Arya U-Clix E-Services (AUES) vs State of Rajasthan and Others

Pratap Krishna Lohra, J.—Appalled by the impugned order dated 29th October, 2014, whereby learned District Judge, Jodhpur Metropolitan has rejected petition of the appellant under Section 34 of the Arbitration and Conciliation Act, 1997 (for short, ''Act of 1996''), appellant has laid this appeal under Section 37 of the Act of 1996.

By the order impugned, the learned Court below after considering the petition of the appellant under Section 34 of the Act of 1996 and the application under Section 5 of the Limitation Act, has opined that objections against the arbitral award dated 18th November, 2013 are barred by limitation and consequently declined to interfere with the same.

The facts in brevity, giving rise to this appeal, are that appellant''s claim for security deposits, commission and damages did not find favour from the sole arbitrator, Divisional Commissioner, Jodhpur, and by its arbitral award dated 18th November, 2013 entire claim of the appellant is rejected.

Being aggrieved by rejection of its claim, appellant approached the learned Court below under Section 34 of the Act of 1996 for setting aside arbitral award. Along with the application under Section 34 of the Act of 1996, appellant also preferred an application under Section 5 of the Limitation Act seeking condonation of delay. The learned Court below, after examining the matter, found that petition/objections under Section 34 of the Act of 1996 are laid belatedly inasmuch as even after 90 days from the date of receipt of the arbitral award, petition is laid with inordinate delay of six months and ten days. It is in these circumstances, while holding that by virtue of sub-section (3) of Section 34 of the Act of 1996, Section 5 of the Limitation Act is not applicable, learned Court below turned down the request of the appellant for setting aside arbitral award.

Learned Counsel, Mr. Rakesh Arora, has strenuously urged that the learned Court below, while passing the impugned order, has not at all cared to examine mandatory provisions envisaged under sub-section (5) of Section 31 of the Act of 1996 and as such impugned order is per-se vulnerable. Mr. Arora submits that Section 31(5) of the Act of 1996 envisages with clarity and precision that duly signed copy of arbitral award is required to be delivered by the arbitrator to the concerned parties, and as in the instant case, sole arbitrator has not made any endeavor to deliver the copy, period of limitation has not been reckoned from the date of award. Learned counsel would contend that from the date of knowledge about the arbitral award, petition/objections under Section 34 of the Act of 1996 are filed by the appellant within time, which ought to have been entertained by the learned Court below on merits. In support of his contentions, learned counsel for the appellant has placed reliance on following legal precedents: (i) Union of India (UOI) Vs. Tecco Trichy Engineers and Contractors, and (ii) The State of Maharashtra and Others Vs. Ark Builders Pvt. Ltd., .

I have heard learned counsel for the appellant and perused the impugned order.

As, by the impugned order, learned Court below has rejected petition/objections of the appellant for setting aside arbitral award solely on the ground of delay and laches, it is imperative for this Court to examine relevant provisions, in this behalf, under the Act of 1996. Under sub-section (5) of Section 31 of the Act of 1996, it is envisaged that after arbitral award is made, a signed copy shall be delivered to each party. Therefore, a plain reading of language employed under sub-section (5) of Section 31 of the Act of 1996 makes it amply clear that arbitrator is required to deliver a signed copy of the award to each party. While interpreting the said provision, Hon''ble Apex Court in Tecco Trichy Engineers and Contractors (supra) has 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." 8. In M/s. Ark Builders Pvt. Ltd. (Supra), the Hon''ble Apex, while reiterating same principles, held as under:--

"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) xxxx

(3) xxxx

(4) xxxx

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

(6), (7), (8) xxxx

(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.

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) xxxx

(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) xxxx"

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.

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."

At this stage, in want of any material, it is difficult to disbelieve the version of appellant that it was not delivered signed copy of the award by the arbitrator. However, from the impugned order, it transpires that appellant had the knowledge about the arbitral award on 28th March, 2014 on which day it has received copy of the award. Arbitral award also indicates that same was passed in presence of its counsel. Accordingly, the learned Court below, while considering the date of knowledge and receipt of the certified copy of the arbitral award on 28th March, 2014, has reckoned the period of limitation. As per sub-section (3) of Section 34 of the Act of 1996, requisite petition for setting aside arbitral award is to be laid by an aggrieved party within 90 days from the receipt of copy of arbitral award. The proviso to sub-section (3) of Section 34 of the Act of 1996 further envisages a grace period of 30 days, which is condonable by the Court if sufficient cause is shown by aggrieved party. Sub-section (3) of Section 34 of the Act of 1996 with proviso is reproduced as under:--

"(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." 10. Section 29(2) of the Limitation Act, 1963 provides with clarity and precision that for setting aside arbitral award under Section 34 of the Act of 1996, Sections 5 and 3 read with Schedule to the Act of 1963 is not applicable.

Hon''ble Apex Court in case of Union of India Vs. M/s Popular Construction Co., , has clarified the position that Section 5 of the Limitation Act is not applicable vis-�-vis proceedings under Section 34 of the Act of 1996. The Court in para 16 held as under:--

"16. Furthermore, section 34(1) itself provides that 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). Sub-Section (2) relates to grounds for setting aside an award and is not relevant for our purposes. But an application filed beyond the period mentioned in Section 34, sub-section (3) would not be an application "in accordance with" that sub-section. Consequently by virtue of Section 34(1), recourse to the court against an arbitral award cannot be made beyond the period prescribed. The importance of the period fixed under Section 34 is emphasised by the provisions of Section 36 which provide that

"where the time for making an application to set aside the arbitral award under Section 34 has expired...the award shall be enforced and the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the court". This is a significant departure from the provisions of the Arbitration Act, 1940. Under the 1940 Act, after the time to set aside the award expired, the court was required to "proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow" (Section 17). Now the consequence of the time expiring under Section 34 of the 1996 Act is that the award becomes immediately enforceable without any further act of the Court. If there were any residual doubt on the interpretation of the language used in Section 34, the scheme of the 1996 Act would resolve the issue in favour of curtailment of the Court''s powers by the exclusion of the operation of Section 5 of the Limitation Act.

The same view is further reiterated by Hon''ble Apex Court in case of Consolidated Engg. Enterprises Vs. Principal Secy. Irrigation Deptt. and Others, with a rider that in an application under Section 34 of the Act of 1996, Section 14 of the Limitation Act can be applied as there is no express exclusion. The Court in para 20 held as under:--

Section 29(2) of the Limitation Act inter alia provides that where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period of limitation prescribed by the Schedule, the provisions of Section 3 shall apply as if such period was the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in Sections 4 to 24 shall apply only insofar as, and to the extent, they are not expressly excluded by such special or local law. When any special statute prescribes certain period of limitation as well as provision for extension up to specified time-limit, on sufficient cause being shown, then the period of limitation prescribed under the special law shall prevail and to that extent the provisions of the Limitation Act shall stand excluded. As the intention of the legislature in enacting sub-section (3) of Section 34 of the Act is that the application for setting aside the award should be made within three months and the period can be further extended on sufficient cause being shown by another period of 30 days but not thereafter, this Court is of the opinion that the provisions of Section 5 of the Limitation Act would not be applicable because the applicability of Section 5 of the Limitation Act stands excluded because of the provisions of Section 29(2) of the Limitation Act. However, merely because it is held that Section 5 of the Limitation Act is not applicable to an application filed under Section 34 of the Act for setting aside an award, one need not conclude that provisions of Section 14 of the Limitation Act would also not be applicable to an application submitted under Section 34 of the Act of 1996. 13. In case of Ark Builders Pvt. Ltd. (supra), the Hon''ble Apex Court has interpreted sub-section (5) of Section 31 of the Act of 1996, which mandates delivery of signed copy of arbitral award to a party by the arbitrator. However, if the party has made endeavor to obtain certified copy of the award and has received it, then in that event from that date it is not expected to plead ignorance about the arbitral award. In the instant case, admittedly the appellant received certified copy of arbitral award on 28th March, 2014, the limitation prescribed under sub-section (3) of Section 34 of the Act of 1996 started running against it. In that situation, the learned Court below has observed in the impugned order that interference with the arbitral award after inordinate delay and laches of six months and ten days is not warranted.

In M/s. Ark Builders Pvt. Ltd. (supra), Hon''ble Apex Court has also considered the factum of receipt of copy of arbitral award by the party concerned. If the provisions under sub-section (5) of Section 31 of the Act of 1996 are to be examined objectively, the intention of legislature is to apprise each party to the arbitral proceedings about passing of the award, and if any party has made endeavor to obtain copy of the award and has received the same, its technical plea that copy was not delivered to it by the arbitrator is obviously of no avail and consequence.

As observed supra, the appellant has made endeavor for seeking condonation of delay by invoking Section 5 of the Limitation Act, which is not applicable in a proceeding under Section 34 of the Act of 1996. I am not persuaded to interfere with the impugned order passed by the learned Court below.

In totality, While passing the impugned order, the learned Court below has not committed any error much less jurisdictional error warranting interference in this appeal.

Resultantly, appeal fails and same is accordingly dismissed.