Sikkim High Court Sets Aside Section 34 Order Passed Without Calling Arbitral Records

The High Court of Sikkim held that a Commercial Court cannot decide a Section 34 challenge to an arbitral award without first calling for the arbitral tribunal’s records, setting aside the impugned order and remanding the matter for fresh consideration.

The High Court of Sikkim at Gangtok has set aside an order of the Commercial Court, Gangtok, passed under Section 34 of the Arbitration and Conciliation Act, 1996, on the ground that the Commercial Court decided the challenge to an arbitral award without calling for the records of the Arbitral Tribunal. The Division Bench, led by Chief Justice A. Muhamed Mustaque and Justice Bhaskar Raj Pradhan, held that calling for arbitral records is an essential statutory requirement before any ground under Section 34 can be adjudicated. The matter has been remanded to the Commercial Court, Gangtok, for fresh consideration on all issues, including a contested limitation objection, after the records are received from the Tribunal.

The Contract and the Arbitral Award

M/s Nar Bahadur Dahal (NBD), a contractor engaged by the Union of India, carried out road improvement work from Gangtok to Nathula. The contract was entered into in 2009–10 and its terms were extended up to 31 March 2015.

Disputes arose and the matter went to arbitration before Justice Pranab Kumar Chattopadhyay (Retd.), a former Judge of the Calcutta High Court, acting as Sole Arbitrator. The Arbitral Tribunal allowed the counterclaims filed by the contractor and rejected the claims raised by the Union of India. The Union of India was directed to pay &rupee;23,21,54,534 (Rupees Twenty-Three Crores Twenty-One Lakhs Fifty-Four Thousand Five Hundred and Thirty-Four).

The Division Bench noted that an earlier arbitrator had been appointed in the matter, but those proceedings were not taken to a logical conclusion before the present award came to be passed by the subsequent Arbitrator.

The Limitation Objection Before the Commercial Court

The Union of India challenged the award before the Commercial Court, Gangtok, under Section 34. One of the specific grounds raised was that the contractor’s counterclaims were time-barred. The Union of India argued that the contractor had worked only until 31 March 2015, making that the starting point for the three-year limitation period. The counterclaim was preferred on 14 September 2022 — well beyond that window.

The Union of India also pointed to a letter dated 28 March 2017, in which the contractor had written to the Department stating that he had no claim, which the Union argued was inconsistent with the counterclaims subsequently filed.

The Arbitral Tribunal had, however, given reasons for overruling the limitation objection after appreciating the materials and records before it.

The Commercial Court, Gangtok, then passed its order under Section 34. It is admitted before the Division Bench that this order was passed without calling for the records from the Arbitral Tribunal.

Why the Division Bench Found the Commercial Court’s Approach Impermissible

The Division Bench identified a clear statutory infirmity. Section 34(2) of the Act provides that a court may set aside an award if the party making the application establishes its case “on the basis of the record of arbitral tribunal.” The Bench held that this language makes the arbitral record an indispensable requirement: without it, the court cannot arrive at any conclusion on any of the grounds raised under Section 34, whether on limitation or otherwise.

The Bench relied on the Supreme Court’s decision in Alpine Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal, 2023 SCC OnLine SC 55, which had settled that applications under Section 34 are summary proceedings and that an application for setting aside an award will not ordinarily require anything beyond the record that was before the arbitrator. The Supreme Court had further clarified this position in Emkay Global Financial Services Limited v. Girdhar Sondhi, (2018) 9 SCC 49, and Canara Nidhi Limited v. M. Shashikala and Others, (2019) 9 SCC 462.

The Bench also drew on the Jharkhand High Court’s decision in Oil and Natural Gas Corporation Limited v. H.N. Roy, 2025 SCC OnLine Jhar 1994, which had applied the same principle and held that the arbitral record is necessary to decide the dispute and to ascertain the exact nature of the controversy.

The Division Bench concluded that the Commercial Court, Gangtok, could not have overruled the limitation objection — or addressed any other ground — merely on the basis of the arbitral award and oral submissions, without the underlying records.

The Limitation Question Left Open

The Bench took care to flag two legal questions on limitation that it deliberately left unresolved, reserving them for the Commercial Court on remand.

The first is whether, on the face of the records, the counterclaims were barred by limitation. The Bench observed that limitation is a question of both fact and law, governed by Section 3 of the Limitation Act, 1963, and grounded in public policy. A court can take note of a limitation plea on the face of the record and reject a claim if it is plainly time-barred, even without an express plea by the opposing party.

The second, more nuanced question concerns waiver of the limitation plea in the arbitration context. The Bench noted that unlike a court — which is a public forum established by the State and whose policy is to favour litigants who are alert and vigilant — an arbitral tribunal is a private forum. Whether a limitation plea can be waived before such a forum without being expressly raised is a question the Bench left open. It observed that the court under Section 34 must first determine whether the claim is barred by limitation; only if it reaches that finding does the question of waiver in the arbitration context arise.

Neither of these questions was decided. The Bench remanded the matter precisely because the Commercial Court had not had the records before it when it ruled.

Order

The Division Bench set aside the impugned judgment of the Commercial Court, Gangtok, passed under Section 34. The Commercial Court is directed to reconsider the matter afresh on all issues raised, within two months of receiving the records from the Arbitral Tribunal.

The parties are directed to appear before the Commercial Court, Gangtok, on 1 June 2026. The Commercial Court is to call for the records from the Tribunal and then proceed to hear all issues. Trial court records are to be remitted back to the Commercial Court, Gangtok.

The appeal was heard on 12 May 2026 and 14 May 2026. Judgment was delivered on 26 May 2026. Ms. Sangita Pradhan, Deputy Solicitor General of India, with Ms. Sittal Balmiki and Mr. Amit Kumar Sharma, appeared for the Union of India. Mr. Jorgay Namka, Senior Advocate, with Mr. Lahang Limboo and Mr. Sawal Rai, appeared for the contractor.