having been made, after refusing it, proceed to pronounce
judgment according to the award, and upon the judgment so pro-
nolli!ced a decree shall follow, and no appeal shall lie from such
decree_ except on the ground it is in excess of, or not otherwise in
accordance with, the award." /

E ~
The Court can pronounce judgment according to the award (1) if the
time for making an application to set aside the award has expired or (2) such
application having been made, after refusing it.

Because of the applicability of Section 5 of the Limitation Act, 1963,
F if the Court has not pronounced judgment for whatever reason, although the
time prescribed for making the application has expired and an application for
setting aside the award is made with a prayer for condonation of delay,
the Court cannot pronounce judgment until the application is rejected. Even
after a decree is passed under Section 17 an application under Section 30 can
G be entertained provided sufficient cause is established. In either case the
rejection of the application would be a refusal to set aside the award. It is
to be emphasized that under Section 17 the grounds of refusal are not
specified nor is there any limitation on the word 'refusal' to mean only a
. ,, '
'

refusal on merits.

H Reading Section 39 (l)(vi) and Section 17 together, it would therefore
. -\ '
ESSAR CONSTRUCTIONS v. N.P. RAMA KRISHNA REDDY [RUMA PAL, J.] 931

1- "' follow that an application to set aside an award which is rejected on the
ground that it is delayed and that no sufficient cause has been made out under
Section 5 of the Limitation Act would be an appealable order.
A

This brings us to the decisions of this Court relied on by the appellant
to contend that the order of the Principal Senior Civil Judge was not an
B
appealable one and could only be revised under Section 115 of ~e Code of
Civil Procedure.

The first decision cited is Nilkantha Shidramappa Ningashetti v.
Kashinath Somanna Ningashetti, [1962] 2 SCR 551. In that case there was
no application to set aside the award at all and no question of r~jection of C
such an application arose. After the award was filed, the defendant No. I filed
his 'say' about the arbitrators award. He subsequently withdrew his 'say'.
Later, a guardian of a party who was a minor, filed a written statement
claiming that the award was null and void on the ground that the award was
without jurisdiction. This objection was not pressed before the Trial Court. D
The Trial Court, therefore, passed a decree in terms of the award. The appeal
to the High Court was dismissed as not maintainable. The further appeal to
this Court was dismissed saying:

" ...... When no party filed an objection praying for the setting aside of
the award, no question of refusing to set it aside can arise and E
therefore no appeal was maintainable under Section 39(1)(vi) of the
Arbitration Act which allows an appeal against an order refusing to
set aside an award."

The case is not an authority for the proposition that where an appli- F
cation under Section 30 is made and is rejected, no appeal is maintainable.
It does not apply to the facts of this case.

The second decision cited was Madan Lal v. Sunderlal, [1967] 3 SCR
147. In that case the question of appealability of an order rejecting an
application under Section 30 of the Arbitration Act, 1940 was neither raised G
nor decided. On the contrary, the· High Court in Madanlal's case had
dismissed the appeal from the order of the Trial Court which had held that
the application under Section 30 was barred by limitation, not on the ground
that the appeal was not maintainable but because it uplield the Trial Court's
decision. The Supreme Court affirmed the High Court's order. On facts
H
932 SUPREME COURT REPORTS [2000] 3 S.C.R.
A therefore, the decision really supports our conclusions. ~
The editorial comment in Justice Bachawat's "Law of Arbitration &
~
Conciliation" (3rd edn.) at p.902 that Mafizuddin's case (supra) has been
overruled by the decisions of Nilkantha v. Kashinath (supra) and Madan Lal
v. Sunder Lal (supra) is, for the reasons stated, erroneous.
B
Besides Madanlal's case was decided in the context of the Indian
Limitation Act, 1908 when the provisions of Section 5 were inapplicable to
)(
applications under Section 30 of the Arbitration Act. The period prescribed
under Article 158. of the 1908 Act for challenging an award was absolute.
It was therefore held thht an objection filed more than 30 days after the notice
c "could not be treated as an application for setting (aside?) the award. (sic) 'for
it would be then barred by limitation. The position thus is that in the present
case there was no application to set aside the award as grounds mentioned
in Section 30 within the period of limitation". It was also observed that even
the Court could not set aside an award suo motu under Section 30 beyond >
D the period of limitation " for if that were so the limitation provided under
Article 158 of the Limitation Act would be completely negatived".

Apart from the decision not being relevant to the issue before us, it is
entirely distinguishable in law. Section 5 of the Limitation Act, 1963 is now
applicable to all applications under the Arbitration Act. Provided that the .:'
E ~
delay is sufficiently explained, there is no such compulsion on the Court to
reject an application filed beyond the prescribed period of limitation nor is
there any question of the prescribed period of limitation being negatived by
entertaining an application under Section 30 beyond the period of limitation.

F We therefore conclude that the order of the Senior Civil Judge rejecting
the application of the respondent under Section 5 was appealable under the
1940 Act. The application under Section 115 of the Code therefore did not
lie. Despite the fact that this issue was neither raised before nor considered
by the High Court, we cannot take a blinkered view of the situation in law.
Had the issue been raised, it would have been open to the High Court to have
G converted the revision petition into an appeal.

To set aside the order of the High Court on this technical ground and
to remand it for a reconsideration of the sufficiency of the cause shown by
the respondent, would be an unnecessary exercise. In the view we have taken,
•
the High Court had the jurisdiction to reappraise· the evidence and condone
H
ESSAR CONSTRUCTIONS v. N.P. RAMA KRISHNA REDDY [RUMA PAL, J.] 933
I

the delay. It has given its reasons for doing so. It cannot, ~h the circumstances, · A
take a different view on the merits of the respondent's case on the question
of delay if the matter were to be remanded. In our opinion, this would be

- an appropriate case for us to exercise our powers under Article 142 of the
Constitution and decide on the merits of the sufficiency cause shown.
B
The High Court gave three reasons for setting aside the order of the
Trial Court after considering several decisions cited before it. The first, to use
its own words, " ... that there was a total negligence and it is on the part of
the counsel who appeared for the State in the Trial Court."

The second reason was that high-stakes were involved in the matter.
The third reason was that no prejudice would be caused to the Contractor
c
because the issue of the validity of the award was yet to be decided in its
suit.

It is a moot point whether the second and third reasons are relevant.
Nevertheless, the first ground should have been and, in our opinion, was D
sufficient to excuse the delay and to remand the matter back to the Trial Court
for a decision on the merits of the application under Section 30. It would be
an euphemism to describe the ineptitude of the advocate's advice to the
respondent in connection with ·the proceedings before the Trial Court as
"negligence". As he holds the post of Govt. Pleader it could reasonably be
assumed by the respondent that he possessed the required legal expertise to E
advise them correctly. His lack of this is home out by the several wholly
misconceived proceedings filed by the respondent before the Senior Civil
Judge on his advice. That the respondent's objection to the award is not the
laggardly response of a frivolous litigant appears from the fact that an
objection to the award was made even before the award was filed. F
The appeal is accordingly dismissed. There will be no order as to costs.

S.V.K. Appeal dismissed.