Condonation of delay beyond a period of limitation, even when applicant the State, delay is owing to administrative difficulties would be impermissible: Justices Rajeev Ranjan Prasad, Kumar Mainsh

In The Union of India through the General Manager, East Central Railway, Hazipur Bihar & Anr. vs. M/s. Oberoi Thermit Pvt. Ltd. through its Authorized representative Sri Arjun Rajput (2026), Patna High Court's Division Bench of Justices Rajeev Ranjan Prasad and Kumar Manish delivered a 13-page long judgement, dated June 25, 2026, wherein it concluded:"....we are of the considered opinion that the learned District Judge is correct in taking a view that the miscellaneous arbitration application preferred by the present appellant was hopelessly barred by limitation. In view of the clear mandate of subsection (3) of Section 34 of the Act of 1996, the learned Court could not have condoned the delay of more than 30 days from the date of expiry of the prescribed period of limitation of three months. Thus, no illegality or infirmity may be found in the impugned order. 16. This appeal fails." The judgement was authored by Justice Prasad.  

The judgement was delivered upon hearing a commercial appeal which had been preferred seeking setting aside of the order dated August 17, 2023 passed by the District Judge, Patna in a Miscellaneous (Arbitration) Case  (Union of India through the General Manager, East Central Railways, Hazipur, Bihar and Anr. vs. M/s. Oberoi Thermit Private Limited) whereby and whereunder the District Judge had dismissed the application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘the Act of 1996’ as amended upto date) read with Section 151 of the Code of Civil Procedure filed on behalf of the petitioners-respondents for setting aside the arbitral award dated December 14, 2021 passed by a sole Arbitrator in a Arbitration Case of 2019 which arose out of Request Case of 2019. 

The application was preferred by the appellant for setting aside the arbitral award was rejected on the ground of the same being hopelessly barred by limitation. The Sheristedar’s report was that there was a delay of 222 days in filing of the application. 

An application seeking condonation of delay was filed. It was pointed out to the trail court that due to the COVID period delay was caused in preparation of the draft and its approval. It was submitted that after taking approval and sanction from the competent authority of the Railways, the matter was sent to Railway Lawyers for drafting the challenge petition in May, 2022 and the department was waiting for the final drafting of the petition. It was also stated that the counsel for the East Central Railways was delisted from its panel by the order of Ministry of Law and Justice and thereafter the deponent assigned the work to one of the learned Standing Government Counsel after approval of the same from the competent authority. It was finally submitted that the Supreme Court had also given a direction to condone the delay, if any, and after March 1, 2022, there was a delay of only 89 days in filing of the present application.

The District Judge had taken note of report of Sheristedar which showed that there was a delay of 222 days in filing of the present case. The Court had also taken note of subsection (3) of Section 34 of the Act of 1996 and held that the delay of 222 days in filing of the case cannot be condoned. 

The counsel for the appellants argued before the High Court that the District Judge, Patna had not considered the order passed by the High Court as well as the Supreme Court during the COVID period in Suo Motu Writ Petition (Civil) No. 03 of 2020 in which the period between March 15, 2020 and February 28, 2022 had been excluded in reckoning of the period of limitation. It was submitted that the trail court had merely considered the Sheristedar’s report and based on that the impugned order was passed. The impugned order suffers from non-consideration of the materials, therefore, it was liable to be set aside.

The counsel for the respondent submitted that on a bare perusal of the impugned order it was evident that the District Judge had duly considered the scope and ambit of subsection (3) of Section 34 of the Act of 1996. So far as Sheristedar’s report is concerned, there was no contest that the appeal was filed on October 22, 2022 for setting aside of the arbitral award delivered on December 14, 2021. It was submitted that if the overall period is computed, the Sheristedar’s report was correct. So far as the COVID period was concerned, no doubt the District Judge had not specifically taken note of the said report in the impugned order but that would not make any change in the opinion of the court and the same would be totally irrelevant so far as the present case is concerned. Even if the period between December 14, 2021 and February 28, 2022 was excluded in reckoning the period of limitation, the fact remains that the application under Section 34(1) was preferred after eight months. The District Judge could not have condoned the delay of more than 30 days from the date of expiry of the period of limitation i.e. three months from the date of receipt of the arbitral award by the party making the application.

Justice Prasad observed:"The facts are not in dispute. The arbitral award has been delivered on 14.12.2021. It is not the case of the appellant that the Award was served on the appellant on any other date. Thus, the period of limitation of three months for filing of an application under Section 34(1) of the Act of 1996 would have expired on 14th March, 2022. By virtue of the order of the Hon’ble Supreme Court in Suo Motu Writ Petition (Civil) No. 03 of 2020 the period between 15.03.2020 and 28.02.2022 were liable to be excluded. In this case, the last date for filing of the application under subsection (1) of Section 34 of the Act of 1996 was due to expire on 14th March, 2022. The period between 14th December, 2021 and 15th March, 2022 are liable to be excluded for the purpose of filing of the application.  10. The application was not filed within a period of three months even if the period between 14th December, 2021 and 15th March, 2022 are excluded, still on showing sufficient cause for not preferring the application within the prescribed period of limitation, the appellant would have got a condonation of another thirty days. Unfortunately, the appellant being such a big organisation having battery of lawyers, law officers and the senior officers dealing with the matter did not take care of the period of limitation and the mandatory nature of subsection (3) of Section 34 of the Act of 1996. They have to blame themselves for this gross negligence on their part in not attending their matter within time. 

This is not the solitary case in which such inordinate delay has taken place. It is for the Railways to set their house in order and the means and ways by which it is to be taken care of or the responsibilities are to be fixed are in the domain of Railways." 

Sub-section (1) and sub-section (3) of Section 34 of the Act of 1996 reads: “34. 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) …...(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.”

Justice Prasad relied on the two judgments of theSupreme Court on this issue. In Simplex Infrastructure Ltd. vs. Union of India reported in (2019) 2 SCC 455, the Supreme Court has held that condonation of delay beyond a period of limitation, even when applicant is the State and delay is owing to the administrative difficulties would be impermissible and in such cases, there would be no application under Section 5 of the Limitation Act. It reads: “11. Section 5 of the Limitation Act, 1963 deals with the extension of the prescribed period for any appeal or application subject to the satisfaction of the court that the appellant or applicant had sufficient cause for not preferring the appeal or making the application within the prescribed period. Section 5 of the Limitation Act, 1963 has no application to an application challenging an arbitral award under Section 34 of the 1996 Act. This has been settled by this Court in its decision in  Union of India vs. Popular Construction Company, (2001) 8 SCC 470 wherein it held as follows : (SCC pp. 474-75, paras 12 &14) “12. As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are “but not thereafter” used in the proviso to sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act. Parliament did not need to go further. To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose. No principle of of interpretation would justify such a result. 

The history and scheme of the 1996 Act supports the conclusion that the time-limit prescribed under Section 34 to challenge an award is absolute and unextendable by court under Section 5 of the Limitation Act. Section 14 of the Limitation Act, 1963 reads “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 23 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.—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.”

Section 14 of the Limitation Act deals with the “exclusion of time of proceeding bona fide” in a court without jurisdiction, subject to satisfaction of certain conditions. The question whether Section 14 of the Limitation Act would be applicable to an application submitted under Section 34 of the 1996 Act has been answered by this Court in Consolidated Engg. Enterprises v. Irrigation Deptt., (2008) 7 SCC 169. 

Supreme Court observed:“23. At this stage it would be relevant to ascertain whether there is any express provision in the 1996 Act, which excludes the applicability of Section 14 of the Limitation Act. On review of the provisions of the 1996 Act, this Court finds that there is no provision in the said Act which excludes 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 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 ofthe 1996 Act, more particularly where no provision is to be found in the 1996 Act, 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 1996 Act 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 1996 Act, 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 1996 Act for setting aside an arbitral award.”

Justice Prasad observed: "14. The position of law is well settled with respect to the applicability of Section 14 of the Limitation Act to an application filed under Section 34 of the 1996 Act. By applying the facts of the present case to the well-settled position of law, we need to assess whether the learned Single Judge of the High Court was justified in condoning the delay for filing an application under Section 34 of the 1996 Act.”

In Union of India vs. Popular Construction Co., reported in (2001) 8 SCC 470, the Supreme Court has held that the application challenging the award filed beyond the period mentioned in Section 34(3) would not be an application “in accordance with” subsection (3) as required under Section 34(1).

Justice Prasad concluded: 13. This Court has discussed both the judgments with the learned counsel for the appellant. Even as we have noticed that in its application under Section ‘5’ of the Limitation Act, 1963 filed before the learned District Judge, the appellant took a plea that the Hon’ble Supreme Court has directed for condonation of delay, if any, we are of the view that the blanket plea taken by the appellant before the learned District Judge has no basis to stand."

Bihar universities will have to wait for directions of 48th Chief Justice to get 289 librarians from state government

Underlining the significance of librarians, Chief Justice Sangam Kumar cited Neil Gaiman, the author of The Graveyard Book who said, “Google can bring you back 1,00,000 answers, a librarian can bring you back the right one."  

In Dr. Ranganathan Rajya Pustakalaya Samiti & Anr. vs. The State of Bihar & Ors. (2026), Patna High Court's Division Bench  of Chief Justice Sahoo and Justice Harish Kumar delivered a 10-page long order dated May 15, 2026, wherein, it concluded:"In the eyes of the law, a vacant librarian post, especially in a University is not merely an administrative oversight; it is seen as a functional breakdown in the "administration of justice" and the "academic health" of an institution. The vacancy of a librarian is not an administrative choice but a failure of the State's duty to provide the necessary infrastructure for education and justice. In the absence of a Librarian, physical collection of books deteriorate without proper preservation protocols, reference services remain absent, institutional subscriptions to journals and databases are not procured, managed, or optimised, and no systematic weeding or collection takes place. 7. With the aforesaid direction and observation, the matter be listed on 06.07.2026." The order was authored by the outgoing chief justice who is retiring on June 4, 2026. The case will now be heard by the next chief justice. 

The petitioner no. 2 is Harishanker Prakash, a resident of Mahinawan Bazar, Maner, Patna. The other five respondents are: Chancellor of the University of Bihar, Patna, Additional Chief Secretary, Department of Education, Patna, Director, Higher Education, Education Department, Patna, Patna University and Tilka Manjhi Bhagalpur University, Bhagalpur.

The case was filed on December 17, 2020 and registered on January 23, 2021. Significantly, five chief justices, namely, Justices Sanjay Karol, K. Vinod Chandran, Vipul Manubhai Pancholi, P.B. Bajanthri and now Sahoo heard the case since June 2021 but the posts of the librarians have not been filled up.   

The High Court's 4-page long order dated March 25, 2026 reads: "This Public Interest Litigation has been filed seeking a direction to the concerned authorities to initiate the process of appointment to the post of Librarian in various higher educational institutions in the State of Bihar, as the posts have remained unfilled since 1990. Consequently, the libraries have become defunct and are being run by unqualified persons in an unprofessional manner, resulting in immense difficulties for the students, faculty members, as well as the colleges and educational institutions in the State of Bihar." Amicus Curiae placed before the Court a datasheet regarding the number of vacancies in different Universities in the State of Bihar, which reveals that 289 posts of librarians are vacant. A copy of the datasheet was furnished to P.K Shahi the Advocate General, who sought some time to obtain instruction. Advocate General sought adjournment on April 30, 2026 and prayed for a short adjournment on May 6, 2026 to ensure filing of a supplementary counter affidavit bringing on record necessary facts.

The May 15, 026 order has recorded that in pursuance of the order of the High Court dated May 13, 2026, the Vice-Chancellors of the different Universities, namely, Munger University, Munger; Patliputra University, Patna; Maulana Mazharul Haque Arabic & Persian University, Patna; Kameshwar Singh Darbhanga Sanskrit University, Darbhanga; Lalit Narayan Mithila University, Darbhanga; Tilka Manjhi Bhagalpur University, Bhagalpur; B.N. Mandal University, Madhepura; Purnea University, Purnea; Veer Kunwar Singh University, Ara; Magadh University, Bodh Gaya; Patna University, Patna; Jai Prakash University, Chapra; and Baba Saheb Bheem Rao Ambedkar University, Muzaffarpur; Aryabhatta Knowledge University, Patna as well as Nalanda Open University are connected through virtual mode in the proceeding.

The High Court's order dated May 13, 2026 reads:"2. In terms of the order dated 25.03.2026 passed by this Court, notices along with a copy of the writ petition and the said order were transmitted through e-mail to the Vice-Chancellors of all the Universities referred to therein. The e-mail service reports have also been brought on record. However, despite service of notice, no response has been filed on behalf of any of the Vice-Chancellors of the concerned Universities till date. 3. The matter was earlier taken up on 30.04.2026 and, on the prayer made by the learned Advocate General seeking a short adjournment, the case has been listed today. From the record, it appears that neither any affidavit nor any document has been filed on behalf of the Vice-Chancellors concerned. It further appears that no steps have been taken either for filing a response or for engagement of counsel to represent them before this Court. 4. Considering the importance of the matter, this Court is left with no option but to direct the personal appearance of all the Vice-Chancellors of the Universities referred in the order dated 25.03.2026, particularly those mentioned in paragraph 4 thereof. 5. Accordingly, all the Vice-Chancellors shall ensure their presence through virtual mode on 15.05.2026 at 11:00 A.M."

The order dated May 15, 026 reads:"5. In order to resolve the dispute, and the acute scarcity of Librarians, as has been raised in the present Public Interest Litigation, we direct all the Vice-Chancellors of the Universities to ensure that where the roster clearance has not been done, they shall take all the requisite necessary actions to get the roster clearance done expeditiously and thereupon, send the requisition to the Director, Higher Education. Since the roster clearance is to be made at the level of the Divisional Commissioner, we further direct the Divisional Commissioner of all the Divisions, where the process of roster clearance is pending, to take up the matter forthwith and pass necessary order with regard to the roster clearance. It is made clear that in those Universities where the list of necessary vacancy position has not been sent for roster clearance, the concerned Vice-Chancellor of the said Universities must ensure and send the list of on date vacancies to the concerned Divisional Commissioner for roster clearance. In order to ensure that all the vacancies are filled up immediately, we will also provide the timeline to all the concerned authorities. In those cases, where vacancies position of the posts have not been sent up to the office of Divisional Commissioner, it must be sent within two weeks from today. The Divisional Commissioners of respective division are directed to complete the formalities of roster clearance within a further period of two weeks. On receipt of the roster clearance, the Vice-Chancellor of different Universities shall ensure that requisition for filling up the vacancies must reach in the office of Director, Higher Education within a further period of two weeks. It is expected that all the authorities must adhere to the timeline, framed hereinabove."

Prior to this High Court's order dated September 15, 2023 recorded:"A counter affidavit dated 27.07.2023 puts forth steps taken by the Government in making appointments to the post of Librarians. It is the submission of the Government that before proceeding with the selection, the Government has attempted to
ascertain the sanctioned posts of non-teaching employees of Grade-III in University/Constituent Colleges of the State, so as to have a clear picture of the existing vacancies of the Librarians. A communication was issued to all the Universities which have been replied to and the collation of data has been going on." 

Earlier, the High Court's order dated April 7, 2023 recorded that counter affidavits filed in 2021 had submitted to the High Court that there was a proposal to appoint a Commission to carry out the appointments, especially since the appointments carried out by the Universities were not approved by the State Government. The 4th respondent, i.e., the Director, Higher Education, Education Department, was asked to file an affidavit as to the further steps taken in constituting a Commission and making the appointments to the post of Librarians as sought for, in the writ petition. 

It is noteworthy that the report of the Bihar Assembly Library Committee presented to the assembly had pointed out in 2023 that from over 500 six decades back, the number of public libraries in the state has gone down to 51. Sudama Prasad, the chairperson of the committee had presented its report for the first time in the 100 years' history of the Vidhan Sabha. Director (library and information) Sachindra Kumar had announced the formation of a state-level library planning committee headed by additional chief secretary in December 2022. As per the data submitted by the education department to the library committee of the assembly, out of the 38 districts in the state, only 19 have central libraries. Notably, divisional libraries are there only in six of the nine divisional headquarters in the state. 

Also read: How Bihar is rapidly losing the libraries that it was once famous for 

"Srimati Radhika Sinha Institute and Sachchidanand Sinha Library (Requisition & Management) Act, 2015 is manifestly arbitrary and violative of Article 14":Supreme Court 

Srimati Radhika Sinha Institute and Sachidanand Sinha Library (Requisition And Management) Act, 2015 is constitutionally valid: Patna High Court

 

 

 

Justice Raj Mohan Singh, former Judge of the Madhya Pradesh High Court appointed as arbitrator: Chief Justice Bajanthri

In Lord Vishnu Construction Private Limited, Patna Through Ramakant Singh vs. The Union of India through the General Manager, East Central Railway, Patna & Ors. (2025), Patna High Court's Division Bench of Chief Justice P.  B. Bajanthri and Justice Alok Kumar Sinha delivered a 4-long judgement dated October 13, 2025, wherein, Justice Raj Mohan Singh, former Judge of the Madhya Pradesh High Court has been appointed as the sole arbitrator to adjudicate the dispute among the parties. The judgement in this Request Case No.21 of 2025 was authored by the Chief Justice Bajanthri. 

The application was filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 seeking appointment of Arbitrator to adjudicate the disputes that arose among the parties under the agreement dated February 14, 2022. The case was that the petitioner and respondents entered into an agreement/contract on February 14, 2022. The agreement contains an Arbitration Clause namely Clause 64(1)(i) which reads as under :
“64 (1) (i) : In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the Contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the “excepted matters” referred to in Clause 63.1 of these Conditions, the Contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration.” 

Dispute arose among the parties in respect of partnership. The petitioner vide its letter dated May 1, 2024, invoked the dispute resolution mechanism and formally requested that the matter be referred for adjudication through arbitration proceedings, the respondents have failed to act in terms of the arbitration Clause. 

The counsel for the petitioner submitted that the arbitration agreement exists and is valid, but the respondents have failed to co-operate in appointment of Arbitrator. 

Chief Justice Bajanthri observed: ''4. Considering the fact that whether valid arbitration agreement among the parties and whether disputes have arisen thereon warranting reference to arbitration, it is admitted that there is agreement and so also valid Clause 64(1)(i) and it relates to arbitration and it is binding among the respective parties. Disputes have admittedly arisen among the parties. The respondents have failed to act as required for constitution of arbitral tribunal. In view of the law laid down by the Hon’ble Supreme Court in the case of Duro Felguera, S.A. vs. Gangavaram Port Limited reported in (2017) 9 SCC 729 and Mayavati Trading Private Limited vs. Praduyat Deb Burman reported in (2019) 8 SCC 714, the Court, at this stage, is only required to examine the existence of the arbitration agreement and nothing beyond.''

He added: ''....it is evident that Clause 64(1)(i) is crystal clear that there is Arbitration Clause existing. Accordingly, this court is satisfied with the requirement of Section 11 of the Act, 1996 and petitioner has made out a case, therefore, this Court appoints Hon’ble Mr. Justice Raj Mohan Singh, Resident of House No. 283, Section 21-A, Chandigarh, Mobile No. 8558809931, former Judge of the Chandigarh High Court and Madhya Pradesh High Court as the sole arbitrator to adjudicate the dispute among the parties. The Learned Arbitrator shall make disclosure under Section 12 of the Act, 1996 before entering upon the reference. Fees of the Arbitrator shall be governed by the Fourth Schedule of the Act, 1996 (unless otherwise agreed by the parties / arbitrator)....7. Registry is hereby directed to communicate the order to the learned Arbitrator.'' The case was allowed. 

Supreme Court's Division Bench sets aside judgement by Justice Yashwant Varma led Bench which had set aside verdict of Single Judge of Delhi High Court

In Interstate Construction vs. National Projects Construction Ltd (2025), Supreme Court's Division Bench of Justices Abhay S. Oka and Ujjal Bhuyan directed against the judgment and order dated August 1, 2023 passed by Delhi High Court's Division Bench of Justice Yashwant Varma in FAO (OS) (Comm) No.175 of 2021. The 34-page long judgement was delivered on May 15 2025. It was authored by Justice Ujjal Bhuyan. 

Justice Varma had allowed the appeal of National Projects Construction Corporation Limited,(NPCC) or the respondent hereinafter, filed under Section 37 of the Arbitration and Conciliation Act, 1996 after setting aside that part of the judgment and order dated August 2, 2021 passed by a Single Judge of the High Court under Section 34 of the 1996 Act upholding the directions contained in paragraph 58(b) of the award dated October 28, 2020 as well as setting aside the directions of the arbitral tribunal as contained in paragraph 58(b) of the said award.

The respondent had engaged the services of the appellant for executing a contract relating to Ramagundam Super Thermal Power Project, Ramagundam, District Karimnagar in the then composite State of Andhra Pradesh. In this regard, two separate work orders were issued. 

Thereafter, contract agreement was entered into between the parties. As per clause 4 of the conditions of contract read with clause 15 of the special conditions attached to the work orders, all the disputes and differences between the parties were to be settled by way of arbitration. 

It is stated that appellant had completed the contract work in the year 1987. The respondent had paid the appellant the contractual dues after withholding certain sums on account of recoveries. The appellant disputed such recoveries. The appellant also raised certain claims which were not accepted by the respondent. 

In view of such disputes and differences, appellant invoked the arbitration clause by issuing notice dated May 17, 1993.

The respondent did not take immediate steps for appointment of an arbitrator. After considerable delay, by communication dated October 7, 1997, respondent appointed Shivamoy Ghosh, Additional General Manager, NPCC, Madras Sector, Chennai as the sole arbitrator to arbitrate on the subject dispute.

The appellant filed statement of claims before the learned arbitrator on January 20, 1998 claiming an aggregate amount of Rs.4,46,29,404.00 along with pendente lite and future interest at the rate of 24 percent per annum till final realization of the amount. 

The appellant sought for a direction from the  arbitrator to the respondent to supply various documents related to the dispute. However,  arbitrator only permitted the appellant an opportunity to inspect the documents and did not issue any direction to the respondent for supply of copies.

The aggrieved thereby, appellant filed a petition under Section 14 of the 1996 Act before the High Court seeking termination of the mandate of the  arbitrator and for appointment of a new arbitrator in his place. This petition was registered as OMP No. 214/2002. By order dated October 11, 2004, Single Judge terminated the mandate of Shivamoy Ghosh and appointed Shri A.S. Chandhiok, Senior Advocate, as the sole arbitrator.

The respondent challenged the said order of the Single Judge dated  October 11, 2004 before the Division Bench of the High Court in FAO (OS) No.241/2004. By order dated February 2, 2005, Division Bench appointed Shri L.R. Gupta, retired Director General of CPWD as the sole arbitrator.

Before L.R. Gupta, the arbitrator, respondent while filing its reply to the statement of claims filed by the appellant, also challenged the authority of one Jagdish Raj Yadav to file the claim on behalf of the appellant. In this regard an application dated February 23, 2007 was filed before the arbitrator. The arbitrator dismissed the said application vide the order dated August 3, 2007.

This order was challenged by the respondent before the learned Single Judge of the High Court by filing a petition under Section 34 of the 1996 Act, being OMP No.537/2007.

Notably, L.R. Gupta resigned as the sole arbitrator on June 23, 2008. 

By order dated January 30, 2007, Single Judge disposed of the petition filed under Section 34 of the 1996 Act bearing OMP No.537/2007.

The appellant filed a petition under Section 15 of the 1996 Act before the High Court being OMP (T) (Comm) No.30/2018 seeking appointment of an arbitrator in place of L.R. Gupta who had resigned. The said petition was disposed of by the Single Judge of the High Court vide order dated May 31, 2018 reconstituting the arbitral tribunal by appointing Justice R.C. Jain, a former Judge of the High Court, as the sole arbitrator to arbitrate on the disputes between the parties. 

The new arbitrator held the first hearing on May 3, 2019 and finally pronounced the award on October 28, 2020. While the arbitral tribunal allowed the claims of the appellant under several heads, we are concerned with the contentious part of the award relating to payment of interest (claim No. 7).

The respondent filed a petition under Section 34 of the 1996 Act before the Single Bench of the High Court for setting aside the award dated October 28, 2020. The same was registered as OMP (Comm) No. 78/2021. By the judgment and order dated August 2, 2021, Single Judge partly allowed the petition by setting aside the award with regard to future interest at the rate exceeding 9 percent per annum from the date of the award till the date of payment. 

The aggrieved by the judgment and order dated August 2, 2021 passed by the Single Judge, respondent preferred an appeal under Section 37 of the 1996 Act before the Division Bench of the High Court which was registered as FAO (OS) (Comm) No. 175/2021. In the appeal, senior counsel for the respondent (which was the appellant before the Division Bench) clarified that the challenge would be restricted to the directions issued by the arbitral tribunal insofar the issue 9 of interest was concerned. This was further clarified by submitting that the challenge was not with respect to the rate of interest or award of interest for the pre-reference/past period. 

Grievance highlighted was against the directions contained in sub-paragraph (b)(i) of paragraph 58 to the extent of the arbitral tribunal stipulating that interest for the period mentioned therein would be leviable not merely on the principal amount as awarded but upon the said amount inclusive of the amount of interest relating to the pre-reference/past period. Likewise, arbitral tribunal awarded interest on identical terms in subparagraph (b)(ii) of paragraph 58 which was objected to. Division Bench of the High Court vide the judgment and order dated August 1, 2023 (impugned judgment) allowed the appeal by setting aside the directions contained in paragraph 58(b).

Aggrieved thereby, the appellant filed the related SLP (C) No.23235/2023 before the High Court. By order dated October 19, 2023, the Court issued notice. In the hearing held on February 25, 2025, leave was granted. 

There was no challenge by either parties to the award on merit, challenge of the respondent being confined only to the interest part. 

While holding that appellant was entitled to award of interest for the pre-reference period i.e. from the date on which the cause of action arose till filing of the claim before the arbitral tribunal as well as for the pendente lite period and also for the future period, arbitral tribunal agreed with the respondent that no interest should be awarded to the appellant for the period when there was absolute laches on the part of the appellant. The Arbitral tribunal held that for the period from 01.01.2009 till 31.12.2016, that is for a period of about eight years, there was complete laches on the part of the appellant. Therefore, the arbitral tribunal declared that appellant would not be entitled to any interest for the aforesaid period.

The respondent filed a petition under Section 34 of the 1996 Act before the High Court impugning the arbitral award dated 28.10.2020. Vide the judgment and order dated 2.08.2021, Single Judge upheld the claims awarded by the arbitral tribunal. On the question of interest, Single Judge framed the question as to whether interest awarded by the arbitral tribunal was exorbitant and unsustainable. The Single Judge held that arbitral tribunal’s decision to award pre-reference interest at the rate of 18 percent per annum did not warrant any interference. As regards pendente lite interest,  Single Judge while noting that arbitral tribunal had awarded 12 percent interest per annum for the period from 20.01.1998 till 31.12.2008 and again from 01.01.2017 till 28.10.2020, justified the decision of the arbitral tribunal not to award interest for the period from 01.01.2009 to 31.12.2016 as during this period the appellant was remiss and did not pursue its claim before the arbitral tribunal diligently. On the rate of interest, Single Judge held that interest at the rate of 12 percent per annum could not by any stretch be considered to be exorbitant or unreasonable but held that 18 percent future interest from the date of the award till the date of payment granted by the arbitral tribunal was ex facie erroneous as according to learned Single Judge the interest rate should have been 2 percent higher than the current rate of interest prevalent on the date of the award.

Therefore, this portion of the award was set aside by the Single Judge; instead Single Judge awarded future interest holding that it could not have been in excess of 9 percent per annum. Therefore, Single Judge partly allowed the petition under Section 34 of the 1996 Act to the extent of setting aside the award of future interest at a rate exceeding 9 percent per annum from the date of the award till the date of payment.

This brought the Court to the impugned judgment and order dated 01.08.2023. We have already noted about the limited nature of challenge made by the respondent during the hearing of the appeal filed under Section 37 of the 1996 Act. The senior counsel appearing for the respondent clarified that the challenge to the award stood restricted to the directions issued by the arbitral tribunal insofar the issue of interest was concerned. He clarified that the challenge was not with respect to either the rate at which interest was awarded or the grant of interest for the pre-reference/past period. The grievance was confined to the directions contained in paragraph 58(b)(i) of the award and the similar nature of interest in paragraph 58(b)(ii) inasmuch as the arbitral tribunal proceeded to award interest on identical terms: on the principal amount plus the amount of interest for the pre-reference/past period. Thr Division Bench referred to Section 31(7)(a) and (b) of the 1996 Act as well as placed reliance on the decision of this Court in Sayeed Ahmed and Company Vs. State of Uttar Pradesh  lite period have been subjected to further levy (2009) 12 SCC 26 and came to the following two conclusions:

i)Section 31(7) recognizes only two periods for which interest may be awarded. The two periods are, firstly from the date on which the cause of action arose till passing of the award and secondly from the date of the award till actual payment. Therefore, the distinction between pre-reference/past period and pendente lite period no longer existed. The period from the date of cause of action i.e. July, 1987 till the date of the award dated 28.10.2020 would constitute the period contemplated under Section 31(7)(a) of the 1996 Act. The period commencing from the date of award till payment would be the second period within the meaning of Section 31(7)(b) of the 1996 Act. 

Therefore, the arbitral tribunal committed an illegality in awarding interest for three periods: pre-reference/past periods, pendente lite and for the future period.

ii) Arbitral tribunal committed further illegality in forging the principal amount with interest as would be evident from paragraph 58(b) of the award. Interest awarded for the pre-reference period as well as for the pendente lite period have been subjected to further levy of interest for the said periods by adding the interest amount with the principal amount awarded. This amounted to levying compound interest which is impermissible. Accordingly, the directions contained in paragraph 58(b) were set aside by the Division Bench.

In the Court's considered view, the reasonings given by the Division Bench are fallacious. We say so for the reasons mentioned hereunder. Section 31 of the 1996 Act is the relevant provision.

It deals with the form and contents of arbitral award. Section 31 has eight sub-sections. Sub-section (7) is central to the debate and after the amendment with retrospective effect from 23.10.2015. 

The Court observed:"We are unable to agree with the view expressed by the Division Bench. Even in Sayeed Ahmed and Company (supra) relied upon by the Division Bench, the Bench held that Section 31(7) had carved out two periods, the first period being from the date on which the cause of action arose till the date on which the award is made and the second period being from the date of award till the date of payment. As regards the first period, the Bench clarified that it includes the pre-reference period plus pendente lite period. Though the arbitral tribunal had granted interest for three periods: pre-reference period, pendente lite and post award period, the first two period basically comprises of the period contemplated under clause (a) of sub-section (7) of Section 31. It is another matter that the arbitral tribunal awarded varying degrees of interest for the two sub-periods: 18 percent per annum for the pre-reference period and 12 percent as pendente lite, excluding from the said period, the period of eight years when the appellant was found to be remiss in pursuing its claims before the arbitral tribunal. This is also permissible as we shall explain.

Therefore, Sayeed Ahmed and Company (supra) does not exclude or does not say that interest should not be granted for the pre-reference period. All that it explains is that Section 31(7)(a) has joined the two periods of interest: pre-reference and pendente lite."

It added: "This position has been clarified by a recent decision of the High Court in Pam Developments Private Limited Vs. State of West Bengal (2024) 10 SCC 715 After extracting Section 31(7) of the 1996 Act, the High Court held that power of the arbitrator to grant pre-reference interest, pendente lite interest and post award interest under Section 31(7) of the 1996 is now fairly well settled. The Bench, thereafter, culled out the following legal propositions in this regard highlighting the difference in the position of law qua the Arbitration Act, 1940 vis-à-vis the 1996 Act."

This position has been further explained by a recent decision of this Bench in North Delhi Municipal Corporation vs. S.A. Builders Ltd. (2024) SCC Online SC 3768. After adverting to Section 31(7) of the 1996. Section 31(7) of the 1996 Act, the Supreme Court explained it as under:

36.1. From a minute reading of sub-section (7), it is seen that it has got two parts: the first part i.e. clause (a) deals with passing of award which would include interest up to the date on which the award is made. The second part i.e. clause (b) deals with grant of interest on the ‘sum’ awarded by the arbitral tribunal.

The Court noted that the Bench had observed that under Section 31(7) of the 1996 Act, an arbitral tribunal has the power to grant – (i) pre-award (ii) pendente lite (iii) post-award interest. The Bench explained the reason for award of such interest in the following manner:

From the provisions contained in Section 31(7) of the 1996 Act, it is evident that an arbitral tribunal has the power to grant (i) pre-award (ii) pendente lite (iii) post-award interest. Intention behind awarding pre-award interest is primarily to compensate the claimant for the pecuniary loss suffered from the time the cause of action arose till passing of the arbitral award. 

Further, this is also to ensure that the arbitral proceeding is concluded within a reasonable period to minimise the impact of the pre-award interest as well as interest pendente lite; thereby promoting efficiency in the arbitration process. Similarly, grant of post-award interest also serves a salutary purpose. It primarily acts as a disincentive to the award debtor not to delay payment of the arbitral amount to the award holder.

Thus, what Section 31(7)(a) has done is that there is now a statutory recognition of the power of the arbitral tribunal to grant pre-reference interest from the date on which the cause of action arose till the date on which the award is made. There was a vacuum in the Arbitration Act, 1940 as there was no such provision for granting pre-reference interest. It was through judicial pronouncements that such power of the arbitrator to grant pre-reference interest was conferred. Now under Section 31(7)(a) of the 1996 Act, such power is statutorily recognized.

A careful and minute reading of clause (a) of sub-section (7) of Section 31 of the 1996 Act makes it clear that the arbitral tribunal has the discretion to include in the sum awarded interest at such rate as it deems reasonable on the whole or any part of the money awarded for the whole or any part of the period from the date on which the cause of action arose till the date on which the award is made. 

The Supreme Court excluded that part of the sentence ‘on the whole or any part of the money’ from its analysis since it thought it was not relevant to the controversy. If we exclude this portion, what then becomes discernible is that the arbitral tribunal has the discretion to include in the sum awarded : firstly, interest at such rate as it deems reasonable; and secondly, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. This would mean that the arbitral tribunal can exclude a period from the date on which the cause of action arose till the date on which the award is made for the purpose of grant of interest, as has been done in the present case. It would also mean that the arbitral tribunal can grant interest for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. It can be a composite period or the said period can be further sub-divided, as done in the present case i.e. from the date of cause of action to filing of the claim and from the date of filing of the claim till the date of the award excluding the period when the appellant was found to be remiss. It would also mean that there can be one rate of interest for the whole period or one or more rates of interest for the sub-divided periods as has been done in the instant case.

In Court's opinion, this would be the correct approach to interpret Section 31(7)(a), given the scheme of the 1996 Act.

That being the position, we are of the view that the Division Bench had fallen in error by holding that the arbitral tribunal had no jurisdiction to award interest for two periods i.e.pre-reference and pendente lite when the statute provides for only one period viz. from the date when the cause of action arose till the date of the award. The view expressed by the High Court is not the correct interpretation of Section 37(1)(a) of the 1996 Act as explained by us supra as well as in Pam Developments Private Limited (supra) and S.A. Builders Ltd. (supra).

The Supreme Court dealt with the second issue on which the High Court set aside the directions of the arbitral tribunal contained in paragraph 58(b) of the award. According to the Division Bench, the arbitral tribunal had committed an illegality in forging the principal amount with interest while computing the awarded amount on which future interest is to be paid. Interest awarded for the past period could not have been subjected to further levy of interest during the pendente lite or post award period on merger with the principal amount as this would amount to levy of compound interest.

This aspect of the matter is no longer res integra.

In State of Haryana vs. S.L. Arora (2010) 3 SCC 690, a 2-Judge Bench of the Supreme Court observed that as regards pre-award period,interest has to be awarded as specified in the contract and in the absence of any contract, as per the discretion of the arbitral tribunal. However, with regard to the post-award period, the interest is payable as per the discretion of the arbitral tribunal and in the absence of exercise of such discretion, at the mandatory statutory rate of 18 percent per annum. Award of interest like award of cost are ancillary matters. Therefore, the expressions sum for which the award is made and the sum directed to be paid by an arbitral award contextually refers to the award on the substantive claims and not ancillary or consequential directions relating to interest or cost. It was held that arbitral tribunals did not have the power to award interest upon interest or compound interest either for the pre-award period or for the post-award period.

A 3-Judge Bench of the Supreme Court in Hyder Consulting (UK) Ltd. vs. Governor, State of Orissa (2015) 2 SCC 189 opined that it was not possible to agree with the conclusion in S.L.Arora (supra) that Section 31(7) of the 1996 Act does not require that interest which accrues till the date of the award be included in the sum from the date of the award for calculating the post award interest. Justice Bobde (as His Lordship then was) authoring the majority opinion was of the view that the conclusion reached in S.L. Arora (supra) did not seem to be in consonance with the clear language of Section 31(7) of the 1996 Act. Hyder Consulting (UK) Ltd. (supra) declared that S.L.Arora (supra) was wrongly decided in that it held that a sum directed to be paid by an arbitral tribunal and the reference to the award on the substantive claim did not refer to interest pendente lite awarded on the sum directed to be paid upon award and that in the absence of any provision of interest upon interest in the contract, the arbitral tribunal did not have the power to award interest upon interest or compound interest either for the pre-award period or for the post-award period. It has been clarified that the ‘sum’ includes the principal as adjudged together with the interest granted.

A three-Judge Bench of this Court in UHL Power Company Ltd. vs. State of Himachal Pradesh (2022) 4 SCC 116 declared that the judgment in S.L. Arora (supra) has since been overruled by a three-Judge Bench of this Court in Hyder Consulting (UK) Ltd. (supra). The majority view in Hyder Consulting (UK) Ltd. (supra) is that post-award interest can be granted by an arbitrator on the interest amount awarded.

This view was reiterated by the Supreme Court in subsequent decisions (please see Delhi Airport Metro Express Private Ltd. vs. Delhi Metro Rail Corporation (2022) 9 SCC 286 and Morgan Securities and Credits Private Ltd. vs. Videocon Industries Limited (2023) 1 SCC 602.

In S.A. Builders (supra), this very Bench of the Court after a thorough analysis of Section 31(7)(a) and Section 31(7)(b) of the 1996 Act had come to the following conclusion:

It emerged from the analysis that "the ‘sum’ so awarded by the arbitral tribunal which may include interest from the date when the cause of action arose to the date of the award, would carry further interest of 18 percent from the date of the award to the date of payment unless the arbitral award otherwise directs (referring to the pre 23.10.2015 position). Thus, the legislative intent is that the awarded sum whether inclusive of interest or not, in case included, then from the date of cause of action to the date of award, would carry further interest from the date of the award to the date of payment."

The Court concluded: "It has been held that the sum awarded would mean the principal amount plus the interest awarded from the date of cause of action upto the date of the award. The sum awarded in Section 31(7)(a) would mean principal amount plus the interest awarded. Thereafter, as per Section 31(7)(b) of the 1996 Act, the sum (principal amount + interest) would carry further interest at the rate of 2 per cent higher than the current rate of interest prevalent on the date of the award to the date of payment. Therefore, in view of the clear legal position delineated as above, impugned judgment of the Division Bench dated 01.08.2023 cannot be sustained."