SC on Limitation Period to Challenge Arbitral Award u/S. 34

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3719

April 04, 2018

Case name: Anilkumar Jinabhai Patel (D) through LRS. Vs. Pravinchandra Jinabhai Patel and Ors.

Date of Judgement: March 27, 2018

In the case, the Appellants approached the Supreme Court against the order of High Court whereby the Court had held that challenge to the arbitral award was time barred under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996.

The subject matter of arbitration in the case involved division of property between appellant and respondent and accordingly arbitration award was passed whereby certain properties were given to the Appellant and Respondent whereas some other assets were kept undivided with equal rights and interest thereon of both groups.

Appellant had filed an arbitration petition under Section 34 of the Act on 29.11.2005 challenging the award dated 07.07.1996 contending that they learnt about the arbitral award only on 11.08.2005 when they were served with the notice of execution petition filed by Respondent.

Hence, the issue in the case pertained to Section 34(3) of Arbitration Act which states that an application for setting aside arbitral award may not be made after three months have elapsed from the date on which the party making the application had received the arbitral award.

In view of the aforesaid, Supreme Court in the case made the following observations:

  • That 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. Proviso to Section 34 states 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 30 days, but not thereafter.
  • The Apex Court opined 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’.
  • Valid Delivery of Arbitral Award- In this context, the Supreme Court relied on its judgment in the case of Union of India v. Tecco Trichy Engineers and Contractors[1], wherein it was held that with respect to the issue of limitation for filing application under Section 34 of the Act for setting aside the arbitral award, the period of limitation would commence only after a valid delivery of an arbitral award takes place under Section 31(5) of the Act. It was also held that 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.
  • 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[2].

The entire case can be accessed here.

[1] (2005) 4 SCC 239

[2] State of Maharashtra and Ors. v. Ark Builders Pvt. Ltd., (2011) 4 SCC 616