Indian Supreme Court: Limitation period prescribed for setting aside arbitral award would commence only from the date of signed copy of the award delivered to all the parties

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In Anil kumar Jinabhai Patel (D) Thr. LR’s v. Pravinchandra Jinabhai Patel And Ors. Civil Appeal No. 3313 of 2018 (Arising out of SLP(C) No.15741 of 2012) dated 27.03.2018, the Supreme Court of India held that by cumulative reading of Section 34(3) and Section 31(5) of the Indian Arbitration and Conciliation Act, 1996 (the Act), the limitation period prescribed under Section 34(3) of the Act would commence only from the date of signed copy of the award delivered to the party making the application for setting it aside. Section 34 deals with application to set aside an award and clause (3) prescribes a limitation period in this regard. The said sub-clause is as follows:

(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.

Section 31 deals with form and contents of arbitral award and sub-clause (5) make it mandatory for the tribunal to deliver the award to all parties. The said sub-clause is as follows:

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

Factual Matrix

In this case the dispute arouse regarding a family business during division of the assets of the family. For this purpose, the family members approached the arbitrators.

While arbitrators were away to Rajkot due to emergency work, both parties decided to streamline the ongoing business of firms and companies by signing of an interim MOU. The said IMOU was signed by Respondent for himself and on behalf of his family members. Similarly, the Appellant signed in the IMOU for himself and also as a power of attorney holder for his wife, his all sons and daughter-in-law. The arbitrators passed the award (with a mention of IMOU dated 29.06.1996) under which certain properties were given to Respondent and Appellants whereas some other assets were kept undivided with equal rights and interest thereon of both groups. The copy of the award was given to Respondent and Appellant by arbitrators in person which was duly acknowledged by them. Copy of the award bears signature of Respondent and Appellant with recital that they and their family members will act as per the award and will give effect to the same.

Dispute arose when Appellant and his family members filed an application in the District Court  to set aside the award under Section 34 of the Act contending that they learnt about the arbitral award only when they were served with the notice of execution petition filed by Respondent alongwith the xerox of the award. Therefore, as per the appellant, period of limitation starts only from the date of their receipt of copy of the award.

The District Judge set aside the award that there is nothing to show that Appellant was authorised by the other applicants to receive a copy of the award on their behalf and it cannot be said that the other Appellants had received the award in terms of Section 31(5) of the Act.

Respondent went to the High Court set aside the order of the District Judge holding that the petition filed under Section 34 of the Act was time barred.

Contentions of Appellants

It was contended that as contemplated under Section 31(5) of the Act, copy of the award was not served upon the family members of the Appellants and mere knowledge as to the existence of the award would not in any manner result in the commencement of period of limitation.

It was further contended that the limitation period can be computed only from the day on which the original signed copy of the arbitral award is received under the provision of Section 31(5) of the Act.

Contentions of Respondent

The Respondent to number of documents to refute appellant’s contention wherein appellant himself admitted many times that the arbitral award was within his knowledge.

Issue  

Whether the application under Section 34 of the Act for setting aside the award was barred by limitation?

Analysis

Section 34(3) provides that an application for setting aside an award shall not be entertained by the court if it is made after three months have elapsed from the date on which the applicant had received the arbitral award.

The proviso to Section 34 further provides that if the court is satisfied that the applicant was prevented by ‘sufficient cause’ from making the application within the prescribed time, it may entertain the application within a further period of thirty days ‘but not thereafter’.

but not thereafter

In State of Arunachal Pradesh v. Damini Construction Co. (2007) 10 SCC 742, the Supreme Court of India inter alia held that the words ‘but not thereafter’ in the proviso are of mandatory nature, and couched in the negative, and leave no room for doubt. Proviso to Section 34 gives discretion to the court to condone the delay for a sufficient cause, but that discretion cannot be extended beyond the period of thirty days, which is made exclusively clear by use of the words ‘but not thereafter.

In Union of India v. Tecco Trichy Engineers and Contractors (2005) 4 SCC 239, a three Judge Bench of this Court, in respect to the issue of limitation for filing application under Section 34 of the Act for setting aside the arbitral award, held that the period of limitation would commence only after a valid delivery of an arbitral award takes place under Section 31(5) of the Act.

In State of Maharashtra and Ors. v. Ark Builders Pvt. Ltd., (2011) 4 SCC 616, while following the judgment in Tecco Trichy Engineers case, held that the expression “..party making that application had received the arbitral award…” cannot be read in isolation and it must be understood that Section 31(5) of the Act requires a signed copy of the award to be delivered to each party.

Conclusion

By cumulative reading of Section 34(3) and Section 31(5) of the Act, it is clear that the limitation period prescribed under Section 34(3) of the Act would commence only from the date of signed copy of the award delivered to the party making the application for setting it aside. The Supreme Court held that having accepted the award through the Appellant, being the head of the family, the other family members of Appellant cannot turn round and contend that they had not received the copy of the award. Receiving the copy by Appellant on behalf of himself and other family members , under an acknowledgment, is in terms of compliance of Section 31(5) of the Act and Section 34(3) thereof and that the application filed under Section 34 of the Act by the Appellant and his family members was barred by limitation.

 

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