The Bombay High Court, in a significant judgment, has ruled that the benefit of Section 14 of the Limitation Act, 1963, can be extended to cases where a petitioner delays filing an application under Section 34 of the Arbitration and Conciliation Act, 1996, due to ongoing legal proceedings pursued in good faith. The ruling came in the case of NTPC BHEL Power Projects Pvt. Ltd. v. Shree Electricals & Engineers (India) Pvt. Ltd., where the petitioner sought to challenge an arbitral award beyond the prescribed limitation period.
Case Background
Disputes arose between NTPC BHEL Power Projects Pvt. Ltd. (the appellant) and Shree Electricals & Engineers (India) Pvt. Ltd. (the respondent) under a purchase order dated March 9, 2013. The respondent approached the Facilitation Council, claiming an amount of Rs. 4,50,92,587/-. Despite efforts at settlement, arbitration ensued, resulting in an arbitral award dated February 5, 2020.
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The petitioner initially filed a writ petition before the Bombay High Court, challenging the jurisdiction of the Facilitation Council to render an arbitral award. This challenge was based on a ruling by the Division Bench in Gujarat State Petronet Ltd. v. Micro and Small Enterprises Facilitation Council (2018), which held that the Facilitation Council only had jurisdiction for conciliation, not arbitration. However, the Supreme Court in Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2023) reversed this position, holding that the Facilitation Council could act as an arbitrator.
Upon this clarification, the petitioner withdrew the writ petition on January 11, 2023, and subsequently filed a Section 34 petition before the District Judge on March 17, 2023, along with an application to condone the delay of 66 days.
Appellant's Contentions:
- The delay was justified as the petitioner had been pursuing legal remedies in good faith based on the prevailing legal position.
- Section 14 of the Limitation Act applies since the petitioner’s initial writ petition was filed with due diligence and in good faith.
- The Supreme Court had extended limitation periods during the COVID-19 pandemic, which also affected the calculation of delay.
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Respondent's Counter-Arguments:
- The arbitral award was received by the petitioner on August 21, 2020.
- Even considering the Supreme Court’s extension of limitation due to COVID-19, the prescribed period under Section 34(3) expired by September 30, 2022.
- Section 14 of the Limitation Act could not be invoked as the petitioner was not bona fide in pursuing the writ petition.
Court’s Observations and Judgment
The Bombay High Court, after analyzing the facts and legal precedents, concluded that Section 14 of the Limitation Act applies in the present case. The court noted:
“It clearly appears that the appellant was pursuing the writ petition considering the legal position as laid down by the Division Bench in Gujarat State Petronet Ltd., which was subsequently reversed by the Supreme Court.”
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The court further observed that the appellant had been diligent in seeking legal remedies and that the withdrawal of the writ petition was necessitated by the Supreme Court’s ruling.
“In situations where the legal landscape changes due to higher judicial pronouncements, litigants cannot be penalized for choosing a legal remedy that was deemed appropriate at the relevant time.”
The court cited the Supreme Court’s ruling in Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department (2008), where it was held that Section 14 of the Limitation Act applies to applications under Section 34 of the Arbitration Act.
Additionally, the court referred to Deena v. Bharat Singh (2002), which affirmed that litigants who prosecuted prior proceedings in good faith should be granted the benefit of Section 14.
The Bombay High Court ruled in favor of the appellant, stating that the delay in filing the Section 34 application should be condoned under Section 14 of the Limitation Act.
“Even assuming that there is a delay in filing of Section 34 proceedings, the same would be required to be condoned applying the provisions of Section 14 of the Limitation Act.”
The impugned order of the District Judge rejecting the delay condonation application was set aside, and the Section 34 proceedings were allowed to proceed on merits.
This ruling has significant implications for arbitration law in India. It underscores the judiciary’s recognition that litigants must not be prejudiced by legal uncertainties or changes in judicial interpretation. The judgment reaffirms that courts should take a pragmatic approach when assessing delays caused by bona fide litigation pursued in good faith.
By allowing the application under Section 14 of the Limitation Act, the Bombay High Court has reinforced the principle that procedural technicalities should not obstruct substantive justice. This case sets a strong precedent for future disputes where litigants may need to rely on Section 14 for exclusion of time spent in prior proceedings.
