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Extension Of Limitation For Section 34 Application, Is Not Contingent On Merits Of Section 33 Application: Delhi High Court

Parina Katyal
20 Nov 2022 12:39 PM GMT
Extension Of Limitation For Section 34 Application, Is Not Contingent On Merits Of Section 33 Application: Delhi High Court
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The Delhi High Court has ruled that the benefit of extension of limitation for filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), by virtue of an application filed under Section 33, for correction and interpretation of award, would not apply solely to the parties making the request under Section 33. The single bench of Justice...

The Delhi High Court has ruled that the benefit of extension of limitation for filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), by virtue of an application filed under Section 33, for correction and interpretation of award, would not apply solely to the parties making the request under Section 33.

The single bench of Justice Vibhu Bakhru held that the issue whether the limitation for filing a Section 34 application would run from the date of disposal of the application under Section 33 or from the date of receipt of the award, is not contingent upon the arbitral tribunal's decision on the application filed under Section 33.

Certain disputes arose between the petitioner- Vidhur Bhardwaj, and the respondents, including- Horizon Crest India Real Estate, under a Binding Settlement Agreement, which was referred to arbitration. The Arbitral Tribunal passed an award in favour of the respondents, awarding them damages. The petitioner filed a petition under Section 34 of the A&C Act challenging the arbitral award before the Delhi High Court.

The petitioner Vidhur Bhardwaj submitted before the High Court that as per the relevant Clause contained in the Binding Settlement Agreement, certain individuals, including the petitioner, cannot be made personally liable for the obligations stipulated under the said Agreement. Therefore, he contended that he could not be made liable for any monetary damages awarded against the respondents/award holders.

The respondent Horizon Crest argued that the petition was not maintainable since it was barred by limitation.

The Court observed that as per Section 34(3) of the A&C Act, an application under Section 34 is required to be filed within a period of 3 months from the date of the receipt of the arbitral award or, if a request has been made under Section 33, for correction and interpretation of award, from the date on which that request had been disposed of by the arbitral tribunal.

The bench further noted that one of the award debtors, Nirmal Singh, had filed an application under Section 33 of the A&C Act before the Arbitral Tribunal, raising a similar contention as that of the petitioner that it could not be made personally liable for the obligations stipulated under the Agreement. Nirmal Singh had averred before the Arbitral Tribunal that as per the relevant Clause contained in the Binding Settlement Agreement, certain individuals, including him, could not be made personally liable under the said Agreement. In its application before the Tribunal, Nirmal Singh had contended that due to an error in the award, he was not expressly excluded from the award, unlike other parties which fell under the ambit of the relevant clause. The Arbitral Tribunal had, however, rejected the applicant Nirmal Singh's application. The Tribunal ruled that Section 33(1) of the A&C Act did not permit the arbitral tribunal to alter its findings and exclude any particular party from the Award already made against him.

The Court observed that the said applicant, Nirmal Singh, had filed the application under Section 33 within a period of 30 days from the receipt of the award, as stipulated under Section 33(1) of the A&C Act. The Court further took into account that subsequently, the petitioner filed a similar application under Section 33 of the A&C Act. However, the said application was filed beyond the period of 30 days, as stipulated under Section 33(1).

The bench held that filing of an application under Section 33 of the A&C Act, which is incompetent on account of being beyond the period of limitation, would not automatically result in extending the period of limitation for filing the petition under Section 34 of the A&C Act.

Thus, it ruled that since the petitioner's application under Section 33 of the A&C Act was filed beyond the period prescribed under the A&C Act, the same was not maintainable. Therefore, the filing of the said application would not extend the benefit of extension of limitation to the petitioner for filing an application under Section 34.

The petitioner Vidhur Bhardwaj argued before the Court that since the application under Section 33 of the A&C Act was filed by it beyond the stipulated period, it would not extend the limitation period. However, it contended that since the application filed by Nirmal Singh under Section 33 was filed within the prescribed time, the period of limitation for filing the application under Section 34 would commence from the date of the decision of the Arbitral Tribunal in regard to the said application and not from the date of receipt of the award.

To this, the respondent Horizon Crest contended that only the party filing an application under Section 33 can avail the benefit of extension of limitation. Also, the respondent argued that the application filed by Nirmal Singh under Section 33 of the A&C Act was in the nature of review and therefore, it could not be considered as an application under Section 33. Thus, it contended that the period of 3 months available for filing the petition under Section 34, must be computed from the date on which the petitioner allegedly received the award and not from the date Nirmal Singh's application was rejected by the Arbitral Tribunal.

Rejecting the contention raised by the respondent, the Court held that Section 34(3) of the A&C Act does not mention that the period of limitation would be extended only in respect of the parties making the request under Section 33 of the A&C Act.

"There is no ambiguity in the language of Section 34(3) of the A&C Act. Even if a request for correction under Section 33 of the A&C Act is made by a party before an arbitral tribunal, the period for the counter parties to make an application under Section 34 of the A&C Act would also commence when the party's request under Section 33 of the A&C Act is disposed of."

The High Court noted that the relevant Clause contained in the Binding Settlement Agreement, expressly limited the liability of certain individuals, including Nirmal Singh and the petitioner. It observed that it was in this context, that the petitioner and Nirmal Singh had filed applications claiming that there was an inadvertent error since they were not excluded from the award along with other parties failing under the said Clause. Further, the Court observed that there was no adjudication made by the Arbitral Tribunal as to why benefit of the relevant Clause was not made available to Nirmal Singh and the petitioner.

The Court laid down that filing of an application under Section 33 of the A&C Act, which is wholly incompetent and which cannot by any stretch of imagination be considered as a request under Section 33 of the A&C Act, would not extend the period of limitation to file the petition under Section 34 of the A&C Act.

However, the bench took into account that though the Arbitral Tribunal did not accept the application of Nirmal Singh, it did hear the oral submissions from both the parties and that it did not reject the application outrightly. Thus, it ruled that it could not be said that the application was wholly misconceived or that it could not be considered as an application under Section 33 of the A&C Act.

The Court further ruled that the issue whether the limitation for filing a Section 34 application would run from the date of disposal of the application under Section 33 or from the date of receipt of the award, is not contingent upon the Arbitral Tribunal's decision on the application filed under Section 33.

"This Court is unable to accept the view that the question whether the limitation would run from the date of disposal of the application under Section 33 of the A&C Act or from the date of receipt of the award is contingent upon the Arbitral Tribunal's decision of the said application. It is only when an application under Section 33 of the A&C Act is disposed of that the parties are finally certain as to the content of the award. It is apparent that the rationale for providing that the limitation would run from the date of disposal of the application is to provide a reasonable time to the parties to take steps for filing the petition under Section 34 of the A&C Act after they are certain as to the final shape and contents of the arbitral award. Clearly, this cannot be contingent on the view that the Arbitral Tribunal may take in respect of the merits of the application under Section 33 of the A&C Act."

The Court added that if a party harboured a bona fide belief that there was an apparent inadvertent error in the arbitral award, which required correction, the application filed by it under Section 33 of the A&C Act must be construed as such, notwithstanding the fate of the said application.

The bench laid down that on a detailed examination, an arbitral tribunal or a court may find that the relief sought cannot be granted under Section 33 of the A&C Act, or that there was no inadvertent error involved. However, the Court added that that would not mean that the limitation would run from the date of the receipt of the award and not from the date on which an application under Section 33 of the A&C Act was decided.

Referring to the decision of the Delhi High Court in Nirmal Singh versus Horizon Crest India Real Estate & Ors. (2020), the Court noted that the petition filed by Nirmal Singh under Section 34 of the A&C Act, challenging the arbitral award, was dismissed by the High Court on the ground of limitation. The Coordinate Bench of the High Court in Nirmal Singh (2020) had ruled that Nirmal Singh's application could not be construed as an application under Section 33 of the A&C Act. Thus, it had rejected the contention that the period of 3 months for filing a Section 34 application was required to be computed from the date of the order of the Arbitral Tribunal rejecting Nirmal Singh's application under Section 33.

While holding that it had reservations in respect of the view expressed by the Coordinate Bench in Nirmal Singh (2020), the Court ruled that it was bound by the said decision of the Coordinate Bench of Delhi High Court.

"In view of the decision of the Coordinate Bench of this Court in Nirmal Singh v. Horizon Crest India Real Estate & Ors. (supra), the petitioner's application [being IA No.5582/2020] seeking condonation of delay in filing the objections is rejected. The period of limitation, as reckoned from the date of receipt of the impugned award, is beyond the period of thirty days that can be condoned by this Court," the Court said.

Thus, ruling that the period of limitation for filing the application under Section 34 was to be reckoned from the date of receipt of the award, the Court held that the petition filed by the petitioner was barred by limitation. Therefore, the Court dismissed the petition.

Case Title: Vidhur Bhardwaj versus Horizon Crest India Real Estate & Ors.

Dated: 16.11. 2022 (Delhi High Court)

Counsel for the Petitioner: Mr. Vivek Sibal, Sr. Adv. with Mr. Anshdeep Singh Khurana, Mr. Dhananjay Jain, Mr. Shreedhar Kale & Mr. Harsh Srivastava, Advs.

Counsel for the Respondents: Mr Sudipto Sarkar, Sr. Adv. With Mr. Saurav Agrawal, Mr. Savrajay Nanda, Mr. Vinay Kumar Misra, Ms. Vani Sharma & Mr. Ribhu Garg Advs.

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