M/S. KLM AXIVA FINVEST LIMITED vs BIJITHA SHAJAN
- Court
- Kerala High Court
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A.R.No.53/2026
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
TH
WEDNESDAY, THE 9 DAY OF SEPTEMBER 2026 / 18TH BHADRA, 1948
AR NO. 53 OF 2026
PETITIONER/CLAIMANT:
M/S. KLM AXIVA FINVEST LIMITED
(FORMERLY KNOWN AS M/S. NEEDS FINVEST LIMITED)
HAVING ITS CORPORATE OFFICE AT KLM GRAND ESTATE,
BYPASS ROAD, EDAPPALLY, ERNAKULAM-
682024,REPRESENTED BY ITS POWER OF ATTORNEY
HOLDER MR. DHANESH K. S.
BY ADV SHRI.G.RENJITH
RESPONDENTS/RESPONDENTS:
1 BIJITHA SHAJAN
W/O SHAJAN C S, CHALIPURATH HOUSE, KARUVANNUR
P.O, THRISSUR, PIN - 680711
2 SHAJAN C S (DIED)
S/O SHANMUKHAN, CHALIPURATH HOUSE, KARUVANNUR
P.O, THRISSUR., PIN - 680711
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3 SHREEBADRA (MINOR),
AGED 16 YEARS
D/O LATE SHAJAN S, REPRESENTED BY HER MOTHER,
BIJITHA SHAJAN, W/O SHAJAN C S, CHALIPURATH
HOUSE, KARUVANNUR P.O, THRISSUR., PIN - 680711
4 SHEHA (MINOR),
AGED 12 YEARS
D/O LATE SHAJAN C S, REPRESENTED BY HER MOTHER,
BIJITHA SHAJAN, W/O SHAJAN C S, CHALIPURATH
HOUSE, KARUVANNUR P.O, THRISSUR., PIN - 680711
BY ADV SRI.V.M.KRISHNAKUMAR
ADV.SMT.SANJANA JAYAKUMAR
THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON
19.08.2026, THE COURT ON 09.09.2026 PASSED THE FOLLOWING:
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CR
S.MANU, J.
--------------------------------------------------
A.R.No.53 of 2026
-------------------------------------------------
th
Dated this the 09 day of September, 2026
ORDER
Petitioner is a non-banking financial institution registered
under the Companies Act, 2013. First respondent availed a loan of
Rs.75,00,000/- from the petitioner by executing Annexure-2
agreement on 04.08.2015. The second respondent is the guarantor. It
was agreed that the loan would be repaid in 20 monthly installments
commencing from 31.07.2015. Annexure-2 contains an arbitration
clause. According to the petitioner, there was failure on the part of
the respondents to repay loan amount as agreed. Therefore,
Annexure-3 notice was issued, invoking the arbitration clause in the
agreement. Thereafter, an arbitrator was nominated. Respondents
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did not appear before the arbitrator and the arbitrator finally passed
Annexure-5 award on 28.12.2018. Petitioner approached the third
Additional District Court, Thrissur in EP No. 75 of 2020 seeking
execution of Annexure-5 award. The learned Additional District
Judge, relying on the judgment in Hedge Finance Private Limited
(M/s.) Ernakulam v. Bijish Joseph [2022 KHC 591] held that the
unilateral nomination of the arbitrator was illegal and hence the
award was unenforceable. Accordingly, the EP was dismissed by
order dated 24.09.2024. Petitioner thereafter filed Arbitration
Request No.148 of 2025. By order dated 09.01.2026 the arbitration
request was rejected by this Court holding that it was premature
since no fresh notice was issued to the respondents to satisfy the
requirement under Section 21 of the Arbitration and Conciliation
Act, 1996, after the execution court dismissed the petition. Later,
fresh notices were issued to the respondents on 12.01.2026.
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Respondents received notices. However, there was no response from
their side. Hence, the instant arbitration request was filed.
2. Notice was served and respondents entered appearance
through counsel.
3. Heard Adv. G.Renjith, the learned counsel for petitioner
and Adv.Sanjana Jayakumar, the learned counsel for the respondents
1 to 4. They both prepared extensively and presented the case with
passion.
4. Learned counsel for the petitioner submitted that the
petitioner had been prosecuting arbitral proceedings diligently and
in a bona fide manner. He submitted that indisputably, Annexure-2
contains an arbitration clause and the same was invoked by the
petitioner when there was default in repayment of the loan by the
respondents. He submitted that there was no appearance on behalf
of the respondents before the arbitrator nominated in the first
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instance and an award was passed by the learned arbitrator.
Subsequently, the execution court found that the nomination of the
arbitrator was unilateral and therefore illegal. He submitted that the
execution court arrived at such a conclusion relying on the law as
clarified in Hedge Finance Private Limited (supra). He submitted
that the only option available to the petitioner was to initiate fresh
arbitral proceedings and therefore Arbitration Request No.148 of
2025 was filed before this Court. Since this Court was of the view that
it was premature for want of a fresh notice, the arbitration request
was rejected. Thereafter, in view of the order passed by this Court,
fresh notice was issued and the present arbitration request was filed.
He submitted that the total amount due from the respondents as on
date is approximately Rupees two crores and if the arbitration
request is rejected, the petitioner will be remediless. He submitted
that fresh arbitral proceedings are permissible in law and relied on
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Section 43(4) of the Arbitration and Conciliation Act. The learned
counsel submitted that impact of an order passed by the execution
court holding that the award was unenforceable is same as that of
setting aside an award. He therefore submitted that benefit of
Section 43(4) of the Arbitration and Conciliation Act is available to
the petitioner in the instant case. He submitted that the period
between the commencement of the arbitration and date of the order
of the Court should be excluded in computing the time prescribed by
the Limitation Act for the commencement of the proceedings with
respect to the dispute between the petitioner and the respondents.
He, hence submitted that the request for reference is not hit by
limitation. Pertaining to the claims raised by the petitioner also,
learned counsel raised the same contention.
5. As an alternative contention, the learned counsel for the
petitioner submitted that even if it is assumed that provisions of
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Section 43(4) are not applicable in the instant case, provisions of
Section 43(1) would definitely apply. He submitted that in view of
Section 43(1) of the Arbitration and Conciliation Act, the provisions
of Limitation Act, 1963 shall apply to arbitrations as they apply to
the proceedings in Court. He hence argued that the provisions of the
Limitation Act, including Section 14, would be applicable to the
case at hand . He submitted that as provided under Section 14 of the
Limitation Act, the time spent prosecuting a proceeding bona fide in
a court without jurisdiction should be excluded in computing the
period of limitation for any suit. He submitted that in the case at
hand arbitral proceedings were initiated and were properly
prosecuted by the petitioner when unilateral appointment of
arbitrators was considered as permissible. He submitted that the
legal position subsequently transformed drastically and unilateral
appointment was held to be impermissible. Hence, he submitted that
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the period spent for the first arbitral proceeding and thereafter
before the execution court is liable to be excluded as provided under
Section 14 of the Limitation Act.
6. The learned counsel relied on various judgments of the
Hon'ble Supreme Court in support of his contentions. He referred to
the judgment of the Hon'ble Supreme Court in State of Goa v.
Western Builders [2006 (6) SCC 239]. The Apex Court in the said case
examined as to whether Section 14 of the Limitation Act has been
excluded by the special enactment, the Arbitration and Conciliation
Act, 1996. Relevant discussion in the judgment is extracted
hereunder:-
“14. The question is whether Section 14 of the
Limitation Act has been excluded by this special
enactment i.e. the Arbitration and Conciliation Act,
1996. Section 43 of the Arbitration and Conciliation Act,
1996 clearly says that the Limitation Act, 1963 shall
apply to arbitration as it applies to the proceedings in
the court.
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15. Therefore, general proposition is by virtue of Section
43 of the Act of 1996 the Limitation Act, 1963 applies to
the Act of 1996 but by virtue of sub-section (2) of
Section 29 of the Limitation Act, if any other period has
been prescribed under the special enactment for
moving the application or otherwise then that period of
limitation will govern the proceedings under that Act,
and not the provisions of the Limitation Act. In the
present case under the Act of 1996 for setting aside the
award on any of the grounds mentioned in sub-section
(2) of Section 34 the period of limitation has been
prescribed and that will govern. Likewise, the period of
condonation of delay i.e. 30 days in the proviso.
16. But there is no provision made in the Arbitration
and Conciliation Act, 1996 that if any party has bona
fidely prosecuted its remedy before the other forum
which had no jurisdiction then in that case whether the
period spent in prosecuting the remedy bona fidely in
that court can be excluded or not. As per the provision,
sub-section (3) of Section 34 which prescribes the period
of limitation (3 months) for moving the application for
setting aside the award before the court then that
period of limitation will be applicable and not the
period of limitation prescribed in the Schedule under
Section 3 of the Limitation Act, 1963. Thus, the
provision of moving the application prescribed in the
Limitation Act, shall stand excluded by virtue of sub-
section (2) of Section 29 as under this special enactment
the period of limitation has already been prescribed.
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Likewise the period of condonation of delay i.e. 30 days
by virtue of the proviso.
17. Therefore, by virtue of sub-section (2) of Section 29
of the Limitation Act what is excluded is the
applicability of Section 5 of the Limitation Act and
under Section 3 read with the Schedule which
prescribes the period for moving application.
18. Whenever two enactments are overlapping each
other on the same area then the courts should be
cautious in interpreting those provisions. It should not
exceed the limit provided by the statute. The extent of
exclusion is, however, really a question of construction
of each particular statute and general principles
applicable are subordinate to the actual words used by
legislature.
19. There is no provision in the whole of the Act which
prohibits discretion of the court. Under Section 14 of the
Limitation Act if the party has been bona fidely
prosecuting his remedy before the court which has no
jurisdiction whether the period spent in that
proceedings shall be excluded or not. Learned counsel
for the respondent has taken us to the provisions of the
Act of 1996: like Section 5, Section 8(1), Section 9,
Section 11, sub-sections (4), (6), (9) and sub-section (3)
of Section 14, Section 27, Sections 34, 36, 37, 39(2) and
(4), Section 41, sub-section (2), Sections 42 and 43 and
tried to emphasise with reference to the aforesaid
sections that wherever the legislature wanted to give
power to the court that has been incorporated in the
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provisions, therefore, no further power should lie in the
hands of the court so as to enable to exclude the period
spent in prosecuting the remedy before other forum. It
is true but at the same time there is no prohibition
incorporated in the statute for curtailing the power of
the court under Section 14 of the Limitation Act. Much
depends upon the words used in the statute and not
general principles applicable. By virtue of Section 43 of
the Act of 1996, the Limitation Act applies to the
proceedings under the Act of 1996 and the provisions of
the Limitation Act can only stand excluded to the
extent wherever different period has been prescribed
under the Act of 1996. Since there is no prohibition
provided under Section 34, there is no reason why
Section 14 of the Limitation Act should not be read in
the Act of 1996, which will advance the cause of justice.
If the statute is silent and there is no specific
prohibition then the statute should be interpreted
which advances the cause of justice. Our attention was
invited to various decisions of this Court but we shall
refer to a few of them which have some relevance.”
7. He made reference to another judgment of the Hon'ble
Supreme Court in Gulbarga University v. Mallikarjun S. Kodagali
and Another [2008 (13) SCC 539]. He relied on the following
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paragraph of the judgment:-
“8. Dr. M.P. Raju, learned counsel appearing on behalf of
the appellant, would contend that the earlier decision of
this Court in Union of India v. Popular Construction Co.
[(2001) 8 SCC 470 : AIR 2001 SC 4010] whereupon reliance
has been placed by the High Court has since been
revisited by this Court in State of Goa v. Western Builders
[(2006) 6 SCC 239] holding: (SCC p. 246, paras 14-18)
“14. The question is whether Section 14 of the
Limitation Act has been excluded by this special
enactment i.e. the Arbitration and Conciliation Act,
1996. Section 43 of the Arbitration and Conciliation Act,
1996 clearly says that the Limitation Act, 1963 shall
apply to arbitration as it applies to the proceedings in
the court.
15. Therefore, general proposition is by virtue of
Section 43 of the Act of 1996 the Limitation Act, 1963
applies to the Act of 1996 but by virtue of sub-section
(2) of Section 29 of the Limitation Act, if any other
period has been prescribed under the special
enactment for moving the application or otherwise
then that period of limitation will govern the
proceedings under that Act, and not the provisions of
the Limitation Act. In the present case under the Act of
1996 for setting aside the award on any of the grounds
mentioned in sub-section (2) of Section 34 the period of
limitation has been prescribed and that will govern.
Likewise, the period of condonation of delay i.e. 30 days
in the proviso.
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16. But there is no provision made in the Arbitration
and Conciliation Act, 1996 that if any party has bona
fide prosecuted its remedy before the other forum
which had no jurisdiction then in that case whether
the period spent in prosecuting the remedy bona fidely
in that court can be excluded or not. As per the
provision, sub-section (3) of Section 34 which
prescribes the period of limitation (3 months) for
moving the application for setting aside the award
before the court then that period of limitation will be
applicable and not the period of limitation prescribed
in the Schedule under Section 3 of the Limitation Act,
1963. Thus, the provision of moving the application
prescribed in the Limitation Act, shall stand excluded
by virtue of sub-section (2) of Section 29 as under this
special enactment the period of limitation has already
been prescribed. Likewise the period of condonation of
delay i.e. 30 days by virtue of the proviso.
17. Therefore, by virtue of sub-section (2) of Section 29
of the Limitation Act what is excluded is the
applicability of Section 5 of the Limitation Act and
under Section 3 read with the Schedule which
prescribes the period for moving application.
18. Whenever two enactments are overlapping each
other on the same area then the courts should be
cautious in interpreting those provisions. It should not
exceed the limit provided by the statute. The extent of
exclusion is, however, really a question of construction
of each particular statute and general principles
applicable are subordinate to the actual words used by
legislature.”
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Referring to Popular Construction [(2001) 8 SCC 470 :
AIR 2001 SC 4010] and National Aluminium Co. Ltd. v.
Pressteel & Fabrications (P) Ltd. [(2004) 1 SCC 540] it
was held: (Western Builders case [(2006) 6 SCC 239] ,
SCC pp. 248-49, para 25)
“25. Therefore, in the present context also it is very
clear to us that there are no two opinions in the matter
that the Arbitration and Conciliation Act, 1996 does
not expressly exclude the applicability of Section 14 of
the Limitation Act. The prohibitory provision has to be
construed strictly. It is true that the Arbitration and
Conciliation Act, 1996 intended to expedite commercial
issues expeditiously. It is also clear in the Statement of
Objects and Reasons that in order to recognise
economic reforms the settlement of both domestic and
international commercial disputes should be disposed
of quickly so that the country's economic progress be
expedited. The Statement of Objects and Reasons also
nowhere indicates that Section 14 of the Limitation Act
shall be excluded. But on the contrary, intendment of
the legislature is apparent in the present case as
Section 43 of the Arbitration and Conciliation Act, 1996
applies the Limitation Act, 1963 as a whole. It is only by
virtue of sub-section (2) of Section 29 of the Limitation
Act that its operation is excluded to that extent of the
area which is covered under the Arbitration and
Conciliation Act, 1996. Our attention was also invited
to the various decisions of this Court interpreting sub-
section (2) of Section 29 of the Limitation Act with
reference to other Acts like the Representation of the
People Act or the provisions of the Criminal Procedure
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Code where separate period of limitation has been
prescribed. We need not overburden the judgment
with reference to those cases because it is very clear to
us by virtue of sub-section (2) of Section 29 of the
Limitation Act that the provisions of the Limitation
Act shall stand excluded in the Act of 1996 to the
extent of area which is covered by the Act of 1996. In
the present case under Section 34 by virtue of sub-
section (3) only (sic for) the application for filing and
setting aside the award a period has been prescribed
as 3 months and delay can be condoned to the extent
of 30 days. To this extent the applicability of Section 5
of the Limitation Act will stand excluded but there is
no provision in the Act of 1996 which excludes
operation of Section 14 of the Limitation Act. If two
Acts can be read harmoniously without doing violation
to the words used therein, then there is no prohibition
in doing so.”
The ratio laid down in the said decision has since been
reiterated in Union of India v. Bhavna Engg. Co. [(2008)
13 SCC 546 : (2007) 5 Raj 458] stating: (SCC pp. 546-47,
para 2)
“2. This Court in a recent judgment rendered in State
of Goa v. Western Builders [(2006) 6 SCC 239] held that
Section 14 of the Limitation Act, 1963 is applicable in
the arbitration and conciliation proceedings. Having
gone through the various facts, we are of the view that
the mistake committed by the appellant in
approaching the Madhya Pradesh High Court and the
Bombay High Court is bona fide. We, therefore,
condone the delay. In the facts of this case and in the
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interest of justice, we, however, think it proper that the
Section 34 application pending before the Additional
District Judge, Gwalior be transferred to the Bombay
High Court. The application will be decided on merits
expeditiously. Parties are at liberty to urge all the
contentions before that Court.”
9. There cannot be any doubt whatsoever that in terms of sub-
section (2) of Section 34 of the Act, an arbitral award may be
set aside only if one of the conditions specified therein is
satisfied. Sub-section (3) of Section 34 provides for the period of
limitation within which an application under Section 34 of the
Act is to be filed. The proviso appended thereto empowers the
court to entertain an application despite expiry of the period of
limitation specified therein, namely, three months. No
provision, however, exists as regards application of Section 14
of the Limitation Act. This Court, as noticed hereinbefore in
Western Builders [(2006) 6 SCC 239] opined that sub-section (2)
of Section 29 thereof would apply to an arbitration proceedings
and consequently Section 14 of the Limitation Act would also
be applicable. We are bound by the said decision. Once it is
held that the provisions of Section 14 of the Limitation Act,
1963 would apply, it must be held that the learned trial Judge
as also the High Court had committed an error in not applying
the said provisions.”
8. He also placed reliance on the judgment of the Hon'ble
Supreme Court in Shakti Tubes Limited through Director v. State
of Bihar and others [2009 (1) SCC 786]. Learned counsel made
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reference to the following paragraphs of the judgment:-
“20. Section 14 of the Limitation Act speaks of
prosecution of the proceedings in a court which, from
defect of jurisdiction or other cause of a like nature, is
unable to entertain it. What would be the true purport of
the words “other cause of a like nature”? The same must
relate to the subject-matter of the issue. A three-Judge
Bench of this Court had an occasion to consider the same
in Rameshwarlal v. Municipal Council, Tonk [(1996) 6 SCC
100] wherein it was held: (SCC p. 101, para 3)
“3. Normally for application of Section 14, the court
dealing with the matter in the first instance, which is
the subject of the issue in the later case, must be found
to have lack of jurisdiction or other cause of like
nature to entertain the matter. However, since the
High Court expressly declined to grant relief
relegating the petitioner to a suit in the civil court, the
petitioner cannot be left remediless. Accordingly, the
time taken in prosecuting the proceedings before the
High Court and this Court, obviously pursued
diligently and bona fide, needs to be excluded.”
(emphasis in original)
21. The question again came up for consideration before
this Court in Union of India v. West Coast Paper Mills Ltd.
[(2004) 3 SCC 458] wherein Lahoti, J. (as the learned Chief
Justice then was), held as under: (SCC p. 464, para 14)
“14. … In the submission of the learned Senior Counsel,
filing of civil writ petition claiming money relief
cannot be said to be a proceeding instituted in good
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faith and secondly, dismissal of writ petition on the
ground that it was not an appropriate remedy for
seeking money relief cannot be said to be ‘defect of
jurisdiction or other cause of a like nature’ within the
meaning of Section 14 of the Limitation Act. It is true
that the writ petition was not dismissed by the High
Court on the ground of defect of jurisdiction. However,
Section 14 of the Limitation Act is wide in its
application, inasmuch as it is not confined in its
applicability only to cases of defect of jurisdiction but
it is applicable also to cases where the prior
proceedings have failed on account of other causes of
like nature. The expression ‘other cause of like nature’
came up for the consideration of this Court in
Roshanlal Kuthalia v. R.B. Mohan Singh Oberoi [(1975)
4 SCC 628] and it was held that Section 14 of the
Limitation Act is wide enough to cover such cases
where the defects are not merely jurisdictional strictly
so called but others more or less neighbours to such
deficiencies. Any circumstance, legal or factual, which
inhibits entertainment or consideration by the court of
the dispute on the merits comes within the scope of the
section and a liberal touch must inform the
interpretation of the Limitation Act which deprives
the remedy of one who has a right.”
........................................................................................
23. The provisions of Section 14 of the Limitation Act have
been held to be applicable even in a proceeding arising
under Section 34 of the Arbitration and Conciliation Act,
1996. (See Gulbarga University v. Mallikarjun S. Kodagali
[(2008) 13 SCC 539 : (2008) 11 Scale 79] .)
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24. We, therefore, have no hesitation in holding that the
provisions of Section 14 of the Limitation Act, 1963 were
applicable to the fact of the present case.”
9. He also relied on a judgment of a three-Judge Bench of
the Hon'ble Supreme Court in Consolidated Engineering
Enterprises and another v. Principal Secretary, Irrigation
Department and others [(2008) 7 SCC 169]. He made reference to
the following paragraphs of the judgment:-
“21. Section 14 of the Limitation Act deals with exclusion
of time of proceeding bona fide in a court without
jurisdiction. On analysis of the said section, it becomes
evident that the following conditions must be satisfied
before Section 14 can be pressed into service:
(1) Both the prior and subsequent proceedings are civil
proceedings prosecuted by the same party;
(2) The prior proceeding had been prosecuted with due
diligence and in good faith;
(3) The failure of the prior proceeding was due to defect
of jurisdiction or other cause of like nature;
(4) The earlier proceeding and the latter proceeding must
relate to the same matter in issue and;
(5) Both the proceedings are in a court.
22. The policy of the section is to afford protection to a
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litigant against the bar of limitation when he institutes a
proceeding which by reason of some technical defect
cannot be decided on merits and is dismissed. While
considering the provisions of Section 14 of the Limitation
Act, proper approach will have to be adopted and the
provisions will have to be interpreted so as to advance
the cause of justice rather than abort the proceedings. It
will be well to bear in mind that an element of mistake is
inherent in the invocation of Section 14. In fact, the
section is intended to provide relief against the bar of
limitation in cases of mistaken remedy or selection of a
wrong forum. On reading Section 14 of the Act it becomes
clear that the legislature has enacted the said section to
exempt a certain period covered by a bona fide litigious
activity. Upon the words used in the section, it is not
possible to sustain the interpretation that the principle
underlying the said section, namely, that the bar of
limitation should not affect a person honestly doing his
best to get his case tried on merits but failing because the
court is unable to give him such a trial, would not be
applicable to an application filed under Section 34 of the
Act of 1996. The principle is clearly applicable not only to
a case in which a litigant brings his application in the
court, that is, a court having no jurisdiction to entertain
it but also where he brings the suit or the application in
the wrong court in consequence of bona fide mistake or
(sic of) law or defect of procedure. Having regard to the
intention of the legislature this Court is of the firm
opinion that the equity underlying Section 14 should be
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applied to its fullest extent and time taken diligently
pursuing a remedy, in a wrong court, should be excluded.
23. At this stage it would be relevant to ascertain whether
there is any express provision in the Act of 1996, which
excludes the applicability of Section 14 of the Limitation
Act. On review of the provisions of the Act of 1996 this
Court finds that there is no provision in the said Act
which excludes the applicability of the provisions of
Section 14 of the Limitation Act to an application
submitted under Section 34 of the said Act. On the
contrary, this Court finds that Section 43 makes the
provisions of the Limitation Act, 1963 applicable to
arbitration proceedings. The proceedings under Section
34 are for the purpose of challenging the award whereas
the proceeding referred to under Section 43 are the
original proceedings which can be equated with a suit in
a court. Hence, Section 43 incorporating the Limitation
Act will apply to the proceedings in the arbitration as it
applies to the proceedings of a suit in the court. Sub-
section (4) of Section 43, inter alia, provides that where
the court orders that an arbitral award be set aside, the
period between the commencement of the arbitration
and the date of the order of the court shall be excluded in
computing the time prescribed by the Limitation Act,
1963, for the commencement of the proceedings with
respect to the dispute so submitted. If the period between
the commencement of the arbitration proceedings till the
award is set aside by the court, has to be excluded in
computing the period of limitation provided for any
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proceedings with respect to the dispute, there is no good
reason as to why it should not be held that the provisions
of Section 14 of the Limitation Act would be applicable to
an application submitted under Section 34 of the Act of
1996, more particularly where no provision is to be found
in the Act of 1996, which excludes the applicability of
Section 14 of the Limitation Act, to an application made
under Section 34 of the Act. It is to be noticed that the
powers under Section 34 of the Act can be exercised by
the court only if the aggrieved party makes an
application. The jurisdiction under Section 34 of the Act,
cannot be exercised suo motu. The total period of four
months within which an application, for setting aside an
arbitral award, has to be made is not unusually long.
Section 34 of the Act of 1996 would be unduly oppressive,
if it is held that the provisions of Section 14 of the
Limitation Act are not applicable to it, because cases are
no doubt conceivable where an aggrieved party, despite
exercise of due diligence and good faith, is unable to
make an application within a period of four months.
From the scheme and language of Section 34 of the Act of
1996, the intention of the legislature to exclude the
applicability of Section 14 of the Limitation Act is not
manifest. It is well to remember that Section 14 of the
Limitation Act does not provide for a fresh period of
limitation but only provides for the exclusion of a certain
period. Having regard to the legislative intent, it will
have to be held that the provisions of Section 14 of the
Limitation Act, 1963 would be applicable to an
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application submitted under Section 34 of the Act of 1996
for setting aside an arbitral award.
............................................................................................
42. The AC Act is no doubt, a special law, consolidating
and amending the law relating to arbitration and
matters connected therewith or incidental thereto. The
AC Act does not prescribe the period of limitation, for
various proceedings under that Act, except where it
intends to prescribe a period different from what is
prescribed in the Limitation Act. On the other hand,
Section 43 makes the provisions of the Limitation Act,
1963 applicable to proceedings—both in court and in
arbitration—under the AC Act. There is also no express
exclusion of application of any provision of the
Limitation Act to proceedings under the AC Act, but
there are some specific departures from the general
provisions of the Limitation Act, as for example, the
proviso to Section 34(3) and sub-sections (2) to (4) of
Section 43 of the AC Act.
43. Where the Schedule to the Limitation Act prescribes a
period of limitation for appeals or applications to any
court, and the special or local law provides for filing of
appeals and applications to the court, but does not
prescribe any period of limitation in regard to such
appeals or applications, the period of limitation
prescribed in the Schedule to the Limitation Act will
apply to such appeals or applications and consequently,
the provisions of Sections 4 to 24 will also apply. Where
the special or local law prescribes for any appeal or
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application, a period of limitation different from the
period prescribed by the Schedule to the Limitation Act,
then the provisions of Section 29(2) will be attracted. In
that event, the provisions of Section 3 of the Limitation
Act will apply, as if the period of limitation prescribed
under the special law was the period prescribed by the
Schedule to the Limitation Act, and for the purpose of
determining any period of limitation prescribed for the
appeal or application by the special law, the provisions
contained in Sections 4 to 24 will apply to the extent to
which they are not expressly excluded by such special
law. The object of Section 29(2) is to ensure that the
principles contained in Sections 4 to 24 of the Limitation
Act apply to suits, appeals and applications filed in a
court under special or local laws also, even if it prescribes
a period of limitation different from what is prescribed in
the Limitation Act, except to the extent of express
exclusion of the application of any or all of those
provisions.
...........................................................................................
54. On the other hand, Section 14 contained in Part III of
the Limitation Act does not relate to extension of the
period of limitation, but relates to exclusion of certain
period while computing the period of limitation. Neither
sub-section (3) of Section 34 of the AC Act nor any other
provision of the AC Act exclude the applicability of
Section 14 of the Limitation Act to applications under
Section 34(1) of the AC Act. Nor will the proviso to Section
34(3) exclude the application of Section 14, as Section 14
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is not a provision for extension of period of limitation,
but for exclusion of certain period while computing the
period of limitation. Having regard to Section 29(2) of the
Limitation Act, Section 14 of that Act will be applicable to
an application under Section 34(1) of the AC Act. Even
when there is cause to apply Section 14, the limitation
period continues to be three months and not more, but in
computing the limitation period of three months for the
application under Section 34(1) of the AC Act, the time
during which the applicant was prosecuting such
application before the wrong court is excluded, provided
the proceeding in the wrong court was prosecuted bona
fide, with due diligence. Western Builders [(2006) 6 SCC
239] therefore lays down the correct legal position.”
10. Learned counsel contended that the provisions of
Section 14 of the Limitation Act are indisputably applicable to the
proceedings under the Arbitration and Conciliation Act, 1996 also in
view of the law laid down by the Hon'ble Supreme Court in the
judgments referred above. He hence submitted that in view of the
applicability of the provisions of Section 14 of the Limitation Act to
the proceedings under the Arbitration and Conciliation Act, the
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objection raised by the respondents that the claims as also the
arbitration request are barred by limitation is not sustainable. He
also submitted that the Arbitration and Conciliation Act has been
enacted to provide a speedy, efficacious and low-cost adjudicatory
mechanism so as to ensure that economic disputes are settled within
a short time, in an effective manner. He submitted that the courts
have a duty to interpret the provisions of the Arbitration and
Conciliation Act keeping in mind the object of the Act. He, therefore,
argued that provisions of Section 43 of the Arbitration and
Conciliation Act shall be interpreted liberally and situations wherein
courts hold that the arbitral awards were unenforceable shall also be
construed as having the same impact of the awards being set aside.
He pleaded that such a view may be adopted by this Court, to extend
the benefit of Section 43(4) of the Arbitration and Conciliation Act to
the petitioner. He also relied on judgments of the Hon'ble Supreme
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Court in the Reserve Bank of India v. Peerless General Finance &
Investment Co. Ltd. and Others [(1987) 1 SCC 424] and referred to
the following paragraph of the said judgment:-
“33. Interpretation must depend on the text and the
context. They are the bases of interpretation. One
may well say if the text is the texture, context is what
gives the colour. Neither can be ignored. Both are
important. That interpretation is best which makes
the textual interpretation match the contextual. A
statute is best interpreted when we know why it was
enacted. With this knowledge, the statute must be
read, first as a whole and then section by section,
clause by clause, phrase by phrase and word by word.
If a statute is looked at, in the context of its
enactment, with the glasses of the statute-maker,
provided by such context, its scheme, the sections,
clauses, phrases and words may take colour and
appear different than when the statute is looked at
without the glasses provided by the context. With
these glasses we must look at the Act as a whole and
discover what each section, each clause, each phrase
and each word is meant and designed to say as to fit
into the scheme of the entire Act. No part of a statute
and no word of a statute can be construed in isolation.
Statutes have to be construed so that every word has
a place and everything is in its place. It is by looking
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at the definition as a whole in the setting of the entire
Act and by reference to what preceded the enactment
and the reasons for it that the Court construed the
expression “Prize Chit” in Srinivasa [(1980) 4 SCC 507 :
(1981) 1 SCR 801 : 51 Com Cas 464] and we find no
reason to depart from the Court's construction.”
11. He thereafter referred to the judgment of the Hon'ble
Supreme Court in Edukanti Kistamma (dead) through Lrs and Others v. S.
Venkatareddy (dead) through Lrs and Others [(2010) 1 SCC 756]. The
relevant paragraph of the judgment is extracted hereunder:-
“26. The 1950 Act being the beneficial legislation
requires interpretation to advance social and economic
justice and enforce the constitutional directives and not
to deprive a person of his right to property. The
statutory provisions should not be construed in favour
of such deprivation. Interpretation of a beneficial
legislation with a narrow pedantic approach is not
justified. In case there is any doubt, the court should
interpret a beneficial legislation in favour of the
beneficiaries and not otherwise as it would be against
the legislative intent. For the purpose of interpretation
of a statute, the Act is to be read in its entirety. The
purport and object of the Act must be given its full
effect by applying the principles of purposive
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construction. The court must be strong against any
construction which tends to reduce a statute's utility.
The provisions of the statute must be construed so as to
make it effective and operative and to further the ends
of justice and not to frustrate the same. The court has
the duty to construe the statute to promote the object of
the statute and serve the purpose for which it has been
enacted and should not efface its very purpose. (Vide
S.P. Jain v. Krishna Mohan Gupta [(1987) 1 SCC 191 : AIR
1987 SC 222] , RBI v. Peerless General Finance and
Investment Co. Ltd. [(1987) 1 SCC 424 : AIR 1987 SC
1023] , Haryana SEB v. Suresh [(1999) 3 SCC 601 : 1999
SCC (L&S) 765 : AIR 1999 SC 1160] , Gayatri Devi Pansari
v. State of Orissa [(2000) 4 SCC 221 : AIR 2000 SC 1531] ,
High Court of Gujarat v. Gujarat Kishan Mazdoor
Panchayat [(2003) 4 SCC 712 : 2003 SCC (L&S) 565 : AIR
2003 SC 1201] , Indian Handicrafts Emporium v. Union
of India [(2003) 7 SCC 589 : AIR 2003 SC 3240] , Ashok
Leyland Ltd. v. State of T.N. [(2004) 3 SCC 1] , Ameer
Trading Corpn. Ltd. v. Shapoorji Data Processing Ltd.
[(2004) 1 SCC 702 : AIR 2004 SC 355] , Deepal Girishbhai
Soni v. United Insurance Co. Ltd. [(2004) 5 SCC 385 : 2004
SCC (Cri) 1623 : AIR 2004 SC 2107], Maruti Udyog Ltd. v.
Ram Lal [(2005) 2 SCC 638 : 2005 SCC (L&S) 308 : AIR 2005
SC 851], Oriental Insurance Co. Ltd. v. Brij Mohan
[(2007) 7 SCC 56 : (2007) 3 SCC (Cri) 304 : AIR 2007 SC
1971] and Karnataka State Financial Corpn. v. N.
Narasimahaiah [(2008) 5 SCC 176 : AIR 2008 SC 1797].)”
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12. Learned counsel submitted that a huge amount is due to
the petitioner from the respondents and the petitioner had been
diligently prosecuting its case before the arbitral tribunal, thereafter
the execution court and later before this Court. He submitted that if
the contentions of the respondents are accepted and it is held that
no reference can be made, huge loss will be caused to the petitioner
company. He therefore pleaded that this Arbitration Request may be
allowed and the parties may be referred for arbitration.
13. Conversely, the learned counsel for the respondents
vehemently submitted that the claims raised in this arbitration
request are hopelessly time-barred. She submitted that the dispute
arose long ago and the petitioner did not diligently prosecute the
case. She submitted that the petitioner, at the first instance, resorted
to unilateral appointment of the arbitrator which is impermissible in
law. The petitioner secured an award and the execution court rightly
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held that the award was unenforceable. She argued that a court
giving a declaration that an award was unenforceable and setting
aside an arbitral award under Section 34 of the Arbitration and
Conciliation Act are two distinct and dissimilar situations. She
submitted that if an award is set aside under the provisions of
Section 34 of the Arbitration and Conciliation Act, the same is on the
basis of the grounds delineated in the provision and on the other
hand, holding that an award is unenforceable or is a nullity is a
totally different situation. She also submitted that if an award is
unenforceable and void in the eye of law, question of setting it aside
does not arise. She asserted that the provisions of Section 43(4) of
the Arbitration and Conciliation Act are not applicable in the instant
case. She referred to the language employed in Section 43(4) and
pointed out that the legislature has consciously employed the words
'where the court orders that an arbitral award be set aside '. She submitted
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that the intention of the legislature is clear that the provisions of
Section 43(4) would be attracted only if an arbitral award is set aside.
She submitted that if the argument of the learned counsel for the
petitioner that a situation where an arbitral award has been held
unenforceable can also be equated with the situation of an arbitral
award being set aside is accepted, the Court will be venturing to
rewrite the language of the provision and the same is impermissible.
She hence contended that as the award passed by the arbitrator
appointed at the first instance was held unenforceable by the
execution court, the petitioner is not entitled to claim the benefit of
Section 43(4) of the Act.
14. Learned counsel also took exception to the argument
advanced by learned counsel for the petitioner that the provisions of
Section 14 of the Limitation Act would apply to the instant case. She,
with reference to paragraph 12 of the judgment of the Hon'ble
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Supreme Court in Consolidated Engineering Enterprises (supra),
submitted that the Apex Court had held that the following
conditions must be satisfied before Section 14 can be pressed into
service:-
(1) Both the prior and subsequent proceedings are
civil proceedings prosecuted by the same party;
(2) The prior proceeding had been prosecuted with
due diligence and in good faith;
(3) The failure of the prior proceeding was due to
defect of jurisdiction or other cause of like nature;
(4) The earlier proceeding and the latter
proceeding must relate to the same matter in issue
and;
(5) Both the proceedings are in a court.
15. She contended that the conditions pointed out by the
Hon'ble Supreme Court, as noted above, should be satisfied
cumulatively and if any one of the conditions mentioned is not
satisfied, then the benefit of Section 14 of the Limitation Act cannot
be claimed. She submitted that in the case at hand none of the
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conditions mentioned has been satisfied. She therefore argued that
provisions of Section 14 of the Limitation Act cannot be pressed into
service by the petitioner in the case at hand.
16. Learned counsel for the respondents placed reliance on a
judgment of a learned Single Judge of this Court in India Cements
Capital Limited (M/s.) v. William and Others [2015 (4) KHC 728].
She referred to the following paragraph of the judgment:-
“18. Petitioner's contention that if an award is
declared to be a nullity in execution proceedings, it
will amount to adding one more ground to S.34 of the
Act is totally unacceptable. As mentioned earlier,
S.34 of the Act provides seven grounds to set aside an
award. If the expression "set aside" is understood
correctly, there will not be any lack of clarity or
obfuscation. Ordinarily the expression "set aside" is
understood as meaning abandon, abjure, abrogate,
discard, dispense with, to omit, reject, repudiate, etc.
The term "set aside" is defined in Black's Law
Dictionary (Eighth Edition) as vb. (Of a Court) to
annul or vacate (a judgment, order, etc.). The term
"set aside" in the legal parlance means, to cancel,
annul or revoke a judgment or order. It is an
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indisputable proposition that in order to set aside a
decree or order or award, there must be one in
existence. In other words, a decree or award not in
existence cannot be set aside. No one can seek to set
aside a decree or award which is not in existence.
That exercise will be as futile, rather as impossible,
as one attempting to commit feticide of an unborn
foetus. Therefore, what is provided in S.34 of the Act
is only ways and means to set aside an award made
in an arbitral proceedings. As succinctly stated by
the Supreme Court, what is sought to be achieved by
taking recourse to S.47 of the Code is to make a
declaration that the decree (here, an award) sought
to be executed is a nullity. In other words, seeking a
pronouncement that there is no executable decree or
award at all. If the end result of an adjudication
under S.47 of the Code is entering a finding that
there is no decree or award at all, there cannot be a
question of setting aside such a decree or award in
that proceedings. Therefore, the contention of the
revision petitioner that the declaration of nullity of
an award in a proceeding under S.47 of the Code will
tantamount to adding one more ground to S.34 of the
Act is legally incorrect and, therefore, not
acceptable.”
17. She contended that this Court explained the expression
'set aside' in the above extracted paragraph and categorically held
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that in order to set aside a decree or order or award, there must be
one in existence. She submitted that as contended by her, the award
passed at the first instance was rendered by an arbitral tribunal
appointed unilaterally and therefore the same was not in existence
in the eye of law. Therefore, question of setting aside such an award
would not arise at all. She therefore submitted that the basic
requirement to claim the benefit of Section 43(4) of the Arbitration
and Conciliation Act is absent in the instant case.
18. Learned counsel relied on the judgment of the Hon'ble
Supreme Court in Project Director, National Highways No.45 E
and 220 National Highways Authority of India v. M. Hakeem and
Another [(2021) 9 SCC 1]. She referred to the following paragraph of
the judgment:-
“47. “ Purposive construction” of statutes, relevant in
the present context, is referred to in a recent
concurring judgment by Nariman, J. in Eera v. State
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(NCT of Delhi) (2017) 15 SCC 133 : (2018) 1 SCC (Cri)
588] , as the theory of “creative interpretation”.
However, even “creative interpretation” has its limits,
which have been laid down in the aforesaid judgment
as follows : (SCC p. 214, para 139)
“139. A reading of the Act as a whole in the light
of the Statement of Objects and Reasons thus
makes it clear that the intention of the legislator
was to focus on children, as commonly
understood i.e. persons who are physically under
the age of 18 years. The golden rule in
determining whether the judiciary has crossed
the Lakshman Rekha in the guise of interpreting a
statute is really whether a Judge has only ironed
out the creases that he found in a statute in the
light of its object, or whether he has altered the
material of which the Act is woven. In short, the
difference is the well-known philosophical
difference between “is” and “ought”. Does the
Judge put himself in the place of the legislator
and ask himself whether the legislator intended a
certain result, or does he state that this must
have been the intent of the legislator and infuse
what he thinks should have been done had he
been the legislator. If the latter, it is clear that the
Judge then would add something more than what
there is in the statute by way of a supposed
intention of the legislator and would go beyond
creative interpretation of legislation to legislating
itself. It is at this point that the Judge crosses the
Lakshman Rekha and becomes a legislator,
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stating what the law ought to be instead of what
the law is.”
19. The learned counsel for the respondent relied on yet
another judgment of the Hon'ble Supreme Court in HPCL Bio-Fuels
Ltd. v. Shahaji Bhanudas Bhad [2024 SCC Online SC 3190] to
buttress her contention that all ingredients required for the
applicability of Section 14 shall be fulfilled to claim the benefit of the
said provision. She submitted that if those conditions are not
satisfied, it should be deemed that limitation was running without
any hindrance and the claims should be held to be time-barred. She
made specific reference to the following paragraph of the judgment:-
“89. Undoubtedly, this Court over a period of time
has taken a consistent view that the expression
“other cause of a like nature” appearing in Section 14
should be given a wide interpretation. However,
while considering the applicability of Section 14 of
the Limitation Act, one must not lose sight of the fact
that the applicability of the provision is contingent
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upon not just the reason for the failure of the earlier
proceedings, but is also dependent on several other
factors as explained in the preceding paragraphs. It is
only when all the ingredients required for the
applicability of Section 14 are fulfilled that the
benefit would become available. In this context the
appellant has submitted that as the proceedings
undertaken by the respondent before the IBC and the
proceedings for the appointment of arbitrator before
the High Court are not for the “same relief”, hence
the benefit of Section 14 of the Limitation Act will not
be available to the respondent. To address this
contention of the appellant, it is important to
understand the purpose of IBC proceedings vis-à-vis
proceedings under Section 11(6) of the Act, 1996.”
20. She reiterated her contention that it is not open to the
Court to alter the language of a provision while interpreting the law.
She submitted that if it is held that Section 43(4) applies to cases
wherein arbitral awards have been held to be unenforceable, the
same would be contrary to the language of Section 43(4) as well as
the legislative intent. She hence contended that none of the
arguments advanced by the petitioner is sustainable in law and
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hence the arbitration request is liable to be rejected.
21. In order to appreciate the contentions raised by both
sides, it is essential to advert to the chronology of dates and events
in the instant case. The loan agreement was executed on 04.08.2015.
Respondents committed default in payment on 30.09.2015.
Registered notices were issued to the respondents on 09.05.2017 at
the instance of the petitioner. Notices were received by the
respondents on 15.05.2017. Arbitral proceedings were thereafter
commenced and the petitioner filed claim statement before the
arbitrator on 30.07.2017. On 11.09.2017, the arbitral tribunal issued
notice to the respondents for appearance before it. There was no
appearance for the respondents before the tribunal and on
28.12.2018 award was passed. Thereafter, execution proceedings
were pursued before the third Additional District Court, Thrissur and
on 24.09.2024, the EP was dismissed, relying on the law explained in
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Hedge Finance Private Limited (supra). On 23.06.2025, the
petitioner approached this Court by filing Arbitration Request
No.148 of 2025. The said arbitration request was rejected by order
dated 9.1.2026 by this Court. Thereafter, on 12.01.2026, a notice
invoking the arbitration clause, as contemplated under Section 21 of
the Arbitration and Conciliation Act, was issued. Acknowledgments
were returned to the learned counsel for the petitioner on 19.1.2026.
It is contended by the petitioner that the total period between
30.09.2015, the date on which the respondents committed default
and the commencement of the present arbitration is 3764 days. It is
further contended by the petitioner that the period between the
commencement of the initial arbitral proceedings and the date of
the order of the execution court is 2689 days. Therefore, it is
contended that the remaining period is 1075 days. Hence, it is
contended that a period of three years is available under Article 137
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of the Limitation Act and in the instant case if the period between
the initiation of the first arbitral proceedings and the date of the
order of the execution court is excluded, the notice dated 12.01.2026
was issued within the period of limitation.
22. Contentions of both sides revolve around the scope and
application of Section 43 of the Act. The provision is extracted
hereunder for swift reference:-
“43. Limitations.
(1) The Limitation Act, 1963 (36 of 1963), shall apply to
arbitration's as it applies to proceedings in Court
(2) For the purposes of this section and the Limitation
Act, 1963 (36 of 1963), an arbitration shall be deemed to
have commenced on the date referred in section 21.
(3) Where an arbitration agreement to submit future
disputes to arbitration provides that any claim to which
the agreement applies shall be barred unless some step
to commence arbitral proceedings is taken within a
time fixed by the agreement, and a dispute arises to
which the agreement applies, the Court, if it is of
opinion that in the circumstances of the case undue
hardship would otherwise be caused, and
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notwithstanding that the time so fixed has expired, may
on such terms, if any, as the justice of the case may
require, extend the time for such period as it thinks
proper.
(4) Where the Court orders that an arbitral award be set
aside, the period between the commencement of the
arbitration and the date of the order of the Court shall
be excluded in computing the time prescribed by the
Limitation Act, 1963 (36 of 1963), for the commencement
of the proceedings (including arbitration) with respect
to the dispute so submitted.”
23. First limb of the argument of the learned counsel for the
petitioner is that the petitioner is entitled for the benefit of Section
43(4) of the Act. As noted above, the argument is that the executing
court’s declaration that the appointment of the arbitrator was
illegal, and hence that the award was unenforceable, virtually
amounted to the arbitral award being set aside, thereby attracting
sub-section (4) of Section 43. Counter argument vehemently
advanced on behalf of the respondents is that there is a marked
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distinction between a declaration that an arbitral award is a nullity
and an order setting aside an arbitral award under Section 34 of the
Act. Further it was argued that a party can claim exclusion of the
period spent in an earlier arbitral proceeding only if it establishes
the existence of a judicial order setting aside the arbitral award.
24. Legislature has carefully chosen to exclude the period
between the commencement of the arbitration and the date of the
order of the Court in computing the time prescribed under the
Limitation Act for commencement of proceedings, including
arbitration, where the Court orders that an arbitral award be set
aside. On a literal reading, the phrase "an arbitral award be set
aside" used in sub-section (4) of Section 43 does not allow for the
inclusion of any other circumstance within the purview of the
clause. Section 34 of the Act uses the same wording. Section 34 is
encompassed in Chapter VII, "Recourse Against Arbitral Award". The
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provision has the title "Application for setting aside arbitral award."
The remedy under Section 34 is a unique remedy, and the Court's
jurisdiction to set aside the award can only be exercised if the
conditions outlined in subsections (2) and (2A) of Section 34 of the
Act are satisfied. Timelines for filing of the application and disposal
are also incorporated in Section 34. Procedural requirement of
issuing prior notice is also ingrained. A limited window for extension
of the time-limit for filing the application is also a notable feature of
the provision. Scope and ambit of Section 34 have been explained by
the Hon'ble Supreme Court in umpteen reported judgments. Under
the scheme of the Act, proceedings for setting aside an arbitral
award are therefore a significant feature of the Act. Hence, the
reference to the Court ordering that an arbitral award be set aside in
Section 43(4) can be understood only with reference to an order
passed under Section 34 of the Act. I find merit in the contention of
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the learned counsel for the respondents that Parliament consciously
refrained from employing broader expressions in Section 43(4) and
the deliberate legislative choice of words cannot be disregarded or
substituted by judicial interpretation. I hence hold that Section 43(4)
would apply only when the Court orders that an arbitral award be
set aside under Section 34 or Section 37 of the Act and an order of an
execution court, holding that the arbitral award is unenforceable or
is a nullity, cannot be equated with an order passed under Section
34 or Section 37 of the Act.
25. The next limb of the argument of the learned counsel for
the petitioner is that even if Section 43(4) has no application, in view
of Section 43(1) of the Act, the provisions of the Limitation Act shall
apply to arbitrations as they apply to proceedings in Court. As noted
above, it was therefore submitted that Section 14 of the Limitation
Act would apply and the period spent in the first round of arbitral
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proceedings as well as in the execution proceedings would stand
excluded, as the petitioner was bonafidely prosecuting the matter.
Section 14 reads as under:-
“ 14. Exclusion of time of proceeding bona fide
in court without jurisdiction .
(1) In computing the period of limitation for any
suit the time during which the plaintiff has been
prosecuting with due diligence another civil
proceeding, whether in a court of first instance or of
appeal or revision, against the defendant shall be
excluded, where the proceeding relates to the same
matter in issue and is prosecuted in good faith in a
court which, from defect of jurisdiction or other cause
of a like nature, is unable to entertain it.
(2) In computing the period of limitation for any
application, the time during which the applicant has
been prosecuting with due diligence another civil
proceeding, whether in a court of first instance or of
appeal or revision, against the same party for the same
relief shall be excluded, where such proceeding is
prosecuted in good faith in a court which, from defect of
jurisdiction or other cause of a like nature, is unable to
entertain it.
(3) Notwithstanding anything contained in rule
2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of
1908), the provisions of sub-section (1) shall apply in
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relation to a fresh suit instituted on permission granted
by the court under rule 1 of that Order, where such
permission is granted on the ground that the first suit
must fail by reason of a defect in the jurisdiction of the
court or other cause of a like nature.
Explanation. For the purposes of this section,-
(a) in excluding the time during which a former
civil proceeding was pending, the day on which
that proceeding was instituted and the day on
which it ended shall both be counted;
(b) a plaintiff or an applicant resisting an appeal
shall be deemed to be prosecuting a proceeding;
(c) misjoinder of parties or of causes of action shall
be deemed to be a cause of a like nature with defect
of jurisdiction .”
26. The Hon'ble Supreme Court has explicitly elucidated that
Section 14 of the Limitation Act is applicable to arbitration
proceedings under the Arbitration and Conciliation Act, 1996 in
various reported judgments, including the judgments in
Consolidated Engineering Enterprises (supra), Western Builders
(supra), Shakti Tubes Limited (supra) and Gulbarga
University (supra) cited by the learned counsel for the petitioner.
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Hence, it is needless to deliberate much on the applicability of the
provision to arbitral proceedings. Nevertheless, the learned counsel
for the respondents argued vigorously that the benefit of Section 14
of the Limitation Act can be claimed only when the party claiming
the same was pursuing proceedings bona fide before an incompetent
forum. She submitted that the petitioner in the instant case
unilaterally nominated an arbitrator and proceeded with the
arbitration against the scheme of the Act. She submitted that since
the unilateral appointment of the arbitrator was illegal, it cannot be
argued by the petitioner that it was prosecuting the matter
bonafidely and diligently. Learned counsel for the petitioner, on the
contrary, submitted that when the arbitrator was nominated, the
legal position was different. He pointed out that an arbitrator was
chosen by the parties at the time of execution of the agreement and
the name of the arbitrator was mentioned in the arbitration clause
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in the agreement. It was also envisaged that arbitration could be
conducted by another named arbitrator in case of death, refusal,
neglect or incapability of the arbitrator first mentioned in the
clause. Annexure-5 award was passed by the arbitrator mentioned in
the agreement. He therefore argued that the petitioner had
bonafidely and diligently prosecuted the matter before the
arbitrator agreed by both sides. He also submitted that the
respondents did not choose to seek recourse to the remedy under
Section 34 of the Act. They raised objection only when the petitioner
sought execution of the award. He therefore pointed out that the
respondents, without challenging the award, waited for execution
proceedings and are now raising a plea of limitation to avoid
satisfying of the liability to pay the huge amount now due to the
petitioner company.
27. Chronology of the proceedings between the parties is
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narrated in a previous paragraph. Submission of the learned counsel
for the petitioner that the first round of arbitral proceedings were
before an arbitrator who was specifically mentioned in the
arbitration agreement is correct. Respondent had no quarrel about
an arbitrator being nominated in the agreement while executing the
agreement. Therefore, it cannot be said that the petitioner was not
diligent. Proceedings before the arbitrator named in the agreement
and also before the execution court cannot be held as pursued
without bonafides by the petitioner. That being so, in my view, the
petitioner is eligible for the benefit of Section 14 of the Limitation
Act. The period spent for completing the first arbitral proceedings
and for executing the award is liable to be excluded in calculating
the period of limitation. I hence accept the contention of the learned
counsel for the petitioner in this regard. Section 14 of the Limitation
Act would come to the rescue if the arbitral proceedings were
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prosecuted diligently and bonafidely before an arbitral tribunal,
even though it was later held as incompetent by a competent court.
28. Whether the claims are time-barred is the next aspect to
take into account. Though the learned counsel for the respondents
vehemently argued that the claims are hopelessly time-barred, the
learned counsel for the petitioner refuted the contention by
asserting that if the period spent for the first round of arbitral
proceedings and the execution proceedings is excluded, the
arbitration request at hand was filed within the time limit. He relied
on the chronology mentioned above in support of his assertion.
Prima facie, it appears that the contention of the learned counsel for
the petitioner deserves to be accepted. Moreover, no intricate
inquiry into the issue of limitation is within the province of the
referral court. It is entirely for the arbitral tribunal to consider the
issue when an evidentiary analysis is essential to decide whether the
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claims are time-barred or not. It is apposite to refer to the following
paragraph of the judgment of a three-Judge Bench of the Apex Court
in Aslam Ismail Khan Deshmukh v. Asap Fluids Private Limited
and another [(2025) 1 SCC 502] in this regard.
“ 43. Therefore, while determining the issue of limitation
in the exercise of powers under Section 11(6) of the 1996
Act, the referral Court must only conduct a limited
enquiry for the purpose of examining whether the Section
11(6) application has been filed within the limitation
period of three years or not. At this stage, it would not be
proper for the referral Court to indulge in an intricate
evidentiary enquiry into the question of whether the
claims raised by the petitioner are time-barred. Such a
determination must be left to the decision of the
arbitrator.
44. After all, in a scenario where the referral Court is able
to discern the frivolity in the litigation on the basis of bare
minimum pleadings, it would be incorrect to assume or
doubt that the Arbitral Tribunal would not be able to
arrive at the same inference, especially when they are
equipped with the power to undertake an extensive
examination of the pleadings and evidence adduced before
them.
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45. As observed by us in SBI General Insurance Co. Ltd. v.
Krish Spg., [(2024) 12 SCC 1 : 2024 SCC OnLine SC 1754], the
power of the referral Court under Section 11 must
essentially be seen in light of the fact that the parties do
not have the right of appeal against any order passed by
the referral Court under Section 11, be it for either
appointing or refusing to appoint an arbitrator. Therefore,
if the referral Court delves into the domain of the Arbitral
Tribunal at the Section 11 stage and rejects the
application of the claimant, we run a serious risk of
leaving the claimant remediless for the adjudication of
their claims.
46. Moreover, the courts are vested with the power of
subsequent review in which the award passed by the
arbitrator may be subjected to challenge by any party to
the arbitration. Therefore, the courts may take a second
look at the adjudication done by the Arbitral Tribunal at a
later stage, if considered necessary and appropriate in the
circumstances.
......................................................................................
50. As evident from the aforesaid discussion and especially
in light of the observations made in Krish Spg., this Court
cannot conduct an intricate evidentiary enquiry into the
question of when the cause of action can be said to have
arisen between the parties and whether the claim raised
by the petitioner is time-barred. This has to be strictly left
for the determination by the Arbitral Tribunal. All other
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submissions made by the parties regarding the
entitlement of the petitioner to 4,00,000 and 2,00,010 equity
shares in Respondent 1 company are concerned with the
merits of the dispute which squarely falls within the
domain of the Arbitral Tribunal.
51. It is now well-settled law that, at the stage of Section 11
application, the referral Courts need only to examine
whether the arbitration agreement exists — nothing more,
nothing less. This approach upholds the intention of the
parties, at the time of entering into the agreement, to refer
all disputes arising between themselves to arbitration.
However, some parties might take undue advantage of
such a limited scope of judicial interference of the referral
Courts and force other parties to the agreement into
participating in a time-consuming and costly arbitration
process. This is especially possible in instances, including
but not limited to, where the claimant canvasses either ex
facie time-barred claims or claims which have been
discharged through “accord and satisfaction”, or cases
where the impleadment of a non-signatory to the
arbitration agreement is sought, etc.”
52 . In order to balance such a limited scope of judicial
interference with the interests of the parties who might be
constrained to participate in the arbitration proceedings,
the Arbitral Tribunal may direct that the costs of the
arbitration shall be borne by the party which the Tribunal
ultimately finds to have abused the process of law and
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caused unnecessary harassment to the other party to the
arbitration.”
29. Given the foregoing discussion, I find that this is not a
case wherein nomination of arbitrator should be refused. The basic
parameters for exercising the jurisdiction to nominate an arbitrator
are satisfied in this case. Hence, the arbitration request is allowed
with the following directions:-
I. The Kerala High Court Arbitration Centre is
directed to nominate a sole Arbitrator from
Panel-II, to resolve the disputes that have arisen
between the petitioner and the respondents under
Annexure-2 Agreement.
II. The learned Arbitrator may entertain all issues
between the parties in connection with the said
Agreement, including questions of jurisdiction and
limitation, if any, raised by the parties. All
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contentions of the parties are left open and they
are at liberty to raise their claims and
counterclaims, if any, before the learned
Arbitrator, in accordance with law.
III. The Registry shall communicate the substance of
this order to the Kerala High Court Arbitration
Centre within ten days and the Centre shall inform
the learned Arbitrator within a further period of
one week and shall obtain duly signed Form 3 as
required under Rule 20(4) of the Kerala High Court
(Arbitration Centre) Rules, 2025 and forward the
same to this Court.
IV. Upon receipt of the Form 3, the Registry shall
issue a certified copy of this order with a copy of
the Form 3 appended to the Kerala High Court
Arbitration Centre. The original of the Disclosure
Statement shall be retained by the Kerala High
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Court Arbitration Centre.
V. The fees of the learned Arbitrator of the Kerala
High Court Arbitration Centre shall be governed
by Rule 28 of the Kerala High Court (Arbitration
Centre) Rules, 2025. The manner in which the fees
and costs payable by the parties shall be governed
by Rule 27 of the Kerala High Court (Arbitration
Centre) Rules, 2025.
VI. If the learned Arbitrator needs the assistance of an
expert, then he is at liberty to seek such assistance
in the course of the arbitration proceedings.
Sd/-
S.MANU
JUDGE
skj
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APPENDIX OF AR NO. 53 OF 2026
PETITIONER’S ANNEXURES
Annexure 1 THE TRUE COPY OF THE CERTIFIED COPY OF
THE POWER OF ATTORNEY DATED 14.12.2019
Annexure 2 THE TRUE COPY OF THE LOAN AGREEMENT
ENTERED BETWEEN THE PETITIONER BANK AND
THE RESPONDENTS 1 AND 2 DATED 4.8.2015
Annexure 3 THE TRUE COPY OF THE LAWYER NOTICE
DATED 9.5.2017 ISSUED TO THE
RESPONDENTS 1 AND 2
Annexure 4 THE TRUE COPY OF THE CLAIM STATEMENT
FILED BEFORE THE ARBITRATOR DATED
30.7.2017
Annexure 5 THE TRUE COPY OF THE ARBITRATION AWARD
PASSED IN ARBITRATION REFERENCE BEARING
NO. 4 OF 2017 OF THE SOLE ARBITRATOR
DATED 28.12.2018
Annexure 6 TRUE COPY OF THE ORDER PASSED BY THE
III ADDITIONAL DISTRICT COURT, THRISSUR
IN EP. NO.75 OF 2020 IN ARB. NO. 4 OF
2017 DATED 24.9.2024
Annexure 7 TRUE COPY OF THE JUDGEMENT IN
ARBITRATION REQUEST. NO. 148 OF 2025 OF
THE HIGH COURT OF KERALA DATED 9.1.2026
Annexure 8 TRUE COPY OF THE NOTICE INVOKING
ARBITRATION SENT BY THE COUNSEL FOR THE
PETITIONER TO THE RESPONDENTS DATED
12.1.2026
Annexure 9 TRUE COPY OF THE ACKNOWLEDGEMENTS CARD
RECEIVED BY THE COUNSEL FOR THE
PETITIONER INDICATING THE DELIVERY OF
THE NOTICE
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RESPONDENTS’ ANNEXURES
Annexure R1(a) True copy of the judgment in State of
West Bengal v. M/s. B.B.M.
Enterprises(2026 (3) KHC 418)
Annexure R1(b) A true copy of the judgment reported in
2021 (5) SCC 738 (Bharat Sanchar Nigam
Ltd. v. Nortel Networks India Pvt.
Ltd.) (2021 KHC 6156)
Annexure R1(c) A true copy of the judgment in Elfit
Arabia v. Concept Hotel BARONS Limited
2024(5) KHC 495
Annexure I True copy of the Judgment in India
Cements Capital Ltd. v. William and
Others,( 2015 (4) KHC 728) is produced
herewith and marked as Annexure 1.