Union Of India & Ors vs M/S Neelam Engineering & Contruction Co

arrangement in various zones at TBRL Range, 2

Ramgarh, near Chandigarh. Certain disputes arose

between the Appellants and the Respondent which

were referred to the arbitration of Col. T.S.

Plaha, appointed as the sole Arbitrator for

adjudication of the said disputes between the

parties. The sole Arbitrator made his Award on 27th

January, 1996, for a sum of Rs.1,70,020/-, together

with interest at the rate of 18% per annum from 31st

December, 1991, till the date of decree or payment,

whichever was earlier, in favour of the Respondent.

On 27th February, 1996, the Respondent filed a

petition in the Civil Court under Sections 14(2),

17 and 29 of the Arbitration Act, 1940, for making

the Award dated 27th January, 1996, a Rule of Court.

3. After an interval of about two years, on 3rd

January, 1998, the Appellants filed an objection

petition under Sections 30 and 33 of the

Arbitration Act, 1940, for setting aside the Award

published by the sole Arbitrator, on the ground 3

that the Arbitrator had misconducted himself while

giving his finding on the claims of the parties.

4. On 18th February, 1998, the Court directed the

Arbitrator to file the Award in Court. When the

matter was listed for hearing on 27th May, 1998, the

Court recorded that reply had been received to the

objection petition which had been filed and that

the original arbitration file had been received

from the Arbitrator. The case was, therefore,

adjourned till 27th July, 1998, for filing

rejoinder. After considering the application made

by the Respondent under Sections 14(2), 17 and 29

of the Arbitration Act, 1940, and the objection

filed by the Appellant, the Civil Court rejected

the said objection by holding that since the

objection had been filed prior to filing of the

Award, the same was premature and could not be

taken note of and further that the objection had

been filed beyond the period of limitation as 4

prescribed under Article 119 of the Limitation

Act. The Civil Court accordingly allowed the

Appellants' application under Sections 14(2), 17

and 29 of the Arbitration Act, 1940, and ordered

that the Award dated 27th January, 1996, be made a

Rule of Court, and granted interest at the rate of

18% per annum thereupon from the date of order till

realization.

5. Aggrieved by the said order of the learned

Civil Judge, Junior Division, Chandigarh, the

Appellants herein filed an appeal against the same

before the learned Additional District Judge,

Chandigarh, being C.R. No.52 dated 8th August, 2003,

under Section 39 of the aforesaid Act.

6. The submissions which had been made before the

learned Civil Judge, Junior Division, Chandigarh,

were reiterated in the Appeal. It was contended

that while the Award was passed by the Arbitrator

on 22nd January, 1996, the petition under Sections 5 14(2), 17 and 29 of the Arbitration Act, 1940, was

filed by the Respondent Company on 27th February,

1996. Directions were, thereafter, given by the

Trial Court to the Arbitrator to produce the Award

in Court and the same appears to have been sent by

the learned Arbitrator by post and was received by

the Trial Court on 18th February, 1998. It also

appears that notice was issued to both the parties,

but ultimately on account of inadvertence, on

subsequent dates it was recorded that the Award had

not been received. Ultimately, on 27th May, 1998,

the Trial Court recorded that the original

arbitration file had been received and the case was

adjourned till 27th July, 1998, for filing

rejoinder. The Appeal Court, therefore, held that

legally and technically both the parties came to

know about the filing of the Award in Court for the

first time on 27th May, 1998, although, the Award

had been received through the post in the Court on

18th February, 1998. Having regard to the above, 6

27th May, 1998, was held to be the date when the

parties had notice of filing of the Award. It was

also observed that under Article 119 of the

Limitation Act, 1963, a party to an Arbitration

Award could file objection, with a prayer to set

aside or modify the Award, within 30 days from the

date of notice of filing of the Award in Court.

The Appeal Court also recorded the fact that in

this case without waiting for the filing of the

Award in Court, the Appellants herein filed their

objections to the Award on 3rd January, 1998, before

the Award had been received in the Court and the

parties had notice thereof. It was accordingly held

that it could not be said that the objections were

barred by limitation, but they were in fact pre-

mature and could not, therefore, be taken note of.

In fact, during the course of arguments, it was

also the case of the Respondent Company that the

objection filed on behalf of the Appellants could

not be held to be barred by limitation, but was 7

pre-mature and the Appellants were not competent to

file the said objection before the Award was

received in the Court.

7. Aggrieved by the order of the Appeal Court, the

Appellants filed a Civil Revision in the High

Court. However, the said Civil Revision was

dismissed by the High Court as per the order

impugned in this appeal.

8. Learned Additional Solicitor General, Ms.

Indira Jaising, submitted that both the Trial Court

and the High Court erred in holding that the

objection filed on behalf of the Appellants under

Sections 30 and 33 of the Arbitration Act, 1940,

could not be taken note of, having been filed even

before notice of filing of the Award had been

issued. Ms. Jaising contended that since the

objection was already on record, the same ought to

have been taken into consideration while

considering the respondent's application under 8 Section 14(2) of the above Act for making the Award

a Rule of Court, instead of holding the same to be

pre-mature and disregarding the same. Ms. Jaising

submitted that in order to do complete justice to

the parties, the Trial Court should not have relied

upon technicalities, which only served to defeat

the very purpose of Sections 30 and 33 of the above

Act. Ms. Jaising submitted that this was not a

case of negligence on the part of the Appellants,

but that the Appellants had acted promptly on

receiving a copy of the Award.

9. Ms. Jaising submitted that the consequence of

the order passed by the learned Trial Judge, as

endorsed by the Appeal Court and the High Court,

will have far reaching consequences since under the

Award the Appellants are to pay the awarded amount

to the Respondent together with interest at the

rate of 18% per annum from 31st December, 1991 upto 9

the date of decree or payment, whichever was

earlier.

10. Ms. Jaising submitted that since notice had not

been issued to the parties upon filing of the Award

in Court and Article 119 of the Limitation Act,

1963, provided for a period of 30 days from the

date of service of notice to file an application

for setting aside an Award, it could not be

contended that the objection was barred since

notice had not at all been issued to the parties

after filing of the Award. Ms. Jaising submitted

that the finding of the Trial Court as also that of

the High Court that the object of notice was merely

to make parties aware of the filing of the Award

and that the said object had been satisfied, since

on 27th May, 1998, the parties had knowledge of the

filing of the Award in Court, was contrary to the

aforesaid provisions of the Limitation Act and was

liable to be set aside. Ms. Jaising submitted 10

that the notice contemplated under Article 119 of

the Limitation Act was not meant to be oral,

particularly when Section 14(2) of the Arbitration

Act, 1940, made it absolutely clear that upon the

Arbitration Award being filed in Court, the Court

is required to give notice to the parties of the

filing of the Award. Ms. Jaising submitted that

the language of Section 14(2) was mandatory and

cast a duty upon the Court to give notice to the

parties regarding the filing of the Award so that

objection, if any, thereto could be taken as

provided under the Act. Ms. Jaising submitted that

not having done so, the High Court could not have

held that the objection filed under Section 30 and

33 of the Arbitration Act, 1940, was barred by

limitation.

11. Appearing on behalf of the respondent, Mr.

Mahabir Singh, learned Senior Advocate, submitted

that service of notice is only to inform the 11

parties regarding filing of the Award in Court and

it was not mandatory that the same would have to be

in writing. In the absence of any prescribed mode

of service of notice, even oral notice would be

sufficient. In support of his submission, Mr.

Singh referred to the judgment of this Court in

East India Hotels Ltd. vs. Agra Development

Authority [(2001) 4 SCC 175], wherein it was held

that service of notice was an essential requirement

under Section 14(2) of the aforesaid Act and that

mere recording of the presence of the parties in

Court would not amount to service of notice. This

Court, in fact, observed that when the Trial Court

had recorded that the Award had been filed by the

Umpire and directed that the counsel for parties be

informed and counsel for both the parties had in

due course taken note of the said order by

endorsing the proceeding sheet, in such case the

provisions of Section 14(2) would have been held to

be duly complied with. It was also held that 12

notice need not be issued in writing, but could

also be oral, but that the fact of filing of the

Award by the Umpire had to be informed to the

learned counsel for the parties and was to be noted

by them. In such a situation, it was held that the

essential requirement of Sub-section (2) of Section

14 had been complied with, inasmuch as, intimation

of filing of the Award had been given to the

parties.

12. Mr. Mahabir Singh then referred to the decision

of this Court in Nilkantha Shidramappa Ningashetti

vs. Kashinath Somanna Ningashetti and others

[(1962) 2 SCR 551], wherein the question of notice

under Section 14(2) of the 1940 Act fell for

consideration together with Article 158 of the

Indian Limitation Act, 1908, relating to filing of

objections against the Award of the Arbitrator.

While dealing with the said question, a Bench of

four Judges of this Court held that communication 13

by the Court to the parties or through counsel of

the information that an Award had been filed was

sufficient compliance with the requirements of Sub-

Section (2) of Section 14 of the 1940 Act with

respect to the giving of notice to the parties

concerned about the filing of the Award. This

Court went on to say that notice did not

necessarily contemplate communication in writing.

The expression "give notice" in Sub-Section (2) of

Section 14 of the 1940 Act simply means giving

intimation of the filing of the Award. Such

intimation need not be given in writing and could

be communicated orally and that the same would

amount to service of notice when no particular mode

of service was prescribed.

13. Mr. Mahabir Singh also referred to the decision

of this Court in Secretary to Government of

Karnataka & Anr. vs. V. Harishbabu [(1996) 5 SCC

400], wherein also it was emphasized that in the 14

absence of any formal mode of service, notice need

not be in writing and may also be given orally.

What was essential was that notice or intimation or

a communication of filing of the Award would have

to be issued by the Court to the parties and served

upon them. It was also held that the period of

limitation for filing objections seeking the

setting aside of an arbitration Award commenced

from the date of service of notice issued by the

Court upon the parties regarding the fling of the

Award under Section 14(2) of the Act. The issuance

of such notice by the Court is a mandatory

requirement and limitation would begin only after

notice of the filing of the Award is given by the

Court.

14. Mr. Mahabir Singh, learned counsel, referred to

a decision of the Bombay High Court in Ratanji

Virpal & Co. vs. Dhirajlal Manilal [AIR 1942 Bom.

101], where a similar question had fallen for 15

consideration of the learned Judge. While

considering the provisions of Sections 14 and 31 of

the Arbitration Act, 1940, the Court held that till

an Award was filed in Court, no application could

be filed for setting aside the same. While holding

as above, the High Court took into consideration

the amendment in Schedule I of the Limitation Act,

1908, where Article 158 was substituted with a new

Article which provided that under the 1940 Act, to

set aside an Award or to get an Award remitted for

reconsideration, the period of limitation is 30

days from the date of service of notice of filing

of the Award. The Bombay High Court held that in

amending the Limitation Act, the legislature

contemplated that an application for setting aside

the Award could only be made after the date of

service of notice of filing of the Award and,

therefore, the limitation of 30 days is fixed after

that particular date. The Court ultimately held

that it was not competent for a party to the 16

arbitration Award to file a petition for setting

aside the Award till the Award had been filed. Mr.

Singh submitted that having regard to the views

expressed in the aforesaid judgment and having

particular regard to the provisions of Article 119

of the Limitation Act, 1963, where limitation for

making an application under the 1940 Act for

setting aside an Award has been fixed as 30 days

from the date of service of notice of the filing of

the Award, the question of filing an objection

under Sections 30 and 33 of the said Act prior to

the filing of the Award, did not arise. Mr. Singh

submitted that the appeal was without merit and was

liable to be dismissed.

15. We have carefully considered the submissions

made on behalf of the Appellants and though they

appear to be attractive, we are unable to accept

the same.

17

16. In view of Section 19 of the Limitation Act,

1963, the period of limitation for filing an

application commences only after the date of

service of the notice of the making of the Award.

The raison d'etre for filing objection under

Sections 30 and 33 of the Arbitration Act, 1940, is

the Award which has to be filed in Court either by

the Arbitrator or at the instance of any of the

parties requiring the Arbitrator to do so. Even

the Court may direct the Arbitrator to file his

Award on the application made by any of the parties

thereto. Filing an objection against something

which did not exist on the date when the objection

was filed is unacceptable and must be rejected. All

the decisions cited by Mr. Mahabir Singh take a

similar view. The objections filed under Sections

30 and 33 of the Arbitration Act, 1940, by the

Appellants herein, therefore, have been rightly

held to be pre-mature and could not be treated to

be an objection filed after the filing of the 18

Award. While the original Award was filed in Court

on 27th May, 1998, the objections filed under

Sections 30 and 33 of the Arbitration Act, 1940,

for setting aside the Award was filed on 3rd

January, 1998. There was, therefore, no occasion

for such an objection to be filed in terms of

Article 119 of the Limitation Act, 1963.

17. The objection filed by the Appellant under

Sections 30 and 33 of the Arbitration Act, 1940,

for setting aside the Award on 3rd January, 1998,

was obviously on account of the fact that the

Respondent had filed a petition in the Civil Court

on 27th February, 1996, for making the Award a Rule

of Court. At the time when the objection was

filed, it was noted on 18th February, 1998, that the

Award had not been received in Court and notice was

issued to the Arbitrator to file the original Award

in pursuance whereof the original Award was filed

in Court on 27th May, 1998.

19

18. It is unfortunate that although the Appellants

filed their objection under Sections 30 and 33 of

the Arbitration Act, 1940, the same was done

prematurely even before the filing of the Award and

such objection could not be treated as a valid

objection under Sections 30 and 33 of the Act in

view of the provisions of Article 119 of the

Limitation Act, 1963.

19. We, therefore, have no option, but to dismiss

the appeal. The appeal is, accordingly, dismissed,

but without any order as to costs.

_____________J.

(ALTAMAS KABIR)

_____________J.

(CYRIAC JOSEPH) New Delhi Dated:10.03.2010