Arbitration award limitation began in 2015, not on award date, while Section 34 challenge was pending: Calcutta High Court allows execution of SAIL award

Steel Authority of India Limited (“award holder”) entered into a contract dated 6 April 1992 with M/s Eastern Minerals and Trading Agency (“award debtor”) for raising, seizing and transporting limestone from Kuteshwar Limestone Mines, Madhya Pradesh.

Following the award debtor’s failure to perform its contractual obligations, the contract was terminated with effect from 5 September 1997, and the disputes were referred to arbitration.

By an award dated 29 February 2008, the learned sole arbitrator awarded the award holder ₹5,51,98,684.13, together with interest at 18% per annum compounded monthly.

The award debtor filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for setting aside the award.

Although the petition was dismissed for default on 28 August 2023 and the recall application was dismissed on 19 December 2023, the Section 34 proceedings were subsequently restored and remained pending; no stay of the award was in force.

The award holder thereafter filed the present execution petition.

The award debtor objected that execution was barred by the twelve-year limitation period under Article 136 of the Limitation Act, 1963, since the award was made approximately seventeen years earlier.

Whether the execution petition was barred by limitation under Article 136 of the Limitation Act, 1963, having been filed more than twelve years after the date of the arbitral award?

Whether, for the purpose of Article 136, the award became enforceable on the date of the award, or only on 23 October 2015 when the amended Section 36 of the Arbitration Act became applicable to the pending court proceedings?

Whether the period from 29 February 2008 to 22 October 2015 could be excluded because execution was effectively unavailable under the then-binding judicial interpretation of unamended Section 36?

Whether the decision in Goutam Paul v. Union of India required dismissal of the execution petition on the ground of limitation?

Article 136 of the Limitation Act, 1963 prescribes a twelve-year limitation period for execution of a decree, commencing when the decree becomes enforceable.

Unamended Section 36 of the Arbitration Act provided that an award could be enforced as a decree only after expiry of the period for filing a Section 34 application or after such application had been refused.

Although National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd., National Buildings Construction Corpn. Ltd. v. Lloyds Insulation (India) Ltd. and Fiza Developers & Inter-Trade (P) Ltd. had treated the filing of a Section 34 application as producing an automatic stay, Hindustan Construction Co. Ltd. v. Union of India held that this doctrine was per incuriam and that even unamended Section 36 did not create an automatic stay; amended Section 36 was clarificatory and required a specific stay order.

The 2015 amendment substituted Section 36 and made an award enforceable notwithstanding a pending Section 34 application unless the court granted a separate stay; Kochi Cricket (P) Ltd. v. BCCI held that the amended provision applied to court proceedings instituted or pending after 23 October 2015, notwithstanding the date of commencement of the underlying arbitral proceedings.

Section 87 of the 2019 Amendment Act and the retrospective deletion of Section 26 of the 2015 Amendment Act were struck down in Hindustan Construction.

Applying the principle that limitation cannot run during a period when a remedy is legally unavailable, together with the maxim *lex non cogit ad impossibilia*, the Court held that execution became enforceable for Article 136 purposes on 23 October 2015.

The Court distinguished between the correct legal position concerning automatic stay and the practical enforceability of the award during the relevant period.

Although Hindustan Construction subsequently declared that unamended Section 36 never legally imposed an automatic stay, National Aluminium and the judgments following it were binding precedent between 29 February 2008 and 22 October 2015.

During that period, an execution petition filed while the Section 34 application was pending would, as a matter of judicial practice and binding authority, have been rejected or treated as unavailable.

Since Section 36, as amended with effect from 23 October 2015, applied to the pending court proceedings under Kochi Cricket, and no separate stay order existed, the award became capable of execution from that date.

The Court therefore excluded the earlier period from computation under Article 136, reasoning that the award holder could not fairly be penalised for failing to pursue a remedy that the prevailing law had effectively foreclosed.

The Court declined to follow Goutam Paul on this specific issue because, on the material before it, that Division Bench had not considered the distinct argument that practical unavailability of execution postponed enforceability for limitation purposes.

Since the execution petition was filed before that date, it was held to be maintainable and not barred by limitation.

The award debtor’s objection was rejected.

The award debtor was directed to file an affidavit of assets within four weeks, and the execution petition was directed to be listed after five weeks.