http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: M/S ESSAR CONSTRUCTIONS

       Vs.

RESPONDENT: N.P.  RAMA KRISHNA REDDY

DATE OF JUDGMENT:       03/05/2000

BENCH: D.P.Wadhwa, Ruma Pal

JUDGMENT:

     RUMA PAL, J

     Leave granted.

     The  litigants,  in this case, have traversed  unknown procedural  paths crossing legal barriers to present us with a  case  which  has  no  simple  solution.   The  cause  for complaint  before us is an order passed by the High Court of Andhra  Pradesh  under  Section  115 of the  Code  of  Civil Procedure condoning the delay in filing an application under Section  30  of the Arbitration Act, 1940 and remanding  the matter  to  the  Trial  Court  for  a  decision  on  merits. According  to  the  petitioners the High Court  had  wrongly interfered  with  the order dated 28th April, 1999 by  which the  Principal Senior Civil Judge Kakinada had dismissed the respondents  application under Section 5 of the  Limitation Act,  1963 on the ground that the cause shown for the  delay was  insufficiently  explained.   Had   the  issue  been  so straightforward, unquestionably the High Courts order would have  had  to be set aside, because it had re-appraised  the cause  shown by the respondent and condoned the delay  under Section 5 of the 1963 Act.  There is ample authority to hold that  this  could not be done under Section 115 of the  Code [See:   D.L.F.  Housing & Construction Company Private Ltd., New  Delhi  vs.   Sarup  Singh & Others  1970  (2)  SCR  368 Manindra  Land and Building Corporation Ltd.  vs.   Bhutnath Banerjee  and  Others 1964 (3) SCR 495 and  Pandurang  Dhoni Chougule  vs.  Maruti Hari Jadhav 1966 (1) SCR 102.] But was the   Civil  Judges  order   dismissing  the   respondents application  under Section 5 at all revisable under  Section 115  of the Code or did an appeal lie from it under  Section 39 of the Arbitration Act, 1940?  The answer is of moment as the  powers  of  an  appellate Court are  wider  than  those available  under  Section 115.  Section 39 (1) (vi)  of  the Arbitration  Act,  1940 says that an appeal shall lie  inter alia  from  an order refusing to set aside an  award.   To arrive at a conclusion as to whether the order passed by the Senior  Civil Judge, Kakinada was an order refusing to  set aside  the award, we have to consider the facts.   Disputes between  the  parties were referred to three arbitrators  in terms  of an arbitration agreement.  There was no  unanimity among  the Arbitrators.  Two arbitrators passed an award  in favour  of the appellant before us and the third decided  in favour  of the respondent.  The respondent made an  abortive attempt  to  set  aside the award and to have  the  minority

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

award  made a rule of Court before the award was filed.  The award  was filed on 27.8.97.  Notice under Section 14(2)  of the  Act  was  issued to the respondent on  the  same  date. According  to the respondent, it never received the  notice. The appellant filed a suit to make the majority award a rule of  Court  under Section 17 of the Act.  The respondent  has filed  a  written statement in the suit.  In  addition,  the respondent  filed  two suits  one for making  the  minority award  a  rule  of Court and another for setting  aside  the majority  award.  Along with the second suit (OSSR 3098/98), the  respondent filed an application under Section 5 of  the Limitation  Act  (I.A No.  1394/98).  A few days later,  the respondent  filed a second application (I.A.  No.   1395/98) in  which  it was contended that the second suit was  not  a suit  at  all  but  an application which  had  been  wrongly numbered  as  a  suit.  It was, therefore, prayed  that  the Court should convert the said application i.e.  petition to set  aside  the  Award as OP.  The Principal  Senior  Civil Judge  by  his order dated 28th April 1999 disposed  of  the application  under  Section  5 treating OSS  3098/98  as  an application  for  setting aside the award.  This is what  he said:  13.  Now coming to the explanation of petitioner for condonation  of  delay of 331 days in filing application  to set  aside  Award, the petitioner states that as notice  was sent  by  Court  to  Bombay Port Trust  even  though  it  is addressed  to  Kakinada  Port  under Dis.   No.   8994,  Dt. 30.8.1997  and  actually the said notice was  despatched  by Court  on  1.9.1997,  therefore the petitioner  states  that after  excluding  30  days time from 1.9.1997 the  delay  in filing  application for setting aside Award is 331 days i.e. from 1.10.1997 to 2.9.1998.

     14.   In  the affidavit of the petitioner,  petitioner only  refers  to their filing a suit which was  rejected  on 21.3.1997 and did not refer to respondent herein filing O.S. 445/97  against  petitioner  herein  and  petitioner  herein receiving  summons in that suit on 19.1.1998 and  thereafter petitioner  herein  entering appearance through  A.G.P.   on 1.2.1998  and  filing written statement in O.S.   445/97  on 17.7.1998.    The  above  circumstances  go  to  show   that petitioner is not willing to state that particulars referred to  above, as the same will go against the petitioner and it will amount to service of notice of Arbitrators filing Award into Court.  In the present circumstances of the case and as the explanation of petitioner is not sufficient explanation, I  am of the view that delay as claimed by petitioner cannot be  condoned.  Accordingly, this petition is dismissed,  but under the circumstances of the case no costs.

     The outcome of the order in effect was that the prayer for  setting  aside the award was refused on the  ground  of delay.

     The  effect-test  was applied by the High  Court  of Andhra  Pradesh in Babumian & Mastan and Anr.  V.  Smt.   K. Seethayamma  and Others AIR 1985 AP 135 which said:   In the  light of the rulings in Gopalaswamy v.  Navalgaria (AIR 1967  Mad 403) (supra) and the decision of the Bench in  CMA No.   612 of 1977 dated 3.4.1978, the legal position may  be enunciated  as  follows:  The order refusing to condone  the delay in filing the claim petition has the effect of finally disposing  of  the  original petition.  Such an  order  can, therefore,   be  treated  as  an   award  and  hence  it  is appealable.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

     Again  a  Division  Bench of the Assam High  Court  in Mafizuddin  v.   Alimuddin  AIR  1950   Ass  191  has  said: Whether  objections to an award are dismissed on the merits or  they  are  dismissed on the ground that they  are  filed beyond  time, the Court by dismissing them in effect refuses to  set aside the award, and an order refusing to set  aside is clearly appealable under S.  30.

     In  some High Courts, no separate application is filed under  Section  5 of the Limitation Act and the  prayer  for condonation of delay is included along with the prayers made for  substantive  relief.  Courts have  entertained  appeals from  an  order dismissing an application on the  ground  of limitation.   Thus,  in  State  of West Bengal  V.   M/s  A. Mondal AIR 1985 Cal 12 DB where an application under Section 30  of  the Arbitration Act was dismissed on the  ground  of limitation,  an appeal was entertained.  [See also Damodaran V.   Bhaskaran  1988 (2) KLT 753] The procedure  appears  to have been approved by the Supreme Court in the case of Union of  India V.  Union Building AIR 1985 Cal 337 (DB), where on an  appeal to the Supreme Court from an order dismissing  an application  under  Section 30 on the ground of  delay,  the appeal  was  remanded to the High Court to be  disposed  of. The  position  should  be  no different in  Courts  where  a separate  application under Section 5 of the Limitation  Act is  required  to  be  filed.  If  the  various  High  Courts decisions  noted  earlier are correct, then the  application under  Section  5  being dismissed,  the  application  under Section  30  would  consequently also have to  be  dismissed although  this  might be a mere formality.  The  end  result would be the same.  None of the High Courts in the decisions noted,  have  spelt out the underlying reasons why an  order rejecting  an  application  on   the  ground  of  limitation tantamounts  to  a rejection of the application itself.   In our  view,  the  unspoken  major premise  is  based  on  the Limitation  Act.   As  observed  by  the  Privy  Council  in Harinath  Chatterjee vs.  Mathurmohan Goswami ( 1894) ILR 21 Cal.   18, the statute of limitations assumes the  existence of a cause of action and does not define or create one.  The cause  of action in this case is the alleged impropriety  of the  award.   The application to set aside the award may  be and  was resisted by the defence of limitation.  This is not a  technical plea but one that is given by Section 3 of  the Limitation  Act,  1963  which   inter  alia  provides  that: Subject  to  the provisions of Sections 4 to 24 of the  Act every  suit  instituted, appeal preferred,  and  application made,  after  the  prescribed  period  shall  be  dismissed, although limitation has not been set up as a defence

     The  section  makes it clear that limitation may be  a ground  for  rejecting a suit already instituted, an  appeal preferred   and,  in  the  context   of  this   case,   most importantly,  an  application already made.  What is  before the  Court is the substantive application when the  question of  limitation is decided.  Limitation, like the question of jurisdiction  may be provided for in a separate statute  but it   is  a  defence  available  in  the  suit,   appeal   or application.   When the defence is upheld it is the suit  or the appeal or the application itself which is dismissed.  Of course,  the question as far as appeals are concerned may be debatable having regard to the provisions of Order 41 of the Code  of Civil Procedure relating to admission of appeals as an appeal may not be admitted at all because it is barred by limitation.   We  express no final view in the matter.   But

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

there  is  no  corresponding requirement  for  admission  of applications  or  suits  after overcoming  the  barriers  of limitation.   A  suit  which is dismissed on the  ground  of limitation may be appealed against as a decree.  By the same token  an application under Section 30 which is dismissed on the  ground  of  limitation is a refusal to  set  aside  the award.  Section 39 (1)(vi) of the Arbitration Act, 1940 does not  indicate  the grounds on which the court may refuse  to set  aside  the award.  There is nothing in its language  to exclude  a  refusal  to  set aside  the  award  because  the application  to set aside the award is barred by limitation. By  dismissing  the application albeit under Section 5,  the assailability  of the award is concluded as far as the Court rejecting   the   application  is   concerned.    Ultimately therefore,  it  is an order passed under Section 30  of  the Arbitration  Act  though by applying the provisions  of  the Limitation  Act.   Section 17 of the Arbitration  Act,  1940 provides:   Judgment  in terms of award.- Where  the  Court sees  no  cause  to remit the award or any  of  the  matters referred  to arbitration for reconsideration or to set aside the  award,  the Court shall, after the time for  making  an application  to  set  aside the award has expired,  or  such application  having been made, after refusing it, proceed to pronounce  judgment  according  to the award, and  upon  the judgment  so pronounced a decree shall follow, and no appeal shall  lie  from such decree except on the ground it  is  in excess of, or not otherwise in accordance with, the award.

     The  Court  can  pronounce judgment according  to  the award (1) if the time for making an application to set aside the  award  has expired or (2) such application having  been made,  after  refusing it.  Because of the applicability  of Section  5 of the Limitation Act, 1963, if the Court has not pronounced  judgment for whatever reason, although the  time prescribed  for  making the application has expired  and  an application  for  setting  aside the award is  made  with  a prayer  for condonation of delay, the Court cannot pronounce judgment  until  the application is rejected.  Even after  a decree  is  passed  under Section 17  an  application  under Section  30 can be entertained provided sufficient cause  is established.    In   either  case   the  rejection  of   the application  would be a refusal to set aside the award.   It is  to  be emphasized that under Section 17 the  grounds  of refusal are not specified nor is there any limitation on the word  refusal  to mean only a refusal on merits.   Reading Section  39  (1)(vi)  and  Section  17  together,  it  would therefore  follow that an application to set aside an  award which  is rejected on the ground that it is delayed and that no sufficient cause has been made out under Section 5 of the Limitation Act would be an appealable order.  This brings us to the decisions of this Court relied on by the appellant to contend  that the order of the Principal Senior Civil  Judge was  not  an appealable one and could only be revised  under Section  115  of  the Code of Civil  Procedure.   The  first decision  cited is Nilkantha Shidramappa Ningashetti  versus Kashinath  Somanna Ningashetti :  1962 (2) SCR 551.  In that case  there was no application to set aside the award at all and  no question of rejection of such an application  arose. After  the  award  was filed, the defendant No.1  filed  his say about the arbitrators award.  He subsequently withdrew his  say.   Later, a guardian of a party who was a  minor, filed  a written statement claiming that the award was  null and   void  on  the  ground   that  the  award  was  without jurisdiction.   This  objection was not pressed  before  the Trial Court.  The Trial Court, therefore, passed a decree in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

terms  of  the  award.   The appeal to the  High  Court  was dismissed  as not maintainable.  The further appeal to  this Court  was  dismissed  saying:  When no  party  filed  an objection  praying  for the setting aside of the  award,  no question of refusing to set it aside can arise and therefore no  appeal  was maintainable under Section 39(1)(vi) of  the Arbitration  Act  which  allows an appeal against  an  order refusing to set aside an award."

     The  case is not an authority for the proposition that where  an  application  under  Section 30  is  made  and  is rejected,  no appeal is maintainable.  It does not apply  to the facts of this case.  The second decision cited was Madan Lal  versus  Sunderlal 1967 (3) SCR 147.  In that  case  the question   of  appealability  of  an  order   rejecting   an application  under  Section 30 of the Arbitration Act,  1940 was  neither raised nor decided.  On the contrary, the  High Court  in Madanlals case had dismissed the appeal from  the order of the Trial Court which had held that the application under Section 30 was barred by limitation, not on the ground that  the appeal was not maintainable but because it  upheld the  Trial Courts decision.  The Supreme Court affirmed the High Courts order.  On facts therefore, the decision really supports  our conclusions.  The editorial comment in Justice Bachawats Law of Arbitration & Conciliation (3rd edn.) at p.902  that Mafizuddins case (supra) has been overruled  by the  decisions of Nilkantha vs.  Kashinath (supra) and Madan Lal  vs.   Sunder  Lal (supra) is, for the  reasons  stated, erroneous.   Besides  Madanlals  case was  decided  in  the context  of  the  Indian  Limitation   Act,  1908  when  the provisions  of  Section 5 were inapplicable to  applications under  Section  30  of  the  Arbitration  Act.   The  period prescribed under Article 158 of the 1908 Act for challenging an  award  was  absolute.   It was therefore  held  that  an objection  filed  more than 30 days after the notice  could not  be  treated as an application for setting (aside?)  the award  (sic) for it would be then barred by limitation.  The position  thus  is  that in the present case  there  was  no application  to set aside the award as grounds mentioned  in Section  30  within the period of limitation.  It was  also observed  that  even the Court could not set aside an  award suo  motu under Section 30 beyond the period of limitation for  if  that were so the limitation provided under  Article 158  of  the Limitation Act would be completely  negatived. Apart  from  the  decision not being relevant to  the  issue before us, it is entirely distinguishable in law.  Section 5 of  the  Limitation  Act,  1963 is  now  applicable  to  all applications  under the Arbitration Act.  Provided that  the delay is sufficiently explained, there is no such compulsion on  the  Court  to reject an application  filed  beyond  the prescribed period of limitation nor is there any question of the  prescribed  period  of limitation  being  negatived  by entertaining  an  application  under Section 30  beyond  the period  of limitation.  We therefore conclude that the order of  the Senior Civil Judge rejecting the application of  the respondent  under  Section 5 was appealable under  the  1940 Act.   The  application  under  Section   115  of  the  Code therefore did not lie.  Despite the fact that this issue was neither  raised before nor considered by the High Court,  we cannot  take a blinkered view of the situation in law.   Had the  issue been raised, it would have been open to the  High Court  to  have  converted  the revision  petition  into  an appeal.   To  set aside the order of the High Court on  this technical  ground and to remand it for a reconsideration  of the  sufficiency of the cause shown by the respondent, would

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

be  an unnecessary exercise.  In the view we have taken, the High  Court had the jurisdiction to reappraise the  evidence and  condone the delay.  It has given its reasons for  doing so.   It cannot, in the circumstances, take a different view on  the  merits of the respondents case on the question  of delay  if  the matter were to be remanded.  In our  opinion, this  would  be an appropriate case for us to  exercise  our powers  under Article 142 of the Constitution and decide  on the  merits of the sufficiency cause shown.  The High  Court gave  three reasons for setting aside the order of the Trial Court  after considering several decisions cited before  it. The  first, to use its own words,  that there was a  total negligence and it is on the part of the counsel who appeared for  the  State in the Trial Court. The second  reason  was that  high-stakes  were involved in the matter.   The  third reason  was  that  no  prejudice  would  be  caused  to  the Contractor  because  the issue of the validity of the  award was  yet  to  be decided in its suit.  It is  a  moot  point whether   the  second  and   third  reasons  are   relevant. Nevertheless,  the first ground should have been and, in our opinion,  was  sufficient to excuse the delay and to  remand the  matter  back to the Trial Court for a decision  on  the merits of the application

     under  Section  30.   It  would  be  an  euphemism  to describe  the  ineptitude  of the advocates advice  to  the respondent  in  connection with the proceedings  before  the Trial  Court as negligence.  As he holds the post of Govt. Pleader  it  could reasonably be assumed by  the  respondent that  he  possessed the required legal expertise  to  advise them  correctly.   His  lack  of this is borne  out  by  the several  wholly  misconceived  proceedings   filed  by   the respondent  before  the  Senior Civil Judge on  his  advice. That  the  respondents  objection to the award is  not  the laggardly  response of a frivolous litigant appears from the fact that an objection to the award was made even before the award was filed.

     The appeal is accordingly dismissed.  There will be no order as to costs.