Author: Nikitha Panchagnula, Student at University College of Law, Osmania University.
Date of Decision: March 30, 2015
Bench: Ashok Bhushan, A. M. Shaffique
Original Copy: N/A
Issues in Question:
- If a request for arbitration under Section 3G(5) of the National Highway Act, 1956 has to be made within a specified time limit?
- If Section 5 of the Limitation Act, 1963 is applicable to the arbitral proceedings, if there is a delay in filing the request for such arbitration?
Background of the case:
- The National Highway authorities after issuing a notification under Section 3D of the National Highway Act, 1956 have acquired the property of the Appellant (petitioner in the present case) having an extent of 0.35 acres in survey no. 8/19A and 6.10 acres in survey no. 8/18 in Panancheri village, Kerala for the purpose of constructing a National Highway. The competent authority had determined the compensation at Rs. 15,44,984/-. The same was paid to the petitioner after which the possession was taken by the government
- Dissatisfied with the amount of compensation granted, the petitioner had submitted an application under Section 3G(5) of the Act seeking reference of the matter to Arbitration. Upon such reference to the arbitrator, the arbitrator conveyed to the petitioner that his application cannot be entertained since it is barred by limitation. The petitioner challenged this award passed by the arbitrator by filing a writ petition contending that the provisions of the National Highway Act, 1956 or the Rules framed thereunder, do not prescribe any limitation period to refer the dispute to Arbitration and also that the provisions of the Limitation Act, 1963 shall not apply.
- The said Writ Petition was disposed off by the learned single judge confirming the decision of the authority in rejecting the application since the same was barred by limitation and that the provisions of Limitation Act, 1963 shall apply to the Arbitral proceedings under the National Highway Act, 1956
- The petitioner had filed an appeal against this judgment before the Hon’ble high Court of Kerala praying :
- i) To quash the order passed by the Arbitrator
- ii) To direct the 1st respondent to entertain the application filed by the petitioner and to proceed with Arbitration under National Highway Act, 1956 and thereafter pass an award as per the provisions of the Act.
- The Court reiterated that Section 3G(5) of National Highway Act, 1956 does not prescribe the time period within which a reference can be made to an arbitrator. It only provides that if the amount decided by the competent authority is not acceptable, the amount shall be decided by the arbitrator on an application made by either of the parties to the dispute
- The court while considering the question of limitation in arbitration matters has relied on the judgement of the Apex Court by a 3 judge bench in J. C. Budhraja Vs. Chairman, Orissa Mining Corpn. Ltd [(2008) 2 SCC 444] where in it held in arbitration, limitation for claim is to be calculated on the date on which the arbitration is deemed to have commenced
- The Court in the present case held that since there is no provision regarding a claim for enhanced compensation under the National Highway Act, 1956 Article 113 of the Limitation Act has to be applied which states that limitation period is 3 years from the date on which the right to sue accrues. In the present case, the right to sue has accrued on the date when the amount was determined by the competent authority. The limitation Act equally applies to the arbitral proceedings under the National Highway Act, 1956 and hence if the parties wish to go for arbitration, they need to refer the same to arbitration by filing an application within 3 years from the date on which the amount is determined by the competent authority. If the reference is not made to the arbitrator within such period, the arbitrator is entitled to reject the claim as being barred by limitation
- The court disagreed with the contention urged by the petitioner that the delay in filing a request for arbitration could be condoned as the application filed requesting for arbitration is an application under Article 137 of the Limitation Act, 1963. The Court held firstly that neither a request for delay condonation was made nor an application was filed for the same and secondly that Section 5 of the Act has no application for suit filing as there is no procedure for condoning the delay in filing the suit
- The Court dismissed the appeal agreeing with the view of the learned single judge that the request made for arbitration is barred by limitation as being made after 3 years from the date on which the competent authority has fixed the compensation.
- The law of limitation is a statute which prescribes the maximum period in which a legal action can be commenced after the cause of action arises. The limitation law is based on the maxim vigilantibus non dormientibus jura subveniunt which means to say that laws serve the vigilant and not those who sleep. No law is an exception to this principle and so is the case with the Arbitration and Conciliation Act, 1996.
- The main aim of the alternate dispute resolution mechanisms in India is speedy disposal of cases. This could be discerned from the provisions of the Arbitration and Conciliation Act, 1996, enacted by the Legislature which prescribes the period for commencement of the arbitral proceedings, passing of an award by the arbitrator, challenging such award etc.. In lieu of these provisions, allowing a period of 3 years to refer the dispute to arbitration from the date on which such right accrues applying Article 137, a residuary provision in the Limitation Act, 1937 runs against the basic essence of the provisions of the Act. This portion would require an amendment by the Legislature which can attain the ultimate goal of completing the arbitral proceedings in time.