Judgement Name: M/s USS Alliance v. The State of Uttar Pradesh and Ors.
Citation: Petition for Special Leave to Appeal No. 23676/2022
Court: Supreme Court of India
Coram: Sanjiv Khanna & M.M. Sundresh, JJ.
Date: 6th January 2023
Keywords: Arbitration; Arbitral Award; Suo Motu Modification; Limitation Period; Section 33.
A Division Bench of the Supreme Court has, in a recent judgement clarified the position of law with regard to the commencement of the limitation period for lodging an appeal against an Arbitral Award passed by a Tribunal when a suo motu change has been made to the Award. The court held that the limitation period for the same commences from the date on which the modified Award is received by the Party.
In the present case, an arbitral Award was passed by the tribunal on 18th April 2018. Of its own volition, the Arbitral Tribunal had invoked its powers under Section 33 of the Arbitration & Conciliation Act, 1996 (“A&C Act”) to make suo motu changes to an Arbitral Award for the correction of a computation error, clerical errors, typographical errors, or errors of a similar nature. The modified Award was passed and received by the party on 5th May 2018, within the 30-day period permitted for correction of an Arbitral Award. An Application for the setting aside of the Award was consequently filed on 3rd August 2018. The filing of the Application was challenged before the Lucknow Bench of the Allahabad High Court contending that the period of limitation for filing of Application for appeal commenced from the date of the original Award and not the modified Award, and as such, 107 days had elapsed from the date of the original order, resulting in the appeal falling afoul of the 90-day limitation period. The Lucknow Bench of the Allahabad High Court rejected these contentions, holding that the limitation period would only commence from the date on which the modified Award was made and received by the party filing the appeal. The same was appealed before the Supreme Court.
Whether a suo motu change to the Award passed by the Arbitral Tribunal would result in the commencement of a fresh period of limitation?
The Division Bench of the Supreme Court agreed with the view of the Lucknow Bench of the Allahabad High Court, holding that the limitation period for appeal against an Award commenced from the date on which the suo motu modified Award was made and received by the Party filing the appeal. In doing so, the Supreme Court transposed the judgement passed by itself in a Special Leave Petition filed before it in the case of Ved Prakash Mithal and Sons v. Union of India,[i] in which it was held that the limitation period for filing an appeal against an Award began upon the rejection of an Application made by a party for correction of order. In that case, the Supreme Court overruled the judgement of the Bombay High Court in the case of Amit Suryakant Lunavat vs. Kotak Securities,[ii] where it was held that there could be no justification for the commencement of a fresh period of limitation upon the rejection of the Application under Section 33 of the A&C Act. Further, it held that the commencement of a fresh limitation period was contemplated only when a positive step is taken by an arbitrator in response to an Application. The same view was held to be bad in law by the Division Bench of the Supreme Court in Ved Prakash Mithal (cited above), which held that the mere disposal of an Application for correction or modification or grant of an additional Award initiates a fresh period of limitation, notwithstanding the fact of whether the same has resulted in a positive step or not. This ruling of the Supreme Court was transposed to the present case, and it was held that when an Arbitral Tribunal, suo motu, makes a change to the Award under Section 33(3), the limitation period commences from the date of receipt of the modified Award.
The author of this case update submits that it is not appropriate to transpose the ruling in the case of M/s Ved Prakash Mithal to the present case. Under Section 33(3) of the A&C Act, an arbitral tribunal may only exercise its suo motu powers when there is found to be a clerical, typographic or computational error, in the grant of an Award. Parties are provided a 90-day period within which they may file an appeal against an Award. The same has been granted to allow parties to carefully study, examine and understand the Award, and thereupon may file an appeal or Application against the same. The author believes, by holding that a fresh limitation period commences upon the modification of the order, that it may inadvertently result in the commencement of a fresh period of limitation for minor clerical corrections, that do not form the substantive part of the judgement. Section 33(1)(a) of the A&C Act empowers the Arbitral Tribunal to suo motu modify an Award passed by it for the rectification of any typographic or clerical errors. In the event of correction of a typographic or clerical error of the nature specified in the aforementioned section, the cause of action against which the right to appeal lies– the substantive part of the Impugned Award– would remain the same. Thus, the Court must reconsider its stance on the commencement of limitation periods in the event of suo motu changes under Section 33(3) of the A&C Act, to analyse whether such modification, has resulted in a substantive change to the Award and as such has given rise to a new cause of action.
The Division Bench of the Supreme Court has imported the rationale adopted in the case of Ved Prakash Mithal to the present case and held that the period of limitation commences from the date of receipt of the modified Award when a suo motu change has been made by the Tribunal in the exercise of its powers under Section 33(3) A&C Act.
[This case update has been authored by Ishan Mhapsekar, an editor at Mapping ADR.]