Limitation period for filing a Section 34 Petition
begins from the Date of Receipt of the Signed Copy of the Arbitral Award
Introduction:
Recently, a division bench of the Supreme Court in Dakshin
Haryana Bijli Vitran Nigam Ltd. V. M/s Navigant Technologies Pvt. Ltd.[1] has inter
alia (i) clarified when the limitation period for challenging an
arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996
(“Arbitration Act”) commences; (ii) discussed the legal requirement and
significance of an award being signed; and (iii) highlighted the relevance of
dissenting opinions in arbitration proceedings. The Court has also made
observations on what happens to the underlying disputes between the parties
after an award is set aside.
Facts
A Service Level Agreement dated May 2, 2011 (“Agreement”)
was executed by Dakshin Haryana Bijli Vitran Nigam Limited (“the Appellant”)
in favour of M/s. Navigant Technologies Limited (“the Respondent”),
for providing call centre services. Clause 13 of the Agreement provided for
resolution of disputes vide arbitration by a three-member
tribunal, under the Arbitration Act. Subsequently, on October 16, 2014, the
Appellant terminated the Agreement leading to disputes between the parties,
which were referred to arbitration as stipulated under Clause 13 of the
Agreement.
On April 27, 2018, the arbitral tribunal orally pronounced its
award (in a 2:1 ratio), whereby the claims of the Respondent were allowed (“Award”).
The third arbitrator disagreed with the view taken by majority of the
arbitrators and the parties were informed that his opinion would be rendered
separately. A copy of the draft Award was provided to the parties to identify
any computation, clerical or typographical errors, which would be taken up
during the next hearing scheduled for May 12, 2018.
Thereafter, on May 12, 2018, a copy of the dissenting opinion
was provided by the third arbitrator to the parties (dated April 27, 2018) and
the matter was scheduled for May 19, 2018 to identify any clerical or
typographical mistakes in the same. As the parties had not filed any
application to point out any clerical or typographical mistakes, a signed copy
of the Award was provided to both the parties on May 19, 2018 and the
proceedings were duly terminated.
However, on September 10, 2018, the Appellant filed its
objections under Section 34 of the Arbitration Act before the Civil
Court, Hisar, Haryana (“Civil Court”) to challenge the Award, along with
an application for condonation of delay. It was submitted by the Appellant that
the objections were filed within the period prescribed by Section 34(3) of the
Arbitration Act, i.e., within three months and thirty days from the date of
receipt of the signed Award, i.e., on May 12, 2018.
The Civil Court dismissed the application for condonation of
delay vide its order dated February 14, 2019 and held that the
Appellant had received the majority Award on April 27, 2018. Thus, it was held
that the period of limitation would start running from the said date and the
objections to the Award were dismissed solely on the ground of delay.
Being aggrieved, the Appellant filed an appeal under Section 37
of the Arbitration Act before the High Court. The High Court vide its
order dated December 11, 2019, affirmed the order dated February 14, 2019
passed by the Civil Court. The said order of the High Court was assailed by the
Appellant before the Hon’ble Supreme Court, by way of a Special Leave Petition.
Submissions of the
Parties
The Appellant inter alia contended that (i) its
objections had been erroneously dismissed by the Civil Court as well as the
High Court on the sole ground of limitation, and not on merits; (ii) reference
to the arbitral award in the Act under Section 34(4) includes both the majority
award as well as the minority opinion; (iii) if the majority Award was
interpretated as the arbitral award, the dissenting opinion of the minority
tribunal would have no relevance and such a view would cause grave prejudice to
the award debtor; (iv) the dissenting opinion has been held to be the correct
view by courts in various cases.
The Respondent inter alia contended that (i)
the objections filed by the Appellant under Section 34 of the Act were barred
by limitation, and ought to be dismissed; (ii) since the majority Award was
pronounced on April 27, 2018, the limitation period applicable under Section
34(3) commenced from that date; (iii) under Section 34(3) of the Act, a party
may file objections within three months from the date of receipt of the award
and the dissenting opinion of the minority member was not an award for the
purposes of computing the limitation period prescribed under the same; (iv)
Section 29 (1) of the Act contemplates that the decision of the majority of the
members of the tribunal is the arbitral award; and (v) the opinion of the
minority tribunal was only a view and could not be enforced as an award. It
could also not be considered as the arbitral award for the purpose of computing
limitation under Section 34(3) of the Act.
Findings of the Court
Examining the scheme of the Arbitration Act, and in particular
the nature of arbitral awards, the Court observed that the same recognised only
one arbitral award passed by an arbitral tribunal, which may either be a
unanimous award, or an award passed by a majority in the case of a panel of
members. In this regard, the Court inter alia observed that
(i) an award was a binding decision made by the arbitrator(s) on all the issues
referred for adjudication; (ii) it contained the reasons assigned by the
tribunal on the adjudication of the rights and obligations of the parties
arising from the underlying commercial contract; and (iii) it must be one which
decides all the issues referred for arbitration. The Court further observed
that the view of a dissenting arbitrator was not an award, but an opinion. It, however,
clarified that a party aggrieved by the award could draw support from the
reasoning and findings assigned in the dissenting opinion.
The Court also observed that an ‘arbitral award’ was the
decision made by the majority members of an arbitral tribunal and that, a
dissenting opinion did not determine the rights or liabilities of the parties,
as enforceable under Section 36 of the Arbitration Act. The Court clarified
that the reference to the phrase ‘arbitral award’ in Sections 34 and 36
referred to the decision of the majority of the members of the arbitral
tribunal. It further stated that a party cannot file a petition under Section
34 for setting aside, or under section 36 for enforcement of a dissenting
opinion. It stated that under Section 34, only the decision reached by the
majority of the members of the tribunal was the ‘arbitral award’ capable
of being set aside. Similarly, under section 36, the “arbitral award” passed by
majority of the members could only be enforced.
Legal requirement of signing the award
The Court further observed that Section 31[2] of
the Arbitration Act contained the legal requirement of an arbitral award being
signed by a sole arbitrator, or the members of a tribunal. The Court iterated
that Section 31 (1) of the Arbitration Act was couched in mandatory terms
requiring an arbitral award to be made in writing and signed by all the members
of the arbitral tribunal. It observed that in cases where the arbitral tribunal
comprised more than one arbitrator, the award would be made when the
arbitrators acting together finally expressed their decision in writing and the
same was authenticated by their signatures[3].
The Court further stated that an award took legal effect only after it was
signed by all the arbitrators, which gave it authentication. The legal effect
of signing of the award would also make the award final. Thus, the Court held
that an award would be made when it is authenticated by the person who makes
it.
Further, the Court emphasized that the Arbitration Act made it
mandatory for each of the members of the tribunal to sign the award, in order
to make it a valid award. It clarified that the usage of the term “shall”
made it a mandatory requirement and the same was not merely a ministerial act,
or an empty formality which could be dispensed with. It further stated that
Section 31(1) read with sub-section (4) made it amply clear that the
Arbitration Act contemplated 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. The Court further stated that Section 31 (5) required the
arbitrator / tribunal to provide the signed copy of the arbitral award to the
parties. Thus, the Court held that the receipt of a signed copy of the award
would be the date from which the period of limitation for filing objections
under Section 34 would commence. It clarified that Section 34(3) provided a
specific time limit of three months from the date of receipt of the award, and
a further period of 30 days would be granted if it was satisfied that the party
was prevented by sufficient cause from making the application within the said
period but not thereafter. Furthermore, the Court held that if the objections
were not filed within the period prescribed by Section 34, the award holder
would be entitled to move for enforcement of the arbitral award as a deemed
decree of the Court under Section 36 of the Arbitration Act.
In this regard, the Court relied on Union of India v. Tecco
Trichy Engineers & Contractors[4], wherein
a three-judge bench of the Supreme Court had held that the period of limitation
for filing an application under Section 34 would commence only after a valid
delivery of the award took place under Section 31(5) of the Arbitration Act.
Additionally, it relied on the judgment State of Maharashtra v. Ark
Builders[5], wherein
the Supreme Court had held that Section 31(1) obliged the members of the
arbitral tribunal to make the award in writing and sign it. It held that
sub-section (5) of Section 31 required the delivery of a copy of the award
signed by the members of the arbitrator, and not any copy of the award. The
Court further stated that 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 was
delivered to the party making the application for setting aside the award. In
particular, the Court observed that if the law (i) prescribed that a copy of
the award was to be communicated, delivered, despatched, forwarded, rendered,
or sent to the parties concerned in a particular way; and (ii) set a period of
limitation for challenging the award in question by the aggrieved party; then
the period of limitation could only commence from the date on which the award
was received by the concerned party in the manner prescribed by law.
The Court further noted that the judgment in Tecco Trichy (Supra) has
been recently followed in Anilkumar Jinabhai Patel v. Pravinchandra
Jinabhai Patel[6].
The Court held that if one of the members gave a dissenting
opinion, the same must be delivered contemporaneously on the same date as the
final award, and not on a subsequent date, as the tribunal becomes functus
officio upon the passing of the final award. It held that the period
for rendering the award and dissenting opinion must be within the period
prescribed by Section 29A of the Arbitration Act.
In view of the above, the Court held that there was only one
date recognised by law, that is, 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. Furthermore, the Court observed that the
date on which the signed award was provided to the parties was a crucial date
in arbitration proceedings under the Arbitration Act as it was from that
date that: (i) the period of 30 days for filing an application under
Section 33 for correction and interpretation of the award, or additional award
could be filed; (b) the arbitral proceedings would terminate as provided by
Section 32(1) of the Arbitration Act; and (c) the period of limitation for
filing objections to the award under Section 34 would commence.
Relevance of a dissenting opinion
The Court held that a dissenting opinion of a minority
arbitrator could be relied upon by the party seeking to set aside the award, to
buttress its submissions in the proceedings under Section 34. The Court also
clarified that at the stage of judicial scrutiny by a Court under Section 34,
it is not precluded from considering the findings and conclusions of the
dissenting opinion of the minority member of the tribunal.
The Court affirmed that in law, where the Court set aside the
award passed by the majority members of the tribunal, the underlying disputes
would require to be decided afresh in an appropriate proceeding. The bench
further iterated that under Section 34 of the Act, the Court could either
dismiss the objections filed, and uphold the award, or set aside the award, if
the grounds contained in sub-sections (2) and (2A) were made out. It reiterated
and clarified that Courts had no power to modify an arbitral award or correct
the errors of the arbitrators, while deciding a challenge under Section 34 of
the Arbitration Act. It could only quash the award, leaving the parties free to
begin the arbitration again if desired. In the light of the above, the
Court held that in the present case, 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 May 19,
2018. Accordingly, it was held that the objections were filed within the
period of limitation prescribed under Section 34(3) i.e. from
the date of receipt of the signed award.
Accordingly, the Court allowed the appeal filed by the
Appellant, set aside the orders passed by the Civil Court and the High Court
and restored the petition to the file of the Civil Court, to be decided in
accordance with the law.
CONCLUSION
The Supreme Court has, at length, discussed and clarified the
meaning, significance, and legal requirements of an arbitral award; the
importance of a dissenting opinion; and the limited scope of judicial
interference under the Arbitration Act. The Court has also given due importance
to the significance of signing an arbitral award and has reiterated that, while
deciding a challenge to an arbitral award, Courts cannot modify the same,
thereby encouraging minimal judicial interference. This is yet another
pro-arbitration and pro-enforcement judgment of the Supreme Court in keeping
with the UNCITRAL Model Law principles and the global pro-arbitration regime.
[1] Judgment dated March 2, 2021 passed in
Civil Appeal No. 791 of 2021
[2] “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) For the purposes of sub-section (1), in arbitral proceedings
with more than
one arbitrator, the signatures of the majority of all the
members of the arbitral
tribunal shall be sufficient so long as the reason for any
omitted signature is
stated .
….
(4) The arbitral award shall state its date and the place of
arbitration as
determined in accordance with section 20 and the award shall be
deemed to
have been made at that place.
(5) After the arbitral award is made, a signed copy shall be
delivered to each
party.”
[3] Malhotra’s Commentary on the Law of Arbitration,
Wolters Kluwer, 4th Ed., Vol.1, p.794
[4] (2005)
4 SCC 239.
[5] (2011) 4 SCC 616
[6] (2018)
15 SCC 178
