Serving Signed Copy Of Award To Employee Of Party Does Not Constitute Valid Service U/S 31(5) Of Arbitration Act: Bombay High Court

Brief Facts

The respondent and the appellant had business dealings. Dispute arose between them and an arbitration clause was invoked. The arbitrator passed an award granting relief to the claimant. The appellants argued that they were not served during arbitration and came to know about the award only on August 10, 2023, when the arbitrator refused to serve them a copy of the award.

They filed a petition under section 34 of the Arbitration Act which was dismissed by the court on the ground that the award had been received on time and the petition was filed after expiry of the time period provided under section 34(3) of the Arbitration Act. Hence, the present appeal under section 37 of the Arbitration Act.

Contentions:

The appellants submitted that as per section 31 of the Arbitration Act, the arbitrator must send a signed copy of the award to all the parties involved. In the present case, only two signed copies were created and there were five parties therefore substantiating the fact that the three partners of the firm were not served. since they were not served with a copy of the award, the limitation period had not started for them.

It was also argued that the copy of the award was served to the clerk who was not authorized to receive the legal documents therefore service on the clerk will not be a valid service.

Per contra, the respondents submitted that the appellants failed to prove that the clerk was not authorised to receive the documents since they had failed to examine him or submit his affidavit during section 34 proceedings. Therefore, it was rightly held that the copy was served on the partnership firm and its partners.

Observations:

The court at the outset noted that section 2(h) of the Arbitration Act defines the term party as a party to an arbitration agreement and referred to the judgment of the Supreme Court in Benarsi Krishna Committee & Ors. Vs. Karmyogi Shelters Pvt. Ltd.(2012) where it was held that a party under section 2(h) means only party to an arbitration agreement and not any agent or advocate acting on behalf of the party.

The court further noted that in the State of Maharashtra & Ors. Vs. M/s. Ark Builders Pvt. Ltd. (2011) the Supreme Court held that section 31(5) of the Arbitration Act contemplates that a signed copy of an award will be served on each party to an arbitration agreement. When a signed copy of this award is received by each party to an arbitration agreement, a limitation period for filing an application to set aside an award under section 34(3) will commence and not before that.

Similarly, the Delhi High Court in the Ministry of Health & Family Welfare & Anr. Vs. M/s. Hosmac Projects Division of Hosmac India Pvt. Ltd (2023) held that a signed copy of the award has to be served on each party to an arbitration agreement and service of such an award on the authorized representative of the party would not be a valid service for the purpose of section 31 of the Arbitration Act.

Based on the above discussion, the court held that “from the material on record, it is clear that as there were only two copies of the award signed in original, the requirement of Section 31(5) of the Act of 1996 of delivering a signed copy of the award to each party could not have been satisfied as there were five parties before the Arbitrator.”

The court after perusing the entire material on record noted that the appellant no. 3rd was not served with the signed copy of the award.

The court observed that even if the signed copy of the award was sent to the partnership firm which was acknowledged by an employee, such an acknowledgement by an employee does not constitute a valid service within the meaning of section 31 of the Act. This non-compliance was overlooked by the Single Judge.

It further added that the arbitrator prepared only two signed copies of the award which indicates that he treated the claimant and the partnership firm as the only parties to the proceedings. This failure to serve every partner of the firm with a copy of the award violated section 31 of the Arbitration Act. Therefore, the petition under section 34 was held to be filed within the period of limitation counting from the date when the Arbitrator refused to issue a copy of the award to the partners.

Accordingly, the impugned order was set aside.

Case Title: Health Care, Medical & General Stores Versus Amulya Investment,Through Proprietor Mr. Sameer G. Narvekar

Citation: 2025 LiveLaw (Bom) 23

Mr. Rohaan Cama with Mr. Kyrus Modi and Mr. Gaurav Gupte, i/by Mr. J. Ranawat, Advocates for the Appellants.

Mr. Yogendra Kanchan, i/by Mr. Vasant Dhawan, Advocates for the Respondent No.1.

Click Here To Read/Download The order