IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 13TH DAY OF NOVEMBER, 2019 PRESENT THE HON’BLE MRS. JUSTICE B.V.NAGARATHNA AND THE HON’BLE MS. JUSTICE JYOTI MULIMANI M.F.A. No.8927/2018 (AA) BETWEEN:
SRI B.M. PRASANNA KUMAR S/O. SRI B. MALLANNA, AGED ABOUT 55 YEARS, R/O. 6TH CROSS, J.C.R. EXTENSION, CHITRADURGA – 577 501. ... APPELLANT (BY SRI THIPPESWAMY U., ADVOCATE) AND:
SRI TEJAS M. SATI S/O. LATE SRI. S.M. MANJUNATH, MANAGING PARTNER OF S. MALLIKARJUNAYYA AND SONS, AGED ABOUT 35 YEARS, R/O. NO. C 1603, MANTHRI GREENS, SAMPIGE ROAD, MALLESHWARAM, BENGALURU – 560 003. ... RESPONDENT (BY SRI G. NARASI REDDY, ADVOCATE) THIS MFA IS FILED UNDER SECTION 37(1)(C) OF ARBITRATION AND CONCILIATION ACT, AGAINST THE ORDER DATED 06/10/2018 PASSED ON A.S.NO.160/2018 ON THE FILE OF THE 6TH ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU (CCH-11), REJECTING THE APPLICATION FILED U/S.34(3) OF ARBITRATION AND CONCILIATION ACT, 1996 R/W SEC.5 OF THE LIMITATION ACT, FOR CONDONING THE DELAY IN FILING THE PRESENT SUIT.
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 counsel on both sides, it is heard finally.
2. The appellant herein was the plaintiff in A.S.No.160/2018’ while the respondent was defendant in the said proceeding. Being aggrieved by the order passed on I.A.No.3 by the VI Addl. City Civil & Sessions Judge, Bengaluru City (hereinafter referred to as “the trial Court” for the sake of convenience), dated 06/10/2018, under which the application (A.S.No.160/2018) filed under Section 34(3) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act” for the sake brevity) read with Section 5 of the Limitation Act, 1963 (hereinafter referred to as “the Limitation Act” for the sake of brevity) dismissing A.S.No.160/2018, the appellant/plaintiff has preferred this appeal.
3. For the sake of convenience, the parties shall be referred to in terms of the status and ranking before the trial Court.
4. The appellant/plaintiff filed A.S.No.160/2018 being aggrieved by the award made by the sole arbitrator in A.C.No.104/2016 dated 25/01/2017. At this stage itself, it may be noted that the said award was an ex parte award. Being successful in the said arbitration proceeding, the respondent/defendant filed Ex.No.46/2017. On service of notice by the executing Court, the appellant/plaintiff appeared in the said proceeding. It is his case that he then became aware of the ex parte arbitral award. Thereafter, he filed an application seeking certified copy of the said award before the executing Court. On receipt of the certified copy of the said award from the executing Court, he filed A.S.No.160/2018 on 28/07/2018 along with an application seeking condonation of delay in filing the said proceeding. The trial Court, however, dismissed the said application and consequently, A.S.No.160/2018 also came to be dismissed. Being aggrieved, the plaintiff has preferred this appeal.
5. We have heard learned counsel for the appellant and learned counsel for the respondent and perused the material on record.
6. Plaintiff’s counsel submitted that the trial Court was not right in dismissing I.A.No.3 filed for seeking condonation of delay and consequently, A.S.No.160/2018 also. He submitted that the arbitral award dated 25/01/2017 was an ex parte one. The Arbitration and Conciliation Centre, Bengaluru, wherein the arbitration proceeding was held, did not communicate a copy of the award to the appellant. That the appellant became aware of the award dated 25/01/2017 in Ex.No.46/2017 dated 07/07/2018. Immediately thereafter, an application was filed before the executing Court for seeking certified copy of the said award and on 28/07/2018, A.S.No.160/2018 was filed. That in fact, there was no delay in filing A.S.No.160/2018. However, by way of precaution, an application was filed under proviso to Section 34(3) of the Act read with Section 5 of the Limitation Act. The trial Court has failed to appreciate the said facts and dismissed the application and consequently, A.S.No.160/2018 also came to be dismissed. That the said order of the trial Court may be set aside and the matter may be remanded to the trial Court for a fresh adjudication. In this regard, learned counsel for the appellant has drawn our attention to Section 34(3) as well as Section 31(5) of the Act to contend that it is a mandatory requirement that the signed copy of arbitral award is delivered to each party and it is only on receipt of the arbitral award, the limitation period would commence which is three months from the date of receipt of the award. That in the instant case, the said period had not lapsed and there was no delay in filing A.S.No.160/2018. He further submitted that the appellant subsequently made an application before the Arbitration and Conciliation Centre and he received a copy of the award on 29/10/2018. However, even prior to that he filed A.S.No.160/2018 on 28/07/2018 on receipt of certified copy of the award from the executing Court. Learned counsel for the appellant therefore submitted that the impugned order may be set aside and the matter may be remanded to the trial Court for a fresh adjudication.
7. Per contra, learned counsel for the respondent drew our attention to his statement of objections and particularly to Annexure – 10 therein which was a communication made by the respondent to the Director, Arbitration and Conciliation Centre, Bengaluru, seeking to know as to whether a copy of the award was sent to the respondent in the said proceeding viz., appellant/plaintiff, even though he was placed ex parte in the said proceeding.
8. Learned counsel for the respondent drew our attention to Annexure – 11 to the statement of objection, which is a communication dated 18/09/2019 issued by the Director, Arbitration and Conciliation Centre, Bengaluru, stating that when a respondent is placed ex parte, then there is no practice of sending a copy of the arbitral award to such party. Further, both parties would be informed through e-mail to collect the original signed arbitration award copy from the Centre.
9. Learned counsel for the respondent further submitted that this appeal has been rendered infructuous as the arbitral award has been satisfied by the appellant in Ex.No.46/2017. That no purpose would be served in remanding the matter to the trial Court for a fresh adjudication. However, this Court may pass an appropriate order on the aspect of limitation. In the circumstances, the appeal may be dismissed.
10. Having heard learned counsel for the respective parties, following points would arise for our consideration:
(i) Whether the trial Court was justified in dismissing I.A.No.3 being an application filed under proviso to Section 34(3) of the Act read with Section 5 of the Limitation Act and consequently, dismissing A.S.No.160/2018?
(ii) What order?
11. The detailed narration of facts and contention would not call for a reiteration. However, what is necessary to be highlighted is that in the instant case, the Arbitration and Conciliation Centre Bengaluru passed an award dated 25/01/2017 in favour of the respondent herein. The said award is admittedly an ex parte award which is clear from the communication dated 18/09/2019 issued by the Director of the Arbitration and Conciliation Centre, Bengaluru, a copy of which is appended as Annexure – 11 to the statement of objections filed by the respondent. It is apparent and clear that the said Centre has no practice of issuing a copy of the arbitral award to a party who is placed ex parte. In other words, it is clear that when a party is placed ex parte, there is no compliance of Section 31(5) of the Act. Section 31(5) of the Act categorically states that after the arbitral award is made, a signed copy shall be delivered to each party. The said section does not differentiate between a party who has appeared and a party who is placed ex parte. Every party of the arbitral proceeding must be communicated with the signed copy of arbitral award. The said requirement is a mandatory requirement and it assumes significance having regard to Section 34(3) of the Act and the same reads as under:
“34. Application for setting aside arbitral award.— (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.”
On a reading of the same, it is clear that the limitation period prescribed for filing an application (in the form of a suit) seeking setting aside of an arbitral award is three months from the date of receipt of arbitral award or if a request has been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal. Therefore, in the instant case, what is significant is, date of receipt of arbitral award. It is not the date of the award, but it is the date of receipt of the arbitral award, which is the starting point of limitation of three months of filing of an application under Section 34(3) of the Act. Further, if there is no intimation of the arbitral award and a party comes to know of the award being made, an application could be made under Section 33 of the Act, in which event the limitation period would commence from the date of request had been disposed of by the arbitral tribunal. The proviso to sub-Section (3) of Section 34 states that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the period of three months, in such an event, there is a provision for condonation of delay under Section 5 of the Limitation Act read with proviso to Section 34(3) of the Act.
12. In this regard, it would be useful to refer to the following decisions of the Hon’ble Supreme Court:
(a) In Union of India vs. Tecco Trichy Engineers & Contractors [(2005)4 SCC 239] (Tecco Trichy Engineers & Contractors), the Hon’ble Supreme Court at paragraph No.8, 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.”
On a reading of the same, it is clear that sub-Section (5) of Section 31 of the Act is not a matter of mere formality, but there has to be due compliance of the same. The reason being, the date of the receipt of the arbitral award is the date from which the limitation period of three months commences under Section 34(3) of the Act for the purpose of filing an application in the form of a suit to seek setting aside of the award.
(b) It is also relevant to refer to another decision of the Hon’ble Supreme Court in the case of Consolidated Engineering Enterprises vs. Prl. Secretary, Irrigation Department, [(2008) 7 SCC 169], (Consolidated Engineering Enterprises), which is another judgment of three Judge Bench of the Hon’ble Supreme Court on the proviso to Section 34(3) of the Act. In the said case, after referring to section 34 of the Act, and considering the same in light of Section 29(2) of the Limitation Act, it was observed that when any special statute prescribes certain period of limitation as well as provision for extension up to specified time limit on sufficient cause being shown, the period of limitation prescribed under the special law shall prevail and to that extent, the provisions of Limitation Act shall stand excluded. This is because of the intention of the Parliament in enacting sub-section (3) of Section 34 of the Act of 1996. That an application for setting aside the award must be made within three months and the period can be further extended on sufficient cause being shown by another period of thirty days, but not thereafter. Hence, Section 5 of the Limitation Act is inapplicable as it stands excluded under Section 29(2) of the Limitation Act Further, it was also observed that even though Section 5 of the Limitation Act is not applicable to an application filed under Section 34 of the Act for setting aside the award, one need not conclude that Section 14 of the Limitation Act would also be inapplicable to an application filed under Section 34 of the Act of 1996.
(i) In the said case, His Lordship, Raveendran J.
gave a separate but concurring opinion. His Lordship referred to Section 43 of the Arbitration Act to hold that Section 43 makes an express reference to the Limitation Act both in the Court and in arbitration. That there is also no express exclusion by an application of the provision of the Limitation Act to the proceedings under the Arbitration Act. But, there are some specific departures from the general provisions of Limitation Act, such as, the proviso to Section 34(3) and sub-sections (2) to (4) of Section 43 of the Act. His Lordship observed that where the schedule to the Limitation Act prescribes a period of limitation for appeals or applications to any court, and the special or local law provides for filing of appeals and applications to the Court, but does not prescribe any period of limitation in regard to such appeals or applications, the period of limitation prescribed in the Schedule to the Limitation Act will apply to such appeals or applications and consequently the provisions of Sections 4 to 24 will also apply. But, where the special or local law prescribes for any appeal or application, a period of limitation different from the period prescribed by the Schedule to the Limitation Act, then the provisions of Section 29(2) would be attracted. In that event, the provisions of Section 3 of Limitation Act will apply, as if the period of limitation prescribed under the special law was the period prescribed by the Schedule to Limitation Act, and for the purpose of determining any period of limitation prescribed for the appeal or application by the special law, the provisions contained in sections 4 to 24 will apply to the extent to which they are not expressly excluded by such special law. That the object of Section 29(2) is to ensure that the principles contained in Sections 4 to 24 of Limitation Act apply to suits, appeals and applications filed in a court under special or local laws also, even if it prescribes a period of limitation different from what is prescribed in the Limitation Act, except to the extent of express exclusion of the application of any or all of those provisions.
(ii) In this context, it was clarified that the provisions of the Limitation Act would not apply to appeals or applications before Tribunals, unless expressly provided. This is because, the Schedule to the Limitation Act prescribes the period of limitation only to proceedings in Courts and not to any proceedings before any Tribunal or quasi-judicial authority. Therefore, it was held that the provisions of the Limitation Act could apply to all proceedings under the Arbitration Act both in Court and in arbitration except to the extent expressly excluded by the provisions of the Arbitration Act. This was because of the express reference to applicability of the Limitation Act to the proceedings in Court and arbitral Tribunal under Section 43 of the Arbitration Act.
(iii) The next question considered by his Lordship was whether under the proviso to Section 34(3) of the Arbitration Act, Section 14 of Limitation Act was excluded. Section 14 of Limitation Act relates to exclusion of time when proceeding bona fide in a court without jurisdiction. While considering Section 14 in light of Section 34(3) of the Arbitration Act and the proviso thereto, it was observed that the use of the words “but not thereafter” in the proviso makes it clear that even if a sufficient cause is made out for a longer extension, the extension cannot be beyond thirty days. Differentiating between the proviso to section 34(3) of Arbitration Act and Section 5 of the Limitation Act, it was observed that they both vest a discretion in a court to extend the prescribed period of limitation if the applicant satisfies the court that he had sufficient cause for not making the application within the prescribed period. Section 5 of Limitation Act does not place any outer limit in regard to the period of extension, whereas the proviso to sub-section (3) of Section 34 of the Arbitration Act places a limit on the period of extension of the period of limitation. It differs in regard to period of extension and it has the effect of excluding section 5 alone of the Limitation Act. Hence, it was held that having regard to Section 29(2) of the Limitation Act, Section 14 of the Act would be applicable to an application under Section 34(1) of Arbitration Act. Even when there is cause to apply Section 14, the limitation period continues to be three months and not more, but in computing the limitation period of three months for the application under section 34(1) of the Arbitration Act, the time during which the applicant was prosecuting such application before the wrong court is excluded, provided the proceeding in the wrong court was prosecuted bona fide and with due diligence. While holding so, the judgment in State of Goa vs. Western Builders [(2006) 6 SCC 239], (Western Builders) was approved.
(c) The subsequent judgment in the case of Simplex Infrastructure Limited vs. Union of India [(2019)2 SCC 455], it has been held that Section 5 of the Limitation Act would have no application to challenge an arbitral award under Section 34 of the Act if it is filed beyond the period prescribed under the said provision. However, in the said case, following the decision in Union of India vs. Popular Construction Company [(2001)8 SCC 470], Section 14 of the Limitation Act was made applicable for exclusion of time for proceeding bona fide in a Court or forum without jurisdiction while computing the limitation period of three months.
(d) In Anilkumar Jinabhai Patel (dead) through legal representatives vs. Pravinchandra Jinabhai Patel & others [(2018) 15 SCC 178], it has been held that the limitation period for setting aside the arbitral award is from the date when the copy of the award is served. It has also been clarified that the said award need not be served on all the parties, when such parties were represented by the family head or common power-of- attorney holder who received the award on their behalf, he being the person directly connected with, and in control of the proceedings.
13. Therefore, what emerges is that the date of receipt of the arbitral award is significant for the purpose of computing limitation period of three months as it commences from the said date, but in the instant case, the appellant being placed ex parte in the arbitral proceeding, a copy of the award was not sent to the appellant. Consequently, he had not received it as per Section 31(5) of the Act. It is the case of the appellant that when he became aware of the passing of the arbitral award in Ex.No.46/2017, he applied for the certified copy of the same before the executing Court and on receipt of the same within a few days i.e., on 28/07/2018, he filed the arbitration suit. It is the case of the appellant that he became aware of the arbitral award only on 17/07/2018 and received a certified copy of the same and filed the arbitration suit on 28/07/2018.
14. In fact, the appellant subsequently made an application before the Arbitration and Conciliation Centre seeking a copy of the arbitral award, which he received on 29/10/2018, but by then, he had already filed the arbitration suit on 28/07/2018. Thus, it is observed that in the instant case, there was no delay at all on the part of the appellant/plaintiff in approaching the trial Court in filing an application in the form of A.S.No.160/2018 seeking setting aside of the ex parte award. The trial Court could not have proceeded on the basis that it is three months from the date of the award, which is a wrong assumption and contrary to Section 34(3) of the Arbitration Act. The limitation period is three months from the date of receipt of the award and a mandatory duty is cast on the Arbitral Tribunal to send a signed copy of the arbitral award to each of the parties. That even if a party is placed ex parte in a proceeding, nevertheless, a copy of the same has to be sent to such a party, but in the instant case, it is noted from the communication of the Director of Arbitration and Conciliation Centre, dated 18/09/2019 that there is no practice of sending a copy of the arbitral award to a party who has been placed ex parte. Thus, no award was received by the appellant herein in terms of Section 31(5) of the Act. Such a thing is contrary to Section 31(5) of the Act. In the circumstances, we hold that the impugned order of the trial Court in dismissing the application filed under the proviso to Section 34(3) of the Act read with Section 5 of the Limitation Act is erroneous and therefore, it is set aside.
15. Before parting with this appeal, on taking into consideration, letter dated 18/09/2019, with regard to A.C.No.104/2016, we impress upon the Arbitration and Conciliation Centre, Bengaluru, to comply with Section 31(5) of the Act and to ensure that the copy of the signed arbitral award is sent not only to the parties who have appeared in the arbitration proceedings, but also to the parties who are placed ex parte so that there is no further complication which may arise under Section 34(3) of the Act in case an ex parte award is sought to be assailed by a party who was placed ex parte. It is also noted from the said communication that sub-clause (5) of Rule 32 of the Arbitration and Conciliation Centre Rules that “after the Arbitral Award is made, a signed copy shall be delivered to each party, by the Directorate” is also not complied with in the instant case. If such a Rule is provided, it is in consonance with Section 31(5) of the Act, but the said Rule, it appears, is not being implemented as in the instant case the Arbitration and Conciliation Centre has not sent a signed copy of the arbitral award to the appellant herein who was respondent in the arbitration proceeding and who was placed ex parte therein. It is only after the appellant herein made a request on 22/10/2018 that a copy of the award was issued to him on 29/10/2018.
16. In the circumstances, the impugned order of the trial Court is set aside and the appeal is allowed.
17. The matter is remanded to the trial Court for consideration of the suit in accordance with law. Since both the parties are represented by their respective counsel, they are directed to appear before the concerned trial Court on 18/12/2019.
Parties to bear their respective costs.
In view of disposal of the appeal, I.A.No.1/19 is ordered to be filed.
S* Sd/- JUDGE Sd/- JUDGE