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Saturday, March 19, 2011

Challenge to Arbitration Award & Limitation : The Law

Justice Aftab Alam
In a recent decision, the Supreme Court in State of Maharashtra v M/s Ark Builders Pvt. Ltd., examined whether the period of limitation for making an application under section 34 of the Arbitration and Conciliation Act, 1996 for setting aside an arbitral award is to be reckoned from the date a copy of the award is received by the objector by any means and from any source, or it would start running from the date a signed copy of the award is delivered to him by the arbitrator?

9. The High Court upheld the submissions made on behalf of the claimant-respondent, affirmed the view taken by the Principal District Judge and by judgment and order dated October 6, 2009 dismissed the appeal filed by the appellants. It took note of section 31(5) and section 34(3) of the Act and the decision of this Court in Tecco Trichy Engineers & Contractors but rejected the appellant's contention highlighting that the word used in section 31(5) is `delivered' and not `dispatched'. The High Court held and observed as follows:

"17. It is to be noted that sub-section (5) of Section 31 prescribes that after arbitral award is made, a signed copy shall be `delivered' to each party. The word `delivered' appearing in Section 31(5) cannot be equated with `dispatched'. A distinction has to be made between these two words. The `Shorter Oxford English Dictionary' gives meaning of the word `delivered' as, "to bring and handover a letter, a parcel to the proper recipient or address". "Deliver" means: (i) bring and handover (a letter or goods) to the proper recipient; formally hand over (someone); and (iii) provide (something promised or expected). Thus, what is important is that the copy of the award should be handed over to the proper recipient or addressee. In this view of the matter, sub-section (5) of Section 31 does not require that a copy of the arbitral award should be sent off by the Arbitrator to the concerned party, but it is required that copy of the arbitral award be handed over to the proper parties.

18. In the instant matter, admittedly the copy of award was received by the Executive Engineer in the month of April 2003. However, appellants did not act till January 2004 for about nine months. Thus, for their inaction, appellants have to blame only themselves. In the instant matter, it cannot be said that there is non compliance of sub-section (5) of Section 31 of the Act of 1996. There is sufficient compliance of the provisions of Section 31(5), as admittedly, appellants received copy of the award in the month of April, 2003. Appellants thereafter did not take steps in respect of raising challenge to the award and allowed the matter to remain in cold storage. The delay occasioned in presenting the application is essentially because of the lapses committed by the appellants only."

10. The appellants are now before this court by grant of special leave. The two provisions of the Arbitration and Conciliation Act, 1996, relevant to answer the question raised in the case are sections 31 and 34. Section 31 deals with `form and contents of arbitral award; and in so far as relevant for the present provides as follows:

"31. Form and contents of arbitral award.- (1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal.

(2) xxxxxxxxxxx

(3) xxxxxxxxxxx

(4) xxxxxxxxxxx

(5) After the arbitral award is made, a signed copy shall be delivered to each party.

(6), (7), (8) xxxxxxxxxxx

(emphasis added)

Section 31(1) obliges the members of the arbitral tribunal/arbitrator to make the award in writing and to sign it and sub-section (5) then mandates that a signed copy of the award would be delivered to each party. A signed copy of the award would normally be delivered to the party by the arbitrator himself. The High Court clearly overlooked that what was required by law was the delivery of a copy of the award signed by the members of the arbitral tribunal/ arbitrator and not any copy of the award.

11. Section 34 of the Act then provides for filing an application for setting aside an arbitral award, and sub-section (3) of that section lays down the period of limitation for making the application in the following terms: "34. Application for setting aside arbitral award.-(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub- section (2) and sub-section (3).

(2) xxxxxxx

(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 sufficient 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 thereafter.

(4) xxxxxxx"

The expression "..party making that application had received the arbitral award.." can not be read in isolation and it must be understood in light of what is said earlier in section 31(5) that requires a signed copy of the award to be delivered to each party. Reading the two provisions together it is quite clear that the limitation prescribed under section 34 (3) would commence only from the date a signed copy of the award is delivered to the party making the application for setting it aside.

12. We are supported in our view by the decision of this Court in Union of India v. Tecco Trichy Engineers & Contractors, (2005) 4 SCC 239; in paragraph 8 of the decision it was held and observed as follows: "8. The delivery of an arbitral award under sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be "received" by the party. This delivery by the Arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings." (emphasis added)

13. The highlighted portion of the judgment extracted above, leaves no room for doubt that the period of limitation prescribed under section 34(3) of the Act would start running only from the date a signed copy of the award is delivered to/received by the party making the application for setting it aside under section 34(1) of the Act. The legal position on the issue may be stated thus. If the law prescribes that a copy of the order/award is to be communicated, delivered, dispatched, forwarded, rendered or sent to the parties concerned in a particular way and in case the law also sets a period of limitation for challenging the order/award in question by the aggrieved party, then the period of limitation can only commence from the date on which the order/award was received by the party concerned in the manner prescribed by the law.

14. We may here refer to a decision of the Patna High Court in Dr. Sheo Shankar Sahay v. Commissioner, Patna Division and Ors., 1965 BLJR 78. Section 18(1) of the Bihar Building (Lease, Rent and Eviction) Control Act, 1947 prescribed a period of limitation of 15 days for filing an appeal against an order of the House Controller and provided as follows: "any person aggrieved by an order passed by the Controller may, within fifteen days from the date of receipt of such order by him, prefer an appeal in writing to the appellate authority" It was contended on behalf of the petitioner before the High Court that the order-sheet of the House Controller was shown to the lawyer of the respondent on June 10, 1959 and therefore, that would be the starting point of limitation under section 18(1) of the Bihar Building (Lease, Rent and Eviction) Control Act, 1947. A division bench of the High Court consisting of Chief Justice V. Ramaswami (as his Lordship then was) and Justice N.L. Untwalia (as his Lordship then was) rejected the submission observing as follows:

"2. ... But we shall assume that the petitioner is right in alleging that the order was shown to the lawyer on the 10th June, 1959. Even so, we are of opinion that the appeal preferred by respondent no.4 before the Collector of Shahabad was not barred by limitation. The reason is that Sec. 18(1) provides limitation of fifteen days "from the date of receipt of the order" and not from the date of communication of the order. It is significant that Sec. 14 of the Bihar House Rent Control Order, 1942, had provided that "any person aggrieved by an order of the Controller may, within fifteen days from the date on which the order is communicated to him, present an appeal in writing to the Commissioner of the division". Sec. 18(1) of Bihar Act III of 1949 is couched in different language. In our opinion, Sec. 18(1) implies that the Controller is bound, as a matter of law, to send a written copy of his order to the person aggrieved, and limitation for filing an appeal does not start unless and until the copy of the order is sent. In the present case it is not disputed that no copy of the order was sent to respondent no.4. It is true that the respondent himself applied for a copy of the order on the 11th December, 1959, and obtained a copy on the 14th December, 1959. In any event, therefore, limitation will not start running against respondent no.4 under Sec. 18(1) of the Act till the 14th December, 1959, and as the appeal was filed on the 26th December, 1959, there is no bar of limitation in this case...."

(emphasis added)

15. We are in respectful agreement with the view taken by the Patna High Court in the case of Dr. Sheo Shankar Sahay.

16. In light of the discussions made above we find the impugned order of the Bombay High Court unsustainable. The High Court was clearly in error not correctly following the decision of this Court in Tecco Trichy Engineers & Contractors and in taking a contrary view. The High Court overlooked that what section 31(5) contemplates is not merely the delivery of any kind of a copy of the award but a copy of the award that is duly signed by the members of the arbitral tribunal.

1 comment:

  1. Dear Moderators,

    Case Laws supported Article is splendid and of tremendous use for practice.

    Thanks for your efforts and concern.

    Rabin Majumder
    Advocate-on-Record
    Supreme Court of India
    New Delhi

    ReplyDelete

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