The Supreme Court in the matter of Anilkumar Jinabhai Patel (D) Thr. Lrs. vs. Pravinchandra Jinabhai Patel and Ors by upholding the decision of the High Court of Judicature at Bombay Bench at Aurangabad has reaffirmed that the limitation to file an application for setting aside of an arbitral award begins from the date on which the signed copy of the award is acknowledged to have been received by the aggrieved party.
The Appellant and Respondent, who were brothers, together started a business of fertilizer manufacturing, chemical and real estate in Jalgaon. Since the children of Parties had grown up and in order to avoid any possible litigation, both the brothers and their family members decided to divide the assets of the family. The parties signed a Memorandum of Understanding dated 21.05.1996 (MoU) and appointed two arbitrators. The MoU was signed by all the members of the family i.e. the Appellants and Respondents.
In the interim and during the pendency of the arbitral proceedings Pravinchandra Patel and Anilkumar Patel decided to streamline the ongoing business of firms and companies by signing of an interim MOU on 29.06.1996 (IMOU). The covenants of the said IMOU covered the matters relating to bank accounts and withdrawal power etc. The said IMOU was signed by Pravinchandra Patel for himself and on behalf of his family members. Similarly, Anilkumar Patel also signed the IMOU for himself and also as a power of attorney holder for his wife, his all sons and daughter-in-law.
An award dated 07.07.1996 (with a mention of the IMOU) was passed and signed by the arbitrators. The copy of the award was handed over to Pravinchandra Patel and Anilkumar Patel by arbitrators in person which was duly acknowledged by them. The copy of the award bore signatures of both Pravinchandra Patel and Anilkumar Patel, respectively, with a recital that they and their family members will act as per the award and will give effect to the same. Further by another award dated 03.11.1996, the issues between Appellants and Respondents were finally decided taking note of earlier awards.
The Appellants thereafter filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) challenging the award dated 07.07.1996. The Appellants amongst other contentions also contended that the they learnt about the arbitral award only on 11.08.2005 when they were served with the notice of execution petition filed by Pravinchandra Patel alongwith the xerox of the award dated 07.07.1996. Therefore, as per the appellant-Anilkumar Patel, period of limitation starts only from 11.08.2005, from the date of their receipt of copy of the award.
The District Judge vide order dated 14.02.2011 allowed the application under Section 34 of the Act and set aside the award dated 07.07.1996 holding that the holding that the period of limitation prescribed under Section 34(3) of the Act is to be computed from the point of time when the party concerned received the copy of the arbitral award and in the present factual matrix there is nothing to show that Anilkumar Patel was authorised by the other applicants to receive a copy of the award on their behalf and it cannot be said that the appellant Nos.1(a) to 1(d) and respondent No.10 had received the award in terms of Section 31(5) of the Act.
At this point it would be necessary to bring knowledge that Section 34(3) of the Act provides that an application for setting aside of an award shall be made within 3 months from the date on which the party has received the award. The sub-section further provides an extension of 30 days in filing the application only if the Court finds sufficient grounds for the delay. Section 31(5) of the Act provides that after an arbitral award is made a signed copy shall be delivered to the parties.
Being aggrieved by the order dated 14.02.2011, Pravinchandra Patel challenged the same before the Hon’ble High Court and the High Court set aside the order of the District Judge holding that the petition filed in the year 2005 under Section 34 of the Act was time barred. The High Court enumerated various circumstances to hold that Anilkumar Patel and his family members were well aware of the award dated 07.07.1996. The High Court also relied upon various correspondence between the parties, legal proceedings etc. to arrive at the conclusion that Anilkumar Patel had received the award dated 07.07.1996.
Upon perusal of the impugned judgment and materials placed on record, the following points arose for the Supreme Courts’ consideration:-
- Whether Anilkumar Patel represented his family in the arbitration proceedings and whether respondents are right in contending that receipt of copy of award by Anilkumar Patel was for himself and on behalf of his family members?
- Whether the High Court was right in holding that the application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award was barred by limitation?
The Apex Court relying on State of Arunachal Pradesh v. Damini Construction Co. observed that the words ‘but not thereafter‘ in the proviso to Section 34 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‘.
In furtherance to the above the Apex Court also relied upon Union of India v. Tecco Trichy Engineers and Contractors further observed that the period of limitation would commence only after a valid delivery of an arbitral award takes place under Section 31(5) of the Act.
The Supreme Court also relied on State of Maharashtra and Ors. v. Ark Builders Pvt. Ltd. observed that the expression “…party making that application had received the arbitral award…” cannot be read in isolation and it must be understood that Section 31(5) of the Act requires a signed copy of the award to be delivered to each party.
The Supreme Court opined that cumulative reading of Section 34(3) and Section 31(5) of the Act makes it clear that the limitation period prescribed under Section 34(3) of the Act would commence only from the date on which the signed copy of the award is delivered to the party making the application for setting it aside.
Lastly the Supreme Court appreciated the other observations made by the High Court on the circumstances that were brought on record to clearly show that Anilkumar Patel was authorized by other Appellant Nos. 1(a) to 1(d) to receive copy of the award and act on their behalf.
Summing up their observation and appreciating the observation of the High Court that having accepted the award through Anilkumar Patel, being the head of the family, appellant Nos. 1(a) to 1(d) cannot turn round and contend that they had not receive the copy of the award and hence in terms of compliance of Section 31(5) and Section 34(3) of the Act the Appellants challenge to the award is barred by limitation.
By upholding the judgment passed by the High Court, the Supreme Court has yet again reinforced the stand of the Apex Court in the above mentioned case laws; a combined reading of Section 31(5) with Section 34(3) of the Act prescribes that the period of limitation would start ticking from the moment the signed copy of the award is delivered or received by the proper party.