WHETHER SERVICE OF ARBITRATION AWARD ON AN AGENT OF THE PARTY AMOUNTS TO SERVICE ON THE PARTY ITSELF?

[Mr. M. GOVINDARAJAN]

Section 31 of the Arbitration Act, 1996 (‘Act’ for short) deals with the form and contents of the arbitral award.  Section 31(5) provides that after the arbitral award is made a signed copy shall be delivered to each party.

Section 34(3) of the Act provides that an application for setting aside of an award of arbitration 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, (deals with correction and interpretation of award/additional award) from the date on which that request has been disposed of by the arbitral tribunal. 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.

Usually in judicial proceedings Advocate is authorized to appear before the judicial authority on behalf of the petitioner and proceed the case. He will take care of the receipt of the judgment copy on applying the same. Whether the same principle is applicable to arbitration proceedings? The issue to be discussed in this article is whether service of arbitration award on agent or advocate of the party amounts to service on the party itself with reference to decided case law.

In ‘Bensari Krishna Committee and others V. Karmyogi Shelters (P) Limited’ – [2012 (12) TMI 827 - SUPREME COURT] the petitioner is a Committee of Managing Landlords, who are co-owners of the Benarsi Krishna Estate at the Moti Cinema Compound, Chandni Chowk, Delhi.  The property apparently belongs to the Khanna family and the Seth family. The respondent No.1 is a private limited company incorporated under the Companies Act, 1956 and is an estate developer and builder of both residential and commercial properties. The petitioner-committee entered into a collaboration agreement dated 16.11.1990, by which the respondents agreed to convert the Moti-cinema compound into a commercial complex. 

Subsequently, the agreement was amended on 02.05.1991, by which certain changes were introduced with regard to the scheme of payment. 

Inasmuch as disputes arose between the parties over the working of the agreement the respondent filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator. The Delhi High Court appointed an arbitrator as the sole arbitrator. The Arbitrator passed his award holding that the respondent had committed breach of the terms of the collaboration agreement and directed the petitioner to refund the sum of Rs.41 lakhs received from the respondent within 3 months from the date of the award and in default of the payment within the said period, the amount would carry interest @ 12% per annum from the date of the award till the date of payment.

The Arbitration award duly signed by the arbitrator was received by the Advocate of the respondent on 13.05.2004. The respondent got the award from the Advocate in later date and filed a petition on 03.02.2005 under Section 34 of the Act to set aside the award of the Arbitrator.  The petitioner objected the petition on limitation. Since the petition has been filed after a delay of more than 9 months from the date of receipt of the award the same is liable to be dismissed. The High Court dismissed the petition of the respondent on limitation. The High Court further held that the expression ‘party’ used in Section 31(5) would also include the agent of the party. The Division Bench also observed that in view of Section 2(h) of the Act, there was no justifiable reason to depart from the precise definition of expression ‘party’ which means a party to arbitration agreement.

Appeal was filed by the respondent before the division bench which remanded the matter to the single judge to decide the objections on merits. The Division Bench held that for compliance with the provisions of Sections 31(5) of the Act, a copy of the award had to be delivered to the party itself and service on its counsel did not amount to service within the meaning of Section 31(5) of the Act. The petitioner filed a special leave petition before the Supreme Court against the order of the Division Bench.

The petitioner contended the following before the Supreme Court:

• The award had been passed on 12.05.2004, a copy of the same, duly signed by the arbitrator was received by counsel for the respondent on 13.05.2004, while the petition under Section 34 was filed only on 03.02.2005, well beyond the period of 3 months prescribed in Section 34(3) of the Act and also beyond the further period of 3 months as indicated in the proviso thereto;
• Once a Vakalat had been executed by a party in favor of his advocate, the said advocate was competent to do such acts as could be done by the party himself as held by Supreme Court in ‘Pushpa Devi Bhagat V. Rajinder Sing’ – (2006) 5 SCC 566;
• Intimation to the pleader of the parties amounted to service of the notice on the parties about the filing of the award as held in ‘Nilakantha Sidramappa Ningshetti V. Kashinath Somanna Ningashetti’ – (1962) 2 SCR 551;
• The Division Bench of the Delhi High Court had in the teeth of the aforesaid decision erred in holding that service of the signed copy of the award by the Arbitrator on the respondent’s counsel, did not amount to compliance of the provisions of Section 31(5) of the\Act;

The respondent submitted the following contentions before the Supreme Court:

• Once hearing before the Arbitrator had been concluded and an award had been passed by him, the power given to an Advocate by the vakalatnama executed in his favor, came to an end and the Advocate was no longer entitled to act on the strength thereof;
• Service on the Advocate of the party cannot be treated as service of the award on the party itself;
•  Service on a ‘party’ as defined in Section 2(h) and read with Section 34(3) of the Act, had to be construed to be a person directly connected with and involved in the proceedings and who is in control of the proceedings before the arbitrator, as he would be the best person to understand the appreciate the arbitral award and to take a decision n as to whether an application under Section34 was required to be moved;
• No interference was called for with the decision of the Division Bench of the High Court impugned in the special leave petition, which was liable to be dismissed.

The Supreme Court analyzed the provisions of the Act in this regard.  It also analyzed the term ‘party’. The expression ‘party’ as defined in Section 2(h) of the Act clearly indicates a person who is a party to an arbitration agreement.  The said definition is not qualified in any way so as to include the agent of the party to such agreement.  Any reference, therefore, made in Section 31(5) and Section 34(2) of the Act can only mean the party himself and not his or her agent or Advocate empowered to act on the basis of a Vakalatnama. In such circumstances, proper compliance with Section 31(5) would mean delivery of a signed copy of the arbitral award on the party himself and not on his advocate, which gives the party, concerned the right to proceed under Section 34(3) of the Act.

The Supreme Court further held that the view taken in ‘Pushpa Bhagat’s case’ (supra) is in relation to the authority given to an advocate to act on behalf of a party to a proceeding in the proceeding itself, which cannot stand satisfied where a provision such as Section 31(5) of the Act is concerned.   The said provision clearly indicates that a signed copy of the award has to be delivered to the party.

The Supreme Court further observed that the decision in ‘Nilakhantha Sidramappa Ningshetti’s case (supra) was rendered under the provisions of Arbitration Act, 1940 which did not have a provision similar to the provisions of Section 31(5) of the Act. Therefore the said decision would not be applicable to the present case.

Since in this case a signed copy of the award had not been delivere4d to the party itself and the party obtained the same on 15.12.2004 and the petition under Section 34 was filed on 03.02.2005, it has to be held that the said petition was filed within the stipulated period of three months as contemplated under Section 34(3) of the Act. The Supreme Court rejected the appeal of the petitioner.