22 March 2021
Introduction:
Recently, a division bench of the Supreme Court in Dakshin Haryana Bijli Vitran Nigam Ltd. V. M/s Navigant Technologies Pvt. Ltd.[1] has inter alia (i) clarified when the limitation period for challenging an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) commences; (ii) discussed the legal requirement and significance of an award being signed; and (iii) highlighted the relevance of dissenting opinions in arbitration proceedings. The Court has also made observations on what happens to the underlying disputes between the parties after an award is set aside.
Facts
A Service Level Agreement dated May 2, 2011 (“Agreement”) was executed by Dakshin Haryana Bijli Vitran Nigam Limited (“the Appellant”) in favour of M/s. Navigant Technologies Limited (“the Respondent”), for providing call centre services. Clause 13 of the Agreement provided for resolution of disputes vide arbitration by a three-member tribunal, under the Arbitration Act. Subsequently, on October 16, 2014, the Appellant terminated the Agreement leading to disputes between the parties, which were referred to arbitration as stipulated under Clause 13 of the Agreement.
On April 27, 2018, the arbitral tribunal orally pronounced its award (in a 2:1 ratio), whereby the claims of the Respondent were allowed (“Award”). The third arbitrator disagreed with the view taken by majority of the arbitrators and the parties were informed that his opinion would be rendered separately. A copy of the draft Award was provided to the parties to identify any computation, clerical or typographical errors, which would be taken up during the next hearing scheduled for May 12, 2018.
Thereafter, on May 12, 2018, a copy of the dissenting opinion was provided by the third arbitrator to the parties (dated April 27, 2018) and the matter was scheduled for May 19, 2018 to identify any clerical or typographical mistakes in the same. As the parties had not filed any application to point out any clerical or typographical mistakes, a signed copy of the Award was provided to both the parties on May 19, 2018 and the proceedings were duly terminated.
However, on September 10, 2018, the Appellant filed its objections under Section 34 of the Arbitration Act before the Civil Court, Hisar, Haryana (“Civil Court”) to challenge the Award, along with an application for condonation of delay. It was submitted by the Appellant that the objections were filed within the period prescribed by Section 34(3) of the Arbitration Act, i.e., within three months and thirty days from the date of receipt of the signed Award, i.e., on May 12, 2018.
The Civil Court dismissed the application for condonation of delay vide its order dated February 14, 2019 and held that the Appellant had received the majority Award on April 27, 2018. Thus, it was held that the period of limitation would start running from the said date and the objections to the Award were dismissed solely on the ground of delay.
Being aggrieved, the Appellant filed an appeal under Section 37 of the Arbitration Act before the High Court. The High Court vide its order dated December 11, 2019, affirmed the order dated February 14, 2019 passed by the Civil Court. The said order of the High Court was assailed by the Appellant before the Hon’ble Supreme Court, by way of a Special Leave Petition.
Submissions of the Parties
The Appellant inter alia contended that (i) its objections had been erroneously dismissed by the Civil Court as well as the High Court on the sole ground of limitation, and not on merits; (ii) reference to the arbitral award in the Act under Section 34(4) includes both the majority award as well as the minority opinion; (iii) if the majority Award was interpretated as the arbitral award, the dissenting opinion of the minority tribunal would have no relevance and such a view would cause grave prejudice to the award debtor; (iv) the dissenting opinion has been held to be the correct view by courts in various cases.
The Respondent inter alia contended that (i) the objections filed by the Appellant under Section 34 of the Act were barred by limitation, and ought to be dismissed; (ii) since the majority Award was pronounced on April 27, 2018, the limitation period applicable under Section 34(3) commenced from that date; (iii) under Section 34(3) of the Act, a party may file objections within three months from the date of receipt of the award and the dissenting opinion of the minority member was not an award for the purposes of computing the limitation period prescribed under the same; (iv) Section 29 (1) of the Act contemplates that the decision of the majority of the members of the tribunal is the arbitral award; and (v) the opinion of the minority tribunal was only a view and could not be enforced as an award. It could also not be considered as the arbitral award for the purpose of computing limitation under Section 34(3) of the Act.
Findings of the Court
Examining the scheme of the Arbitration Act, and in particular the nature of arbitral awards, the Court observed that the same recognised only one arbitral award passed by an arbitral tribunal, which may either be a unanimous award, or an award passed by a majority in the case of a panel of members. In this regard, the Court inter alia observed that (i) an award was a binding decision made by the arbitrator(s) on all the issues referred for adjudication; (ii) it contained the reasons assigned by the tribunal on the adjudication of the rights and obligations of the parties arising from the underlying commercial contract; and (iii) it must be one which decides all the issues referred for arbitration. The Court further observed that the view of a dissenting arbitrator was not an award, but an opinion. It, however, clarified that a party aggrieved by the award could draw support from the reasoning and findings assigned in the dissenting opinion.
The Court also observed that an ‘arbitral award’ was the decision made by the majority members of an arbitral tribunal and that, a dissenting opinion did not determine the rights or liabilities of the parties, as enforceable under Section 36 of the Arbitration Act. The Court clarified that the reference to the phrase ‘arbitral award’ in Sections 34 and 36 referred to the decision of the majority of the members of the arbitral tribunal. It further stated that a party cannot file a petition under Section 34 for setting aside, or under section 36 for enforcement of a dissenting opinion. It stated that under Section 34, only the decision reached by the majority of the members of the tribunal was the ‘arbitral award’ capable of being set aside. Similarly, under section 36, the “arbitral award” passed by majority of the members could only be enforced.
Legal requirement of signing the award
The Court further observed that Section 31[2] of the Arbitration Act contained the legal requirement of an arbitral award being signed by a sole arbitrator, or the members of a tribunal. The Court iterated that Section 31 (1) of the Arbitration Act was couched in mandatory terms requiring an arbitral award to be made in writing and signed by all the members of the arbitral tribunal. It observed that in cases where the arbitral tribunal comprised more than one arbitrator, the award would be made when the arbitrators acting together finally expressed their decision in writing and the same was authenticated by their signatures[3]. The Court further stated that an award took legal effect only after it was signed by all the arbitrators, which gave it authentication. The legal effect of signing of the award would also make the award final. Thus, the Court held that an award would be made when it is authenticated by the person who makes it.
Further, the Court emphasized that the Arbitration Act made it mandatory for each of the members of the tribunal to sign the award, in order to make it a valid award. It clarified that the usage of the term “shall” made it a mandatory requirement and the same was not merely a ministerial act, or an empty formality which could be dispensed with. It further stated that Section 31(1) read with sub-section (4) made it amply clear that the Arbitration Act contemplated a single date on which the arbitral award is passed, i.e., the date on which the signed copy of the award is delivered to the parties. The Court further stated that Section 31 (5) required the arbitrator / tribunal to provide the signed copy of the arbitral award to the parties. Thus, the Court held that the receipt of a signed copy of the award would be the date from which the period of limitation for filing objections under Section 34 would commence. It clarified that Section 34(3) provided a specific time limit of three months from the date of receipt of the award, and a further period of 30 days would be granted if it was satisfied that the party was prevented by sufficient cause from making the application within the said period but not thereafter. Furthermore, the Court held that if the objections were not filed within the period prescribed by Section 34, the award holder would be entitled to move for enforcement of the arbitral award as a deemed decree of the Court under Section 36 of the Arbitration Act.
In this regard, the Court relied on Union of India v. Tecco Trichy Engineers & Contractors[4], wherein a three-judge bench of the Supreme Court had held that the period of limitation for filing an application under Section 34 would commence only after a valid delivery of the award took place under Section 31(5) of the Arbitration Act. Additionally, it relied on the judgment State of Maharashtra v. Ark Builders[5], wherein the Supreme Court had held that Section 31(1) obliged the members of the arbitral tribunal to make the award in writing and sign it. It held that sub-section (5) of Section 31 required the delivery of a copy of the award signed by the members of the arbitrator, and not any copy of the award. The Court further stated that on a harmonious construction of Section 31(5) read with Section 34(3), the period of limitation prescribed for filing objections would commence only from the date when the signed copy of the award was delivered to the party making the application for setting aside the award. In particular, the Court observed that if the law (i) prescribed that a copy of the award was to be communicated, delivered, despatched, forwarded, rendered, or sent to the parties concerned in a particular way; and (ii) set a period of limitation for challenging the award in question by the aggrieved party; then the period of limitation could only commence from the date on which the award was received by the concerned party in the manner prescribed by law. The Court further noted that the judgment in Tecco Trichy (Supra) has been recently followed in Anilkumar Jinabhai Patel v. Pravinchandra Jinabhai Patel[6].
The Court held that if one of the members gave a dissenting opinion, the same must be delivered contemporaneously on the same date as the final award, and not on a subsequent date, as the tribunal becomes functus officio upon the passing of the final award. It held that the period for rendering the award and dissenting opinion must be within the period prescribed by Section 29A of the Arbitration Act.
In view of the above, the Court held that there was only one date recognised by law, that is, the date on which a signed copy of the final award is received by the parties, from which the period of limitation for filing objections would start ticking. Furthermore, the Court observed that the date on which the signed award was provided to the parties was a crucial date in arbitration proceedings under the Arbitration Act as it was from that date that: (i) the period of 30 days for filing an application under Section 33 for correction and interpretation of the award, or additional award could be filed; (b) the arbitral proceedings would terminate as provided by Section 32(1) of the Arbitration Act; and (c) the period of limitation for filing objections to the award under Section 34 would commence.
Relevance of a dissenting opinion
The Court held that a dissenting opinion of a minority arbitrator could be relied upon by the party seeking to set aside the award, to buttress its submissions in the proceedings under Section 34. The Court also clarified that at the stage of judicial scrutiny by a Court under Section 34, it is not precluded from considering the findings and conclusions of the dissenting opinion of the minority member of the tribunal.
The Court affirmed that in law, where the Court set aside the award passed by the majority members of the tribunal, the underlying disputes would require to be decided afresh in an appropriate proceeding. The bench further iterated that under Section 34 of the Act, the Court could either dismiss the objections filed, and uphold the award, or set aside the award, if the grounds contained in sub-sections (2) and (2A) were made out. It reiterated and clarified that Courts had no power to modify an arbitral award or correct the errors of the arbitrators, while deciding a challenge under Section 34 of the Arbitration Act. It could only quash the award, leaving the parties free to begin the arbitration again if desired. In the light of the above, the Court held that in the present case, the period of limitation for filing objections would have to be reckoned from the date on which the signed copy of the award was made available to the parties, i.e., on May 19, 2018. Accordingly, it was held that the objections were filed within the period of limitation prescribed under Section 34(3) i.e. from the date of receipt of the signed award.
Accordingly, the Court allowed the appeal filed by the Appellant, set aside the orders passed by the Civil Court and the High Court and restored the petition to the file of the Civil Court, to be decided in accordance with the law.
CONCLUSION
The Supreme Court has, at length, discussed and clarified the meaning, significance, and legal requirements of an arbitral award; the importance of a dissenting opinion; and the limited scope of judicial interference under the Arbitration Act. The Court has also given due importance to the significance of signing an arbitral award and has reiterated that, while deciding a challenge to an arbitral award, Courts cannot modify the same, thereby encouraging minimal judicial interference. This is yet another pro-arbitration and pro-enforcement judgment of the Supreme Court in keeping with the UNCITRAL Model Law principles and the global pro-arbitration regime.
For further information, please contact:
Aditya Mehta, Partner, Cyril Amarchand Mangaldas
aditya.mehta@cyrilshroff.com
[1] Judgment dated March 2, 2021 passed in Civil Appeal No. 791 of 2021
[2] “31. Form and contents of arbitral award.- (1) An arbitral award shall be made in
writing and shall be signed by the members of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral proceedings with more than
one arbitrator, the signatures of the majority of all the members of the arbitral
tribunal shall be sufficient so long as the reason for any omitted signature is
stated .
….
(4) The arbitral award shall state its date and the place of arbitration as
determined in accordance with section 20 and the award shall be deemed to
have been made at that place.
(5) After the arbitral award is made, a signed copy shall be delivered to each
party.”
[3] Malhotra’s Commentary on the Law of Arbitration, Wolters Kluwer, 4th Ed., Vol.1, p.794
[4] (2005) 4 SCC 239.
[5] (2011) 4 SCC 616
[6] (2018) 15 SCC 178
