Tuesday, 20 November 2018

When court can condone delay in filing application U/S 34 of Arbitration Act?

 Considering the object of provisions of Section 34 of the Arbitration Act and in view of absence of conclusive material on record in respect of delivery of service of arbitral award on the appellants, a case is made out by the appellants that they were prevented by sufficient cause from making an application.
21. In view of the above stated facts and circumstances, we find that as the copy of the award was not served on the appellants, the explanation tendered for condoning delay in preparing petition under Section 34 deserves consideration. A party cannot be prevented to resort to statutory remedy if it is established that there was no fault on their part in approaching the Court beyond the prescribed period of limitation or in view of non-compliance of provisions of Section 34 of the Arbitration Act.

In the High Court of Bombay
Ordinary Original Civil Jurisdiction
(Before Naresh H. Patil and G.S. Kulkarni, JJ.)

JSC Ispat Pvt. Ltd. v. M/s. HDB Financial Services Ltd. .
Appeal (L) No. 80 of 2018
In
Notice of Motion (L) No. 2556 of 2015 (for condonation of delay)
In
Arbitration Petition No. 40 of 2018
(Arbitration Petition (L) No. 1814/2015)
With
Notice of Motion (L) No. 130 of 2018 (for stay)
Decided on March 6, 2018
Citation: 2018 SCC OnLine Bom 538

1. This appeal is directed against the order passed by the learned Single Judge of this Court dated 4th January 2018 dismissing the Notice of Motion (l) No. 2556/2015 seeking condonation of delay in filing the arbitration petition.
2. The petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘Arbitration Act’ for short) was filed praying for setting aside the Award passed on 28th August, 2014. There was delay in filing the said petition. Therefore, a Notice of Motion was filed by the appellants herein for condonation of delay in filing the arbitration petition.
3. On behalf of the petitioners in arbitration petition, Mr. Deepak Bansal filed affidavit before the learned Single Judge. It was contended by the petitioner in the affidavit that the Sole Arbitrator passed Award on 28th August, 2014. The petitioners received Notice of Execution Proceedings filed by the respondents before the Faridabad Court on 16thJanuary, 2015. At that point of time the petitioners came to know about passing of such an Award. They tried to contact their Advocate but were unable to contact. Thereafter, they applied for certified copy of award before the Faridabad Court on 13th May, 2015 which was supplied to them on 14th May, 2015.
4. It is the categorical contention of the appellants that till filing of the Notice of Motion, they did not receive copy of the Award. They have calculated the delay from the date of receipt of copy of the Award. Thereafter, they approached an Advocate for opinion and after taking opinion on 9th September, 2015, the present proceedings were preferred. A draft of arbitration petition was prepared and approved and finally a petition was filed on 11th September, 2015. There was delay of 30 days in filing arbitration petition. The appellant preferred Notice of Motion for condonation of delay.
5. The Counsel appearing for the appellants submits that in accordance with provisions of Arbitration Act, a copy of Award was required to be served on the appellants which was not served at all. Reliance placed on the service acknowledgement of the postal department does not establish that the Award was sent by the Arbitrator which was served on the appellants. In absence thereof the delay is required to be condoned otherwise the appellants would loose their statutory right to file appeal and would suffer consequences without there being any fault on their part. It is submitted that the postal record do not establish service of the award on the appellants. On behalf of respondents it was submitted that a ‘Detailed Track Events’ produced on record conclusively establishes that award was delivered and served on the appellants. The delay is not at all explained satisfactorily. The arbitration petition was filed beyond prescribed period of limitation.
6. The learned Counsel appearing for the respondents submits that the learned Single Judge had gone through the record and proceedings. The view adopted by the learned Single Judge is reasonable and proper view. The appellants did not bother to attend to the proceedings of the arbitration. Copy of Award was dispatched on their mailing address. The track record of the postal department shows that items were delivered. Therefore, no case was made out for interfering in the impugned order.
7. We had called for the original record of Arbitration Petition maintained by the Arbitrator. We have perused the postal details of the Track Events endorsement’ which were referred to by the learned Single Judge.
8. Section 2(1)(h) of the Arbitration and Conciliation Act, 1996 defines “party”, which reads as under:
2. Definitions.- (1) In this Part, unless the context otherwise requires-
(a) .
(b) .
(c) .
(d) .
(e) .
(f) ….
(g) .
(h) “party” means a party to an arbitration agreement.
9. Section 3 refers to receipt of written communication, which reads as under:
3. Receipt of written communication. - (1) Unless otherwise agreed by the parties, -
(a) any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address, and
(b) if none of the places referred to in clause 9(a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.
(2) The communication is deemed to have been received on the day it is so delivered.
(3) This section does not apply to written communications in respect of proceedings of any judicial authority.
10. Section 31 refers to form and contents of arbitral award. Section 31(5) reads as under:
31. Form and contents of arbitral award.-
(1) …..
(2) .
(3) ….
(4) ….
(5) After the arbitral award is made, a signed copy shall be delivered to each party.
11. Section 34 refers to application for setting aside arbitral award. Section 34(3) and (4) read 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.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. Provisions of Section 27 of the General Clauses Act, 1897 read as under:
27. Meaning of service by post- Where any [Central Act] or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression “serve” or either of the expressions “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.”
12. Under the scheme of the Act and in view of the provisions of Section 31, it is obligatory on the Arbitral Tribunal to make the award in writing and after signing it, it is mandatory that signed copy of the award is delivered to each of the party to the arbitration agreement. A signed copy of the award is normally delivered to the party by Arbitrator himself.
13. We have perused the original record maintained by the Arbitrator and the R & P from the learned Single Judge. The record maintained by the Arbitrator does not reflect that the Arbitrator forwarded signed copy of the award to the parties. The postal track record also does not show that the envelopes containing copy of award was dispatched by the Arbitrator. The post was booked at BNPL SP Hub Vile Parle West Mumbai. At page 115 record and proceedings, a stamped document of 10/9/2014 is appearing having endorsement; Business Post Center, Chakala, MIDC, Mumbai City, North Division. Said document is titled as “5 HDB Award dated 28.08.2014 DIS on 09.09.2014 Speed Post List/Ashish Aggrwal”. The record shows that address of Ashish Aggrwal is Andheri East, Mumbai, who appeared as an authorized representative/Advocate for the claimant.
14. We find certain infirmities in respect of service of award claimed to have been made on the appellants. The acknowledgement receipt of forwarding of the postal envelopes is not found in Arbitrator's proceedings. The ‘Detailed Track Events’ are on record which show that some of the appellants received the envelopes. It does not establish as to who had forwarded these envelopes on the address of the appellants. There is nothing on record to show that the arbitrator had forwarded copy of the award which is said to be received by the appellants. It even does not establish that the envelopes which were sent and said to have been received contain copy of Award. The Counsel submits that it is practically an ex parte award and appellants must get opportunity to contest the award on merits.
15. We find substance in the submissions of the Counsel appearing for the appellants that while dealing with the application for condonation of delay the learned Single Judge had even discussed the merits of the subject matter of the award. In Paragraph-7, the learned Single Judge observed as under:—
“7. Before going into the issue of limitation, this Court enquired with the learned counsel for the petitioners about merit of the matter and whether the petitioners are ready and willing to deposit any amount. Learned counsel for the petitioners fairly states that except raising preliminary objection before the learned arbitrator, his client did not attend any of the meetings before the learned arbitrator nor filed any written statement. His client is also not in a position to deposit any amount if any opportunity is granted by this Court in the event of this Court coming to the conclusion that delay in filing the arbitration petition can be condoned.”
16. In the case of Union of India v. Tecco Trichy Engineers and Contractors1, the Apex Court, in para 8, observed 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.
17. In the case of Benarsi Krishna committee v. Karmyogi Shelters Private Limited2, the Apex Court, in para 15, observed as under:—
“15. Having take note of the submissions advanced on behalf of the respective parties and having particular regard to the expression “party” as defined in Section 2(1)(h) of the 1996 Act read with the provisions of Sections 31(5) and 34(3) of the 1996 Act, we are not inclined to interfere with the decision of the Division Bench of the Delhi High Court impugned in these proceedings. The expression “party” has been amply dealt with in Tecco Trichy Engineers case and also in ARK Builders (P) Ltd. case, referred to hereinabove. 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 empowered to act on the basis of a vakalatnama. In such 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.
18. We may refer to the Judgment of the Apex Court in the case of Commissioner, Nagar Parishad, Bhilwara v. Labour Court Bhilwara3 wherein Apex Court observed in Paragraphs 4 and 5 as under:
“4. It is not in dispute that there was a delay of 178 days in filing the appeal against the order of the learned Single Judge dated 12-3-2004. While rejecting the application for condonation of delay, the High Court had considered the merits of the appeal and then rejected the application for condonation of delay.
5. While deciding an application for condonation of delay, it is well settled that the High Court ought not to have gone into the merits of the case and would have only seen whether sufficient cause had been shown by the appellant for condoning the delay in filing the appeal before it……….”
19. The learned Single Judge while placing reliance on the judgment in the case of Francisco A. D'Souza v. L and T Finance Limited, Mumbai (2015 (5) Mh.L.J. 390) observed that the principle laid down in the said judgment would apply to the facts of this case. In the said case, the award was sent by the Arbitrator on two addresses, whereas in the present case the record does not suggest that the Arbitrator had sent signed copy of award to the parties. We find substance in the submissions advanced on behalf of the appellants that during the course of execution of award, the parties came to know of passing of the award. Even if the award is not contested on merits by the parties, the Arbitrator is bound to forward a signed copy of the award on the given address of the parties. Considering the consequences of passing of award in law, receipt of copy of the award assumes significance. It is held in the case of Union of India v. Tecco Trichy Engineers and Contractors (Supra) that the delivery of an arbitral award is not a matter of mere formality. It has the effect of conferring certain rights on the party and bringing to an end the right to exercise those rights on expiry of period of limitation. We, therefore, find that the judgment in the case of Francisco A. D'Souza v. L and T Finance Limited, Mumbai, relied upon by the learned Single Judge will not be applicable to the facts of the present case.
20. Considering the object of provisions of Section 34 of the Arbitration Act and in view of absence of conclusive material on record in respect of delivery of service of arbitral award on the appellants, a case is made out by the appellants that they were prevented by sufficient cause from making an application.
21. In view of the above stated facts and circumstances, we find that as the copy of the award was not served on the appellants, the explanation tendered for condoning delay in preparing petition under Section 34 deserves consideration. A party cannot be prevented to resort to statutory remedy if it is established that there was no fault on their part in approaching the Court beyond the prescribed period of limitation or in view of non-compliance of provisions of Section 34 of the Arbitration Act.
ORDER
1. The Appeal is allowed.
2. The impugned order dated 4th January, 2018 passed by the learned Single Judge is quashed and set aside.
3. The Notice of Motion for condonation of delay is allowed.
4. The Arbitration Petition No. 40/2018 be heard and decided on its own merits.
22. In view of disposal of appeal, Notice of Motion(l) 130/2018 does not survive and stands disposed of.
23. It is clarified that we have not expressed any opinion on the merits of the subject matter of the arbitral Award.
1 [(2005) 4 SCC 239]
2 [(2012) 9 SCC 496]
3 (2009) 3 SCC 525
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