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Delay Beyond Three Months (plus One Month Extention) Is Not Condonable Under Section 34 (3) Of The Arbitration And Conciliation Act Especially When The Petitioner Fails To Give A Reasonable Explanation For The Delay: Delhi High Court

Shivani Negi ,
  21 February 2024       Share Bookmark

Court :
High Court of Delhi
Brief :

Citation :
2024 DHC 131

Case title:

NATIONAL RESEARCH DEVELOPMENT Corporation

Versus

CHROMOUS BIOTECH Pvt. Ltd.

Date of Order:

January 8th, 2024

Bench:

Justice Pratibha M. Singh

Parties:

NATIONAL RESEARCH DEVELOPMENT CORPORATION - Petitioners 

CHROMOUS BIOTECH PVT LTD – Respondent

SUBJECT

  • The central issue concerns an application for condonation of delay in filing a petition, with reference to Section 34(3) of the Arbitration and Conciliation Act, 1996.
  • After reviewing several precedents, the High Court concluded that in certain instances where petitions or applications filed by a party are notably deficient or contain fundamental defects, the filing by the party would be deemed non est, with no legal significance. In such circumstances, the party cannot avail themselves of the initial filing date, and instead, the date on which the defects are rectified must be considered as the date of the initial filing.
  • The petitioner’s application under section 34 of the Arbitration & Conciliation Act for seeking condonation of 54 days delay in refiling the present petition was dismissed by the Single Judge Bench of Justice Pratibha M. Singh as the petitioner failed to provide a reasonable explanation for the delay.

ABBREVIATIONS

  • National Research Development Corporation (hereinafter, ‘NRDC’) 
  • Department of Scientific and Industrial Research (hereinafter, ‘DSIR’)
  • The Arbitration and Conciliation Act, 1996 (hereinafter, “the Act”)

IMPORTANT PROVISIONS

  • Section 34 of the Act: Provides for the procedure to file an application to set aside the arbitral award. 
  • Section 34 (2)(iv) of the Act: Provides that an arbitral award may be set aside by the Court only if it 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.
  • Section 34(3) of the Act: Provides for a limitation period of 3 months for filing the application with a further 30 days extension period.

OVERVIEW

  • The Respondent proposed a malaria diagnostics kit for the Petitioners and a royalty agreement was signed in 2011, outlining the kit's development, design, standardization, validation, and cost estimation. 
  • The Respondent was obligated to transfer the 'know-how document' and enhancements if they failed to commercialize the technology within the specified timeframe, along with paying interest and royalties.
  • In accordance with Clause 13 of the royalty agreement, DSIR possessed the authority to terminate the agreement upon recommendation of the Project Review Committee (PRC) at any point if it determined that the funds had been misused, adequate progress was not being achieved, or the terms and conditions were not being followed.
  • DSIR had the option to reclaim funds from CBPL in case of unauthorized abandonment or termination of the project and to reimburse any unused grants and accrued interest.
  • The Respondent concluded the project on October 17, 2014, and recognized in March 2017 their incapacity to pay the royalty at that time, subsequently neglecting to return the developed technology.
  • Their offer to restore the technology via video contact after seven years was rejected by the petitioners and the Arbitral Tribunal was created in December 2021 as per Clause 15 (b) of the agreement.
  • The Delhi High Court designated a sole arbitrator who concluded that the claimants were not eligible for any compensation including royalty, damages, interest, or costs- thereby dismissing their claims.
  • The petitioner wanted to challenge the arbitral award before the High Court however, the period of 90 days plus 30 days, prescribed under section 34 (3) of the Act, expired on 9th April.
  • Therefore, the petitioner filed an application seeking condonation of delay

ISSUES RAISED

  • Whether the respondent should be obligated to pay interest and royalties as per the agreement.
  • Whether petitioners should be allowed to file an application seeking reason for the delay of 54 days.

ARGUMENTS FROM THE PETITIONER

The petitioner argued that the 54-day delay in refiling the current petition was unreasonably overlooked as the petition was filed on 2nd March 2023 and was returned under objections on 4th March 2023.

The petitioner also claimed that no efforts by the respondents were made by them to return the technology developed under the project for a long period.

ARGUMENTS FROM THE RESPONDENT

  • It was argued by the respondent that in a communication dated March 17th, 2021, the Respondent proposed to return the technology but the Petitioners declined to accept the same.
  • The application for condonation of delay was signed on May 24, 2023 and vakalatnama was executed on 2nd May, 2023. Therefore, the respondent urged that the 54-day delay should not be condoned by the Court.

JUDGEMENT ANALYSIS

  • The High Court took note of  the judgement of  the Supreme Court in Union of India v. Popular Construction (2001) 8 SCC 470 where it was observed that the time-limit prescribed under Section 34 of the Act is absolute.
  • Further relevance was given to the judgement in Simplex Infrastructure Ltd. v. Union of India (2019) 2 SCC 455, wherein it was established that the proviso to Section 34(3) of the Act allows for an extension of the specified period by an additional 30 days upon presentation of sufficient cause by the applying party. 
  • The Delhi High Court emphasized a key aspect in its judgment, highlighting that the Supreme Court's observation in the aforementioned case indicated that entertaining an application to set aside an Award beyond the extended period would undermine the significance of the phrase "but not thereafter" in Section 34 of the Act, 
  • It was observed that while the Court can allow delays beyond the prescribed three-month and thirty-day limitation period, the party is required to demonstrate that rectifying the defects within this timeframe was unfeasible due to uncontrollable reasons, as established in the Division Bench ruling of Delhi Development Authority v. Durga Construction Co. [2013 (139) DRJ 133 (DB)]. 
  • The important sections highlighted in the aforementioned case established that the party cannot benefit from the initial filing date, and the date on which the defects are rectified must be considered as the date of initial filing. 
  • There was a lack of plausibility regarding the filing of the petition in March 2023 without the execution of necessary documentation, such as the vakalatnama and statement of truth, which were completed only on May 24, 2023. 
  • The absence of proof or documentation supporting the filing in March 2023 rendered the assertion unreliable. Therefore, it was held that the delay was not condonable.

CONCLUSION

  • The Delhi High Court, considering the decisions of its division bench and the Supreme Court and the lack of concrete documentation, concluded that any delay exceeding three months plus one month was not acceptable for condonation, and further, the Petitioner's failure to offer a reasonable explanation left the Court unconvinced for granting condonation under Section 34(3) of the Act.
  • The petition was ultimately dismissed due to the exceeding of the timeframe stipulated under Section 34(3) of the Act, and pending applications were set aside.
     
 
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