Section 34(1) of the Indian Arbitration and Conciliation Act 1996 (the Act) provides for recourse to a court against an arbitral award by way of an application to set aside the award.

Section 34(3) of the Act provides that an application to challenge the arbitration award must be made within three months from the date of receipt of the arbitration award, provided that if sufficient cause is shown for delay, the court is empowered to extend this time limit further for a period of thirty days but not thereafter.

Section 37 of the Act provides for appeal against, inter alia, the refusal of an application challenging the arbitral award.

In this case, M/s Hindustan Construction Company Ltd. (the respondent) entered into a contract with the State of Maharashtra (the appellant) for construction of civil works. Differences arose between the parties with respect to the amounts due and other issues and the dispute was referred to arbitration. The arbitral tribunal awarded an amount of 178,125,152.00 Indian Rupees (INR) to be paid by the appellant to the respondent. The appellant challenged the arbitral award under section 34 of the Act before the district judge but the application was rejected.

The appellant appealed to the Bombay High Court under section 37 of the Act. Pending a decision on the appeal, and a long time after the expiry of the period specified under section 34(3) of the Act, the appellant made an application to amend the Memorandum. The court dismissed the application for amendment on the basis that it sought to raise additional grounds for setting aside the arbitration award which cannot be permitted after the expiry of the time limit prescribed in section 34(3). The appellant appealed against the Bombay High Court's decision to the Supreme Court by way of a Special Leave Petition.

In deciding whether the courts have the power to allow an amendment of the Memorandum after the expiry of the time limit specified under section 34(3) of the Act, the Supreme Court first analysed its judgments in Ganesh Trading Co v Moji Ram, LJ Leach and Company Ltd v Jardine Skinner and Co, Pirgonda Hongonda Patil v Kalgonda Shidgonda Patil, Jai Jai Ram Manohar Lal v National Building Material Supply, Gurgaon and the Privy Council’s judgment in Charan Das and Others v Amir Khan and Others. An analysis of these judgments showed clearly that it is an established principle with respect to original proceedings that leave to amend pleadings and particulars can be granted by the court even after the expiry of the time limit, if the amendment is considered to be in the "interest of justice". Further, referring to its judgment in Harcharan v State of Haryana, the Supreme Court observed that the same power extends to an appeal court in respect of an amendment to the memorandum of an appeal.

The Supreme Court then proceeded to consider whether the same principle extended to amendment to the Memorandum. The court referred to its judgments in Madan Lal v Sunder Lal and Another, UOI v Popular Construction Company and Consolidated Engineering Enterprises, in which it was held that the time limit prescribed under section 34(3) of the Act was absolute. However, the Supreme Court was of the opinion that even so, the legislature could not have intended the provision to have such an effect that no amendment to an application for setting aside an award, however material or relevant it may be for consideration by the court, could be made after the prescribed time limit had expired, even though the application for setting aside the arbitral award had been made in time.

The court concluded that the principle (as stated above) applicable to the original proceedings or other appeals was also applicable to an amendment to the Memorandum. The court, distinguishing the Bombay High Court judgment in Vastu Invest and Holdings Pvt. Ltd, Mumbai v Gujarat Lease Financing Limited, Mumbai and its judgment in Bijendra Nath Srivastava v Mayank Srivastava, held that unless the amendment sought to add an independent ground which amounted to filing a fresh application or to add material "facts" as opposed to material "particulars", the court had the power to allow such amendment after the expiry of the time limit in section 34(3) of the Act.

However, on the facts of the case, the Supreme Court observed that the additional grounds sought to be added by way of amendment to the Memorandum were new grounds, containing new facts and without any foundation in the original application for setting aside the award. The court thus held that since such new grounds cannot be allowed to be added by way of amendment, the Bombay High Court decision to refuse to grant leave to amend the Memorandum was correct.

This decision clarifies that:

This decision correctly applies the principle that amendments must not be allowed unless exceptional circumstances exist, such that refusal to amend in such circumstances would result in grave injustice. It also assists in the expeditious disposal of challenges to awards in so far as it requires parties to raise all the grounds of challenge to the award in the original application.