The arbitration process typically begins with the initiation of arbitration, followed by the parties submitting their claims and defenses, presenting evidence, and making oral arguments. It typically concludes with the passing of an “Arbitral Award”. Similar to other adversarial systems, arbitration proceedings involve both winners and losers, with the losing party having the option to challenge the Arbitral Award in a court of law.
The Arbitration & Conciliation Act, 1996 (‘Act’) provides the legal remedy to a losing party seeking to challenge an Arbitral Award by way of Section 34 and accordingly, the limitation period stipulated to challenge the Award is set forth as 90 days from the date the party received the Arbitral Award.
However, what the term “Party” exactly means and how is an effective service of an Arbitral Party constituted? These two seemingly routine but pertinent question of law came to be answered by a recent judgment of the Delhi High Court.
An appeal under Section 37 of the Act was filed by the Appellant (Ministry of Health and Family Welfare/ MoHFW) against a decision passed by the single bench of the Delhi High Court whereby the Single Judge bench had dismissed the Section 34 Application filed by the Appellant on account of delay.
Factually speaking, the Appellant and the Respondent got into a works contract in 2010 for construction of Emergency Care Services in the premises of RML Hospital i.e., Appellant No. 2. As fate would have it, certain disputes arose between the parties relating to payment and liquidated damages imposed by the Appellant and accordingly, the Respondent invoked the Arbitration and a sole arbitrator was appointed by the Court. The Sole Arbitrator ruled in favour of the Respondent by directing the Appellant to pay a sum of approximately Rs. 22 Crores to the Respondent. However, the Respondent filed an Application under Section 33(1) of the Act seeking correction in the computation of interest component and accordingly, a Corrigendum Order was passed by the Arbitrator and the Award amount reduced to Rs. 15 Crore. The Appellants challenged the Award and the Corrigendum Award on 10.05.2019 under Section 34(3) of the Act along-with an Application seeking condonation of delay.
The Appellants main contention challenging the award was that, they became aware of the Arbitral Award through a letter by RML on 14.03.2019 and further contended that, the Appellant was never sent a signed copy of neither the Arbitral Award nor the Corrigendum Order, but the signed copy of the aforesaid was sent to the authorized representative of RML i.e., Appellant No. 2. Since the Arbitral Award was sent only to the authorized representative of RML and the lawyers of the parties, the Appellant contended that, the limitation for filing Section 34 Application would commence from 14.03.2019.
Further, the Appellant contended that, delivery of Arbitral Award/ Order on an agent/ Counsel of a party does not amount proper service on the party because Section 31(5) read with Section 2(1)(h) of the Act mandates that, a signed copy of the Award/ Order must be delivered to the party to the dispute.
The Respondent meanwhile defended the impugned decision by contending that, arbitral proceedings was prosecuted by RML on behalf of the Appellant and thus the plea raised by the Appellant was a ploy to save Section 34 Application from being dismissed on the ground of delay.
Thus, the crux of the matter for the Court to decide was whether delivery of the true copy of the Arbitral Award/ Corrigendum order to an authorized representative of RML would constitute valid delivery upon the Appellant/ MoHFW as per Section 31(5) of the Act for calculating limitation.
The Court perused the pleadings as well as going through judgments rendered by the Hon’ble Supreme Court on the aforesaid issue allowed the Appeal by MoHFW holding that, firstly, a signed copy of the Arbitral Award ought to be delivered to each party, secondly, the Delivery should be to a party who is competent to take a decision as to whether or not the Award is to be challenged, thirdly, the expression ‘party’ does not include an agent or lawyer of such party and fourthly, the limitation under Section 34(3) of the Act commences ‘when the party making the Application has received the Award.’
In arriving at the decision, the Court also noted that, the root cause of the issue between the parties was borne out of a duly signed and executed agreement between the Appellant/ MoHFW and the Respondent and thus, the Arbitral Award as well as the Corrigendum must have been served on all the parties to constitute a valid service under Section 34(3) of the Act.
Eventually, the Court listed the matter before the Single Judge to decide the case on merits.
