IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 24TH DAY OF JULY, 2019 PRESENT THE HON’BLE MRS. JUSTICE B.V.NAGARATHNA AND THE HON’BLE MR. JUSTICE K. NATARAJAN M.F.A. No.5760/2019 (AA) BETWEEN:
M/S. NAGA CONSTRUCTIONS A PROPRIETARY CONCERN REPRESENTED BY ITS PROPRIETOR SRI G. SELVA KUMAR, S/O. SRI M.C. GURUSWAMY, AGED ABOUT 52 YEARS, RESIDING AT NO.242/3, 18TH CROSS, 7TH MAIN, SADASHIVANAGAR, BENGALURU – 560 080. ... APPELLANT (BY SRI S.S. NAGANAND, SENIOR ADVOCATE A/W SRI S.G. PRASHANTH MURTHY, ADVOCATE FOR JUST LAW ADVOCATE) AND:
1. SRI K.N. RANGASWAMY S/O. LATE SRI K.N. SHASTRY, MAJOR, NO.15, 11TH MAIN, 13TH CROSS, MALLESHWARAM, BENGALURU – 560 003.
2. SMT. RADHA RANGASWAMY W/O. LATE SRI K.N. RANGASWAMY, SINCE DECEASED NOW BY HER LR’s.
2a) SRI RAJIV RANGASWAMY S/O. K.N. RANGASWAMY, MAJOR, R/AT NO.15, 11TH MAIN, 13TH CROSS, MALLESHWARAM, BENGALURU – 560 003.
3. CHOUDAPURKAR ARUN DISTRICT AND SESSIONS JUDGE (RETD.) AND SOLE ARBITRATOR, MAJOR, ARBITRATION & CONCILIATION CENTRE, BENGALURU KHANIJA BHAVAN, RACE COURSE ROAD, BENGALURU – 560 001. ... RESPONDENTS (BY SRI S. GUNASHEKAR, ADVOCATE FOR SRI D.N.MANJUNATH, ADVOCATE FOR C/R-2) THIS MFA IS FILED UNDER SECTION 37(1)(c) OF ARBITRATION & CONCILIATION ACT, 1996, AGAINST THE JUDGMENT & AWARD DATED 11.04.2019 PASSED ON AS.NO.151/2017 ON THE FILE OF THE XXVII ADDITIONAL CITY CIVIL JUDGE, BENGALURU, WHEREIN IT IS STATED THAT, "THE I.A. FILED BY THE DEFENDANT UNDER SECTION 34(3) OF THE ARBITRATION AND CONCILIATION ACT IS ALLOWED, CONSEQUENTLY THE SUIT OF THE PLAINTIFF IS DISMISSED, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO ORDER AS TO COSTS”.
THIS APPEAL COMING ON FOR ADMISSION THIS DAY, NAGARATHNA J., DELIVERED THE FOLLOWING:-
J U D G M E N T Though this appeal is listed for admission, with the consent of learned senior counsel for the appellant and learned counsel for respondent No.2, the appeal is heard finally.
2. The appellant has assailed the order dated 11/04/2019, passed by the XXVII Additional City Civil Judge at Bengaluru City in A.S.No.151/2017. By the said order, the application filed by the respondents under Section 34(3) of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as “the Act”, for the sake of convenience) has been allowed and consequently, A.S.No.151/2017 filed by the appellant herein has been dismissed.
3. Briefly stated the facts are that, the respondents had initiated an arbitration proceeding before the learned Arbitrator at the Arbitration and Conciliation Centre, Bengaluru, against the appellant herein. Learned Arbitrator passed an award on 22/03/2017, in A.C.No.124/2016 partly allowing the claim petition filed by the respondents herein in the terms mentioned below:
AWARD (i) The claim petition is allowed in part.
(ii) The respondents are directed to pay a sum of Rs.1,44,00,000/- (Rupees One Crore Forty Four Lakhs Only) to the claimants with interest at 12% per annum from the date of filing this claim statement till realisation of the amount.
(iii) The respondents are further directed to pay liquidated damages of Rs.25,000/- to the claimants.
(iv) The claimants are entitled to the cost of this proceedings.
(v) The stamp duty payable as per the provision of Karnataka Stamp Act, 1957.
(vi) The award is signed and issued in 3 originals, one for the record of the Centre and rest of the 2 to each of the parties.
The date of the award is 22/03/2017. It is the case of the appellant that copy of the award was received by the appellant only on 31/10/2017 and thereafter, on 04/11/2017, A.S.No.151/2017 was filed before the XXVII Additional City Civil Judge (hereinafter referred to as “City Civil Court” for the sake of convenience) at Bengaluru, assailing the said award. That in the said proceeding, an application was filed by the respondents under Section 34(3) of the Act by filing A.S.No.151/2017 as belated and hence, the same has been allowed. Being aggrieved, the plaintiff in A.S.No.151/2017 has filed this appeal.
4. We have heard learned senior counsel for the appellant as well as learned counsel for respondent No.2 and perused the material on record.
5. Learned senior counsel for the appellant contended that under Section 34(3) of the Act, an application for setting aside the arbitral award could be filed within three months from the date of receiving the award. That in the instant case, the arbitral award was received on 31/10/2017 and that A.S.No.151/2017 was filed on 04/11/2017, which is well within the period of three months. That the respondent unnecessarily filed an application seeking dismissal of the suit on the ground that it is belated by contending that the filing of the suit was beyond three months from the date of making of the award. That the learned Judge of the City Civil Court has accepted the said contention, which is contrary to what is stated in Section 34(3) of the Act. He also drew out attention to Section 31(5) of the Act, which states that after the arbitral award is made, a signed copy has to be delivered to each party. That even though in the instant case, learned Arbitrator has ordered that a copy of the award must be sent to each of the parties, but the appellant did not receive any such copy and it is only on 31/10/2017 the copy was received. In this regard, learned senior counsel for the appellant contended that the matter was posted on 22/03/2017 before the learned Arbitrator and on that date, the application for bringing the legal representatives of deceased respondent No.1 had to be considered on that date, the appellant was not present before the learned Arbitrator and instead, two days later, the award was passed. That it was not within the knowledge of the appellant with regard to passing of the award, the appellant did not receive any copy of the award from the Arbitration Centre and it was only when Execution Petition No.2271/2017 being filed by the respondent and notice being received in the said proceeding the appellant became aware of the arbitral award. Thereafter steps were taken to get a copy of the same and that the copy was received on 31/10/2017. Learned senior counsel emphasized that the crucial expression in Section 34(3) of the Act is “received the arbitral award”, which is the starting point of the limitation and in the instant case, the award having been received on 31/10/2017 and the filing of the suit on 04/11/2017 was well within the limitation period of three months prescribed under Section 34(3) of the Act and therefore, the application filed by the respondent ought to have been rejected. He contended that on allowing the said application, the suit itself has been dismissed. Therefore, the impugned order may be set aside and A.S.No.151/2017 may be restored on the file of the City Civil Court.
6. Per contra, learned counsel for the respondent drew out attention to what has been recorded by the learned Arbitrator during the course of his award and contended that the appellant herein remained absent, did not file the statement of objections to the claim petition despite grant of time and thereafter did not bother to participate in the arbitral proceeding and subsequently when the execution of the award was sought by respondent at a belated stage, the suit has been filed by the appellant. He supported the order of the City Civil Court and contended that there is no merit in this appeal. He further brought to our notice the fact that the instant suit was filed by the appellant therein on 04/11/2017. That earlier A.S.No.25004/2017 was filed by the very same appellant before the City Civil Court, Mayo Hall, Bengaluru and not being successful in getting an interim order in the said suit, the present suit has been filed, wherein an interim order was granted. That the impugned order may not be interfered with as there is no merit in the appeal and the appeal may be dismissed.
7. Having heard learned senior counsel for the appellant and learned counsel for the respondent, the following points would arise for out consideration:
(i) Whether the trial Court was right in dismissing the suit filed by the appellant herein by allowing the application filed under Section 34(3) of the Act by the respondent?
(ii) what order?
8. The undisputed facts in the instant case are that the dispute between the parties was referred before the Arbitration and Conciliation Centre at Bengaluru, which passed an award dated 22/03/2017. As seen from the extract of the operative portion of the award a direction was issued to send a copy of the award to each of the parties. It is the case of the appellant that it did not receive any signed copy of the award from the Centre. That such a copy was obtained by the appellant only on 31/10/2017. Therefore, the starting point of the limitation period would have to be considered from the date of receipt of the award. In the instant case, learned trial Judge has held that the starting point of the limitation would be from the date of passing of the award which is incorrect.
10. Section 34(3) of the Act reads as under:
“34(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.”
Section 31(5) of the Act reads as under:
“31(5) An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen.”
Therefore, the expression “had received the arbitral award” must be given its correct interpretation and the date of receipt of the award is crucial and significant for the commencing of the limitation period. If that is so, in the instant case, it is 31/10/2017 and the suit was filed on 04/11/2017. Hence, the same is within the period of limitation. Therefore, the application filed by the respondent under Section 34(3) of the Act ought to have been dismissed, but the same has been allowed by the trial Court on the premise that three months time had to be reckoned from the date of the award and that in the instant case, the suit was filed beyond the period of three months without explaining any reason for the delay in filing the suit. The approach of the trial Court is contrary to Section 34(3) of the Act. In the circumstances, the impugned order of the trial Court is set aside. A.S.No.151/2017 is set aside and the application filed by the respondent is dismissed and A.S.No.151/2017 is restored on the file of the trial Court.
11. In this regard, reliance could be placed on the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Tecco Trichy Engineers & Contractors [(2005)4 SCC 239], wherein it has been observed as under:
“8. 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 31 has 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. This 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.”
The same is relied upon in Anilkumar Jinabhai Patel vs. Pravinchandra Jinabhai Patel & others [(2018)15 SCC 178]. Reference could also be made on another decision of the Hon’ble Supreme Court in the case of State of Maharashtra vs. ARK Builders (P) Ltd. [(2011)4 SCC 616] wherein it has been observed as under:
“17. 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 Section 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.”
12. The matter does not end. The submission of learned counsel for the respondent that A.S.No.151/2017 is the second suit filed by the appellant assailing the very same award in earlier A.S.No.25004/2017 was filed by the appellant before the Mayo Hall Court. On that aspect of the matter, we do not wish to express any opinion as that is not the subject matter of this appeal. However, we reserve liberty to the respondent to take appropriate steps with regard to the same, if so advised.
13. In the circumstances, the appeal is allowed and disposed of in the aforesaid terms.
Parties to bear their respective costs.
In view of disposal of the appeal, I.A.1/19 also stands disposed.
Sd/- JUDGE Sd/- JUDGE S*