This case comment is a part of our Annual Arbitration Review 2017.
Judgment Name: Anilkumar Jinabhai Patel (D) v. Pravinchandra Jinabhai Patel
Citation: (2018) 15 SCC 178
Court: Supreme Court of India
Coram: R.K. Aggarwal, R. Banumathi, JJ.
Date: 29th March 2018
Keywords: Arbitral Award, Memorandum of Understanding, Limitation Period.
A business of chemicals, fertilizers and real estate was run by the Petitioner (Anilkumar Jinabhai Patel) and Respondent (Pravinchandra Jinabhai Patel), brothers situated in Gujarat. In the course of their business, they set up several companies and partnership concerns and acquired numerous immovable and movable properties.
Both the parties and their family members decided to divide all the family assets to avoid any future litigation or misunderstandings. The Petitioner and Respondent jointly appointed their sister, Latikaben and brother-in-law, Bhikhalal Nathalal Patel as the arbitrators for the division of the family assets. The appointment of the arbitrators (Latikaben and Bhikhalal Nathalal Patel) was made through a Memorandum of Understanding which the Petitioner and the Respondent jointly signed. An Interim Memorandum of Understanding was signed by the parties, which was done in the absence of the appointed arbitrators in the matters relating to bank accounts, withdrawal power, NPK allocations, etc.
The Arbitrators subsequently passed an award, while mentioning the Interim Memorandum of Understanding, whereby some properties were allotted to the Petitioner, and the Respondent and some properties were left undivided, with equal rights of both the Parties and their respective family members. Subsequently, another award was passed, which finalized the issues between the parties.
Subsequently, the Petitioners challenged the afore-mentioned arbitral award under Section 34 of the Arbitration and Conciliation Act on the ground that they did not receive the copy of the award in time and that their signature on the copy of the award was forged. The Arbitration Petition of the appellants was allowed by the District Judge.
The Respondent challenged this judgment by which the District Judge had allowed the Petitioners to challenge the arbitral award. The Respondent's challenge was accepted by the High Court of Judicature at Bombay, which set aside the District Judge's judgment. The High Court held that the challenge to the arbitral award was time-barred under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996. This ruling has subsequently been challenged before the Supreme Court.
Whether the High Court was right in holding that the application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award was barred by limitation?
A perusal of the relevant sections is imperative to understand the ruling given by the Court. The Court observed that Section 34(3) provides that the court shall not entertain an application for setting aside an award if it is made after three months have elapsed from the date on which the applicant had received the arbitral award. The Proviso to Section 34 further provides that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the prescribed time, it may entertain the application within a further period of thirty days "but not thereafter."
The Court relied on the case of Union of India v. Tecco Trichy Engineers, which had held in relation to the issue of limitation for filing application under Section 34 of the Act for setting aside the arbitral award. It had held that the period of limitation would commence only after a valid delivery of an arbitral award takes place under Section 31(5) of the Act.
The award that was passed had been signed by both the arbitrators as well as by the Petitioner and the Respondent. Both of them agreed to implement the award with their free will and pleasure, as seen from the excerpt: "As per this Arbitration "Award", both the groups and their family members have to honestly, wholeheartedly and faithfully act in accordance with and implement the transaction of the property, the IMOU which is now considered as MOU and the accounting chart in respect of the companies and the firms. The aforesaid Arbitration Award I agreed to and approved of by and our descendant guardian and heirs. We undertake to implement the same with free-will and pleasure."
After signing the award conveying that the copy of the award has been received, Pravinchandra Patel and Anilkumar Patel had stated: "….For ourselves and on behalf of our family members." It is pertinent to note that the award also referred to the Interim Memorandum of Understanding by which the members of the respective families authorized Pravinchandra Patel and Anilkumar Patel to act on behalf of their family members.
The court held that the limitation period prescribed under section 34(3) of the Act is to be computed from the point of time when the party concerned received the copy of the arbitral award. Receiving of the copy of the award by Anilkumar Patel on behalf of himself and Respondent Nos. 2 to 6, under an acknowledgment, complies with Section 31(5) of the Act and Section 34(3). Additionally, the application filed under Section 34 of the Act by Anilkumar Patel and Appellant Nos. 1(a) to 1(d) and Respondent No.10 was barred by limitation.