Only Objective Of S. 14(2) Arbitration Act 1940 Is That Parties Are Aware Of Award's Existence: Supreme Court
The Supreme Court reiterated that the only objective of Section 14(2) under the Arbitration Act, 1940 is that the parties are aware of the Award’s existence and suggests that this a substantive compliance.
The Court reiterated thus in a Civil Appeal in which the question for consideration was whether the time for filing a Section 17 Application commences when the party seeking to challenge the Award receives a formal notice of the making of the Award, or from the date such party is aware of the existence of the Award.
The two-Judge Bench of Justice P.S. Narasimha and Justice Sandeep Mehta observed, "Similarly, the decision in Indian Rayon Corporation Ltd. v. Raunaq and Co. (P) Ltd.6 clarifies that the only objective of Section 14(2) is that the parties are aware of the award’s existence and suggests that this a substantive compliance. If this were to be a procedural stipulation, the party intending to file objections can insist of technicalities like the mode of notice, and use those unfairly to gain time."
The Bench said that the parties need to be notified of the filing of Award and while Article 119(b) of the Limitation Act, 1962 requires that there be a ‘service of notice’ for the limitation to start running, Section 14(2) of the 1940 Act merely states that the Court ‘give notice’ to the parties. It added that the precise form of what constitutes as a ‘notice’ of filing the award is unspecified, however, interpreted reasonably, what must be required is that the parties come to know about the existence of the Award so that any objections to it may be filed.
AOR Madhusmita Bora appeared for the Appellant while AOR Debojit Borkakati appeared for the Respondents.
Brief Facts -
The Appellant’s husband secured an Award in his favour in 2022 under the 1940 Act. Her husband was a sole proprietor of a firm which had secured a work order from the Respondents. The work order was governed by the general conditions of contract including an arbitration clause. The agreement involved the firm constructing a permanent ‘armament section’ at Tezpur. The said work was completed and a bill was raised for the same in 1993. As the Respondents did not make the payment, the Appellant requested for arbitration to resolve the dispute. The Respondents declined and hence, the Appellant filed an Application before the Delhi High Court, seeking the appointment of an Arbitrator. However, the same was dismissed due to lack of jurisdiction and resultantly, another Application was filed before the Additional District Judge (ADJ), Delhi but it was again dismissed. It was only in 2019 that the Application was allowed and an Arbitrator was appointed.
The Appellant’s husband passed away during the arbitral proceedings and therefore, she represented him as his legal heir. The Arbitrator made an Award in Appellant’s favour and directed the Respondents to pay Rs. 1,33,47,268.92/- with an interest @ 9% p.a. However, the Respondents did not clear the dues and on approaching the Court, the District Judge directed the Respondents to clear the same. The Appellant received the copy of Award but the Respondents neither cleared the balance share of Arbitrator’s fees, nor collected the Award. They deposited a cheque after which it received the notice of filing Award. The District Court dismissed the Appellant’s Application under Section 17 holding it to be premature filed even before the limitation for filing objections to the Award could expire. Questioning this, the Appellant filed a Civil Revision Petition before the High Court but the same was dismissed. Being aggrieved, the Appellant approached the Apex Court.
The Supreme Court in view of the above facts, said, “The limitation for filing objections to the award is 30 days, and is governed by Article 119(b) of the First Schedule to the Limitation Act, 1963. The trigger for the limitation to start running specified therein is the date of service of notice of the filing of the award. Section 14(2) of the 1940 Act requires that the court of relevant jurisdiction should give notice to the concerned parties when an award is filed.”
The Court noted that, what appears from the usage of the word ‘notice’ is that the parties merely reach a state of awareness about the Award and plan their next steps accordingly, and not the imposition of another procedural step.
“The pleader acts as an agent of the party and his awareness is sufficient for the parties to access and scrutinise the contents of the award. Even if a formal notice is issued thereafter, it is at best an act of court which cannot disturb rights accrued in law. This is squarely applicable to the case before us, wherein the order dated 21.09.2022 precisely laid out that the award is available, and the only formality withholding the respondent’s access to it is clearance of the arbitrator’s fees”, it further remarked.
The Court emphasised that the parties have to take steps to scrutinise the Award themselves as soon as it becomes accessible and they are aware of its accessibility.
“The court directing the respondents to clear the fees was a clear intimation about its filing. Holding otherwise would not only be departing from precedents of this Court, but also allowing the respondents to take advantage of their own inaction. Hence, the limitation is to be treated as expired on 20.10.2022, and the appellant’s application seeking pronouncement of judgment in terms of the award was valid and well beyond the period for filing objections to the award”, it added.
Accordingly, the Apex Court allowed the Appeal, set aside the High Court’s Order, and directed the District Judge to take up and dispose of the case as expeditiously as possible within 5 months.
Cause Title- Krishna Devi @ Sabitri Devi (Rani) v. Union of India & Ors. (Neutral Citation: 2024 INSC 24)
Appearance:
Appellant: AOR Madhusmita Bora and Advocate Dipankar Singh.
Respondents: AOR Debojit Borkakati and Advocate Anuradha Gayen.
