Tag Archives: Arbitration and Conciliation Act

Arbitral Award – Delivery of

       In Union of India v. Tecco Trichy Engineers & Contractors, (2005) 4 SCC 239, a three Judge Bench of the Hon’ble Supreme Court, in respect to the issue of limitation for filing application under Section 34 of the Arbitration and Conciliation Act, 1996 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. It was held as under:

       “The delivery of an arbitral award under sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the act arises. The delivery of arbitral award to the party, to be effective, has to be “received” by the party. The delivery by the Arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings.”

       In State of Maharashtra v. ARK Builders (P) Ltd., (2011) 4 SCC 616, while following the Judgment in  Union of India v. Tecco Trichy Engineers & Contractors, (2005) 4 SCC 239 held that the expression “….party making that application had received the arbitral award….” cannot be read in isolation and it must be understood that Section 31(5) of the Act requires a signed copy of the award to be delivered to each party. By cumulative reading of Section 34(3) and 31(5) of the Act, it is clear that the limitation period prescribed under Section 34(3) of the Act would commence only from the date of signed copy of the award delivered to the party making the application for setting it aside. Anil Kumar Jinabhai Patel v. Pravinchandra Jinabhai Patel, (2018) 15 SCC 178.

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Application Under Section 34 of the Arbitration and Conciliation Act – Condonation of Delay

In Assam Urban Water Supply and Sewerage Board v. Subash Projects and Marketing Ltd., (2012) 2 SCC 624, an argument was raised with reference to Section 43 of the Arbitration Act that provisions of Limitation Act, 1963 have been made applicable to Arbitrators and when application is made for setting aside award hence all provisions of Act, 1963 should be held applicable but it was negative. In aforesaid judgment an attempt was made to attract Section4 of the Limitation Act, but it was observed as under:

       “The above section enables a party to institute a suit, prefer an appeal or make an application on the day court reopens where the prescribed period for any suit, appeal or application expires on the day when the court is closed. The crucial words in Section 4 of the Limitation Act are ‘prescribed period’. Section 2 (j) of the Limitation Act defines ‘period of limitation’ which means the period of limitation prescribed for any suit, appeal or application by the Schedule, and ‘prescribed period’ means the period of limitation computed in accordance with the provisions of this Act. Section 2 (j) of the Limitation Act when read in the context of Section 34(3) of the Arbitration Act, becomes amply clear that the prescribed period for making an application for setting aside arbitral award is three months. The period of 30 days mentioned in the proviso that follows sub-section (3) of Section 34 of the Arbitration Act is not the period of limitation and therefore, not ‘prescribed period’ forf the purposes of making the application for setting aside the arbitral award. The period of 30 days beyond three months which the court may extend on sufficient cause being shown under the proviso appended to sub-section (3) of Section 34 of the Arbitration Act being not the period of limitation or, in other words, ‘prescribed period’, section 4 of the Limitation Act is not at all attracted.

In Commissioner, M.P. Housing Board v. Mohanlal and Company, AIR 2016 SC 3592, issue of condonation of delay in respect of an application under Section 34 of the Arbitration and Conciliation Act came up for consideration before the Court. After Arbitral Award was given on 11.11.2010, contractor being aggrieved therefrom, instead of filing application/objection under Section 34(1) of the 1996 Act, preferred to file an application under Section 11 of the Act, 1996, in High Court seeking appointment of Arbitrator to adjudicate the dispute. Application was rejected by the Court observing that there is already an arbitral award, hence no further action under Section 11 of Act, 1996 can be allowed. Thereafter contractor filed objection before the Court challenging award on 26.09.2011. He also filed an application under Section 14 requesting to exclude time consumed in the proceedings before High court when he filed application under Section 11 and the same was rejected. That application was allowed by the District Judge taking recourse to Section 141 of the Limitation Act. M.P. Housing Board challenged order of District Judge in Civil Revision Before High Court but failed and that is how matter came to Supreme Court. Relying on Union of India v. Popular Construction company, (2001) 8 SCC 470, Court held that period of limitation under Section 34(3) is mandatory and would bar application of Section 5 of the Limitation Act. Suman Devi v. Addl. Commissioner, 2019 (132) ALR 471.

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Appointment of Arbitrator – Applicability of Article 137 of Limitation Act

It is not in dispute that Article 137 of the Limitation Act would apply to applications filed under Section 11 of the Arbitration and Conciliation Act, 1996. In Major (Retd.) Inder Singh Rekhi v. DDA, (1998) 2 SCC 338, the Hon’ble Apex Court held that in application for appointment of arbitrator Article 137 of the Limitation Act will apply.

       Article 137 of the Limitation Act, 1963 is applicable to applications both under Civil Procedure Code and under the Special Acts. Article 137 constitutes the residuary Article in regard to applications. The starting point of limitation under Article 137 is the date when “the right to apply arises”. Article 137 being a residuary Article to be adopted to different classes of applications, the expression “the right to apply” is expression of a broad common law principle and it has to be interpreted according to the circumstances of each case. In Ramanna v. Nallaparaju, 1995 (2) SCR 936, the Hon’ble Apex Court has held that “the right to apply” means “the right to apply first arises”.

       Under the Arbitration and Conciliation Act, 1996, right to apply to the Court having jurisdiction would arise from the date such controversy arises between the parties. Central Electronics Limited v. Friends Cable Industries, Noida, 2017 (125) ALR 588.

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Termination of – Arbitration Proceedings

Section 32 of the Arbitration and Conciliation Act, 1996 contains a heading “Termination of Proceedings”. Sub-section (1) provides that the arbitral proceedings shall be terminated by the final arbitral award or by an order of the Arbitral Tribunal under sub-section (2). Sub-section (2) enumerates the circumstances when the Arbitral Tribunal shall issue an order for the termination of arbitral proceedings. Clause (c) of Section 32(2) of the Arbitration and Conciliation Act, 1996 contemplates two grounds for termination, i.e. (i) the Arbitral Tribunal finds that the continuation of the proceedings has for any other reason become unnecessary, or (ii) impossible. The eventuality as contemplated under Section 32 shall arise only when the claim is not terminated under Section 25(a) and proceeds further. The words “unnecessary” or “impossible” as used in clause (c) of Section 32(2), cannot be said to be covering a situation where proceedings are terminated in default of the claimant. The words “unnecessary” or “impossible” has been used in different contexts than to one of default as contemplated under Section 25(a). Sub-section (3) of Section 32 further provides that the mandate of the Arbitral Tribunal shall terminate with the termination of the arbitral proceedings subject to Section 33 and sub-section (4) of Section 34. Section 33 is the power of the Arbitral Tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature or to give an interpretation of a specific point or part of the award. Section 34(4) reserves the power of the court to adjourn the proceedings in order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. On the termination of proceedings under Sections 32(2) and 33(1), Section 33(3) further contemplates termination of the mandate of the Arbitral Tribunal, whereas the aforesaid words are missing in Section 25. When the legislature has used the phrase “the mandate of the Arbitral Tribunal shall terminate” in Section 32(3), non-use of such phrase in Section 25 (a) has to be treated with a purpose and object. The purpose and object can only be that if the claimant shows sufficient cause, the proceedings can be recommenced. Srei Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd., (2018) 11 SCC 470.

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Appointment of Arbitrator – Arbitrability of Dispute

In Booz Allen and Hamnilton Inc. v. S.B.I. Home Finance Ltd., (2011) 5 SCC 532, Hon’ble Supreme Court considered the arbitrability of dispute and scope of Section 11 of the Arbitration and Conciliation Act and held as under:

       “The nature and scope of issues arising for consideration in an application under Section 11 of the act for appointment of arbitrators, are far narrower than those arising in an application under Section 8 of the Act, seeking reference of the parties to a suit to arbitration. While considering an application under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of “arbitrability” or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrabe, the aggrieved party will have to challenge the award by filing an application, under Section 34 of the Act, relying upon sub-section 2(b)(i) of that Section.”
       In Dura Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729, Hon’ble Supreme Court considered the provisions of sub-section (6) and sub-section (6A) of Section 11 of the Arbitration and Conciliation Act, 1996 and held as under:

       “From a reading of Section 11(6A), the intention of the legislature is quite clear, i.e. the court should and need only look into one aspect – the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple – it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.” Swatantra Properties (P) Ltd. v. Airplaza Retail Holdings Pvt. Ltd., 2018 (5) AWC 5168.

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Arbitral Award – Extension of Time

Section 29-A of the Arbitration and Conciliation Act, 1996 provides for the award to be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Sub-section (2) provides for an incentive in the form of fees to the arbitral tribunal if the award is made within a period of six months from the date the arbitral tribunal enters upon the reference. Time for making award as provided under sub-section (1), may be extended with the consent of parties for a further period of not exceeding six months. In the event, award is not made within the period specified under sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the court has, either prior to or after the expiry of the period so specified, extend the period, provided that while extending the period, if the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five percent for each month of such delay. Thus, while sub-section (2) provides an incentive for disposal of arbitration proceeding within a time bound period, sub-section (4) provides for reduction in fees of the arbitral tribunal in the event award is not made within a period of twelve months or within extended period of six months.

      The power to extend the period is vested in the parties who may extend the period by consent upto six months. The power to extend the period vested in court under sub-section (5), is required to be exercised by the court on application of mind. The period can be extended by court only for sufficient cause and on such terms and conditions as may be imposed by the court. Sub-section (6) further confers power to the court that while extending the period referred to in sub-section (4), it may substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidences and material. The arbitral tribunal so reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal. To discourage the delay in conclusion of the arbitral proceedings, the court has been conferred power under sub-section (8) to impose actual or exemplary costs upon any of the parties. Jairath Constructions v. Triveni Engineering and Industries Ltd., 2018 (5) AWC 4676.

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Arbitral Tribunal – Powers Under Section 17 of the Act

 

Under Section 17, the Arbitral Tribunal has the power to order interim measures of protection, unless the parties have excluded such power by agreement. Section 17 is an important provision, which is crucial to the working of the arbitration system, since it ensures that even for the purposes of interim measures, the parties can approach the Arbitral Tribunal rather than await orders from a court. The efficacy of Section 17 is however, seriously compromised given the lack of any suitable statutory mechanism for the enforcement of such interim orders of the Arbitral Tribunal.

In Sundaram Finance Ltd. v. NEPC India Ltd. [Sundaram Finance Ltd.v. NEPC India Ltd., (1999) 2 SCC 479], the Hon’ble Supreme Court observed that though Section 17 gives the Arbitral Tribunal the power to pass orders, the same cannot be enforced as orders of a court and it is for this reason only that Section 9 gives the court power to pass interim orders during the arbitration proceedings. Subsequently, in Army Welfare Housing Organisationv. Sumangal Services (P) Ltd. [Army Welfare Housing Organisation v. Sumangal Services (P) Ltd., (2004) 9 SCC 619] , the Court had held that under Section 17 of the Act no power is conferred on the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof.

In the face of such categorical judicial opinion, the Hon’ble Delhi High Court attempted to find a suitable legislative basis for enforcing the orders of the Arbitral Tribunal under Section 17 in Sri Krishan v. Anand [Sri Krishan v. Anand, 2009 SCC OnLine Del 2472 : (2009) 112 DRJ 657 : (2009) 3 Arb LR 447] [followed in Indiabulls Financial Services Ltd. v. Jubilee Plots & Housing (P) Ltd. [Indiabulls Financial Services Ltd. v. Jubilee Plots & Housing (P) Ltd., 2009 SCC OnLine Del 2458] ]. The Delhi High Court held that any person failing to comply with the order of the Arbitral Tribunal under Section 17 would be deemed to be “making any other default” or “guilty of any contempt to the Arbitral Tribunal during the conduct of the proceedings” under Section 27(5) of Act. The remedy of the aggrieved party would then be to apply to the Arbitral Tribunal for making a representation to the court to mete out appropriate punishment. Once such a representation is received by the court from the Arbitral Tribunal, the court would be competent to deal with such party in default as if it is in contempt of an order of the court i.e. either under the provisions of the Contempt of Courts Act or under the provisions of Order 39 Rule 2-A of the Code of Civil Procedure, 1908. Alka Chandewar v. Shamshul Ishrar Khan, (2017) 16 SCC 119 

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