M/s. Consolidated Engineering Enterprises Versus Principal Secretary, (Irrigation Department) and OTHERS [ ALL SC 2008 APRIL]

KEYWORDS:- APPLICABILITY OF LIMITATION LAW IN ARBITRATION

AIR 2008 SCW 4182 : JT 2008 (6) SC 22 : (2008) 6 SCALE 748 : (2008) 7 SCC 169

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M/s. Consolidated Engineering Enterprises	Appellant
Versus
Principal Secretary, (Irrigation Department) and OTHERS	Respondent

WITH

Hatti Gold Mines Co. Ltd.	Appellant
Versus
Vinay Heavy Equipments	Respondent

(Before : K. G. Balakrishnan, C.J.I. R. V. Raveendran And J. M. Panchal, JJ.)

Civil Appeal Nos.2461 with 2462 of 2008 (arising out of SLP (C) Nos. 10311 with 15619 of 2005, Decided on : 03-04-2008.

Arbitration and Conciliation Act, 1996—Sections 34 and 43—Delay—Limitation Act, 1963—Sections 5 and 14—Application of—Provisions have to be interpreted so as to advance the cause of justice rather than abort the proceedings—Principle of exclusion of timeTime Where any expression of it occurs in any Rules, or any judgment, order or direction, and whenever the doing or not doing of anything at a certain time of the day or night or during a certain part of the day or night has an effect in law, that time is, unless it is otherwise specifically stated, held to be standard time as used in a particular country or state. (In Physics, time and Space never exist actually-“quantum entanglement”) spent in bona fide litigious activity can be applied to the proceedings under the Act—Held: That provisions of Section 14 of Act of 1963 apply to the proceedings.

Counsel for the Parties:

R. F. Nariman, Sr. Advocate, Joseph Poockatt, Nikhil Majithia, Prashant Kumar, A. S. Bhasme, Varun Thakur, Hage Lampu and Sanjay R. Hegde, with him for the appearing parties.

JudgmentJudgment The statement given by the Judge on the grounds of a decree or order - CPC 2(9). It contains a concise statement of the case, points for determination, the decision thereon, and the reasons for such decision - Order 20 Rule 4(2). Section 354 of CrPC requires that every judgment shall contain points for determination, the decision thereon and the reasons for the decision. Indian Supreme Court Decisions > Law declared by Supreme Court to be binding on all courts (Art 141 Indian Constitution) Civil and judicial authorities to act in aid of the Supreme Court (Art 144) Supreme Court Network On Judiciary – Portal > Denning: “Judges do not speak, as do actors, to please. They do not speak, as do advocates, to persuade. They do not speak, as do historians, to recount the past. They speak to give Judgment. And in their judgments, you will find passages, which are worthy to rank with the greatest literature….” Law Points on Judgment Writing > The judge must write to provide an easy-to-understand analysis of the issues of law and fact which arise for decision. Judgments are primarily meant for those whose cases are decided by judges (State Bank of India and Another Vs Ajay Kumar Sood SC 2022)

Raveendran, J—I respectfully agree with the judgment proposed by learned Brother Panchal, J. Having regard to the importance of the issue, I am add ing a few of my own reasons.

2. Two questions of law arise for our consideration :

(i) Whether Limitation Act, 1963 is inapplicable to a proceeding in a court, under the Arbitration and Conciliation Act, 1996?

(ii) Even if Limitation Act, 1963 is applicable, whether applicability of section 14 of the said Act is excluded to proceedings under section 34(1) of the Arbitration and Conciliation Act, 1996?

Re : Question No. (i) :

3. Learned counsel for the appellant contended that the Arbitration and Concili ation Act, 1996 (AC Act for short) is a self-contained Code relating to arbitration and all matters incidental thereto including limitation. He submitted that section 34(3) of AC Act prescribes the period of limitation for an application for setting aside the arbitral award, when such period can be extended and the limit to which it could be extended. Section 43 of the AC Act makes the provisions of the Limitation Act, 1963 (‘Limitation Act’ for short) applicable only to proceedings in arbitration and not to proceedings in court. Therefore, the provisions of Limitation Act are inapplicable to proceedings in a court under the AC Act.

4. To decide this question, reference to the relevant provisions of the AC Act and Limitation Act is necessary.

4.1) Part I of AC Act relates to arbitration. It contemplates a party approaching a court in three circumstances :

(a) for grant of interim measures under section 9;

(b) for setting aside an arbitral award, under section 34(1; and

As section 9 deals with applications for interim measures, the question of limitation does not arise. In regard to applications for setting aside an award under sub-section (1) of section 34, sub-section (3) thereof prescribes a limitation of three months, different from the period of one month prescribed in the Schedule to the Limitation Act. Section 37 does not prescribe any period of limitation for filing appeals. If Limitation Act is inapplicable to court proceedings under AC Act, there will be no limitation for filing appeals under section 37. If Limitation Act is applicable, the period of Limitation for appeals filed under section 37 of AC Act will be governed by Article 116 of the Schedule to the Limitation Act.

4.2) Section 43 of the AC Act, relates to limitation and it is extracted below :

“43. Limitation. – (1) The Limitation Act, 1963 (36 of 1963, shall apply to arbi trations as it applies to proceedings in Court.

(2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963, an arbitration shall be deemed to have commenced on the date referred in section 21.

(3) Where an arbitration agreementContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act. to submit future disputes to arbitration pro vides that any claimA Claim A claim is “factually unsustainable” where it could be said with confidence before trial that the factual basis for the claim is entirely without substance, which can be the case if it were clear beyond question that the facts pleaded are contradicted by all the documents or other material on which it is based. to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinionOpinion A judge's written explanation of a decision of the court. In an appeal, multiple opinions may be written. The court’s ruling comes from a majority of judges and forms the majority opinion. A dissenting opinion disagrees with the majority because of the reasoning and/or the principles of law on which the decision is based. A concurring opinion agrees with the end result of the court but offers further comment possibly because they disagree with how the court reached its conclusion. that in the circumstances of the case undue hardship would otherwise be caused, and not withstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper.

(4) 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 (36 of 1963, for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.”

Section 2(1)(e) of the Act defines ‘Court’ as follows :

“2(1)(e). ‘Court’ means the principal Civil Court of original jurisdictionJurisdiction Authority by which courts receive and decide cases. Limited Jurisdiction: the authority over only particular types of cases, or cases under a prescribed amount in controversy, or seeking only certain types of relief, the District Court is a court of limited jurisdiction. Original Jurisdiction: Jurisdiction of the first court to hear a case. in a dis trict, and includes the High Court in exercise of its ordinary original civil jurisdic tion, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes.”

4.3) Let me next refer to the relevant provisions of Limitation Act. Section 3 of the Limitation Act provides for the bar of limitation. It provides that subject to the provisions contained in sections 4 to 24 (inclusive, 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. Prescribed period” means that period of limitation computed in accordance with the provisions of the Limitation Act. ‘Period of limitation’ means the period of limitation prescribed for any suit, appeal or application by the Schedule to the Limitation Act (vide section 2(j) of the said Act). Section 29 of Limitation Act relates to savings. Sub-section (2) thereof which is relevant is extracted below :

“29(2) Where any special or local law prescribes for any suit, appeal or applica tion a period of limitation different from the period prescribed by the Schedule, the provisions of Section 3 shall apply as if such period were the period prescribed by the Schedule and for the purposes of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions con tained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.”

4.4) Article 116 of the Schedule prescribes the period of limitation for appeals to High Court (90 days) and appeals to any other court (30 days) under the Code of Civil Procedure, 1908. It is now well settled that the words ‘appeals under the Code of Civil Procedure, 1908’ occurring in Article 116 refer not only to appeals preferred under Code of Civil Procedure, 1908, but also to appeals, where the procedure for filing of such appeals and powers of the court for dealing with such appeals are governed by Code of Civil Procedure (See decision of the Constitution Bench in Vidyacharan Shukla vs. Khubchand Baghel – AIR 1964 SC 1099). Article 119 (b) of the Schedule prescribes the period of limitation for filing an application (under Ar bitration Act, 1940, for setting aside an award, as thirty days from the date of ser vice of notice of filing of the award.

5. AC Act is no doubt, a special law, consolidating and amending the law relating to arbitration and matters connected therewith or incidental thereto. AC Act does not prescribe the period of limitation, for various proceedings under that Act, except where it intends to prescribe a period different from what is prescribed in the Limi tation Act. On the other hand, Section 43 makes the provisions of Limitation Act, 1963 applicable to proceedings – both in court and in arbitration – under the AC Act. There is also no express exclusion of application of any provision of the Limi tation Act to proceedings under AC Act, but there are some specific departures from the general provisions of Limitation Act, as for example, the proviso to section 34(3) and sub-sections (2) to (4) of section 43 of the AC Act.

6. Where the Schedule to the Limitation Act prescribes a period of limitation for appeals or applications to any court, and the special or local law provides for filing of appeals and applications to the court, but does not prescribe any period of limita tion in regard to such appeals or applications, the period of limitation prescribed in the Schedule to the Limitation Act will apply to such appeals or applications and consequently the provisions of sections 4 to 24 will also apply. Where the special or local law prescribes for any appeal or application, a period of limitation different from the period prescribed by the Schedule to the Limitation Act, then the provisions of section 29(2) will be attracted. In that event, the provisions of section 3 of Limitation Act will apply, as if the period of limitation prescribed under the special law was the period prescribed by the Schedule to Limitation Act, and for the pur pose of determining any period of limitation prescribed for the appeal or application by the special law, the provisions contained in sections 4 to 24 will apply to the extent to which they are not expressly excluded by such special law. The object of section 29(2) is to ensure that the principles contained in sections 4 to 24 of Limita tion Act apply to suits, appeals and applications filed in a court under special or local laws also, even if it prescribes a period of limitation different from what is prescribed in the Limitation Act, except to the extent of express exclusion of the application of any or all of those provisions.

7. It may be noticed at this juncture that the Schedule to the Limitation Act prescribes the period of limitation only to proceedings in courts and not to any pro ceeding before a Tribunal or quasi-judicial authority. Consequently section 3 and section 29(2) of Limitation Act will not apply to proceedings before Tribunal. This means that the Limitation Act will not apply to appeals or applications before Tribu nals, unless expressly provided.

8. Learned counsel for the appellant contended that section 43 of the AC Act makes applicable the provisions of Limitation Act only to arbitrations, thereby ex pressing an intent to exclude the application to any proceedings relating to arbitra tion in a court. The contention of appellant ignores and overlooks section 29(2) of the Limitation Act and section 43(1) of the AC Act. Sub-section (1) of section 43 of the Act provides that the Limitation Act shall apply to Arbitrations as it applies to proceedings in court. The purpose of section 43 of AC Act is not to make Limitation Act inapplicable to proceedings before court, but on the other hand, make Limita tion Act applicable to arbitrations. As already noticed, the Limitation Act applies only to proceedings in court, and but for the express provision in section 43, the Limitation Act would not have applied to arbitration, as Arbitrators are Private Tri bunals and not courts. Section 43 of the AC Act, apart from making the provisions of Limitation Act, 1963 applicable to arbitrations, reiterates that Limitation Act ap plies to proceedings in court. Therefore, the provisions of Limitation Act, 1963 apply to all proceedings under the AC Act, both in court and in arbitration, except to the extent expressly excluded by the provisions of the AC Act.

Re : Question No. (ii) :

9. The learned counsel for the appellant next contended that even if Limitation Act applied, section 14 is excluded by reason of the proviso to section 34(3) and at best, prosecution before a wrong forum can be considered as a sufficient cause for explaining the delay, in which event condonation cannot be for a period in excess of 30 days. He submitted that sub-section (3) of section 34 prescribes the period of limitation for an application to set aside an award as three months, and the proviso thereto provides for extension of such period of limitation, by a period not exceed ing one month. He pointed out that the object of the AC Act is to expedite arbitration proceedings with minimal judicial intervention as is evident from Section 5 of that Act. He further submitted that the legislature, while incorporating a provision for extension of time for an application under section 34(1) of AC Act, on sufficient cause being shown, did not choose to incorporate any provision for excluding the time spent before a wrong court, and therefore, section 14 of the Limitation Act, 1963 is inapplicable; and even if the principle underlying section 14(2) of Limita tion Act is held to be applicable, as a sufficient cause for extension of the period of limitation, the extension on that ground can be only for a period not exceeding thirty days as provided in the proviso to sub-section (3) of section 34 of the AC Act. In Supplort of the aforesaid contentions, reliance is placed on the decisions of this Court in Commissioner of Sales Tax, U.P. V.Parson Tools and Plants, Kanpur (1975) 3 SCR 743, Union of India vs. Popular Construction Co. (2001) 8 SCC 470 ) and Fairgrowth Investments Ltd vs. Custodian (2004) 11 SCC 472. The Appellant also contended that the decision rendered by two Judges Bench of this Court in State of Goa vs. Western Builders (2006) 6 SCC 239 ) holding that section 14 of Limitation Act applied to applications under section 34 of the AC Act was not good law as it failed to notice the earlier decision of a larger Bench in Parson Tools and failed to follow Popular Construction.

10. The respondents, on the other hand, contended that having regard to sec tion 29(2) of the Limitation Act, provisions of sections 4 to 24 of that Act would apply for determining the period of limitation prescribed for an application under any special law, unless expressly excluded by such special law. The AC Act, which is a special law, prescribes a period of limitation for an application to set aside an award, different from what was prescribed under the Limitation Act. It also excludes application of section 5 of the Limitation Act to an application under section 34(1, by making an express provision in the proviso to section 34(3, for extension of period of limitation. Sections 4 and 6 to 24 of the Limitation Act would however apply to an application under section 34(1) of the AC Act, as they are not excluded. Respondents also contended that the question is squarely covered by the decision of this Court in State of Goa vs. Western Builders (2006) 6 SCC 239. They submitted that the decisions in Popular Construction (su pra) and Fairgrowth (supra) are inapplicable, as they deal with section 5 and not section 14 of the Limitation Act. They also contended that the decision in Parson Tools did not relate to a proceeding before a court, but a proceeding before a Tribunal.

11. Section 34 of AC Act relates to applications for setting aside an arbitral award. Sub-section (1) provides that recourse to a court against an arbitral award may be made only by an application for setting aside such an award in accordance with sub -sections (2) and (3). Sub-section 2 contains the grounds on which an arbitral award can be set aside. Sub-section (3) which is relevant is extracted below :

“34(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 suffi cient 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 thereaf ter.”

11.1. Section 5 of Limitation Act, providing for extension of prescribed period in certain cases, reads thus :

“5. : Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.”

**********

11.2. Section 14 of Limitation Act relates to exclusion of time of proceeding bona fide in court without jurisdiction. Sub-section (2) thereof relevant for our pur pose is extracted below :

“14(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceed ing, 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 na ture, is unable to entertain it.”

12. Sub-section (3) of section 34 of the AC Act prescribes the period of limita tion for filing an application for setting aside an award as three months from the date on which the applicant has received the arbitral award. The proviso thereto vests in the court, discretion to extend the period of limitation by a further period not ex ceeding thirty days if the court is satisfied that the applicant was prevented by suffi cient cause for not making the application within three months. The use of the words “but not thereafter” in the proviso makes it clear that even if a sufficient cause is made out for a longer extension, the extension cannot be beyond thirty days. The purpose of proviso to section 34(3) of AC Act is similar to that of Section 5 of the Limitation Act which also relates to extension of the period of limitation prescribed for any application or appeal. It vests a discretion in a court to extend the prescribed period of limitation if the applicant satisfies the court that he had sufficient cause for not making the application within the prescribed period. Section 5 of Limitation Act does not place any outer limit in regard to the period of extension, whereas the proviso to sub-section (3) of section 34 of the AC Act places a limit on the period of extension of the period of limitation. Thus the proviso to sub-section 34(3) of the AC Act is also a provision relating to extension of period of limitation, but differs from section 5 of the Limitation Act, in regard to period of extension, and has the effect of excluding section 5 alone of the Limitation Act.

13. On the other hand, Section 14 contained in Part III of Limitation Act does not relate to extension of the period of limitation, but relates to exclusion of certain period while computing the period of limitation. Neither sub-section (3) of section 34 of the AC Act nor any other provision of the AC Act exclude the applicability of section 14 of the Limitation Act to applications under section 34(1) of the AC Act. Nor will the proviso to section 34(3) exclude the application of section 14, as sec tion 14 is not a provision for extension of period of limitation, but for exclusion of certain period while computing the period of limitation. Having regard to section 29(2) of Limitation Act, section 14 of that Act will be applicable to an application under section 34(1) of the AC Act. Even when there is cause to apply section 14, the limitation period continues to be three months and not more, but in computing the limitation period of three months for the application under section 34(1) of the AC Act, the time during which the applicant was prosecuting such application before the wrong court is excluded, provided the proceeding in the wrong court was pros ecuted bona fide, with due diligence. Western Builders therefore lays down the correct legal position.

14. Reliance placed by the appellant on the decision of three Judges of this Court in Parson Tools (supra) is totally misplaced. That decision re lated to section 10(3B) of the U. P. Sales Tax Act, 1958 which provided a limitation period of one year for invoking the revisional jurisdiction and further provided that the revising authority may on sufficient cause being shown, entertain an application within a further period of six months. The appellant con tended that section 10(3B) of the U.P. Sales Tax Act considered in Parsons Tools is similar to proviso to section 34(3) of the AC Act and therefore the following obser vations in Parson Tools, with reference to section 10(3B) of U. P. Sales Tax Act, making section 14(2) of the Limitation Act inapplicable to a revision under section 10(3B) of U. P. Sales Tax Act, would also make section 14(2) inapplicable, to an application under section 34(1) of the AC Act :

“Three features of the scheme of the above provision are noteworthy. The first is the no limitation has been prescribed for the suo motu exercise of its jurisdiction by the Revising Authority. The second is that the period of one year prescribed as limi tation for filing an application for revision by the aggrieved party is unusually long. The third is that the Revising Authority has no discretion to extend this period be yond a further period of six months, even on sufficient cause shown. As rightly pointed out in the minority judgment of the High Court, pendency of proceedings of the nature contemplated by section 14(2) of the Limitation Act, may amount to a sufficient cause for condoning the delay and extending the limitation for filing a revision application, but S. 10 (3-B) of the Sales Tax Act, gives no jurisdiction to the Revising Authority to extend the limitation, even in such a case, for a further period of more than six months.”

“………..We are of the opinion that the object, the scheme and language of S.10 of the Sales-Tax Act do not permit the invocation of S.14(2) of the Limitation Act, either, in terms, or, in principle, for excluding the time spent in prosecuting proceed ings for setting aside the dismissal of appeals in default, from computation of the period of limitation prescribed for filing a revision under the Sales-tax. “

[Emphasis Supplied )

The said observations have to be read and understood with reference to the issue that was being considered in that case. In Parson Tools, this court did not hold that section 14(2) was excluded by reason of the wording of section 10(3B) of the Sales Tax Act. This Court was considering an appeal against the Full Bench decision of the Allahabad High Court. Two Judges of the High Court had held that the time spent in prosecuting the application for setting aside the order of dismissal of appeals in default, could be excluded when computing the period of limitation for filing a revision under section 10 of the said Act, by application of the principle underlying section 14(2) of the Limitation Act. The minority view of the third Judge was that the revisional authority under section 10 of the U P Sales Tax Act did not act as a court but only as a Revenue Tribunal and therefore the Limitation Act did not apply to the proceedings before such Tribunal, and consequently neither sec tion 29(2) nor section 14(2) of Limitation Act applied. The decision of the Full Bench was challenged by the Commissioner of Sales Tax before this Court, contending that the Limitation Act did not apply to tribunals, and section 14(2) of Limitation Act as excluded in principle or by analogy. This Court upheld the view that Limitation Act did not apply to Tribunals, and that as the Revisional Authority under section 10 of UP Sales Tax Act was a Tribunal and not a court, Limitation Act was inapplicable. This Court further held that the period of pendency of proceedings before the wrong forum could not be excluded while computing the period of limitation by applying section 14(2) of Limitation Act. This Court however held that by applying the prin ciple underlying section 14(2, the period of pendency before the wrong forum may be considered as a ‘sufficient cause’ for condoning the delay, but then having regard to section 10(3B, the extension on that ground could not extend beyond six months. The observation that pendency of proceedings of the nature contemplated by section 14(2) of the Limitation Act, may amount to a sufficient cause for condoning the delay and extending the limitation and such extension cannot be for a period in excess of the ceiling period prescribed, are in the light of its finding that section 14(2) of Limitation Act was inapplicable to revisions under section 10(3B) of U. P. Sales Tax Act. These observations cannot be interpreted as laying down a proposition that even where section 14(2) of Limitation Act in terms applied and the period spent before wrong forum could therefore be excluded while computing the period of limitation, the pendency before the wrong forum should be considered only as a sufficient cause for extension of period of limitation and therefore, subjected to the ceiling relating to the extension of the period of limitation. As we are concerned with a proceeding before a court to which section 14(2) of Limitation Act applies, the decision in Parson Tools which related to a proceeding before a tribunal to which section 14(2) of Limitation Act did not apply, has no application.

15. The decision in Popular Construction is also of no assis tance. That decision makes it clear that AC Act, 1996 being a special law, and section 34 thereof prescribing a period of limitation different from that prescribed under the Limitation Act and providing a ceiling on the period by which the period of limitation could be extended, the corresponding provisions in the Limitation Act prescribing the period of limitation for filing an application for setting aside an award (Article 119(b) of the Schedule to Limitation Act ) and for extending the period of limitation for sufficient cause (section 5 of the Limitation Act, were inapplicable. It did not relate to applicability of section 14(2) of Limitation Act. Nor did this Court consider the applicability of section 14(2). Therefore, the decision in Popular Construction will not apply. Fairgrowth merely reiterates the principle in Popular Construction in regard to the exclusion of section 5 of Limitation Act, as is evident from the following observations :

“……….the general rule as far as special and local Acts are concerned is that the specified provisions including Section 5 of the Limitation Act will apply provided the special or local Act provides a period of limitation different from that prescribed under the Limitation Act. There is an additional requirement viz. that the special local Act does not expressly exclude the application of the Limitation Act.”

Therefore it has to be held that section 14(2) of the Limitation Act, 1963 is appli cable to proceedings under section 34(1) of the AC Act.

16. I agree that the appeal arising from SLP (C) No. 10311/2005 is to be dis missed and appeal arising from SLP (C) No. 15619/2005 is to be allowed.

17. J.M. PANCHAL, J. :- Civil Appeal No. 2461 of 2008 @ SLP(C) No. 10311/ 2005

Leave granted.

18. The instant appeal is directed against judgment dated April 4, 2005 rendered by the Division Bench of the High Court of Karnataka at Bangalore in Misc. First Appeal No.4465 of 2003, by which, decision dated October 24, 2002 passed by the learned District Judge, Bangalore Rural District, Bangalore in A.S. No. 2 of 2000 dismissing the application submitted by the appellant under Section 34 of the Arbi tration and Conciliation Act, 1996 (the Act for short) as time barred has been set aside and the matter is remanded to the District Court with a direction to proceed further with the matter in accordance with law.

19. The appellant is an enterprise engaged in civil engineering construction as well as development of infrastructure. It entered into an agreement dated January 20, 1989 with the respondent for construction of earthen bund, head sluices and the draft channel of the Y.G. Gudda tank. During the subsistence of the contractContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act., dis putes arose between the parties. Therefore, the appellant invoked Arbitration clause No. 51 of the agreement pursuant to which the disputes were referred to the sole arbitrator for adjudication. The sole arbitrator made his award on April 10, 1999 in favour of the appellant. Feeling aggrieved by the said award, the respondents pre ferred an application dated July 5, 1999 to set aside the award as contemplated by Section 34 of the Act in the court of learned Civil Judge (Senior Division, Ramanagaram, Bangalore Rural District. The said application was registered as A.C. No. 1 of 1999. It was realized by the respondents that an application for setting aside the award should have been filed before the learned Principal District Judge, Banga lore District (Rural). Therefore, the respondents submitted an application on July 26, 2000 in the Court of learned Civil Judge (Senior Division, Ramanagaram with a request to transfer the application made for setting aside the award to the court of learned Principal District Judge (Rural, Bangalore. The learned Civil Judge (Senior Division, Ramanagaram passed an order directing return of the suit records for presentation before the proper court. The respondents collected the papers from the court of learned Civil Judge (Senior Division, Ramanagaram and presented the same in the court of learned Principal District Judge, Bangalore (Rural) on August 21, 2000. The present application for setting aside the award, filed by the respon dents, was numbered as A.S. No. 2 of 2000. The District Court framed preliminary issue for determination which was as under :

“Whether the defendant proves that the present suit is barred by the limitation under Section 34(3) of the Arbitration and Conciliation Act, 1996.” The respondents examined one witness and produced certain documents whereas on behalf of the appellants one witness was examined. After appreciating the evidenceEvidence All the means by which a matter of fact, the truth of which is submitted for investigation, is established or disproved. Bharatiya Sakshya (Second) Adhiniyam 2023 and hearing the learned counsel for the parties, the learned District Judge held that the suit/application for setting aside the award, was time barred and dismissed the same by his judgment dated October 24, 2002.

20. Thereupon the respondents invoked appellate jurisdiction of the High Court of Karnataka at Bangalore by filing Misc. First Appeal No.4465 of 2003 under Sec tion 37 of the Act. The issue, namely, whether the provisions of Sections 12 and 14 of the Limitation Act, 1963 are applicable to an application filed under Section 34 of the Act was pending for consideration in other matters also. The appeal filed by the respondents was, therefore, taken up for hearing with other matters. The Division Bench of the High Court of Karnataka was of the view that the learned District Judge, Bangalore Rural District, Bangalore committed an error in holding that Sec tion 14 of the Limitation Act was not applicable to an application submitted under Section 34 of the Act and, therefore, the time taken during which the respondents had been prosecuting in the court of learned Civil Judge (Senior Division, Ramanagaram was not excludable. On facts, the High Court held that there was no lack of bona fide on the part of the respondents and that the respondents had dili gently prosecuted the matter before the other court. In view of these conclusions, the High Court by Judgment dated April 4, 2005 set aside the decision dated October 24, 2002 rendered by the learned District Judge, Bangalore (Rural) in A.S. No.2 of 2000 and has directed the learned District Judge to proceed further with the matter in accordance with law, giving rise to the instant appeal.

Civil Appeal No……… of 2008 @ SLP (C) NO. 1561 9/2005

21. Leave granted.

22. This appeal is directed against the judgment dated April 4, 2005 rendered by the Division Bench of the High Court of Karnataka in W.P. No. 7089 of 2003 by which it is held that Sections 12 and 14 of the Limi tation Act are applicable to an application submitted under Section 34 of the Act, but the appellant is not entitled to exclusion of time as contem plated by Section 14 of the Limitation Act, because the appellant had not prosecuted application for setting aside the award made by the arbitrator, in other courts, with due diligence and in good faith.

23. The appellant is a public sector undertaking of the Government of Karnataka. It had invited tenders by way of public notification for mining and transporting ore from Ajjanahalli mine to Ingaldal. The tender submitted by the respondent was ac cepted on May 10, 1999 and an agreement was entered into between the parties. The respondent was directed to commence the work from May 26, 1999 and to deploy required number of vehicles etc. The respondent did not follow the instructions given by the appellants and, therefore, disputes arose between the parties. The appellant and the respondent mutually agreed to terminate the contract as per the clause men tioned in the contract. The respondent made claim with respect to the works done by it during the subsistence of the contract. The claim was not accepted by the Appellant. Therefore the dispute was referred to the sole arbitrator for adjudication as stipulated by the contract. The arbitrator made his award on March 15, 2002. The appellant filed an application on June 6, 2002 in the court of learned Civil Judge (Senior Division, Chitradurga to set aside the award made by the arbitrator on the footing that the court of learned Civil Judge (Senior Division) was the Principal Civil Court of original jurisdiction in the District and that two other cases, namely, Arbitration Case No. 1/97 and 1/2001 were also pending in the court of learned Civil Judge (Senior Division, Chitradurga. After sometime, the appellant realized that the appropriate court before which an application for setting aside the award should have been made was the court of learned District Judge, Chitradurga. Therefore, the appellant filed an application under order VII, Rule 10A seeking prayer to return the application to it for presentation before the District Court, Chitradurga. The learned Civil Judge (Senior Division, Chitradurga after hearing the learned counsel for the parties directed the appellant to present the application made under Section 34 of the Act before the District Court, Chitradurga by an order dated October 29, 2002 and directed the parties to appear before the learned District Judge on November 21, 2002. In view of the directions given by the learned Civil Judge (Senior Division, Chitradurga the appellant presented the application filed under Section 34 of the Act before the District Court, Chitradurga on November 21, 2002. The respondent raised a preliminary objection regarding jurisdiction of the learned District Judge, Chitradurga to entertain the application submitted under Section 34 of the Act on the ground that the agreement was entered into between the parties within the jurisdic tion of city of Bangalore and, therefore, the City Civil Court, Bangalore had juris diction to entertain the application filed by the appellant. The learned District Judge, Chitradurga by an order dated February 3, 2003 held that he had no jurisdiction to entertain the application submitted by the appellant and accordingly returned the application, for presentation before the appropriate court. The appellant thereafter presented the application for setting aside the award, before the VIth Additional City Civil Court, Bangalore on February 10, 2003 which was registered as an appeal. Along with the appeal, the appellant also filed an application under Section 14 read with Section 5 of the Limitation Act and prayed to exclude the time taken in pros ecuting the proceedings bona fide before the two courts which had no jurisdiction. The learned Judge of City Civil Court, Bangalore dismissed the application, as time barred, by an order dated July 17, 2003. Thereupon the appellant invoked extra ordinary jurisdiction of the High Court of Karnataka under Article 226 of the Con stitution by filing Writ Petition No.7089 of 2003. The questions posed for consider ation of the High Court was, whether the provisions of Sections 12 and 14 of the Limitation Act were applicable to an application filed under Section 34 of the Act and whether the appellant had prosecuted the matter in other courts with due diligence and in good faith. After hearing the learned counsel for the parties, the High Court by Judgment dated April 4, 2005 held that the provisions of Sections 12 and 14 of the Limitation Act are applicable to a proceeding under the Act. However, on appreciation of facts the High Court held that the appellant had not prosecuted the matter in other courts, with due diligence and in good faith. In view of the above mentioned conclusion the High Court has dismissed the writ petition filed by the appellant vide Judgment dated April 4, 2005, giving rise to the instant appeal.

24. This Court has heard the learned counsel for the parties at length and in great detail as well as considered the documents submitted by the parties.

25. The question posed for consideration before the Court is whether the provi sion of Section 14 of the Limitation Act would be applicable to an application sub mitted under Section 34 of the Act of 1996 for setting aside the award made by the arbitrator. In order to resolve the controversy it would be advantageous to refer to certain provisions of the Limitation Act and Section 34 of the Act of 1996. Section 14 and relevant part of S. 29(2) of the Limitation Act, necessary for the purpose of deciding the issue, read as under :

“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 or of a 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 proceed ing, 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 na ture, is unable to entertain it.

(3) Notwithstanding anything contained in Rule 2 of Order XXIII 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 purpose 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 prosecut ing a proceeding.

(c) misjoining of parties or of cause of action shall be deemed to be a cause of a like nature with defect of jurisdiction.”

“29(2). Where any special or local law prescribes for any suit, appeal or applica tion a period of limitation different from the period prescribed by the Schedule, the provision of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.” However, Section 34 of the Arbitration and Conciliation Act, 1996 reads as under :

“34. Application for setting aside arbitral award. –

(1) Recourse to a Court against an arbitral award may be made only by an appli cation for setting aside such award in accordance with sub-section (2) and sub-sec tion (3).

(2) An arbitral award may be set aside by the Court only if –

(a) the party making the application furnishes proof that – (i) a party was under some incapacity; or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appoint ment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award 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 :

Provided that, if the decisions on matters submitted to arbitration can be sepa rated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

(b) the Court finds that –

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation – Without prejudice to the generality of sub-clause (ii) of clause (b, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.

(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 :

(4) On receipt of an application under sub-section (1, the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.”

26. A bare reading of sub-section (3) of Section 34 read with the proviso makes it abundantly clear that the application for setting aside the award on the grounds mentioned in sub-section (2) of Section 34 will have to be made within three months. The period can further be extended, on sufficient cause being shown, by another period of 30 days but not thereafter. It means that as far as application for setting aside the award is concerned, the period of limitation prescribed is three months which can be extended by another period of 30 days, on sufficient cause being shown to the satisfaction of the Court. Section 29(2) of the Limitation Act, inter alia pro vides that where any special or local law prescribes for any suit, appeal or applica tion a period of limitation different from the period of limitation prescribed by the schedule, the provisions of Section 3 shall apply as if such period was the period prescribed by the schedule and for the purpose of determining any period of limita tion prescribed for any suit, appeal or application by any special or local law, the provisions contained in Sections 4 to 24 shall apply only insofar as, and to the ex tent, they are not expressly excluded by such special or local law. When any special statute prescribes certain period of limitation as well as provision for extension up to specified time limit, on sufficient cause being shown, then the period of limitation prescribed under the special law shall prevail and to that extent the provisions of the Limitation Act shall stand excluded. As the intention of the legislature in enacting sub-section (3) of Section 34 of the Act is that the application for setting aside the award should be made within three months and the period can be further extended on sufficient cause being shown by another period of 30 days but not thereafter, this Court is of the opinion that the provisions of Section 5 of the Limitation Act would not be applicable because the applicability of Section 5 of the Limitation Act stands excluded because of the provisions of Section 29(2) of the Limitation Act.

27. However, merely because it is held that Section 5 of the Limitation Act is not applicable to an application filed under Section 34 of the Act for setting aside an award, one need not conclude that provisions of Section 14 of the Limitation Act would also not be applicable to an application submitted under Section 34 of the Act of 1996.

28. Section 14 of the Limitation Act deals with exclusion of time of proceeding bona fide in a court without jurisdiction. On analysis of the said Section, it becomes evident that the following conditions must be satisfied before Section 14 can be pressed into service :

(1) Both the prior and subsequent proceedings are civil proceedings prosecuted by the same party;

(2) The prior proceeding had been prosecuted with due diligence and in good faith;

(3) The failure of the prior proceeding was due to defect of jurisdiction or other cause of like nature;

(4) The earlier proceeding and the latter proceeding must relate to the same mat ter in issue and;

(5) Both the proceedings are in a court.

The policy of the Section is to afford protection to a litigant against the bar of limitation when he institutes a proceeding which by reason of some technical defect cannot be decided on meritsMerits Strict legal rights of the parties; a decision “on the merits” is one that reaches the right(s) of a party as distinguished from a disposition of the case on a ground not reaching the rights raised in the action; for example, in a criminal case double jeopardy does not apply if charges are nolle prossed before trial commences, and in a civil action res judicata does not apply if a previous action was dismissed on a preliminary motion raising a technicality such as improper service of process. and is dismissed. While considering the provisions of Section 14 of the Limitation Act, proper approach will have to be adopted and the provisions will have to be interpreted so as to advance the cause of justice rather than abort the proceedings. It will be well to bear in mind that an element of mistake is inherent in the invocation of Section 14. In fact, the section is intended to provide relief against the bar of limitation in cases of mistaken remedy or selection of a wrong forum. On reading Section 14 of the Act it becomes clear that the legislature has enacted the said section to exempt a certain period covered by a bona fide litigious activity. Upon the words used in the section, it is not possible to sustain the interpretation that the principle underlying the said section, namely, that the bar of limitation should not affect a person honestly doing his best to get his case tried on merits but failing because the court is unable to give him such a trial, would not be applicable to an application filed under Section 34 of the Act of 1996. The principle is clearly applicable not only to a case in which a litigant brings his application in the court, that is, a court having no jurisdiction to entertain it but also where he brings the suit or the application in the wrong court in consequence of bona fide mistake or law or defect of procedure. Having regard to the intention of the legisla ture this Court is of the firm opinion that the equity underlying Section 14 should be applied to its fullest extent and time taken diligently pursuing a remedy, in a wrong court, should be excluded.

29. At this stage it would be relevant to ascertain whether there is any express provision in the Act of 1996, which excludes the applicability of Section 14 of the Limitation Act. On review of the provisions of the Act of 1996 this Court finds that there is no provision in the said Act which excludes the applicability of the provi sions 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 provi sions of the Limitation Act, 1963 applicable to arbitration proceedings. The pro ceedings 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 commence ment 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 appli cable to an application submitted under Section 34 of the Act of 1996 more particu larly where no provision is to be found in the Act of 1996, which excludes the appli cability 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 juris diction 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 Act of 1996 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 4 months. From the scheme and language of Section 34 of the Act of 1996, 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 Act of 1996 for set ting aside an arbitral award.

30. We may notice that in similar circumstances the Division Bench of this Court in State of Goa vs. Western Builders, (2006) 6 SCC 239 has taken a similar view. As observed earlier the intention of the legislature in enacting Section 14 of the Act is to give relief to a litigant who had approached the wrong forum. No canon of construction of a statute is more firmly established than this that the purpose of interpretation is to give effect to the intention underlying the statute. The interpretation of Section 14 has to be liberal. The language of beneficial provision contained in Section 14 of the Limitation Act must be construed liberally so as to Supplress the mischief and advance its object. Therefore, it is held that the provisions of Section 14 of the Limitation Act are applicable to an application sub mitted under Section 34 of the Act of 1996 for setting aside an arbitral award.

31. The plea that in view of the decision rendered by three Judge Bench of this Court in Commissioner of Sales Tax, Uttar Pradesh vs. Parson Tools and Plants, Kanpur, (1975) 3 SCR 743 the provisions of Section 14 of the Limitation Act should not be held to be applicable to an application filed under Section 34 of the Act, has no substance. The question determined in the Commis sioner of Sales Tax, Uttar Pradesh (supra) was whether under the circumstances of the case, Section 14 of the Limitation Act extended the period for filing of the revi sions by the time during which the restoration application remained pending as be ing prosecuted bona fide. In the said case, Sales-Tax Officer had made two assess ment orders. The assessee had filed appeals before the Appellate Authority. The appeals were dismissed in default as the assessee did not remain present on the specified date. The assessee filed two applications for setting aside such dismissal, under Rule 68(6) of the U.P. Sales Tax Rules. During the pendency of the applica tion a Single Judge of Allahabad High Court declared Rule 68(5) of the Rules ultra vires under which the appeals were dismissed for default. In view of the ruling of High Court, the Appellate Authority dismissed the appeals. The assessee, therefore, filed two revision petitions. They were filed more than 18 months after the dismissal of the appeals. The revisions were accompanied by two applications in which the assessee had prayed for exclusion of time spent by him in presenting the aborting proceedings under Rule 68(6) for setting aside the dismissal of his appeals. The revisional authority excluded the time spent in those proceedings from computation of limitation by applying Section 14 of the Limitation Act. The High Court dis missed the Reference made on the motion of the Commissioner of Sales-Tax. In appeal, this Court held that (1) if the legislature in a special statute prescribes a certain period of limitation, then the Tribunal concerned has no jurisdiction to treat within limitation, an application, by excluding the time spent in prosecuting in good faith, on the analogy of Section 14(2) of the Limitation Act and (2) the Appellate Authority and Revisional Authority were not courts but were merely administrative Tribunals and, therefore, Section 14 of the Limitation Act did not, in terms, apply to the proceedings before such Tribunals. From the judgment of the Supreme Court in Commissioner of Sales Tax, U.P. (supra, it is evident that essen tially what weighed with the Court in holding that Section 14 of the Limitation Act was not applicable, was that the Appellate Authority and Revisional Authority were not courts. The stark features of the revisional powers pointed out by the court, showed that the legislature had deliberately excluded the application of the principles underlying Sections 5 and 14 of the Limitation Act. Here in this case, the Court is not called upon to exmine scope of revisional powers. The Court in this case is dealing with Section 34 of the Act which confers powers on the Court of the first instance to set aside an award rendered by an arbitrator, on specified grounds. It is not the case of the contractor that the forums before which the Government of India undertaking had initiated proceedings for setting aside the arbitral award are not courts. In view of these glaring distinguishing features, this Court is of the opin ion that the decision rendered in the case of Commissioner of Sales Tax, Uttar Pradesh, Lucknow (supra) did not decide the issue which falls for consideration of this Court and, therefore, the said decision cannot be construed to mean that the provisions of Section 14 of the Limitation Act are not applicable, to an application submitted under Section 34 of the Act of 1996.

32. The contention that in view of the decision of Division Bench of this Court in Union of India vs. Popular Constructions Co., (2001) 8 SCC 470 the Court should hold that the provisions of Section 14 of the Limitation Act would not apply to an application filed under Section 34 of the Act, is devoid of substance. In the said decision what is held is that Section 5 of the Limitation Act is not applicable to an application challenging an award under Section 34 of the Act. Section 29(2) of the Limitation Act inter alia provides that where any special or local law prescribes, for any application, a period of limitation different from the period prescribed by the schedule, the provisions contained in Sections 4 to 24 shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law. On introspection, the Division Bench of this Court held that the provisions of Section 5 of the Limitation Act are not applicable to an appli cation challenging an award. This decision cannot be construed to mean as ruling that the provisions of Section 14 of the Limitation Act are also not applicable to an application challenging an award under Section 34 of the Act. As noticed earlier, in the Act of 1996, there is no express provision excluding application of the provi sions of Section 14 of the Limitation Act to an application filed under Section 34 of the Act for challenging an award. Further, there is fundamental distinction between the discretion to be exercised under Section 5 of the Limitation Act and exclusion of the time provided in Section 14 of the said Act. The power to excuse delay and grant an extension of time under Section 5 is discretionary whereas under Section 14, exclusion of time is mandatory, if the requisite conditions are satisfied. Section 5 is broader in its sweep, than Section 14 in the sense that a number of widely different reasons can be advanced and established to show that there was sufficient cause in not filing the appeal or the application within time. The ingredients in respect of Sections 5 and 14 are different. The effect of Section 14 is that in order to ascertain what is the date of expiration of the prescribed period, the days excluded from oper ating by way of limitation, have to be added to what is primarily the period of limi tation prescribed. Having regard to all these principles, it is difficult to hold that the decision in Popular Construction Co. (supra) rules that the provisions of Section 14 of the Limitation Act would not apply to an application challenging an award under Section 34 of the Act.

33. As this Court holds that Section 14 of the Limitation Act, 1963 is applicable to an application filed under Section 34 of the Act, 1996 for setting aside an award made by an arbitrator, the appeal arising from Special Leave Petition (C) No. 10311 of 2005 will have to be dismissed because the Division Bench of the High Court of Karnataka has in terms held that there was no lack of bona fide on the part of the respondents and that the respondents had diligently prosecuted the matter before the other court and had also immediately after coming to know the lack of jurisdiction of the court had filed the memo seeking withdrawal of the appeal and presented the same before the lower court which had the jurisdiction.

34. As far as the appeal arising from Special leave Petition (C) No. 15619 of 2005 is concerned, this Court finds that the view taken by the High Court of Karnataka that the provisions of Sections 12 and 14 of the Limitation Act, 1963 are applicable to the proceedings under the Arbitration and Conciliation Act, 1996 is eminently just and is hereby upheld. However, this Court finds it difficult to uphold the finding recorded by the Division Bench of the High Court that the appellant had not pros ecuted the matter in other courts with due diligence and in good faith and was, there fore, not entitled to exclusion of time taken in prosecuting the matter in wrong courts.

35. To attract the provisions of Section 14 of the Limitation Act, five conditions enumerated in the earlier part of this Judgment have to co-exist. There is no manner of doubt that the section deserves to be construed liberally. Due diligence and cau tion are essentially pre-requisites for attracting Section 14. Due diligence cannot be measured by any absolute standards. Due diligence is a measure of prudence or activity expected from and ordinarily exercised by a reasonable and prudent person under the particular circumstances. The time during which a court holds up a case while it is discovering that it ought to have been presented in another court, must be excluded, as the delay of the court cannot affect the due diligence of the party. Sec tion 14 requires that the prior proceeding should have been prosecuted in good faith and with due diligence. The definition of good faith as found in Section 2(h) of the Limitation Act would indicate that nothing shall be deemed to be in good faith which is not done with due care and attention. It is true that Section 14 will not help a party who is guilty of negligence, lapse or inaction. However, there can be no hard and fast rule as to what amounts to good faith. It is a matter to be decided on the facts of each case. It will, in almost every case be more or less a question of degree. The mere filing of an application in wrong court would not prima facie show want of good faith. There must be no pretended mistake intentionally made with a view to delaying the proceedings or harassing the opposite party. In the light of these prin ciples, the question will have to be considered whether the appellant had prosecuted the matter in other courts with due diligence and in good faith. As is evident from the facts of the case, initially the appellant had approached the court of learned Civil Judge, Senior Division, Chitradurga for setting aside the award made by the arbitra tor. On direction dated October 29, 2002 issued by the learned Civil Judge (Senior Division, Chitradurga, the appellant had presented the application for setting aside the award before the learned District Judge, Chitradurga. Before the learned District Judge, Chitradurga an objection was raised by the respondent that the application was not maintainable before the said court and that the application was maintainable before the learned Judge, City Civil Court, Bangalore. The District Judge, Chitradurga by an order dated February 3, 2003 held that it had no jurisdiction to entertain the application submitted by the applicant and accordingly returned the application for presentation before the appropriate court. The question of jurisdiction was seriously contested between the parties not only before the court of learned Civil Judge (Se nior Division, Chitradurga but also before the learned District Judge, Chitradurga. The question of jurisdiction had to be considered by the courts below because of establishment of City Civil Court, Bangalore under a special enactment and in view of the definition of the word court as given in Section 2(e) of the Arbitration and Conciliation Act, 1996 which means the principal civil court of original jurisdiction in a district. The record does not indicate that there was pretended mistake inten tionally made by the appellant with a view to delaying the proceeding or harassing the respondent. There was an honest doubt about the court competent to entertain the application for setting aside the award made by the arbitrator. The mere fact that the question of jurisdiction is an arguable one would not negative good faith because the appellant believed bona fide that the court in which it had instituted the proceeding had jurisdiction in the matter. By filing the application in the courts which had no jurisdiction to entertain the same, the appellant did not achieve any thing more particularly when the lis was never given up. Under the circumstances this Court is of the opinion that the Division Bench of the High Court of Karnataka was not justified in concluding that the appellant had not prosecuted the matter in other courts with due diligence and in good faith. The said finding being against the weight of evidence on record, is liable to be set aside and is hereby set aside. We, therefore, hold that the appellant had prosecuted the matter in other courts with due diligence and in good faith and, therefore, is entitled to claim exclusion of time in prosecuting the matter in wrong courts. Therefore, the appeal arising from SLP(C) No. 15619 of 2005 will have to be allowed.

36. For the foregoing reasons civil appeal arising from SLP(C) No. 10311 of 2005 fails and is dismissed. The judgment rendered by the Division Bench of the High Court of Karnataka on April 4, 2005, in W.P. No. 7089 of 2003 dismissing the application filed by the appellant under Section 34 of the Arbitration and Concilia tion Act, 1996 for setting aside the award of the arbitrator, is set aside, and civil appeal arising from SLP(C) No. 15619 of 2005, is allowed. The Division Bench of the High Court of Karnataka is directed to proceed further with the matter in accor dance with law. There shall be no order as to costsCosts Subject to any written law, costs are at the discretion of the Court, and the Court has the power to determine all issues relating to the costs of or incidental to all proceedings, including by whom and to what extent the costs are to be paid, at any stage of the proceedings or after the conclusion of the proceedings. Generally “Costs” includes charges, disbursements, expenses, fees, and remuneration. Costs in any matter are payable from the date of the order of the Court unless the parties otherwise agree. The costs of a third-party funding contract are not recoverable as part of the costs of, or costs. in both the appeals.