Supreme Court of India: From when does the limitation period for challenging the award triggers if an application for correction of an award is filed under Section 33 of the Indian Arbitration Act?

Supreme-Court-of-India-1_85138_730x419

Section 33 of the Indian Arbitration Act (the Act) provides a time limit of 1 month from the receipt of the arbitral award for filing an application for correction and interpretation of an award before the arbitral tribunal. Further, as per Section 34(3) of the Act, in case, a party has filed an application under Section 33, then the award needs to be challenged within three months from the date on which the application under Section 33 had been disposed off by the arbitral tribunal. In the case of M/S Ved Prakash Mithal & Sons v. Union of India (Special Leave to Appeal (C) No(s). 20195/2017 vide order dated 8th of August 2018), the Supreme Court of India clarified the starting point from when the limitation period provided under Section 34(3) triggers. Detailed case analysis given below:

Factual Matrix

Arbitral award was received on 7th day from the date of making of the award. Thereafter, the award-debtor made an application under Section 33 asking for corrections in the award on the 9th day from the date of receiving the award. A similar application was made by the award-creditor on 13th day from the date of receiving the award. Both applications were dismissed by the arbitral tribunal on 44th day from delivering the original award. Thereafter, the award-debtor challenged the award under Section 34 of the Act after 85 days of arbitral tribunal dismissing the correction applications of both the parties. The question before the Supreme Court was whether this challenge to the award is within the time limit prescribed under Section 34(3) of the Act. In the District Court it was held that that the application was time-barred, reasoning that the application should have been made on and from the first date as, in fact, there was no correction made to the Award. In appeal, the Delhi High Court reversed the District Court order holding that that as the Section 33 application had been disposed of only on 44th day from delivering the original award, the period mentioned in Section 34(3) would start running only from then, in which case, the Section 34 application could be said to be within time. The matter was in appeal in Supreme Court.

Applicable Legal Principles

Section 33 of the Act

“33 Correction and interpretation of award; additional award.—

1. Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties—

                (a) a party, with notice to the other party, may request the arbitral tribunal to                            correct any computation errors, any clerical or typographical errors or any                          other errors of a similar nature occurring in the award;

(b) if so agreed by the parties, a party, with notice to the other party, may                                    request the arbitral tribunal to give an interpretation of a specific point or                            part of the award.

2. If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award.

3. The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award.

4. Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.

5. If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request.

6. The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5).

7. Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.”

Section 34(3) of the Act

“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.”

Parties’ Contentions

The award-debtor argued that the expression “disposed” which is mentioned in Section 34(3) would have to be read in consonance with and in harmony with Section 33. So read, this would only mean where some positive step has, in fact, taken place under Section 33 and the Award is either corrected or modified. This could not possibly refer to an Award which is not ultimately corrected or modified and the application under Section 33 is merely dismissed. For this argument, award-debtor relied on a Bombay High Court Juddgement (Amit Suryakant Lunavat vs. Kotak Securities, Mumbai reported in 2010(6) Mh.L.J. 764) wherein it was held as under:

13. There is no justification, as contended, to accept the submission in view of the mandate of section 34 and considering the scheme and purpose of the Arbitration Act that because the application under section 33 of the Act was filed and it was rejected subsequently, therefore, the limitation period commenced afresh from the date of such decision of the award. In my view, it is contemplated only on a situation where the Arbitrator corrects or interprets and/or add or decide to add any additional claims and modified the award as only in such cases the original award looses its originality and therefore an application for setting aside the award needs to be filed within three months from the date of receipt of such corrected or modified award. Therefore, the party who received the award after deciding the application under section 34(3) of the Act, may get the benefit of fresh commencement of limitation from the receipt of the modified and/or corrected award and not otherwise.

Analysis

The Court followed the literal interpretation of Section 34(3) as followed by Delhi High Court and observed that the judgment of the Bombay High Court does not reflect the correct position in law. It was held that Section 34(3) specifically speaks of the date on which a request under Section 33 has been “disposed of” by the Arbitral Tribunal. Further, the Court also noted that that a “disposal” of the application can be either by allowing it or dismissing it.

Conclusion

Therefore, it was held that limitation of three months to challenge an award provided under Section 34(3) in the case where the either party has opted to apply for correction/interpretation of an award under Section 33 of the Act triggers from 90 days from the disposal of such application of correction/interpretation irrespective of whether the arbitral tribunal had either allowed or dismissed it.

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