"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Wednesday, October 10, 2012

Service of Arbitral Award on Agent of a Party: Guest Post

[This guest post by  Ms. Roshni Rajiv (BSL LLB from ILS Law College, Pune (2011) and Company Secretaryship Professional Level) is a descriptive comment on a recent judgement of the Supreme Court of India.]
 
In Benarsi Krishna Committee and Ors. V.Karmayogi Shelters Pvt. Ltd  (date of judgement: 21.09.2012), the Supreme Court answered the question as to whether the service of an arbitral award on the Advocate(agent) of the party amounted to service on the party itself.

Brief Facts

When disputes arose out of a Collaboration agreement entered into by the parties, Karmayogi Shelters Pvt. Ltd (“ M/s Karmayogi”) approached the Delhi High court to appoint a Sole arbitrator u/s 11 of the Arbitration and Conciliation Act 1996(“ 1996 Act”). Accordingly, a Sole arbitrator was appointed by the High Court to resolve the disputes. After considering the materials brought on record, the Sole arbitrator passed an award holding that M/s Karmayogi had committed breach of the terms of Collaboration Agreement and directed Benarsi Committee to refund the sum of Rs 41 lakhs received from M/s Karmayogi. The award was passed on 12th May 2004 and a duly signed copy of the award was received by Advocate of M/s Karmayogi on 13th May 2004. However, M/s Karmayogi received the copy of the signed award only in December 2004 and in February 2005, they filed an application u/s 34 of 1996 Act to set aside the award.

Before the Delhi High Court:

The Single Judge of High Court referred to Section 34(3) of 1996 Act which provides that,
  • An application to set aside the award is to be made within 3 months from the date on which party making the application had received the arbitral award.
  • Proviso to this sub-section provides that Court may entertain the application within a further period of 30 days if it is satisfied that the applicant was prevented by sufficient cause from making the application within the said 3 months period; but not thereafter.
Hence, on the ground that petition was filed after a delay of more than 9 months from the date of receipt of the award, the Judge dismissed M/s Karmayogi’s application by holding that it was time barred.
 
Further, the Judge referring to  Section 31(5) of 1996 Act which provides that a signed copy of the arbitral award shall be delivered to each party, held that the expression” party” as used in the section would also include the agent of the party.

In the appeal, Division bench of Delhi High Court reversed the order of the Single Judge and held that for compliance with Section 31(5) of 1996 Act, a copy of the award had to be delivered to the party itself. The Bench also observed that Section 2(h) of 1996 Act clearly defines that a “party” means a party to the arbitration agreement. 

Special Leave Petition before Supreme Court

The Benarsi Committee filed SLP against the Division bench judgement. They mainly contended that the application to set aside the award was time barred and also that service of signed copy of the award on M/s Karmayogi’s advocate did amount to service of award on the party itself.As an additional ground, Benarsi Committee also contended that once Vakaltnama was executed in favour of the advocate, the said advocate was competent to do such acts as could be done by the party himself.

Whereas, M/s Karmayogi contended that power given to an Advocate by the Vakalatnama executed in his favour, comes to an end once the hearings are concluded and award has been passed. They further contended that reading Section 34(3) with Section 2(h), it can be construed that the “party” would mean a person directly involved in the arbitration proceeding and who is control of the proceedings before the arbitrator and the right person to decide whether an application was to be filed under section 34 .

The Supreme Court after carefully noting all the contentions, dismissed the SLP and held the following:
  1. When definition of a “party” in Section 2(h) is read with Section 31(5) and 34(3) of 1996 Act, it becomes explicitly clear that the expression” party” does not include agent of the party. It is one thing for an Advocate to act and plead on behalf of a party in a proceeding and it is another for an Advocate to act as the party himself.
  2. Proper compliance with Section31(5) would mean delivery of a signed copy of the Arbitral award on the party himself and not on his Advocate, which gives the party concerned the right to proceed u/s 34(3) of the 1996 Act.
  3. As the signed copy of the award was delivered to M/s Karmayogi only by December 2004 and they filed the petition to set aside in February 2005, the petition was not time barred.

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