Wednesday, 29 May 2019

When court should not reject application for setting aside Arbitration Award on ground of limitation?

 True, there is no specific averment in the application filed under Section 34(1) of the Act that copy of the award was not received by the appellant or that it was not served or not delivered on him. However, the District Court should have considered the averments in the application under Section 34(1) of the Act as a whole and entered a finding whether copy of the arbitral award was delivered to the appellant or not. The finding of the learned District Judge that the application was hopelessly barred by limitation is merely based on the ground that it was filed nearly three years after the passing of the award. The question whether the appellant had received copy of the award was not considered by the District Court. 

IN THE HIGH COURT OF KERALA AT ERNAKULAM

Arb. A. No. 8 of 2007

Decided On: 08.02.2019

S. Balu  Vs. ICDS Ltd. and Ors.

Hon'ble Judges/Coram:
V. Chitambaresh and R. Narayana Pisharadi, JJ.

Citation: AIR 2019 Kerala 94


1. The appellant challenged the award passed against him by the arbitrator by filing application under Section 34(1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') in the District Court, Thiruvananthapuram. The learned District Judge dismissed the application on two grounds; (i) that court had no territorial jurisdiction to entertain the application and (ii) the application was hopelessly barred by limitation.

2. The appellant and another person were the guarantors to the loan availed of by the company by name 'Anugraha Wood Products Limited' from the first respondent company. The award passed by the arbitrator was with regard to recovery of the loan amount from the appellant and other persons.

3. The loan agreement executed by Anugraha Wood Products Limited and the first respondent company on 04.03.1996 contained an arbitration clause. Apart from that agreement, there was also a separate arbitration agreement executed by that company and the first respondent. The arbitration agreement contained the following clause:

"h) The Arbitrator shall hold the enquiry at Udupi only. However, the Arbitrator may change the place of enquiry if he desires so."
4. It is evident from the arbitration agreement that the seat of the arbitration was Udupi. There is also no dispute with regard to the fact that the arbitrator conducted the whole proceedings only at Udupi.

5. The contention of the appellant is that he is a person permanently residing at Thiruvananthapuram and therefore, the District Court, Thiruvananthapuram has got territorial jurisdiction to entertain the application under Section 34(1) of the Act in view of the provision contained in Section 20(a) of the Code of Civil Procedure, 1908.

6. We find no merit in the aforesaid contention. The moment the seat of the arbitration is designated it is akin to an exclusive jurisdiction clause (See Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited : MANU/SC/0456/2017 : AIR 2017 SC 2105).

7. The principle laid down in Indus Mobile (supra) has been reiterated by the Apex Court in Emkay Global Financial Services Limited v. Girdhar Sondhi (MANU/SC/0875/2018 : AIR 2018 SC 3894).

8. Indus Mobile (supra) has been followed by this Court in Britannia Industries Limited v. Easwaran (MANU/KE/1674/2018 : 2018 (3) KHC 574) and Sasidharan v. Sundaram Finance Limited (MANU/KE/1790/2018 : 2018 (3) KHC 638).

9. In the light of the decisions referred to above, the conclusion can only be that the court concerned at Udupi alone has got territorial jurisdiction to entertain the application filed by the appellant under Section 34(1) of the Act.

10. Now, the question of limitation. The award was passed by the arbitrator on 24.06.2000. The application under Section 34(1) of the Act was filed by the appellant in the District Court, Thiruvananthapuram on 21.05.2003. Therefore, the learned District Judge found that the application was hopelessly barred by limitation.

11. Section 34(3) of the Act provides that 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. It is also 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.

12. In the instant case, the appellant has got a plea that he did not receive copy of the arbitral award. The plea made by him in the application under Section 34(1) of the Act is that he was not aware of any arbitration proceedings or the passing of the award.

13. True, there is no specific averment in the application filed under Section 34(1) of the Act that copy of the award was not received by the appellant or that it was not served or not delivered on him. However, the District Court should have considered the averments in the application under Section 34(1) of the Act as a whole and entered a finding whether copy of the arbitral award was delivered to the appellant or not. The finding of the learned District Judge that the application was hopelessly barred by limitation is merely based on the ground that it was filed nearly three years after the passing of the award. The question whether the appellant had received copy of the award was not considered by the District Court. However, in view of our finding with regard to the territorial jurisdiction of the District Court, Thiruvananthapuram to entertain the application under Section 34(1) of the Act filed by the appellant, no question of remanding the application to that court for considering the question of limitation afresh arises.

14. In the light of the findings above, the appeal is liable to be dismissed.

Consequently, the appeal is dismissed. No costs.


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