June 27, 2018

India: Limitation Period for application to set aside arbitration award

Source: www.supremecourtofindia.nic.in


Introduction

The Supreme Court of India held in the case of AnilKumar Jinabhai Patel(D) v. Pravinchandra Jinabhai Patel on March 29,2018 that the limitation period for filing of the application for setting aside an arbitration award begins from the date of receiving of the signed copy of the award.

Facts

  • Anilkumar Jinabhai Patel (hereinafter referred to as the ‘Appellant’) and, Pravinchandra Jinabhai Patel (hereinafter referred to as the ‘Respondent’) are real brothers who together started the business of fertilizer manufacturing, chemical and real estate at Jalgaon.

  • As children of both the Appellants and Respondent grew up and in order to avoid any possible litigation, both the brothers and their family members decided to make division of the assets of the family and therefore, approached Latikaben and Bhikhalal Nathalal Patel who is the sister and brother-in-law of Pravinchandra Patel and Anilkumar Patel and the parties agreed to appoint them as arbitrators.

  • The arbitrators passed the arbitral award dated July 7, 1996, wherein certain properties were given to the Appellant and the Respondent and some other assets were kept undivided with equal rights and interest thereon of both groups. The copy of arbitral award was duly signed by both parties with a recital that they and their families would act as per the award. Then by an award dated November 3, 1996, the issues between the parties were finally decided.

  • However, the Appellant, Anilkumar and his family members filed an arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”) before the District Judge, Jalgaon challenged the arbitral award dated July 7, 1996, contending that they became aware of the award only after they were served with the notice of execution petition filed by the Respondent, Pravinchandra Patel, along with the xerox of the award on August 11, 2005, therefore the period of limitation starts only from August 11, 2005, from the date of their receipt of copy of the award.

  • The District Judge vide order dated February 14, 2011 ruled in favor of the Appellant and allowed the application under Section 34 of the Act, as the period of limitation is to be computed from the time that the party concerned received the copy of the arbitral award. The Respondents challenged the decision of the District Court in the Hight Court of Bombay.

  • The High Court reversed the decision of District Judge, Jalgaon holding that the arbitration petition under Section 34 of the Act filed by the Appellants in the year 2005 was time barred and the matter reached the Hon’ble Supreme Court of India.

Issues:

  1. 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?

  2.  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?

Decision of Court

The Supreme Court held that

  • Section 34 (3) of the Act provides that an application for setting aside an award shall not be entertained by the Court if it is made after three months have elapsed from the date on which the applicant had received the arbitral award. The proviso to Section 34 further provides that if the Court is satisfied that the Applicant was prevented by sufficient cause from making the application within the prescribed time, it may entertain the application within a further period of thirty days 'but not thereafter', as held in the case of State of Arunachal Pradesh v. Damini Construction Co. (2007) 10 SCC 742).

  • Further, in the case of Union of India v. Tecco Trichy Engineers and Contractors (2005) 4 SCC 239, the Supreme Court, in respect to the issue of limitation for filing application under Section 34 of the Act for setting aside the arbitral award, held 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 held that the awards dated July 7, 1996 was signed by both the arbitrators and Anilkumar Patel (the applicant herein) received the copy of the award with the following endorsement, "For myself and on behalf of my family members", the receipt of the award by Anilkumar Patel with the aforementioned endorsement could be construed as the receipt of the award by his family members. Having accepted the award through Anilkumar Patel, being the head of the family, the Appellants could not turn around and contend that they had not received the copy of the award. The Supreme Court also held that there was plenty of evidence which established beyond a doubt that the Appellant was well aware of the award dated July 7, 1996, and being the head of the family, he had signed a copy served on him which amounted to signed copy being served on the family members as well.

  • Hence, the Supreme Court held that the arbitral petition filed by the Appellants was barred by time, and that the limitation period for filing of the application for setting aside arbitration award begins from the date of receiving of the signed copy of the award. The Supreme Court dismissed the appeals

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