Full Judgment Text
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CASE NO.:
Appeal (civil) 2461 of 2008
PETITIONER:
CONSOLIDATED ENGG.ENTERPRISES
RESPONDENT:
PRINCIPAL SECY. IRRIGATION DEPTT. & ORS.
DATE OF JUDGMENT: 03/04/2008
BENCH:
CJI K.G. BALAKRISHNAN & J.M. PANCHAL
JUDGMENT:
J U D G M E N T
(Arising out of SLP(C) No.10311 of 2005)
With
CIVIL APPEAL NO. 2462 OF 2008
(Arising out of SLP(C) No.15619 of 2005)
HATTI GOLD MINES COMPANY LTD. \005.. APPELLANTS
Versus
M/S VINAY HEAVY EQUIPMENTS \005.. RESPONDENT
J.M. PANCHAL, J.
Civil Appeal No.2461 of 2008 @ SLP(C) NO.10311/2005
Leave granted.
2. The instant appeal is directed against judgment
dated April 4, 2005 rendered by the Division Bench of the
High Court of Karnataka at Bangalore in Misc. First Appeal
No.4465 of 2003, by which, decision dated October 24, 2002
passed by the learned District Judge, Bangalore Rural District,
Bangalore in A.S. No.2 of 2000 dismissing the application
submitted by the appellant under Section 34 of the Arbitration
and Conciliation Act, 1996 (the Act\022 for short) as time barred
has been set aside and the matter is remanded to the District
Court with a direction to proceed further with the matter in
accordance with law.
3. The appellant is an enterprise engaged in civil
engineering construction as well as development of
infrastructure. It entered into an agreement dated January
20, 1989 with the respondent for construction of earthen
bund, head sluices and the draft channel of the Y.G. Gudda
tank. During the subsistence of the contract, disputes arose
between the parties. Therefore, the appellant invoked
Arbitration clause No.51 of the agreement pursuant to which
the disputes were referred to the sole arbitrator for
adjudication. The sole arbitrator made his award on April 10,
1999 in favour of the appellant. Feeling aggrieved by the said
award, the respondents preferred an application dated July 5,
1999 to set aside the award as contemplated by Section 34 of
the Act in the court of learned Civil Judge (Senior Division),
Ramanagram, Bangalore Rural District. The said application
was registered as A.C. No.1 of 1999. It was realized by the
respondents that an application for setting aside the award
should have been filed before the learned Principal District
Judge, Bangalore District (Rural). Therefore, the respondents
submitted an application on July 26, 2000 in the Court of
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learned Civil Judge (Senior Division), Ramanagaram with a
request to transfer the application made for setting aside the
award to the court of learned Principal District Judge (Rural),
Bangalore. The learned Civil Judge (Senior Division),
Ramanagaram passed an order directing return of the suit
records for presentation before the proper court. The
respondents collected the papers from the court of learned
Civil Judge (Senior Division), Ramanagaram and presented the
same in the court of learned Principal District Judge,
Bangalore (Rural) on August 21, 2000. The present
application for setting aside the award, filed by the
respondents, was numbered as A.S. No.2 of 2000. The
District Court framed preliminary issue for determination
which was as under:
\023Whether the defendant proves that the
present suit is barred by the limitation under
Section 34(3) of the Arbitration and
Conciliation Act, 1996\024.
The respondents examined one witness and produced certain
documents whereas on behalf of the appellants one witness
was examined. After appreciating the evidence and hearing
the learned counsel for the parties, the learned District Judge
held that the suit /application for setting aside the award, was
time barred and dismissed the same by his judgment dated
October 24, 2002.
4. Thereupon the respondents invoked appellate
jurisdiction of the High Court of Karnataka at Bangalore by
filing Misc. First Appeal No.4465 of 2003 under Section 37 of
the Act. The issue, namely, whether the provisions of Sections
12 and 14 of the Limitation Act, 1963 are applicable to an
application filed under Section 34 of the Act was pending for
consideration in other matters also. The appeal filed by the
respondents was, therefore, taken up for hearing with other
matters. The Division Bench of the High Court of Karnataka
was of the view that the learned District Judge, Bangalore
Rural District, Bangalore committed an error in holding that
Section 14 of the Limitation Act was not applicable to an
application submitted under Section 34 of the Act and,
therefore, the time taken during which the respondents had
been prosecuting in the court of learned Civil Judge (Senior
Division), Ramanagaram was not excludable. On facts, the
High Court held that there was no lack of bona fide on the
part of the respondents and that the respondents had
diligently prosecuted the matter before the other court. In
view of these conclusions, the High Court by Judgment dated
April 4, 2005 set aside the decision dated October 24, 2002
rendered by the learned District Judge Bangalore (Rural) in
A.S. No.2 of 2000 and has directed the learned District Judge
to proceed further with the matter in accordance with law,
giving rise to the instant appeal.
Civil Appeal No.2462 of 2008 @ SLP(C) NO.15619/2005
5. Leave granted.
6. This appeal is directed against the judgment dated
April 4, 2005 rendered by the Division Bench of the High
Court of Karnataka in W.P. No.7089 of 2003 by which it is
held that Sections 12 and 14 of the Limitation Act are
applicable to and application submitted under Section 34 of
the Act, but the appellant is not entitled to exclusion of time
as contemplated by Section 14 of the Limitation Act, because
the appellant had not prosecuted application for setting aside
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the award made by the arbitrator, in other courts, with due
diligence and in good faith.
7. The appellant is a public sector undertaking of the
Government of Karnataka. It had invited tenders by way of
public notification for mining and transporting ore from
Ajjanahalli mine to Ingaldal. The tender submitted by the
respondent was accepted on May 10, 1999 and an agreement
was entered into between the parties. The respondent was
directed to commence the work from May 26, 1999 and to
deploy required number of vehicles etc. The respondent did
not follow the instructions given by the appellants and,
therefore, disputes arose between the parties. The appellant
and the respondent mutually agreed to terminate the contract
as per the clause mentioned in the contract. The respondent
made claim with respect to the works done by it during the
subsistence of the contract. The claim was not accepted by
the appellant. Therefore the dispute was referred to the sole
arbitrator for adjudication as stipulated by the contract. The
arbitrator made his award on March 15, 2002. The appellant
filed an application on June 6, 2002 in the court of learned
Civil Judge (Senior Division), Chitradurga to set aside the
award made by the arbitrator on the footing that the court of
learned Civil Judge (Senior Division) was the Principal Civil
Court of original jurisdiction in the District and that two other
cases, namely, Arbitration Case No.1/97 and 1/2001 were
also pending in the court of learned Civil Judge (Senior
Division), Chitradurga. After sometime, the appellant realized
that the appropriate court before which an application for
setting aside the award should have been made was the court
of learned District Judge, Chitradurga. Therefore, the
appellant filed an application under order VII Rule 10A
seeking prayer to return the application to it for presentation
before the District Court, Chitradurga. The learned Civil
Judge (Senior Division), Chitradurga after hearing the learned
counsel for the parties directed the appellant to present the
application made under Section 34 of the Act before the
District Court, Chitradurga by an order dated October 29,
2002 and directed the parties to appear before the learned
District Judge on November 21, 2002. In view of the
directions given by the learned Civil Judge (Senior Division),
Chitradurga the appellant presented the application filed
under Section 34 of the Act before the District Court
Chitradurga on November 21, 2002. The respondent raised a
preliminary objection regarding jurisdiction of the learned
District Judge, Chitradurga to entertain the application
submitted under Section 34 of the Act on the ground that the
agreement was entered into between the parties within the
jurisdiction of city of Bangalore and, therefore, the City Civil
Court, Bangalore had jurisdiction to entertain the application
filed by the appellant. The learned District Judge,
Chitradurga by an order dated February 3, 2003 held that he
had no jurisdiction to entertain the application submitted by
the appellant and accordingly returned the application, for
presentation before the appropriate court. The appellant
thereafter presented the application for setting aside the
award, before the VIth Additional City Civil Court, Bangalore
on February 10, 2003 which was registered as an appeal.
Along with the appeal, the appellant also filed an application
under Section 14 read with Section 5 of the Limitation Act and
prayed to exclude the time taken in prosecuting the
proceedings bona fide before the two courts which had no
jurisdiction. The learned Judge of City Civil Court, Bangalore
dismissed the application, as time barred, by an order dated
July 17, 2003. Thereupon the appellant invoked extra-
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ordinary jurisdiction of the High Court of Karnataka under
Article 226 of the Constitution by filing Writ Petition No.7089
of 2003. The questions posed for consideration of the High
Court was, whether the provisions of Sections 12 and 14 of the
Limitation Act were applicable to an application filed under
Section 34 of the Act and whether the appellant had
prosecuted the matter in other courts with due diligence and
in good faith. After hearing the learned counsel for the
parties, the High Court by Judgment dated April 4, 2005 held
that the provisions of Sections 12 and 14 of the Limitation Act
are applicable to a proceeding under the Act. However, on
appreciation of facts the High Court held that the appellant
had not prosecuted the matter in other courts, with due
diligence and in good faith. In view of the above-mentioned
conclusion the High Court has dismissed the writ petition filed
by the appellant vide Judgment dated April 4, 2005, giving rise
to the instant appeal.
8. This Court has heard the learned counsel for the
parties at length and in great detail as well as considered the
documents submitted by the parties.
9. The question posed for consideration before the
Court is whether the provision of Section 14 of the Limitation
Act would be applicable to an application submitted under
Section 34 of the Act of 1996 for setting aside the award made
by the arbitrator. In order to resolve the controversy it would
be advantageous to refer to certain provisions of the Limitation
Act and Section 34 of the Act of 1996. Section 14 and relevant
part of 29(2) of the Limitation Act, necessary for the purpose of
deciding the issue, read as under:
\02314. Exclusion of time of proceeding
bona fide in court without jurisdiction \026
(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 or of a 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 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\027For the purpose of this section,--
(a) in excluding the time during which a former civil
proceeding was pending, the day on which that
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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) misjoining of parties or of cause of action shall
be deemed to be a cause of a like nature with
defect of jurisdiction.\024
\02329(2) Where any special or local law prescribes
for any suit, appeal or application a period of
limitation different from the period prescribed by
the Schedule, the provision of section 3 shall
apply as if such period were the period prescribed
by the Schedule and for the purpose of
determining any period of limitation prescribed
for any suit, appeal or application by any special
or local law, the provisions contained in sections
4 to 24 (inclusive) shall apply only in so far as,
and to the extent to which, they are not expressly
excluded by such special or local law.\024
However, Section 34 of the Arbitration and Conciliation Act,
1996 reads as under:
\02334. Application for setting aside arbitral
award.-
(1) Recourse to a Court against an arbitral award
may be made only by an application for setting
aside such award in accordance with sub-section (2)
and sub-section (3).
(2) An arbitral award may be set aside by the
Court only if-
(a) the party making the application furnishes
proof that-
(i) a party was under some incapacity; or
ii) the arbitration agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under the law for the
time being in force; or
(iii) the party making the application was not given
proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms
of the submission to arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters submitted
to arbitration can be separated from those not so
submitted, only that part of the arbitral award which
contains decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with
the agreement of the parties, unless such
agreement was in conflict with a provision of
this Part from which the parties cannot
derogate, or, failing such agreement, was not
in accordance with this Part; or
(b) the Court finds that\027
(i) the subject-matter of the dispute is
not capable of settlement by
arbitration under the law for the
time being in force, or
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(ii) the arbitral award is in conflict
with the public policy of India.
Explanation\027 Without prejudice to the generality of
sub-clause (ii) of clause (b), it is hereby declared, for
the avoidance of any doubt, that an award is in
conflict with the public policy of India if the making
of the award was induced or affected by fraud or
corruption or was in violation of section 75 of
section 81.
(3) An application for setting aside may not be
made after three months have elapsed from the date
on which the party making that application had
received the arbitral award or, if a request had been
made under section 33, from the date on which that
request had been disposed of by the arbitral
tribunal:
Provided that if the Court is satisfied that the
applicant was prevented by sufficient cause from
making the application within the said period of
three months it may entertain the application
within a further period of thirty days, but not
thereafter.
(4) On receipt of an application under sub-section
(1), the Court may, where it is appropriate and it is
so requested by a party, adjourn the proceedings for
a period of time determined by it in order to give the
arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as
in the opinion of arbitral tribunal will eliminate the
grounds for setting aside the arbitral award.\024
10. A bare reading of sub-section (3) of Section 34 read
with the proviso makes it abundantly clear that the
application for setting aside the award on the grounds
mentioned in sub-section (2) of Section 34 will have to be
made within three months. The period can further be
extended, on sufficient cause being shown, by another period
of 30 days but not thereafter. It means that as far as
application for setting aside the award is concerned, the period
of limitation prescribed is three months which can be
extended by another period of 30 days, on sufficient cause
being shown to the satisfaction of the Court. Section 29(2) of
the Limitation Act, inter alia provides that where any special
or local law prescribes for any suit, appeal or application a
period of limitation different from the period of limitation
prescribed by the schedule, the provisions of Section 3 shall
apply as if such period was the period prescribed by the
schedule and for the purpose of determining any period of
limitation prescribed for any suit, appeal or application by any
special or local law, the provisions contained in Sections 4 to
24 shall apply only insofar as, and to the extent, they are not
expressly excluded by such special or local law. When any
special statute prescribes certain period of limitation as well as
provision for extension upto specified time limit, on sufficient
cause being shown, then the period of limitation prescribed
under the special law shall prevail and to that extent the
provisions of the Limitation Act shall stand excluded. As the
intention of the legislature in enacting sub-section (3) of
Section 34 of the Act is that the application for setting aside
the award should be made within three months and the period
can be further extended on sufficient cause being shown by
another period of 30 days but not thereafter, this Court is of
the opinion that the provisions of Section 5 of the Limitation
Act would not be applicable because the applicability of
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Section 5 of the Limitation Act stands excluded because of the
provisions of Section 29(2) of the Limitation Act.
11. However, merely because it is held that Section 5 of
the Limitation Act is not applicable to an application filed
under Section 34 of the Act for setting aside an award, one
need not conclude that provisions of Section 14 of the
Limitation Act would also not be applicable to an application
submitted under Section 34 of the Act of 1996.
12. 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.
The policy of the Section is to afford protection to a
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 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 applied to its
fullest extent and time taken diligently pursuing a remedy, in
a wrong court, should be excluded.
13. 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
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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 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 4
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 application submitted under Section 34 of the
Act of 1996 for setting aside an arbitral award.
14. We may notice that in similar circumstances the
Division Bench of this Court in State of Goa vs. Western
Builders 2006 (6) SCC 239 has taken a similar view. As
observed earlier the intention of the legislature in enacting
Section 14 of the Act is to give relief to a litigant who had
approached the wrong forum. No canon of construction of a
statute is more firmly established than this that the purpose of
interpretation is to give effect to the intention underlying the
statute. The interpretation of Section 14 has to be liberal.
The language of beneficial provision contained in Section 14 of
the Limitation Act must be construed liberally so as to
suppress the mischief and advance its object. Therefore, it is
held that the provisions of Section 14 of the Limitation Act are
applicable to an application submitted under Section 34 of the
Act of 1996 for setting aside an arbitral award.
15. The plea that in view of the decision rendered by
three Judge Bench of this Court in Commissioner of Sales
Tax, Uttar Pradesh vs. Parson Tools and Plants, Kanpur
1975 (3) SCR 743 the provisions of Section 14 of the
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Limitation Act should not be held to be applicable to an
application filed under Section 34 of the Act, has no
substance. The question determined in the Commissioner of
Sales Tax, Uttar Pradesh (supra) was \023whether under the
circumstances of the case, Section 14 of the Limitation Act
extended the period for filing of the revisions by the time
during which the restoration application remained pending as
being prosecuted bona fide.\024 In the said case, Sales-Tax
Officer had made two assessment orders. The assessee had
filed appeals before the Appellate Authority. The appeals were
dismissed in default as the assessee did not remain present on
the specified date. The assessee filed two applications for
setting aside such dismissal, under Rule 68(6) of the U.P.
Sales Tax Rules. During the pendency of the application a
Single Judge of Allahabad High Court declared Rule 68(5) of
the Rules ultra vires under which the appeals were dismissed
for default. In view of the ruling of High Court, the Appellate
Authority dismissed the appeals. The assessee, therefore, filed
two revision petitions. They were filed more than 18 months
after the dismissal of the appeals. The revisions were
accompanied by two applications in which the assessee had
prayed for exclusion of time spent by him in presenting the
aborting proceedings under Rule 68(6) for setting aside the
dismissal of his appeals. The revisional authority excluded the
time spent in those proceedings from computation of limitation
by applying Section 14 of the Limitation Act. The High Court
dismissed the Reference made on the motion of the
Commissioner of Sales-Tax. In appeal, this Court held that (1)
if the legislature in a special statute prescribes a certain
period of limitation, then the Tribunal concerned has no
jurisdiction to treat within limitation, an application, by
excluding the time spent in prosecuting in good faith, on the
analogy of Section 14(2) of the Limitation Act and (2) the
Appellate Authority and Revisional Authority were not \021courts\022
but were merely administrative Tribunals and, therefore,
Section 14 of the Limitation Act did not, in terms, apply to the
proceedings before such Tribunals. From the judgment of the
Supreme Court in Commissioner of Sales Tax, U.P. (supra),
it is evident that essentially what weighed with the Court in
holding that Section 14 of the Limitation Act was not
applicable, was that the Appellate Authority and Revisional
Authority were not \021courts\022. The stark features of the
revisional powers pointed out by the court, showed that the
legislature had deliberately excluded the application of the
principles underlying Sections 5 and 14 of the Limitation Act.
Here in this case, the Court is not called upon to exmine scope
of revisional powers. The Court in this case is dealing with
Section 34 of the Act which confers powers on the Court of the
first instance to set aside an award rendered by an arbitrator,
on specified grounds. It is not the case of the contractor that
the forums before which the Government of India undertaking
had initiated proceedings for setting aside the arbitral award
are not \021courts\022. In view of these glaring distinguishing
features, this Court is of the opinion that the decision
rendered in the case of Commission of Sales Tax, Uttar
Pradesh, Lucknow (supra) did not decide the issue which falls
for consideration of this Court and, therefore, the said decision
cannot be construed to mean that the provisions of Section 14
of the Limitation Act are not applicable, to an application
submitted under Section 34 of the Act of 1996.
16. The contention that in view of the decision of
Division Bench of this Court in Union of India vs. Popular
Constructions Co. 2001 (8) SCC 470 the Court should hold
that the provisions of Section 14 of the Limitation Act would
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not apply to an application filed under Section 34 of the Act, is
devoid of substance. In the said decision what is held is that
Section 5 of the Limitation Act is not applicable to an
application challenging an award under Section 34 of the Act.
Section 29(2) of the Limiation Act inter-alia provides that
where any special or local law prescribes, for any application,
a period of limitation different from the period prescribed by
the schedule, the provisions contained in Sections 4 to 24
shall apply only in so far as, and to the extent to which, they
are not expressly excluded by such special or local law. On
introspection, the Division Bench of this Court held that the
provisions of Section 5 of the Limitation Act are not applicable
to an application challenging an award. This decision cannot
be construed to mean as ruling that the provisions of Section
14 of the Limitation Act are also not applicable to an
application challenging an award under Section 34 of the Act.
As noticed earlier, in the Act of 1996, there is no express
provision excluding application of the provisions of Section 14
of the Limitation Act to an application filed under Section 34 of
the Act for challenging an award. Further, there is
fundamental distinction between the discretion to be exercised
under Section 5 of the Limitation Act and exclusion of the time
provided in Section 14 of the said Act. The power to excuse
delay and grant an extension of time under Section 5 is
discretionary whereas under Section 14, exclusion of time is
mandatory, if the requisite conditions are satisfied. Section 5
is broader in its sweep, than Section 14 in the sense that a
number of widely different reasons can be advanced and
established to show that there was sufficient cause in not
filing the appeal or the application within time. The
ingredients in respect of Section 5 and 14 are different. The
effect of Section 14 is that in order to ascertain what is the
date of expiration of the \021prescribed period\022, the days excluded
from operating by way of limitation, have to be added to what
is primarily the period of limitation prescribed. Having regard
to all these principles, it is difficult to hold that the decision in
Popular Construction Co. (supra) rules that the provisions of
Section 14 of the Limitation Act would not apply to an
application challenging an award under Section 34 of the Act.
17. As this Court holds that Section 14 of the Limitation
Act, 1963 is applicable to an application filed under Section 34
of the Act, 1996 for setting aside an award made by an
arbitrator, the appeal arising from Special Leave Petition (C)
No.10311 of 2005 will have to be dismissed because the
Division Bench of the High Court of Karnataka has in terms
held that there was no lack of bona fide on the part of the
respondents and that the respondents had diligently
prosecuted the matter before the other court and had also
immediately after coming to know the lack of jurisdiction of
the court had filed the memo seeking withdrawal of the appeal
and presented the same before the lower court which had the
jurisdiction.
18. As far as the appeal arising from Special leave
Petition (C) No.15619 of 2005 is concerned, this Court finds
that the view taken by the High Court of Karnataka that the
provisions of Sections 12 and 14 of the Limitation Act, 1963
are applicable to the proceedings under the Arbitration and
Conciliation Act, 1996 is eminently just and is hereby upheld.
However, this Court finds it difficult to uphold the finding
recorded by the Division Bench of the High Court that the
appellant had not prosecuted the matter in other courts with
due diligence and in good faith and was, therefore, not entitled
to exclusion of time taken in prosecuting the matter in wrong
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courts.
19. To attract the provisions of Section 14 of the
Limitation Act, five conditions enumerated in the earlier part
of this Judgment have to co-exist. There is no manner of
doubt that the section deserves to be construed liberally. Due
diligence and caution are essentially pre-requisites for
attracting Section 14. Due diligence cannot be measured by
any absolute standards. Due diligence is a measure of
prudence or activity expected from and ordinarily exercised by
a reasonable and prudent person under the particular
circumstances. The time during which a court holds up a
case while it is discovering that it ought to have been
presented in another court, must be excluded, as the delay of
the court cannot affect the due diligence of the party. Section
14 requires that the prior proceeding should have been
prosecuted in good faith and with due diligence. The
definition of good faith as found in Section 2(h) of the
Limitation Act would indicate that nothing shall be deemed to
be in good faith which is not done with due care and attention.
It is true that Section 14 will not help a party who is guilty of
negligence, lapse or inaction. However, there can be no hard
and fast rule as to what amounts to good faith. It is a matter
to be decided on the facts of each case. It will, in almost every
case be more or less a question of degree. The mere filing of
an application in wrong court would not prima facie show
want of good faith. There must be no pretended mistake
intentionally made with a view to delaying the proceedings or
harassing the opposite party. In the light of these principles,
the question will have to be considered whether the appellant
had prosecuted the matter in other courts with due diligence
and in good faith. As is evident from the facts of the case,
initially the appellant had approached the court of learned
Civil Judge, Senior Division, Chitradurga for setting aside the
award made by the arbitrator. On direction dated October 29,
2002 issued by the learned Civil Judge (Senior Division),
Chitradurga, the appellant had presented the application for
setting aside the award before the learned District Judge,
Chitradurga. Before the learned District Judge, Chitradurga
an objection was raised by the respondent that the application
was not maintainable before the said court and that the
application was maintainable before the learned Judge, City
Civil Court, Bangalore. The District Judge, Chitradurga by an
order dated February 3, 2003 held that it had no jurisdiction
to entertain the application submitted by the applicant and
accordingly returned the application for presentation before
the appropriate court. The question of jurisdiction was
seriously contested between the parties not only before the
court of learned Civil Judge (Senior Division), Chitradurga but
also before the learned District Judge, Chitradurga. The
question of jurisdiction had to be considered by the courts
below because of establishment of City Civil Court, Bangalore
under a special enactment and in view of the definition of the
word \023court\024 as given in Section 2(e) of the Arbitration and
Conciliation Act, 1996 which means the principal civil court of
original jurisdiction in a district. The record does not indicate
that there was pretended mistake intentionally made by the
appellant with a view to delaying the proceeding or harassing
the respondent. There was an honest doubt about the court
competent to entertain the application for setting aside the
award made by the arbitrator. The mere fact that
the question of jurisdiction is an arguable one would
not negative good faith because the appellant believed bona
fide that the court in which it had instituted the proceeding
had jurisdiction in the matter. By filing the application in the
courts which had no jurisdiction to entertain the same, the
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appellant did not achieve anything more particularly when the
lis was never given up. Under the circumstances this Court is
of the opinion that the Division Bench of the High Court of
Karnataka was not justified in concluding that the appellant
had not prosecuted the matter in other courts with due
diligence and in good faith. The said finding being against the
weight of evidence on record, is liable to be set aside and is
hereby set aside. We, therefore, hold that the appellant had
prosecuted the matter in other courts with due diligence and
in good faith and, therefore, is entitled to claim exclusion of
time in prosecuting the matter in wrong courts. Therefore, the
appeal arising from SLP(C) No.15619 of 2005 will have to be
allowed.
20. For the foregoing reasons civil appeal arising from
SLP(C) No.10311 of 2005 fails and is dismissed. The judgment
rendered by the Division Bench of the High Court of
Karnataka on April 4, 2005, in W.P. No. 7089 of 2003
dismissing the application filed by the appellant under Section
34 of the Arbitration and Conciliation Act, 1996 for setting
aside the award of the arbitrator, is set aside, and civil appeal
arising from SLP(C) No.15619 of 2005, is allowed. The
Division Bench of the High Court of Karnataka is directed to
proceed further with the matter in accordance with law. There
shall be no order as to costs in both the appeals.