Receipt Of Arbitral Award By Party A Sine Qua Non For Limitation U/S 34(3) To Begin, General Clauses Act Does Not Apply: Allahabad High Court

The Allahabad High Court has held that receipt of the award by the party is a sine qua non for limitation under Section 34(3) of the Arbitration and Conciliation Act, 1996 to begin and definition of “service by post” under Section 27 of the General Clauses does not apply.

The Court observed that Section 27 of the General Clauses Act which defined service by post in a Central Legislation if the words 'serve' or either of the expressions 'give' or 'send' or any other expression is used to mean that service is deemed to be effected at the time at which the letter would be delivered in the ordinary course of post. It was, thus, held that this definition is not applicable to Section 34(3) of the Arbitration Act as it uses the phrase 'receipt of award by the party'.

The bench comprising of Chief Justice Arun Bhansali and Justice Vikas Budhwar held that “for limitation to start running under Section 34(3) of the Act the receipt of the award by the party is a sine qua non.”

The arbitration award was passed on 09.04.2014. Appeal under Section 34 of the Arbitration Act was filed along with an application under Section 34(3) on 26.08.2015 pleading that the award was passed ex-parte. It was pleaded that the appellant came to know of the award for the first time when the execution proceedings had been initiated. It was further pleaded that the Arbitrator had refused to give them a copy of the award and therefore, application under Section 34(3) was filed for explaining the delay.

The Commercial Court observed that the award was sent through registered post to the parties and was indicated to be delivered. Since the application was filed with a delay of more than 1 year, the same was dismissed. Aggrieved, appellant filed an appeal under Section 37 of the Arbitration Act before the High Court.

The Court observed that though the Commercial Court only relied on the Post Master's communication indicated delivery of the award, there was another document as evidence showing that the award sent to the appellant had been returned to the Arbitrator. It was observed that a specific endorsement was made on the document by the Postman, where it was written in Hindi that the person was not found despite multiple delivery attempts.

Perusing Section 34(3), the Court observed that limitation, 30 day period, under Section 34(3) would only commence once a signed copy of the award has been delivered to the parties.

The Court relied on Benarsi Krishna Committee and Others Vs. Karmyogi Shelters Pvt. Ltd wherein the Supreme Court held that delivery of arbitral award on the agent or lawyer of a party is not delivery of award for the purposes of computing limitation under Sections 31(5) and 34(3) of the Act of 1996.

The Court held that Section 34(3) specifically requires delivery of the award for the period of limitation to commence. Since the delivery of the award was not made to the appellant, the Court held that the delay ought to be condoned.

“The determination made by the Commercial Court, based on assumption that as the award was received by the other parties, the same would also have been delivered to the appellant No. 1 is ex-facie contrary to the record and therefore, the order impugned cannot be sustained.”

Accordingly, the Court set aside the order on application under Section 34(3) of the Act and directed the Commercial Court to decide the appeal on merits.

Case Title: Madan Pal Singh And 2 Others v. M/S Ambika Installments Limited And Another [APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 8 of 2023]

Click Here To Read/Download Order