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Limitation Period For Application To Set Aside Arbitral Award Begins From Date Of Disposal Of Application To Correct The Award: SC [Read Order]

‘Section 34(3) specifically speaks of the date on which a request under Section 33 has been “disposed of” by the Arbitral Tribunal. We are also of the view that a “disposal” of the application can be either by allowing it or dismissing it.’

The Supreme Court has made it clear that the limitation period to make application to set aside arbitral award would start running from the date of disposal of the application seeking correction of the award, irrespective of whether such an application is allowed or dismissed. (Ved Prakash Mithal v. Union of India)

The Delhi High Court in this case had reversed the finding of the district judge, before whom Section 34 application was made, that it was time-barred, as the application should have been made on and from the first date as, in fact, there was no correction made to the award.

The high court had distinguished a judgment of the Supreme Court in State Of Arunachal Pradesh v. M/S. Damani Construction with the facts of the present case.

Damani Constructions

In that case, after the award was passed, the party had moved an application purportedly under Section 33, seeking review of the award and another prayer with regard to mode of payment. Holding that such an application was wholly misconceived, the Supreme Court held that limitation would start from date of award itself.

Application under Section 33 not wholly misconceived

In facts of this case, the bench observed: “In law, if an application is ex facie not maintainable under Section 33 of the Act then limitation would not commence after the disposal of the application as held by the Supreme Court in the case of M/s Damini Construction (supra), but once it is found that two views are possible from the situation, with one view being in favour of the party who files an application under Section 33 of the Act, it cannot be held that the filing of the application under Section 33 of the Act was wholly misconceived and the application under Section 33 of the Act was completely beyond the provisions of Section 33 of the Act.”

SC Upholds Delhi HC View

Before the apex court, assailing the high court order, it was argued that the expression “disposed” which is mentioned in Section 34(3) would have to be read in consonance with and in harmony with Section 33. ‘So read, this would only mean where some positive step has, in fact, taken place under Section 33 and the Award is either corrected or modified. This could not possibly refer to an Award which is not ultimately corrected or modified and the application under Section 33 is merely dismissed,” it was contended.

The decision of Bombay High court (Amit Suryakant Lunavat v. Kotak Securities, Mumbai) in this regard was brought to the notice of the bench. Relevant para reads: “There is no justification, as contended, to 3 accept the submission in view of the mandate of section 34 and considering the scheme and purpose of the Arbitration Act that because the application under section 33 of the Act was filed and it was rejected subsequently, therefore, the limitation period commenced afresh from the date of such decision of the award. In my view, it is contemplated only on a situation where the Arbitrator corrects or interprets and/or add or decide to add any additional claims and modified the award as only in such cases the original award looses its originality and therefore an application for setting aside the award needs to be filed within three months from the date of receipt of such corrected or modified award. Therefore, the party who received the award after deciding the application under section 34(3) of the Act, may get the benefit of fresh commencement of limitation from the receipt of the modified and/or corrected award and not otherwise.”

The bench of Justice Rohinton Fali Nariman and Justice Indu Malhotra then observed: “We are of the view that the judgment of the Bombay High Court does not reflect the correct position in law. Section 34(3) specifically speaks of the date on which a request under Section 33 has been “disposed of” by the Arbitral Tribunal. We are also of the view that a “disposal” of the application can be either by allowing it or dismissing it. On this short ground, in our opinion, the learned Single Judge of the Delhi High Court is correct in law.”

Read the Order Here

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