Allahabad High Court: Awareness Of Arbitral Award Content Bars Extension Of Limitation Under Section 31(5) Of The Arbitration Act

Allahabad High Court: Awareness Of Arbitral Award Content Bars Extension Of Limitation Under Section 31(5) Of The Arbitration Act

The Allahabad High Court has ruled that the requirement under Section 31(5) of the Arbitration and Conciliation Act, 1996, for a signed copy of the award to be delivered to the parties, should not be interpreted narrowly. The Court determined that if the party seeking an extension of the limitation period is already aware of the contents of the unsigned award, the limitation period cannot be extended by invoking Section 31(5) of the Act.

Section 31(5) of the Arbitration and Conciliation Act, 1996, stipulates that after an arbitral award is passed, a signed copy must be delivered to each party.

“The legislative intent behind Section 31(5) of the Arbitration Act is to ensure that parties are adequately informed about the award to take necessary legal actions within prescribed timelines. Therefore, an interpretation that considers the party's actual awareness and actions, even if a signed copy was not formally received, aligns better with the legislative intent and the principles of justice and equity,” held Justice Shekhar B. Saraf.

The Court held that once a party has acted upon the contents of the arbitral award, it signifies that the party has knowledge of the award. This nullifies the impact of the award not being signed, as the party has already acted on it.

Section 3A of the National Highways Act, 1956, empowers the Central Government to notify land for acquisition for the purposes of building, maintaining, managing, or operating a national highway or any part of it. Following this, Section 3B allows for the survey of the property intended for acquisition. Section 3C grants any interested person the opportunity for a hearing within 21 days from the date of the notification under Section 3A.

Section 3D provides for the declaration of the acquisition of the land notified under Section 3A. Section 3G authorizes the Competent Authority to determine the compensation for the land acquired under Section 3D. If someone is dissatisfied with the compensation awarded, Section 3G(5) offers a remedy through arbitration.

The Central Government issued a notification under Section 3A, followed by a declaration under Section 3D of the NHAI Act. Subsequently, the Competent Authority, under Section 3G of the NHAI Act, passed an award determining the compensation.

The respondents, private individuals, filed a petition under Section 3G(5) of the NHAI Act before the Additional Commissioner (Administration) of Agra Division, Agra, who served as an arbitrator. The arbitrator remanded the matter back to the competent authority for re-determination of the compensation. NHAI filed an application under Section 34 of the Arbitration Act before the District Court against the remand award, but the application was rejected. Subsequently, NHAI approached the High Court under Section 37 of the Arbitration Act.

NHAI's counsel contended that the arbitrator lacked authority to remit the matter to the competent authority, given its power to determine compensation under Section 3G(5) of the NHAI Act. It was argued that the arbitrator's failure to sign the arbitral award, as mandated by Section 31(5) of the Arbitration Act, constituted a patent illegality. Consequently, it was asserted that the District Judge's dismissal of the application under Section 34 as time-barred was flawed.

The counsel for the respondent argued that since the appellant, NHAI, was aware of the arbitral award, it could not claim ignorance of the award to avoid the limitation period for filing an application under Section 34 of the Arbitration Act.

The Court referenced the case of Union of India v. Tecco Trichy Engineers, in which the Supreme Court established that the delivery of an arbitral award is not merely a formality. It emphasized that various limitations under the Arbitration Act commence from the date of receiving the award.

“In the realm of sports, where victory and defeat hang in balance, arbitration serves as the referee adjudicating disputes on the field of play. Section 31(5) of the Arbitration Act acts as the final whistle, signaling the end of the match and the declaration of the winner. For the prevailing party, the delivery of the award marks the culmination of their efforts and provides them with a means of enforcing their rights against the losing party,” held Justice Saraf.

The Court cited the case of Rahul v. Akola Janta Commercial Cooperative Bank Ltd., wherein the Bombay High Court emphasized that Section 31(5) should not be narrowly construed by adhering strictly to the literal interpretation of its language. It was established that once a certified copy of the award has been received by a party and the contents of the award are known to that party, the limitation period begins. The Court ruled that a party cannot raise the plea of an unsigned arbitral award after the limitation period has expired.

Furthermore, the Court noted that a literal interpretation of Section 31(5) of the Act could lead to unjust outcomes and undermine arbitration's purpose as a swift dispute resolution mechanism.

Upon examining the District Judge's order, the Court observed that NHAI, the appellant, was fully cognizant of the arbitral award and its contents, as evidenced by its request to the Special Land Acquisition officer to determine the compensation amount and issue a supplementary award, which NHAI subsequently acted upon. In light of these circumstances, the Court held that the appellant could not evade the limitation period by invoking procedural technicalities.

“A literal interpretation, which ignores the practical reality that the party was aware of the arbitral award and acted upon it, would be contrary to the spirit of the Arbitration Act.”

The Court also drew upon the precedent set in Union of India v. Bhola Prasad Agrawal, where the High Court of Chhattisgarh ruled that once a party is familiar with the contents of an arbitral award, it cannot assert that a signed copy of the award was not received in accordance with Section 31(5) of the Act.

Emphasizing that engaging with the contents of the award indicates awareness of triggering the limitation period under the Arbitration Act, the Court invoked the doctrine of estoppel. It stated that once a party has taken action based on the award, it is stopped from exploiting its delays by citing procedural irregularities.

Consequently, the Court concluded that there was no evident illegality in the District Judge's decision to dismiss the application under Section 34 of the Arbitration Act due to delay.