In ARK Builder's case (supra), the Apex Court while reiterating
its decision in Tecco Trichy case, held that the expression “party
making that application had received the arbitral award” from Section
34 of the Arbitration Act, cannot be read in isolation and it must be
understood in the 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 of the two provisions together, it is clear that limitation
prescribed under Section 34(3) would commence only from the date the
signed copy of the award is delivered to the party making an application
for setting it aside. On the commencement of the period of limitation,
the Apex Court further observed as follows :-
“15. 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.”
The position of law that can be culled out from the above
decisions is that, delivery of the arbitral award under Section 31(5) must be on the party to the arbitration agreement who is in control of the
proceedings before the arbitrator.
Delivery to any other person
including the Counsel appearing for the parties to the arbitration does
not satisfy compliance of the provision of Section 31(5) of the
Arbitration Act.
In the light of the above legal position the date of delivery of the
award to the Advocate for the petitioner cannot be the starting point for
commencement of the period of limitation. In absence of any other
material on record the date claimed by the petitioner of receipt of the
award by him will have to be accepted as the correct date. Therefore, I
find no substance in the preliminary objection of limitation taken by the
respondent and hold that the petition filed is within the period of
limitation prescribed under Section 34(3) of the Arbitration Act.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
Mr. Gaurang s/o. Late Vinod Doshi V/s. Vinay A. Choksi,
ARBITRATION PETITION NO. 846 OF 2010
CORAM :- SMT. R.P. SONDURBALDOTA, J.
Dated :-20th AUGUST, 2014.
Citation; 2015(2) ALLMR802 Bom
This petition filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”)
challenges the arbitral award dated 10 th August, 2008 made by “Sub-
Committee of Producers Grievances Cell and In-House Settlement” (for
short “the Committee”) of Indian Motion Picture Producers Association
(IMPPA). The challenge to the award is on three grounds. Firstly that,
there is no arbitration agreement between the petitioner and the
respondent. Therefore, the learned arbitrator had no jurisdiction to
decide the dispute between the parties. Secondly that, the notice of the
arbitral proceedings had not been served upon the petitioner. And
ig
thirdly that the award deals with the dispute which is beyond the
statement of claim. The respondent contests the petition contending
that the same is barred by the law of limitation and also on merits.
Briefly stated the facts of the dispute decided by the arbitral
2).
award are as follows :-
.
One Vinod Doshi (since deceased), father of the petitioner,
carried on business of film production in the name and style of “M/s.
V.R. Pictures”.
He intended to produce a Hindi feature film titled
“Trishul-The Game of Death”. He had approached the respondent a
financer, for financial assistance. Tri-partite agreement dated 18 th June,
2004 was executed between the father of the petitioner, the petitioner
and the respondent for rendering financial assistance in which the
father of the petitioner was described as the “Producer”, the petitioner
as the “Guarantor” and the respondent as the “financer”. Under the
extent of Rs.60,00,000/- payable as under :-
Amt transferred from picture “Deewaar-
let's bring our heroes home”
Rs.25,00,000/-
agreement, the respondent agreed to provide financial assistance to the
Rs.35,00,000/-
As per the discretion of the Third part
subject to progress of the said picture.
--------------------- -----------------------------------------------
Rs.60,00,000/- Total (Rupees Sixty Lacs Only)
The amount was to be repaid “along with 18% discount in commission
ig
thereon before effecting the delivery of the prints of the picture for the
territory, C.P. BERAR C. I” i.e. on/or before 18 th December, 2004
whichever was earlier.” The discounting commission was to be paid at
the rate of 1.50 per month per Rs.100/- till repayment of the loan. The
father of the petitioner and the petitioner jointly executed a Bill of
Exchange guaranteeing the repayment of the loan. The petitioner also
issued post-dated cheques totalling to
Rs.25,00,000/- being the
amount already received by the father of the petitioner. Another similar
Bill of Exchange was to be executed and post-dated cheques issued for
the balance amount, as and when, the same was received. Finally the
total amount of financial assistance extended by the respondent under
the agreement was of Rs.57,00,000/-. As a security for repayment of
loan, M/s. V.R. Pictures had forwarded a letter from M/s. Adlabs Films
Limited to the respondent, stating that they shall not deliver any print
respondent.
for release in C.P. BERAR & C-I Circuit without written consent of the
Later the father of the petitioner by his letter dated 18 th
December, 2004 got the due date of repayment under the agreement
extended by another 18 months i.e. until 18 th June 2006 for the reason
that the project of producing the picture had got delayed. Unfortunately
however he died on 31st October, 2006.
As the amount under the agreement remained unpaid the
3).
respondent by his letter dated 25 th July, 2007 complained to IMPPA and
requested it to arbitrate upon the dispute. The Committee of IMPPA
took up the dispute for arbitration and made the impugned award
directing the petitioner, in his capacity as “the proprietor of M/s. V.R.
Pictures” and in his individual capacity as “the guarantor” to deposit a
sum of Rs.57,00,000/- with IMPPA within a period of one month from
the date of the award for paying to the respondent. The petitioner was
also directed to pay interest at the rate of 18% p.a. on the amount from
the date of the agreement till payment. Being aggrieved by the award,
the petitioner has challenged the same by resorting to Section 34 of the
Arbitration Act.
It would be relevant to note here that during the
pendency of the petition, the award was put into execution and one of
the properties of the petitioner has been sold.
Since the respondent has taken up preliminary objection to
4).
the petition that, it is barred by the law of limitation, the same will have
to be considered before touching upon the merits of the matter. The
impugned award is dated 10th August 2008. The present petition was
filed on 26th February 2010. Therefore according to the respondent the
same is barred by limitation. The respondent in his affidavit-in-reply
points out that, Advocate Gajendra Singh had appeared before the
arbitral tribunal on behalf of the petitioner and sought adjournments.
The copy of the award therefore had been forwarded by IMPPA to
Advocate, Gajendra Singh. The petitioner was thus, throughout, aware
of the arbitration proceedings and had knowledge of the award on 15 th
5).
September, 2009.
The petitioner on the other hand disputes that there is delay in
filing application under Section 34 of the Arbitration Act. He, claims
that he learnt about the award for the first time in the month of
January, 2010, when he received notice of the execution proceedings
initiated by the respondent and therefore
the petition filed on 18 th
February, 2010 is within the prescribed period of limitation. According
to him, though a copy of the award had been received by |Advocate
Gajendra C. Singh from IMPPA under
covering letter dated 15 th
September, 2009, no intimation was received by him from the Advocate
IMPAA had not served the award
about receipt of the award.
personally upon him. Therefore, there was no compliance of Section
6).
31(5) of the Arbitration Act.
Mr. Davar the learned advocate appearing for the petitioner
submits that limitation for filing the application for setting aside arbitral
award is prescribed by sec.34(3) of the Arbitration Act which reads as
under:
“34. Application for setting aside arbitral award.--
(1)(2)***
(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.”
Mr. Davar, further submits that Section 31(5) of the Arbitration Act,
mandates that after an arbitral award is made, it's signed copy is
delivered to each party.
Further, delivery of the arbitral award is a
matter of substance because it sets into motion several periods of
limitation, one of them being for challenge to the award. Therefore, the
delivery of the award has to be an effective delivery i.e. direct delivery to
the
party
to
the arbitration and the
period of limitation u/s
34(3) will start to run only after the party itself receives copy of the
award.
In support of his submission Mr Davar seeks to rely upon
7).
following decisions of the Apex court.
(i)
Union of India v/s Tecco Trichy Engineers & Contractors,
reported in (2005) 4 Supreme Court Cases page 239.
(ii) Benarsi Krishna Committee and Others v/s Karmyogi
Shelters Private Limited, reported in (2012) 9 Supreme Court
Cases page 496.
8).
(iii) State of Maharashtra and Others v/s. ARK Builders Private
Limited, reported in (2011) 4 Supreme Court Cases page 616.
In the case of Tecco Trichy (supra), the Apex Court was required
to consider efficacy of service of the arbitral award by delivering a copy
thereof in the office of the General Manager, Southern Railways. The
delivery was acknowledged by someone in the office, probably by the
Inwards Clerk. The Chief Engineer received the copy of the award from
the tribunal more than a week thereafter.
While considering the
question of bar of limitation for application for setting aside the arbitral
award under Section 34 of the Arbitration Act, the Apex Court
considered the provision of Section 31 of the Arbitration Act, to note
that according to it's sub-section (5), the term “party” used in the
provision would be as defined by Clause-(h) of Section 2 of the Act, as
being “a party to an arbitration agreement”. When it came to assign the
meaning to the term, “party” in the context of the State or a Department
of the Government, Apex Court held that the term “party” has to be
construed to be a person directly connected with and involved in the
proceedings and who is in control of the proceedings before the
arbitrator. On the significance and importance of delivery of an arbitral
award under Section 31(5) the Apex Court observed as follows :-
“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.”
In the facts of the case before it, the Apex Court held that service of the
notice on the Chief Engineer was the starting point of limitation to
challenge the award before the Court.
In Benarsi Krishna's case copies of the award duly signed by the
9)
learned arbitrator was received by the Counsel for the respective
parties. The Apex Court rejected the service as proper service observing
that, “It is one thing for an advocate to act and plead on behalf of a
party in a proceeding and it is another for an advocate to act as the
party himself. The expression “party”, as defined in Section 2(1)(h) of
the 1996 Act, clearly indicates a person who is a party to an arbitration
agreement. The said definition is not qualified in any way so as to
include the agent of the party to such agreement.
Any reference,
therefore, made in Section 31(5) and Section 34(2) of the 1996 Act can
only mean the party himself and not his or her agent, or advocate
In
such
empowered to act on the basis of a vakalatnama.
circumstances, proper compliance with Section 31(5) would mean
delivery of a signed copy of the arbitral award on the party himself and
not on his advocate, which gives the party concerned the right to
proceed under Section 34(3) of the aforesaid Act.”
10)
In ARK Builder's case (supra), the Apex Court while reiterating
its decision in Tecco Trichy case, held that the expression “party
making that application had received the arbitral award” from Section
34 of the Arbitration Act, cannot be read in isolation and it must be
understood in the 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 of the two provisions together, it is clear that limitation
prescribed under Section 34(3) would commence only from the date the
signed copy of the award is delivered to the party making an application
for setting it aside. On the commencement of the period of limitation,
the Apex Court further observed as follows :-
“15. 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.”
The position of law that can be culled out from the above
11).
decisions is that, delivery of the arbitral award under Section 31(5) must
be on the party to the arbitration agreement who is in control of the
proceedings before the arbitrator.
Delivery to any other person
including the Counsel appearing for the parties to the arbitration does
not satisfy compliance of the provision of Section 31(5) of the
Arbitration Act.
In the light of the above legal position the date of delivery of the
12)
award to the Advocate for the petitioner cannot be the starting point for
commencement of the period of limitation. In absence of any other
material on record the date claimed by the petitioner of receipt of the
award by him will have to be accepted as the correct date. Therefore, I
find no substance in the preliminary objection of limitation taken by the
respondent and hold that the petition filed is within the period of
13).
limitation prescribed under Section 34(3) of the Arbitration Act.
This brings us to the appreciation of the rival contentions on
merits. It will be relevant to note at the outset that the material facts of
the dispute i.e. advance of loan in the sum of Rs.57,00,000/- to the
proprietor of “M/s. V.R. Pictures”, the
petitioner's father as the
petitioner being the guarantor for repayment of the loan, execution of
the tri-partite agreement dated 18 th June, 2004, issuance of bills of
exchange and post-dated cheques by the petitioner and failure to repay
the loan are not disputed. The challenge to the award on merit is not in
strict sense of the term merit. It is essentially procedural in nature.
14).
The petitioner contends that, there is no arbitration
agreement between him and the respondent. The tri-partite agreement
dated 18th June, 2004 does not contain an arbitration clause. The
agreement of arbitration arises out of the Articles of Association of
IMPPA. It provides for arbitration of disputes inter se the members.
Undisputedly, all the three parties to the tripartie agreement are
members of IMPAA. Mr. Davar, however submits that the agreement
under the Articles of Association cannot be extended to the petitioner
because his role in the transaction was not that of a producer but it was
0f a guarantor.
In my opinion, there can be no merit in the argument of Mr.
15).
Davar. Admittedly, all the three persons to the transaction are members
of IMPAA and the Articles of Association of IMPAA provides for
resolution of the disputes inter se it's members, by way of arbitration
conducted by “Sub-Committee of Producers Grievances Cell and In-
House Settlement”. It is nobody's case that the IMPAA makes any
distinction amongst it's members.
Therefore, even if the dispute
between it's members arises out of any capacity other than strictly that
of a producer in the transaction between the parties, there can be no
escape from the arbitration clause in the Articles of Association.
16).
There is one more reason for rejecting the argument of Mr. Davar
of want of Arbitration agreement between the parties. It is the specific
case of the respondent that father of the petitioner carried on business
of film producing in the name and style of M/s V.R. Pictures. The
petitioner, who is also a producer, on the death of his father, continued
the business of the father in the same name i.e. M/s V.R. Pictures from
the same business premises. Therefore, on the death of the father, he
stepped into shoes of the father and became liable to repay the loan in
the capacity of the principal borrower as well. There is no material on
record to challenge this contention of the respondent. It is not even the
case of the petitioner that, on the death of his father the business carried
on in the name of M/s. V.R. Pictures is closed down by stating the
necessary particulars therefor and that there is no business carried on in
that name since the death of the father.
The petitioner has baldly
denied that, he is carrying on the business of his father. In the peculiar
facts of the case, where the petitioner has stepped into the shoes of his
father, I am not inclined to hold that there is no arbitration agreement
between the parties. Further as will be seen hereinafter, the petitioner
was well aware of the arbitration proceedings, but did not raise the
dispute of absence of arbitration agreement, at any point of time.
17).
The petitioner next complains that notice of arbitration
proceedings was not served upon him. Perusal of the impugned award
shows that, on receipt of the complaint from the respondent, IMPPA
had called for the comments from the petitioner. When he failed to
respond, IMPPA assigned the complaint to the Committee for
arbitration. The Committee sent notice of the arbitration dated 17 th
September, 2007 to the petitioner calling upon him to remain present
before itself for the arbitration proceedings. Three more notices had
thereafter been sent to the petitioner being notices dated 11 th January,
2008, 29th January, 2008 and 8th February, 2008. The final notice
came to be issued on 24th March, 2008 with a specific intimation to the
petitioner that on his failure to attend the meeting, an ex-parte decision
will be taken in the dispute. Even thereafter, two more notices i.e.
notices dated 6th May, 2008 and 26th June, 2008 were given by the
Committee to the petitioner before passing the arbitral award. This
material from the record is neither disclosed in the petition nor dealt
with by the petitioner. In any case, the record shows that the petitioner
had appointed Advocate Gajendra Singh to represent him in the arbitral
proceedings. That is how the advocate had, received the award on his
behalf. Therefore, there is no merit in the contention of non-service of
notice of arbitration proceedings.
18).
The third ground of challenge canvassed is that, the award
deals with the dispute which is beyond the statement of claim. The
details of this contention are not stated anywhere in the arbitration
petition. The reference to the arbitration had been made by the letter
dated 27th July, 2007 sent by the respondent to the Secretary, IMPPA
for taking up th e case with M/s. V.R. Pictures for refund of the amount
of Rs.57,0,000/- with interest thereon. The letter specifically refers to
the extension of time to repay until 18 th June, 2006. Therefore, it
cannot be said that the reference to the arbitration was of a claim that
beyond the statement of claim. In all the above circumstances I find no
merit in the petition and dismiss the same.
(SMT. R.P. SONDURBALDOTA, J)
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