Delay In Challenging Arbitral Award Not Condoned When Party Lacks Due Diligence: Calcutta High Court

The Calcutta High Court on 20 May held that a party cannot invoke Section 14 of the Limitation Act, 1963 to save a delayed challenge to an arbitral award after pursuing proceedings before the wrong forum without due diligence and bona fide conduct.

A Division Bench of Justices Debangsu Basak and Md. Shabbar Rashidi also held that once the High Court entertains an application under Section 29A of the Arbitration and Conciliation Act, 1996, exclusive jurisdiction thereafter vests in it for all subsequent arbitral proceedings, including a challenge to the award and dismissed an appeal filed by Kamlesh Kumar Agarwala. It observed:

“In order to avail the benefits under Section 14 of the Limitation Act, the party claiming benefits has to establish that there was observance of due diligence on the part of such party in pursuing the proceedings in the wrong forum.”

The dispute arose from differences relating to property at 14, R.G. Kar Road, Kolkata. Nirmal Kumar Jain, representing the Estate of Manjan Devi Patni, initiated arbitration proceedings against Kamlesh Kumar Agarwala.

On 28 February 2018, the arbitral tribunal directed Agarwala to pay Rs. 1.10 crore with interest and hand over vacant possession of the property along with related documents. Prior to the award, the Calcutta High Court had, on 5 September 2017, allowed an application under Section 29A of the Arbitration Act extending the arbitrator's mandate.

Agarwala nevertheless challenged the award before the District Judge at Alipore under Section 34 of the Arbitration Act. The Estate of Manjan Devi Patni objected to the maintainability of the petition, contending that, by virtue of Section 42, exclusive jurisdiction vested in the High Court after it entertained the Section 29A proceedings.

The District Judge accepted the objection on 14 August 2018 and returned the Section 34 petition. Agarwala thereafter filed a revisional application under Article 227 of the Constitution, which the High Court dismissed on 24 January 2019.

He subsequently filed a fresh Section 34 petition before the High Court on 6 February 2019. On 2 March 2020, the High Court dismissed the petition as barred by limitation. Agarwala then filed an appeal under Section 37 challenging that order.

Before the Division Bench, Agarwala argued that the time spent before the Alipore Court and in the revisional proceedings should be excluded under Section 14 of the Limitation Act since the initial filing before the District Judge was a bona fide jurisdictional error.

The Estate of Manjan Devi Patni argued that Agarwala had participated in the earlier Section 29A proceedings before the High Court and was therefore fully aware that jurisdiction vested exclusively in the High Court.

The Bench noted that “the appellant was well aware of filing of application under Section 29A before the High Court at Calcutta and in fact, it was contested by the appellant there.”

Holding that Agarwala continued litigating before the wrong forum despite such knowledge and failed to explain why he filed a fresh Section 34 petition instead of representing the returned petition before the competent court, the Court refused to extend the benefit of Section 14 of the Limitation Act.

The judges also observed that “In terms of the forum selection clause envisaged under Section 42 of the Act of 1996, the High Court on its Original Side is the first Court having jurisdiction to entertain an application under Section 34.”

Accordingly, the High Court dismissed the appeal and affirmed that the challenge to the arbitral award was barred by limitation.

Appearances for appellant (Kamlesh Kumar Agarwala): Advocates Uttam Sharma and Vrinda Kedia.

Appearances for respondent (The Estate of Manjan Devi Patni, represented by Nirmal Kumar Jain): Advocates Rajeev Kr. Jain, Kunal Shaw and Yamini Mahanka.