Tuesday, June 18, 2024

𝗝𝘂𝗱𝗶𝗰𝗶𝗮𝗹𝗗𝗿𝗲𝗮𝗺™

𝙰𝙵𝙵𝙾𝚁𝙳𝙰𝙱𝙻𝙴 & 𝙰𝙲𝙲𝙴𝚂𝚂𝙸𝙱𝙻𝙴

ARBITRATIONCASE LAWSLEGAL AFFAIRS

SEC 34 ARB

Dakshin Haryana Bijli Vitran Nigam Ltd. vs. M/S Navigant Technologies Pvt. Ltd., SC 2021

FACTS – On 16.10.2014, the appellant corporation terminated the Service Level Agreement, which led to disputes between the parties. The disputes were referred to arbitration by a three-member tribunal. The arbitral tribunal orally pronounced the award [2:1] on 27.04.2018, whereby the claims of the respondent company were allowed. The parties were informed that the third arbitrator had disagreed with the view taken by the majority of arbitrators, and would be rendering his separate opinion.

A copy of the draft award was provided to the parties to point out any computation, clerical or typographical errors in the award on the next date of hearing.On 12.05.2018, a copy of the dissenting opinion was provided by the third arbitrator to the parties (even though the opinion was dated 27.04.2018).

The matter was then posted to 19.05.2018, for the parties to point out any typographical or clerical mistakes in the dissenting opinion delivered by the third arbitrator.On 19.05.2018, the tribunal recorded that both the parties had not filed any application to point out any clerical or typographical mistakes in the award, or dissenting opinion. On this date, the signed copy of the arbitral award was provided to both the parties, and the proceedings were terminated.

The Appellant-corporation filed its Objections under Section 34 on 10.09.2018 before the Ld. Civil Court, Hisar, Haryana.

The Civil Court dismissed the Application for condonation of delay vide Order dated 14.02.2019. It was held that the Appellant had received the majority award on 27.04.2018. Thus, the period of limitation starts running from the same date. Accordingly, the period of limitation of three months starts from 27.04.2018 i.e. the date on which the Appellant received the arbitral award. The proviso to Section 34(3) provides that if the Court is satisfied that the applicant was prevented from sufficient cause from making the application within 3 months, it may entertain the application within a further period of 30 days. In the present case, the application u/S. 34 was filed even after the expiry of the further period of 30 days. Merely because the dissenting opinion was erroneously styled as an award by the minority arbitrator, it cannot be said that the dissenting opinion attains the status of an award. Consequently, the objections were dismissed solely on the ground of delay.

The appellant corporation filed Appeal under Section 37 of the Arbitration Act before the High Court.The High Court vide the affirmed the Order passed by the Civil Court. It was held that a reading of Section 31 clearly reflects that once an award is signed and communicated by the majority of arbitrators, the same would constitute an “award”. The signed copy of the majority award i.e. signed by two of the three arbitrators was received on 27.04.2018, and u/S. 34(3), the objections had to be filed within 3 months, which would expire on 27.07.2018. Even if the benefit of 30 days had been granted to the Appellants, the objections ought to have been filed by 26.08.2018, whereas the objections had been filed on 10.09.2018. There was no infirmity in the judgment of the Civil Court, and accordingly, the Appeal was dismissed.

Aggrieved by the rejection of the objections under Section 34 on the ground of delay, the appellant corporation has filed the present Appeal before the Supreme Court.

  

CAUSEAffirmation of the order of the Civil Court by the High Court.

ISSUE – Whether the period of limitation for filing the Petition under Section 34 would commence from the date on which the draft award dated 27.04.2018 was circulated to the parties, or the date on which the signed copy of the award was provided.

ARGUMENTS – The appellant corporation inter alia contended that its objections had been erroneously dismissed by the Additional Civil Judge, as well as the High Court on the sole ground of limitation, and not on merits.

Section 31(1) of the Act provides that all the members of the tribunal shall sign the award. Section 31(2) which permits an award to be rendered so long as it is signed by the majority of the members, and reasons for omission of the signature of the third arbitrator is mentioned, applies only in the case of a unanimous award. Section 31(2) has no application when there is dissenting view rendered by one of the arbitrators. Section 34 of the Act provides for objections to be filed against the arbitral award, and not the majority award alone. Consequently, the time limit to file objections against an award under Section 34(3) of the Act, does not relate to only the majority award, but to the arbitral award, which includes the opinion of the dissenting member of the tribunal.

On the other hand, the Respondents contended that the objections filed by the appellant corporation under Section 34 of the Arbitration Act are barred by limitation, and ought to be dismissed as such.

The contention of the Respondent is that since the majority award was pronounced on 27.04.2018, the limitation period applicable under Section 34(3) would commence from this date.The dissenting opinion of the minority member was not an award for the purposes of computing the limitation period prescribed under sub-section (3) of Section 34. The opinion of the minority was only a view, and could not be enforced as an award. It could not be considered to be the arbitral award for the purpose of computing limitation under Section 34(3) of the Act.

  

DECISION – An “arbitral award” is the decision made by the majority members of an arbitral tribunal, which is final and binding on the parties. Section 35 provides that an arbitral award shall be “final and binding” on the parties and persons claiming under them. A dissenting opinion does not determine the rights or liabilities of the parties which are enforceable under Section 36 of the Act

The reference to the phrase “arbitral award” in Sections 34 and 36 refers to the decision of the majority of the members of the arbitral tribunal. A party cannot file a petition u/S. 34 for setting aside, or u/S. 36 for enforcement of a dissenting opinion. What is capable of being set aside u/S. 34 is the “arbitral award” i.e. the decision reached by the majority of members of the tribunal. Similarly, u/S. 36 what can be enforced is the “arbitral award” passed by the majority of the members.

The legal requirement of signing the arbitral award by a sole arbitrator, or the members of a tribunal is found in Section 31 of the 1996 Act, which provides the form and content of an arbitral award.Section 31 (1) is couched in mandatory terms, and provides that an arbitral award shall be made in writing and signed by all the members of the arbitral tribunal. If the arbitral tribunal comprises of more than one arbitrator, the award is made when the arbitrators acting together finally express their decision in writing, and is authenticated by their signatures An award takes legal effect only after it is signed by the arbitrators, which gives it authentication. There can be no finality of the award, except after it is signed, since signing of the award gives legal effect and validity to it.

The statute makes it obligatory for each of the members of the tribunal to sign the award, to make it a valid award. The usage of the term “shall” makes it a mandatory requirement. It is not merely a ministerial act, or an empty formality which can be dispensed with.

  

Section 32 provides that the arbitral proceedings shall be terminated after the final award is passed. With the termination of the arbitral proceedings, the mandate of the arbitral tribunal terminates, and the tribunal becomes functus officio.

In an arbitral tribunal comprising of a panel of three members, if one of the members gives a dissenting opinion, it must be delivered contemporaneously on the same date as the final award, and not on a subsequent date, as the tribunal becomes functus officio upon the passing of the final award. The period for rendering the award and dissenting opinion must be within the period prescribed by Section 29A of the Act.

There is only one date recognised by law i.e. the date on which a signed copy of the final award is received by the parties, from which the period of limitation for filing objections would start ticking. There can be no finality in the award, except after it is signed, because signing of the award gives legal effect and finality to the award.

Applying the law to the facts of the present case, we find from a perusal of the arbitral proceedings that even though the award was pronounced on 27.04.2018, the signed copy of the award was provided to the parties only on 19.05.2018. The procedural orders of the tribunal reveal that on 27.04.2018, only a copy of the award was provided to the parties to point out any computation error, any clerical or typographical error, or any other error of similar nature which may have occurred in the award on the next date.

It was also recorded that the third arbitrator had dissented, and would be delivering his separate opinion. The proceedings were then posted for 12.05.2018. On 12.05.2018, the third arbitrator pronounced his dissenting opinion. On that date, the tribunal posted the matter to 19.05.2018, to enable the parties to point out any typographical or clerical mistakes in the dissenting opinion, and for handing over the original record of the proceedings to the parties. On 19.05.2018, the signed copy of the award and the dissenting opinion, alongwith the original record, were handed over to the parties, as also to each of the arbitrators. The tribunal ordered the termination of the proceedings.

We are of the considered opinion that the period of limitation for filing objections would have to be reckoned from the date on which the signed copy of the award was made available to the parties i.e. on 19.05.2018 in the instant case.

It is the admitted position that the objections were filed within the period of limitation prescribed by Section 34(3) of the Act, if reckoned from 19.05.2018. Undisputedly, in the instant case, the objections have been filed within the period of limitation prescribed under Section 34(3) from the date of receipt of the signed award.

  

In the aforesaid facts and circumstances, the Appeal deserves to succeed and the impugned order passed by the High Court of Punjab & Haryana dated is accordingly set aside.

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