Supreme Court Clarifies Limitation for Challenging Arbitral Awards: Dakshin Haryana Bijli Vitran Nigam Ltd. vs. Navigant Technologies Pvt. Ltd. (2 March 2021)

Date of the Judgment: 2 March 2021

Citation: (2021) INSC 123

Judges: Indu Malhotra, J., Ajay Rastogi, J.

Can the clock for challenging an arbitration award start ticking before the parties receive a signed copy? The Supreme Court of India recently addressed this crucial question in a case concerning a dispute between Dakshin Haryana Bijli Vitran Nigam Ltd. and Navigant Technologies Pvt. Ltd. The core issue revolved around when the limitation period begins for filing objections against an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996: from the date the draft award is circulated or the date the signed copy is provided. This judgment clarifies the procedural aspects of arbitration law, ensuring a fair and transparent process for all parties involved. The bench comprised Justices Indu Malhotra and Ajay Rastogi, with Justice Indu Malhotra authoring the judgment.

Case Background

The case originated from a Service Level Agreement dated 2 May 2011, between Dakshin Haryana Bijli Vitran Nigam Ltd. (the appellant), and Navigant Technologies Pvt. Ltd. (the respondent). The agreement involved the respondent providing call center services to the appellant. Clause 13 of the agreement stipulated that any disputes would be resolved through arbitration by a three-member tribunal, as per the Arbitration and Conciliation Act, 1996.

On 16 October 2014, the appellant terminated the Service Level Agreement, which led to disputes between the parties. These disputes were then referred to a three-member arbitral tribunal.

The arbitral tribunal orally pronounced its award (2:1) on 27 April 2018, allowing the respondent’s claims. The parties were informed that the third arbitrator disagreed with the majority and would provide a separate opinion. A draft copy of the award was given to the parties to identify any computational, clerical, or typographical errors.

On 12 May 2018, the dissenting opinion was provided to the parties. The matter was then adjourned to 19 May 2018, to address any errors in the dissenting opinion. On 19 May 2018, the signed copy of the arbitral award was given to both parties, and the proceedings were terminated.

The appellant filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, on 10 September 2018, challenging the award. The Civil Court dismissed the objections, stating that the limitation period started on 27 April 2018, when the draft award was circulated. The High Court affirmed this decision. Aggrieved by the rejection of objections based on delay, the appellant approached the Supreme Court.

Timeline

Course of Proceedings

The appellant initially filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, before the Civil Court in Hisar, Haryana, challenging the arbitral award dated 27 April 2018. The Civil Court dismissed the objections, holding that the limitation period started on 27 April 2018, the date when the draft award was circulated to the parties. The court reasoned that the period of three months for filing objections began from this date, and the objections were filed beyond the prescribed period, including the additional 30-day extension.

The appellant then filed an appeal under Section 37 of the Arbitration Act before the High Court. The High Court upheld the Civil Court’s decision, stating that the limitation period commenced when the majority award was signed and communicated on 27 April 2018. The High Court concluded that the objections were filed after the expiry of the prescribed time limit, even with the benefit of the 30-day extension. Consequently, the High Court dismissed the appeal.

Aggrieved by the decisions of the Civil Court and the High Court, the appellant filed a Civil Appeal before the Supreme Court.

Legal Framework

The core legal framework for this case is the Arbitration and Conciliation Act, 1996. Several sections of the Act are particularly relevant:

• Section 2(1)(c): Defines “arbitral award” to include an interim award.
• Section 2(1)(d): Defines “arbitral tribunal” as a sole arbitrator or a panel of arbitrators.
• Section 29: Deals with decision-making by a panel of arbitrators, stating that decisions are made by a majority unless otherwise agreed.
  • “29. Decision making by a panel of arbitrators .- (1) Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members.”
• Section 31: Specifies the form and content of an arbitral award, emphasizing that the award must be in writing and signed by the members of the arbitral tribunal.
  • “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 .”
  • “(5) After the arbitral award is made, a signed copy shall be delivered to each party.”
• Section 34: Provides the procedure for applying to set aside an arbitral award.
  • “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.”
• Section 35: States that an arbitral award shall be final and binding on the parties.
• Section 36: Deals with the enforcement of an arbitral award.
• Section 29A: Mandates that arbitral tribunals must make the arbitral award within 12 months.

These sections collectively outline the process of arbitration, the requirements for a valid arbitral award, and the procedure for challenging such an award. The Supreme Court’s interpretation of these provisions is central to the outcome of this case.

Arguments

Appellant’s Submissions:

• The appellant contended that the objections were wrongly dismissed on the grounds of limitation. The term ‘arbitral award’ in the Arbitration Act includes both the majority award and the minority opinion.
• They argued that Section 31(1) of the Arbitration and Conciliation Act, 1996, requires all members of the tribunal to sign the award. Section 31(2), which allows an award signed by the majority, applies only in unanimous awards. It does not apply when there is a dissenting view.
• The appellant submitted that the time limit to file objections under Section 34(3) of the Arbitration and Conciliation Act, 1996, should relate to the entire arbitral award, including the dissenting opinion, not just the majority award.
• They argued that if the majority award is considered the sole arbitral award, the dissenting opinion would become irrelevant, causing prejudice to the award debtor.
• The appellant highlighted that the tribunal had posted the matter on 12 May 2018, to allow parties to point out errors in the award. They emphasized that the dissenting opinion was pronounced on the same date, and the matter was further posted to 19 May 2018, to consider corrections.
• The appellant cited the Supreme Court’s judgment in Ssangyong Engineering and Construction Co. Ltd. v. NHAI [2019 (15) SCC 131], where the dissenting opinion was upheld, and the Bombay High Court’s ruling in Axios Navigation v. Indian Oil Corporation [2012 SCC Online Bom 4], which stated that the minority view is relevant for Section 34 objections.

Respondent’s Submissions:

• The respondent argued that the objections were time-barred as the majority award was pronounced on 27 April 2018, and the limitation period under Section 34(3) of the Arbitration and Conciliation Act, 1996, commenced from that date.
• They contended that Section 34(3) allows for objections within three months from the date of receiving the award, with a possible 30-day extension for sufficient cause. The respondent submitted that the time for filing objections expired on 26 July 2018, or 26 August 2018, with the extension.
• The respondent argued that the dissenting opinion is not an award for computing the limitation period under Section 34(3) of the Arbitration and Conciliation Act, 1996.
• They relied on Section 29(1) of the Arbitration and Conciliation Act, 1996, which states that the decision of the majority of the members of the tribunal is the arbitral award. They also referred to Section 31(2), which allows for an award to be signed by the majority.
• The respondent submitted that the minority opinion is just a view and cannot be enforced as an award. It should not be considered an arbitral award for computing limitation under Section 34(3) of the Arbitration and Conciliation Act, 1996.
• The respondent cited judgments from the Delhi and Bombay High Courts, such as Bharat Sanchar Nigam Ltd. v. Acome and Ors [AIR 2009 Delhi 102], Axion Navigation v. Indian Oil Corporation Ltd. [(2012) 114 (1) Bom LR 392] and Oriental insurance Co. v. Air India Ltd. [(2019) SCC Online Del 11634], to support their claim that the limitation period commences from the date the award is passed.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the period of limitation for filing a petition under Section 34 of the Arbitration and Conciliation Act, 1996, commences from the date on which the draft award was circulated to the parties, or from the date on which the signed copy of the award was provided.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Union of India v. Tecco Trichy Engineers & Contractors [(2005) 4 SCC 239] – The Supreme Court held that the limitation period for filing an application under Section 34 of the Arbitration and Conciliation Act, 1996, commences only after a valid delivery of the award takes place under Section 31(5) of the Act.
• State of Maharashtra v. Ark Builders [(2011) 4 SCC 616] – The Supreme Court reiterated that the limitation period for filing objections commences from the date when the signed copy of the award is delivered to the party.
• Anilkumar Jinabhai Patel v. Pravinchandra Jinabhai Patel [(2018) 15 SCC 178] – This case followed the principles laid down in Tecco Trichy Engineers.
• State of Himachal Pradesh v Himachal Techno Engineers [(2010) 12 SCC 210] – The Supreme Court held that if the award is delivered on a holiday or non-working day, the date of physical delivery is not the date of receipt, and the date of receipt will be the next working day.
• Union of India v. Popular Construction [(2001) 8 SCC 470] – The Supreme Court held that Section 5 of the Limitation Act, 1963, does not apply to applications filed under Section 34 of the Arbitration Act.
• Simplex Infrastructure v. Union of India [(2019) 12 SCC 455] – The Supreme Court reiterated that the statutory period of limitation for filing an application for setting aside is three months, extendable by thirty days, if sufficient cause is shown.
• P. Radha Bai v. P. Ashok Kumar [(2019) 13 SCC 445] – The Supreme Court held that once the time limit for challenging an arbitral award expires, the period for enforcing the award under Section 36 of the Arbitration and Conciliation Act, 1996, commences.
• Ssangyong Engineering & Construction Co. Ltd v. NHAI [(2019) 15 SCC 131] – The Supreme Court upheld the view taken in the dissenting opinion.
• Bharat Sanchar Nigam Ltd. v. Acome and Ors [AIR 2009 Delhi 102] – The Delhi High Court held that the limitation period under Section 34(3) of the Act shall commence from the date when the award is passed.
• Axion Navigation v. Indian Oil Corporation Ltd. [(2012) 114 (1) Bom LR 392] – The Bombay High Court held that the limitation period under Section 34(3) of the Act shall commence from the date when the award is passed.
• Oriental insurance Co. v. Air India Ltd. [(2019) SCC Online Del 11634] – The Delhi High Court held that the limitation period under Section 34(3) of the Act shall commence from the date when the award is passed.
• McDermott International Inc. v. Burn Standard Co. Ltd. – The Supreme Court held that the court cannot correct errors of the arbitrators and can only quash the award.

Books:

• Malhotra’s Commentary on the Law of Arbitration, Wolters Kluwer, 4th Ed., Vol.1, p.794. – This commentary discusses the legal effect of signing an award.
• Fouchard, Gaillard, Goldman, International Commercial Arbitration, Ed. Emmannuel Gaillard, John Savage, p.786 (Kluwer Law International). – This treatise discusses dissenting opinions in international arbitration.
• Gary Born, International Commercial Arbitration, Wolters Kluwer, Ed. 2009, Volume II, p. 2466. – This commentary discusses the right to provide a dissenting opinion.
• David St. John Sutton, Judith Gill and Matthew Gearing QC, Russel on Arbitration, 24th ed. (Sweet & Maxwell), p. 313. – This book discusses the relevance of dissenting opinions.

Authorities Considered by the Court

Judgment

The Supreme Court held that the limitation period for filing objections under Section 34 of the Arbitration and Conciliation Act, 1996, commences from the date on which the signed copy of the award is provided to the parties, not from the date the draft award is circulated. The Court emphasized that the delivery of a signed copy of the award is a crucial step in arbitration proceedings, as it is from this date that the limitation period for filing objections under Section 34 of the Arbitration and Conciliation Act, 1996, begins. The Court also clarified that the dissenting opinion is not an award and does not affect the limitation period.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court relied on Union of India v. Tecco Trichy Engineers & Contractors [ (2005) 4 SCC 239 ]* and State of Maharashtra v. Ark Builders [(2011) 4 SCC 616]* to emphasize that the limitation period commences from the date of receipt of the signed copy of the award.
• The Court distinguished the judgments cited by the respondent, namely Bharat Sanchar Nigam Ltd. v. Acome and Ors [AIR 2009 Delhi 102]*, Axion Navigation v. Indian Oil Corporation Ltd. [(2012) 114 (1) Bom LR 392]* and Oriental insurance Co. v. Air India Ltd. [(2019) SCC Online Del 11634]*, stating that they were not applicable to the present case.
• The Court cited Ssangyong Engineering & Construction Co. Ltd v. NHAI [(2019) 15 SCC 131]* to discuss the relevance of dissenting opinions, but clarified that it does not affect the limitation period.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure a clear and consistent interpretation of the Arbitration and Conciliation Act, 1996, particularly regarding the commencement of the limitation period for challenging arbitral awards. The Court emphasized the importance of the signed copy of the award as the definitive document that triggers the limitation period. The Court’s reasoning was also guided by the following:

• Legal Certainty: The Court aimed to provide legal certainty by clarifying that the limitation period begins only when a signed copy of the award is received by the parties. This ensures that all parties are aware of the exact date from which the clock starts ticking for filing objections.
• Substantive Compliance: The Court underscored the importance of substantive compliance with Section 31(5) of the Arbitration and Conciliation Act, 1996, which mandates the delivery of a signed copy of the award to each party. This requirement ensures that the parties have an authentic and complete record of the award.
• Uniform Application: The Court sought to ensure the uniform application of the law, avoiding confusion and ambiguity regarding when the limitation period begins. This uniform application is crucial for maintaining the integrity of the arbitration process.
• Dissenting Opinion: The Court clarified that while a dissenting opinion is an important part of the arbitral process, it is not part of the arbitral award for the purpose of calculating the limitation period. This clarification is significant because it prevents the dissenting opinion from unduly extending the time available for filing objections, which could lead to delays in the enforcement of awards.
• Fairness: By specifying that the limitation period begins from the date of receiving the signed copy of the award, the Court ensured that all parties have a fair opportunity to challenge the award. This protects the rights of the award debtor by giving them a clear starting point for the limitation period.

Final Decision

The Supreme Court allowed the appeal, setting aside the judgments of the Civil Court and the High Court. The Court held that the limitation period for filing objections under Section 34 of the Arbitration and Conciliation Act, 1996, commences from the date on which the signed copy of the award is provided to the parties, not from the date the draft award is circulated. The Court directed the Civil Court to consider the appellant’s objections on merits.

Implications

The judgment in Dakshin Haryana Bijli Vitran Nigam Ltd. vs. Navigant Technologies Pvt. Ltd. has significant implications for arbitration law in India:

• Clarity on Limitation: The judgment provides much-needed clarity on the commencement of the limitation period for challenging arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996. It establishes that the limitation period starts from the date on which the signed copy of the award is provided to the parties, not from the date the draft award is circulated.
• Importance of Signed Copy: The judgment underscores the importance of the signed copy of the arbitral award as the definitive document for triggering the limitation period. This ensures that all parties have an authentic and complete record of the award.
• Dissenting Opinion: The judgment clarifies that the dissenting opinion is not part of the arbitral award for the purpose of calculating the limitation period. This clarification is important for avoiding confusion and ensuring that the limitation period is not unduly extended.
• Uniformity in Application: The judgment promotes uniformity in the application of the law by providing a clear and consistent interpretation of Section 34 of the Arbitration and Conciliation Act, 1996, regarding the commencement of the limitation period.
• Fairness in Process: The judgment ensures that all parties have a fair opportunity to challenge the award by specifying that the limitation period begins from the date of receiving the signed copy of the award. This protects the rights of the award debtor by giving them a clear starting point for the limitation period.
• Procedural Compliance: The judgment emphasizes the importance of procedural compliance with Section 31(5) of the Arbitration and Conciliation Act, 1996, which mandates the delivery of a signed copy of the award to each party.
• Precedent: This judgment sets a precedent for future cases involving challenges to arbitral awards, providing a clear guideline for determining the commencement of the limitation period.

Flowchart