Section 31 Of Arbitration Act, 1940 Does Not Bar Court From Entertaining Applications Pre-Filing Of Award: Madhya Pradesh High Court

Section 31 of the Arbitration Act, of 1940, specifies the court jurisdiction for arbitration matters. It states that an award may be filed in any court with jurisdiction over the subject matter. It also states that all questions regarding the validity, effect, or existence of an award or arbitration agreement must be decided by the court where the award has been or may be filed, and not by any other court.

Brief Facts:

An agreement was executed on January 30, 1993, under which M/s Liladhar Laxminarayan Agrawal (“Appellant”) agreed to purchase food grains from various centers of M.P. Rajya Beej Evam Vikas Nigam (“Respondent”)at agreed rates. The Appellant purchased food grains worth Rs.1,69,494.33 and paid Rs.1,84,494.38 which entitled him to a refund of Rs.15,000/- along with interest. When the Appellant requested arbitration to settle the matter, the Respondent did not respond. Consequently, the Appellant filed an application under Section 11(1) of the Arbitration Act, of 1940. The 5th Additional District Judge allowed this application on September 17, 1996, and directed for disposal of the case under Section 3 Schedule 1, Rule 3 of the Arbitration Act. An award was subsequently passed on July 28, 1997.

The Appellant challenged this award under Sections 30 and 31 of the Arbitration Act. The court remanded the matter for fresh disposal in accordance with the law. The arbitrator then issued a new award and dismissed the Appellant's claim. The Appellant then filed an application under Section 34 of the Arbitration Act and sought to set aside this arbitration award. However, the application was dismissed on September 24, 2004. Feeling aggrieved, the Appellant approached the High Court and challenged the decision of the 5th Additional District Judge.

The Appellant argued that the objection under Section 30 of the Arbitration Act could not be decided without fulfilling the requirements of Section 14 of the Arbitration Act. The Appellant contended that the arbitrator misconducted himself in the proceedings.

Observations by the High Court:

The High Court noted that Sections 14(1)(2) and 31 of the Arbitration Act outline specific procedures for the signing and filing of the award by the arbitrators, as well as the jurisdictional matters concerning the court. Section 14 requires arbitrators to sign the award and notify the parties in writing, detailing the fees and charges payable for the arbitration and award. Upon payment of these fees, the arbitrators are to file the signed award, along with any depositions and documents, in the court. The court, in turn, must notify the parties about the filing of the award.

Section 31 determines the jurisdiction of the court regarding the arbitration award. It states that all questions about the validity, effect, or existence of the award or arbitration agreement must be decided by the court where the award has been or may be filed. It also mandates that all applications related to the arbitration proceedings must be submitted to the same court. The High Court held that the language of Section 31(3), using "may be filed," indicates that there is no restriction preventing the court from hearing objections about the award before it is formally filed.

The High Court held that the case had been under review since 2005, and sending it back for fresh orders on objections would be impractical and counterproductive. It noted that the Reference Court has carefully evaluated all objections and rightly concluded that the application for the appointment of an arbitrator was filed and registered on July 25, 1996.

Therefore, the High Court held that the Reference Court did not err in applying the provisions of the Arbitration Act, of 1940 to the objections raised. It also held that the arbitrator did not misconduct himself during the proceedings.

Therefore, the High Court found no illegality or procedural impropriety in the award. Consequently, the appeal was dismissed.

Case Title: M/S Liladhar Laxminarayan Agrawal Vs Managing Director M.P. Rajya Beej Evam Vikas Nigam

Case Number: MISC. APPEAL No. 3747 of 2005

Advocate for the Petitioner: Surendra Verma

Advocate for the Respondent: Sidharth Seth

Date of Judgment: 13th OF MAY, 2024

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