Precedent Prevails: SC Rules in Favor of Respondent in Arbitration Limitation Dispute.


03 April 2025 Arbitration Law >> Business & Commercial Law   |   Civil Appeals >> Civil & Consumer Law  

In M/s. R.K. Transport Company v/s M/s. Bharat Aluminum., the Supreme Court of India has affirmed an order of the Chhattisgarh High Court, holding that an application to set aside an arbitral award filed under Section 34 of the Arbitration and Conciliation Act, 1996 (ACA), was within the stipulated limitation period. The apex court reiterated the principle that just as it is necessary to establish legal precedent, it is equally crucial to adhere to existing ones.

The case arose from a contract for bauxite mining and delivery executed in 2002. Following disputes over payments, an arbitral award of ?51,33,40,100 was issued in favor of the appellant on April 9, 2022, the same day it was signed and delivered to the respondent. The respondent subsequently filed an application under Section 34 of the ACA to set aside this award on July 11, 2022, along with a request for a stay on the award.


 

 

The Trial Court initially ruled that the Section 34 application was within the three-month limitation period, which it calculated to have expired on July 9, 2022 – a second Saturday, followed by a Sunday, both being court holidays. Relying on this, the Trial Court also directed the respondent to deposit 50% of the arbitral sum, which was complied with and later withdrawn by the appellant against a bank guarantee.

The appellant challenged this order in the High Court, which granted liberty to file a recall application before the Trial Court. The Trial Court then reversed its earlier stance, holding on April 25, 2023, that the Section 34 application was time-barred as the three-month period, according to its calculation, ended on July 8, 2022, a working day.

The respondent appealed this decision under Section 37 of the ACA, and the Chhattisgarh High Court allowed the appeal, leading to the present matter before the Supreme Court. The High Court had relied on Section 12 of the Limitation Act, 1963, and the Supreme Court's precedent in State of Himachal Pradesh v. Himachal Techno Engineers to conclude that the limitation period expired on July 9, 2022, a court holiday. Consequently, it applied Section 4 of the Limitation Act, citing Bhimashankar Sahakari Sakkare Karkhane Niyamita v. Walchandnagar Industries Limited, to deem the application filed on the next working day as within the limitation period. The High Court remanded the case to the Trial Court for a decision on the merits and continued the interim stay on the execution of the recovery.

The Supreme Court, after hearing arguments from both sides, addressed the calculation of the limitation period. It affirmed its earlier ruling in Himachal Techno Engineers and reiterated in My Preferred Transformation & Hospitality Pvt Ltd v. Faridabad Implements Pvt Ltd. that Section 12(1) of the Limitation Act applies to the calculation of the three-month limitation period under Section 34(3) of the ACA. This means that the day on which the arbitral award was received must be excluded.

Applying this principle to the present case, the Supreme Court noted that the respondent received the award on April 9, 2022. Excluding this date, the three-month limitation period commenced on April 10, 2022, and expired on July 9, 2022, which was indeed a second Saturday and a court holiday.

The court then invoked Section 4 of the Limitation Act, which provides that if the prescribed period for any application expires on a day when the court is closed, the application may be made on the day the court reopens. As the respondent filed the Section 34 application on July 11, 2022, the next working day after the court holidays, the Supreme Court concurred with the High Court that the application was filed within the limitation period. Consequently, the question of condonation of delay did not arise.

The Supreme Court also declined to interfere with the High Court's interim order staying the execution of the recovery, especially considering that the appellant had already withdrawn 50% of the deposited arbitral sum.
In its final order, the Supreme Court dismissed the appeal, upholding the Chhattisgarh High Court's decision and reiterating the importance of adhering to established legal precedents. There was no order as to costs.


Section 34, Arbitration and Conciliation Act - 1996  

Section 37, Arbitration and Conciliation Act - 1996  

Arbitration and Conciliation Act, 1996  

Limitation Act, 1963