Arbitration Act | Once Party Aware Of Contents Of Award, Can't Claim Extension Of Limitation By Invoking S.31(5): Allahabad High Court
The Allahabad High Court has held that the requirement of signed copy of award being delivered to parties under Section 31(5) of the Arbitration and Conciliation Act 1996 is not to be construed narrowly. The Court held that once the party seeking extension of limitation by applying Section 31(5) of the Act is aware of the contents of the alleged unsigned award, the limitation cannot...
The Allahabad High Court has held that the requirement of signed copy of award being delivered to parties under Section 31(5) of the Arbitration and Conciliation Act 1996 is not to be construed narrowly. The Court held that once the party seeking extension of limitation by applying Section 31(5) of the Act is aware of the contents of the alleged unsigned award, the limitation cannot be extended.
Section 31(5) of Act of 1996 provides that after passing of an arbitral award, its signed copy must be delivered to each party.
“The legislative intent behind Section 31(5) of the Arbitration Act is to ensure that parties are adequately informed about the award to take necessary legal actions within prescribed timelines. Therefore, an interpretation that considers the party's actual awareness and actions, even if a signed copy was not formally received, aligns better with the legislative intent and the principles of justice and equity,” held Justice Shekhar B. Saraf.
The Court held that once the party has acted upon the contents of arbitral award, it would mean it has knowledge of the award and would nullify the effect of non-signing the award as it had already been acted upon.
Factual Background
Section 3A of the National Highways Act 1956 empower the Central Government to notify a land for acquisition for building, maintenance, management or operation of a national highway or part thereof. Thereafter, Section 3B provides for survey of such property which is indented to be acquired. Section 3C provides any person interested in such land an opportunity of hearing within 21 days from the date of notification under Section 3A.
Section 3D of the NHAI Act provides for declaration of acquisition of the land notified under Section 3A. Section 3G empowers the Competent Authority under the Act to determine the compensation for the land being acquired under Section 3D. Section 3G(5) provides a remedy of arbitration to anyone who is not satisfied with the compensation awarded by the Competent Authority.
Section 3A notification was issued by the Central Government which was followed by a declaration under Section 3D of the NHAI Act. Thereafter, the Competent Authority under Section 3G of the NHAI Act passed an award determining the compensation.
Respondents, private persons, filed a petition under Section 3G(5) of the NHAI Act before the Additional Commissioner (Administration), Agra Division, Agra who acted as an Arbitrator. The Arbitrator remanded the matter back to the Competent Authority for re-determining the compensation. Against the remand award, NHAI filed an application under Section 34 of the Arbitration Act before the District Court which was rejected. Thereafter, NHAI approached the High Court under Section 37 of the Arbitration Act.
Counsel for NHAI argued that the Arbitrator could not have remitted the matter to the Competent Authority as it was empowered to determine the amount of compensation under Section 3G(5) of the NHAI Act. It was argued that the arbitrator had not signed the arbitral award which was mandatory under Section 31(5) of the Arbitration Act. Accordingly, it was argued that there was patent illegality in the order of the District Judge in dismissing application under Section 34 as time barred.
Counsel for respondent submitted that since the appellant-NHAI was aware of the arbitral award, it cannot claim to having no knowledge of the award to escape the limitation for filing application under Section 34 of the Arbitration Act.
High Court Verdict
The Court relied on Union of India v. Tecco Trichy Engineers, where the Supreme Court held that delivery of arbitral award is not a formality and as several limitations under the Arbitration Act start from the date of receipt of the award.
“In the realm of sports, where victory and defeat hang in balance, arbitration serves as the referee adjudicating disputes on the field of play. Section 31(5) of the Arbitration Act acts as the final whistle, signalling the end of the match and the declaration of the winner. For the prevailing party, the delivery of the award marks the culmination of their efforts and provides them with a means of enforcing their rights against the losing party,” held Justice Saraf.
The Court relied on Rahul v. Akola Janta Commercial Cooperative Bank Ltd., where the Bombay High Court had held that Section 31(5) cannot be narrowly construed by taking the literal meaning of the words contained therein. It was held that once a certified copy of the award has been delivered to the party and the contents of the award are known to the party, the period of limitation will start. The Court held that the party cannot be permitted to raise the plea of unsigned arbitral award after the expiry of limitation period.
The Court held that literal interpretation of Section 31(5) of the Act will lead to unjust outcomes and will defeat the purpose of arbitration as a speedy dispute resolution mechanism.
Perusing the order passed by the District Judge, the Court observed that appellant-NHAI was fully aware of the arbitral award and its contents as it had asked the Special Land Acquisition officer to calculate the compensation amount and publish a supplementary award which was acted upon by the appellant. The Court held that in such circumstances, the appellant could not be allowed to escape the limitation by claiming non-compliance of procedural technicality.
“A literal interpretation, which ignores the practical reality that the party was aware of the arbitral award and acted upon it, would be contrary to the spirit of the Arbitration Act.”
The Court further relied on Union of India v. Bhola Prasad Agrawal where the High Court of Chhattisgarh held that once the party is aware of the contents of the arbitral award, it cannot claim that singed copy of the award was not received by it as per Section 31(5).
The Court held that engagement with the contents of the award signifies its awareness for the purpose of starting limitation period under the Arbitration Act. The Court applied the doctrine of estoppel to state that once the party has acted upon the award, it is estopped from taking advantage of its delays by claiming procedural irregularities.
Accordingly, the Court held that there was no patent illegality in the order passed by the District Judge rejecting the application under Section 34 of the Arbitration Act on grounds of delay.
Case Title: Bharatiya Rashtriya Rajmarg Pradhikaran V. Neeraj Sharma And Others [APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT NO. 8 of 2020]