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Limitation Period For Filing ‘Section 34’ Petition Commences From Date Of Receipt Of Signed Copy Of Arbitral Award By Parties: SC

 

In an interesting, important, impartial, immaculate and inevitably a must read judgment titled Dakshin Haryana Bijli Vitran Nigam Ltd. vs. M/S Navigant Technologies Pvt. Ltd. in Civil Appeal No. 791 of 2021 (Arising out of SLP (C) No. 10372/2020) delivered just recently on March 2, 2021, the Supreme Court has laid down clearly, cogently and convincingly that the period of limitation for filing the Petition under Section 34 of the Arbitration and Conciliation Act would commence from the date on which the signed copy of the award was made available to the parties. It was also observed that there can be no finality of the award, except after it is signed. Very rightly so!

To start with, this latest, learned, laudable and landmark judgment authored by Justice Indu Malhotra for herself and Justice Ajay Rastogi sets the ball rolling by first and foremost observing in para 1 that, “The present Civil Appeal arises from a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 by the Appellant-Bijli Vitrain Nigam to challenge the arbitral award dated 27.04.2018 passed by a three-member tribunal (2:1) in favour of the respondent company.”

To put things in perspective, it is then stated in para 2 that, “The issue which has arisen for our consideration is as to whether the period of limitation for filing the Petition under Section 34 would commence from the date on which the draft award dated 27.04.2018 was circulated to the parties, or the date on which the signed copy of the award was provided.

(i)                        The background facts emanate from a Service Level Agreement dated 02.05.2011 executed by the appellant-corporation in favour of the Respondent-company providing call centre services.

Clause 13 of the Agreement provided for resolution of disputes through arbitration by a three-member tribunal, under the Arbitration and Conciliation Act, 1996.             Clause 13 reads as :

“13. Arbitration

All matter question, disputes, differences and/or claims arising out of and/or concerning and/or in connection and/or in consequences or relating to the Contract whether or not obligations of either or both parties under the Contract be subsisting at the time of such dispute and whether or not the contract has been terminated or purported to be terminated or completed, shall be referred to the arbitration which shall be conducted by three arbitrators, one each to be nominated by the Service Provider and the Nigam (Arbitrator to be approved by the MD DHBVNL or authority of the Nigam) and the third to be named by the president of the institution of Engineers, India. If either of the parties fails to appoint its arbitrator within thirty (30) days after receipt of a notice from the other party invoking the arbitration clause, the president of the institution of Engineers, India, shall have the power at the request of either of the parties, to appoint the arbitrator. A certified copy of the order of the institution of engineers (India) making such an appointment will be furnished to each of the parties.

The decision of the majority of the arbitrators shall be final and binding upon the parties. The parties to the contract agree that the cost of arbitration shall be as per instructions to the Nigam issued/prevalent on the date of appointment of arbitral tribunal. The arbitrators may, from time to time, with the consent of the parties enlarge the time for making the award. In the event of any of the aforesaid arbitrators dying, neglecting, resigning or being usable to act for any reason, it will be lawful for the party concerned to nominate another arbitrator in place of the outgoing arbitrator.

The arbitrator shall have full powers to review and/or revise any decision, opinion, direction, certification or valuation of the Engineer in consonance with the Contract, and neither party shall be limited in the proceedings before such arbitrators to the evidence or arguments put before the engineer for the purpose of obtaining the said decision.

Subject to aforementioned provisions, the provisions of the Arbitration and Conciliation Act, 1996 and the Rules there under any statutory modifications thereof for the time being enforce, shall be deemed to apply to the Arbitration proceedings under the clause.”

(ii)                    On 16.10.2014, the appellant corporation terminated the Service Level Agreement, which led to disputes between the parties. The disputes were referred to arbitration by a three-member tribunal.

(iii)                 The arbitral tribunal orally pronounced the award [2:1] on 27.04.2018, whereby the claims of the respondent company were allowed. The parties were informed that the third arbitrator had disagreed with the view taken by the majority of arbitrators, and would be rendering his separate opinion. A copy of the draft award was provided to the parties to point out any computation, clerical or typographical errors in the award on the next date of hearing.

The proceedings of the tribunal dated 27.04.2018 read as under :

“27.04.2018

Present:-

Sh. Nishant Shrivastava, Advocate for the claimant with Sh. Ankur Bhatia, M.D. of the Claimant.

Sh. Ashish Goyal, Advocate and Sh. Sanjeev Sharma, JE for the respondent.

Vide separately recorded award dated today, claims of the claimant have been allowed with cost. Dr. Shiva Sharma has agreed with same, whereas Sh. D.S. Yadav has disagreed. He shall file his separate award. Copies free of costs, of the award have been supplied to both the Ld. Counsels for the parties. To come up on 12.05.2017, at 4:30 p.m. for award of Sh. D.S. Yadav, Arbitrator. On that date, parties are also required to show any computation error, any clerical or typographical error or any other error of similar nature occurred in the award if any.

Vinod Jain, D&S Judge(retd.) Presiding Arbitrator Sh. Shiva Sharma, D&S Judge (retd.) Sh.D.S. Yadav, Director, DHBVN (retd.)”

The matter was next posted to 12.05.2018.

(iv)                 On 12.05.2018, a copy of the dissenting opinion was provided by the third arbitrator to the parties (even though the opinion was dated 27.04.2018). The matter was then posted to 19.05.2018, for the parties to point out any typographical or clerical mistakes in the dissenting opinion delivered by the third arbitrator.

(v)                     On 19.05.2018, the tribunal recorded that both the parties had not filed any application to point out any clerical or typographical mistakes in the award, or dissenting opinion. On this date, the signed copy of the arbitral award was provided to both the parties, and the proceedings were terminated.

(vi)                 The Appellant-corporation filed its Objections under Section 34 on 10.09.2018 before the Ld. Civil Court, Hisar, Haryana vide Arbitration Petition No. 316/2018 to challenge the award dated 27.04.2018, along with an Application for condonation of delay.

It was submitted by the appellant corporation that the objections were filed within the period prescribed by Section 34(3) i.e. within 3 months and 30 days from the date of receipt of the signed award on 12.05.2018.

(vii)              The Civil Court dismissed the Application for condonation of delay vide Order dated 14.02.2019. It was held that the Appellant had received the majority award on 27.04.2018. Thus, the period of limitation starts running from the same date. Accordingly, the period of limitation of three months starts from 27.04.2018 i.e. the date on which the Appellant received the arbitral award. The proviso to Section 34(3) provides that if the Court is satisfied that the applicant was prevented from sufficient cause from making the application within 3 months, it may entertain the application within a further period of 30 days. In the present case, the application u/S. 34 was filed even after the expiry of the further period of 30 days. Merely because the dissenting opinion was erroneously styled as an award by the minority arbitrator, it cannot be said that the dissenting opinion attains the status of an award. Consequently, the objections were dismissed solely on the ground of delay.

(viii)          The appellant corporation filed Appeal No. 1954/2019 (O&M) under Section 37 of the Arbitration Act before the High Court.

The High Court vide the impugned Order dated 11.12.2019 affirmed the Order passed by the Civil Court. It was held that a reading of Section 31 clearly reflects that once an award is signed and communicated by the majority of arbitrators, the same would constitute an “award”. The signed copy of the majority award i.e. signed by two of the three arbitrators was received on 27.04.2018, and u/S. 34(3), the objections had to be filed within 3 months, which would expire on 27.07.2018. Even if the benefit of 30 days had been granted to the Appellants, the objections ought to have been filed by 26.08.2018, whereas the objections had been filed on 10.09.2018. There was no infirmity in the judgment of the Civil Court, and accordingly, the Appeal was dismissed.

(ix)                 Aggrieved by the rejection of the objections under Section 34 on the ground of delay, the appellant corporation has filed the present Appeal.”

Briefly stated, the key point made in para 4 of this notable judgment which deals with discussion and analysis is stated in sub-para (ix), (x), (xi) and others after noting that, “We have heard the Ld. counsel for the parties. In order to appreciate the rival contentions of the parties, we will first examine the scheme of the Arbitration and Conciliation Act, 1996.” and it is then stated that –

(ix)                 Sub-section (1) of Section 31 read with sub-section (4) makes it clear that the Act contemplates a single date on which the arbitral award is passed i.e. the date on which the signed copy of the award is delivered to the parties. Section 31 (5) enjoins upon the arbitrator / tribunal to provide the signed copy of the arbitral award to the parties. The receipt of a signed copy of the award is the date from which the period of limitation for filing objections u/S. 34 would commence. This would be evident from the language of sub-section (3) of Section 34(3) which reads :

“34. Application for setting aside arbitral award.

(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.”

(x)                     In Union of India v. Tecco Trichy Engineers & Contractors (2005) 4 SCC 239 , a three-judge bench of this Court held that the period of limitation for filing an application u/S. 34 would commence only after a valid delivery of the award takes place u/S. 31(5) of the Act. In para 8, it was held as under :

“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.”

(xi)                 The judgment in Tecco Trichy Engineers (supra) was followed in State of Maharashtra v. Ark Builders, (2011) 4 SCC 616 wherein this Court held that Section 31(1) obliges the members of the arbitral tribunal to make the award in writing and sign it. The legal requirement under sub-section (5) of Section 31 is the delivery of a copy of the award signed by the members of the arbitral tribunal / arbitrator, and not any copy of the award. On a harmonious construction of Section 31(5) read with Section 34(3), the period of limitation prescribed for filing objections would commence only from the date when the signed copy of the award is delivered to the party making the application for setting aside the award. If the law prescribes that a copy of the award is to be communicated, delivered, despatched, forwarded, rendered, or sent to the parties concerned in a particular way, and since the law sets a period of limitation for challenging the award in question by the aggrieved party, then the period of limitation can only commence from the date on which the award was received by the concerned party in the manner prescribed by law.

The judgment in Tecco Trichy has been recently followed in Anilkumar Jinabhai Patel v. Pravinchandra Jinabhai Patel (2018) 15 SCC 178.

(xvi) There is only one date recognised by law i.e. the date on which a signed copy of the final award is received by the parties, from which the period of limitation for filing objections would start ticking. There can be no finality in the award, except after it is signed, because signing of the award gives legal effect and finality to the award.

(xvii) The date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Indian Arbitration and Conciliation Act, 1996. It is from this date that: (a) the period of 30 days’ for filing an application under Section 33 for correction and interpretation of the award, or additional award may be filed; (b) the arbitral proceedings would terminate as provided by Section 32(1) of the Act; (c) the period of limitation for filing objections to the award under Section 34 commences.

(xviii) Section 34 provides recourse for judicial scrutiny of the award by a Court, upon making an application under sub-sections (2) and (3) for setting aside the award.

The period of limitation for filing the objections to the award u/S. 34 commences from the date on which the party making the application has “received” a signed copy of the arbitral award, as required by Section 31(5) of the 1996 Act.

Section 34(3) provides a specific time limit of three months from the date of “receipt” of the award, and a further period of thirty days, if the Court is satisfied that the party was prevented by sufficient cause from making the application within the said period, but not thereafter.

In Union of India v. Popular Construction, (2001) 8 SCC 470, this Court held that Section 5 of the Limitation Act, 1963 would not apply to applications filed under Section 34 of the Arbitration Act. It was held that :

“12. As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are “but not thereafter” used in the proviso to sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act. Parliament did not need to go further. To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose. No principle of interpretation would justify such a result.”

In Simplex Infrastructure v. Union of India, (2019) 12 SCC 455,  this Court held that the phrase “but not thereafter” provided under Section 34(3) of the Act makes it evident that the statutory period of limitation for filing an application for setting aside is three months, which is extendable by thirty days, if sufficient cause is made out. No further period of time can be granted for the filing of an application under Section 34.”

Be it noted, it is then stated in para 5 that, “Applying the law to the facts of the present case, we find from a perusal of the arbitral proceedings that even though the award was pronounced on 27.04.2018, the signed copy of the award was provided to the parties only on 19.05.2018. The procedural orders of the tribunal reveal that on 27.04.2018, only a copy of the award was provided to the parties to point out any computation error, any clerical or typographical error, or any other error of similar nature which may have occurred in the award on the next date. It was also recorded that the third arbitrator had dissented, and would be delivering his separate opinion. The proceedings were then posted for 12.05.2018.

On 12.05.2018, the third arbitrator pronounced his dissenting opinion. On that date, the tribunal posted the matter to 19.05.2018, to enable the parties to point out any typographical or clerical mistakes in the dissenting opinion, and for handing over the original record of the proceedings to the parties.

On 19.05.2018, the signed copy of the award and the dissenting opinion, alongwith the original record, were handed over to the parties, as also to each of the arbitrators. The tribunal ordered the termination of the proceedings.”

Of course, it is then very rightly stated in para 6 that, “We are of the considered opinion that the period of limitation for filing objections would have to be reckoned from the date on which the signed copy of the award was made available to the parties i.e. on 19.05.2018 in the instant case.”

Needless to say, it is then envisaged in para 7 that, “It is the admitted position that the objections were filed within the period of limitation prescribed by Section 34(3) of the Act, if reckoned from 19.05.2018. Undisputedly, in the instant case, the objections have been filed within the period of limitation prescribed under Section 34(3) from the date of receipt of the signed award.”

As a corollary, the Bench then holds in para 8 that, “In the aforesaid facts and circumstances, the Appeal deserves to succeed. The judgment of the Court of the District and Sessions Judge, Hissar, Haryana dated 14.02.2019, and the impugned order passed by the High Court of Punjab & Haryana dated 11.12.2019 are accordingly set aside.”

Finally, it is then held in the last para 9 that, “The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 being Arb. Pet. No. 316 of 2018 is restored to the file of the Court of District and Sessions Judge, Hissar, Haryana to be decided on merits in accordance with law. All pending applications are disposed of. Ordered accordingly.”

All said and done, this noteworthy judgment elaborates quite in detail as to why the limitation period for filing the ‘Section 34’ petition commences from the date of receipt of signed copy of arbitral award by parties. We have already discussed the same aforesaid. All the Courts must always follow this while ruling in similar such cases! There can be certainly no denying or disputing it!

Sanjeev Sirohi

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