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SC PUTS TO REST CONTROVERSY BEHIND INTERPRETATION OF ‘DISPOSED OF’ UNDER SECTION34 (3) OF ARBITRATION AND CONCILIATION ACT

A prominent judgment pronounced by Justice Rohintan Fali Nariman and Justice InduMalhotra on the eight day of August, 2018 in the matter between M/s Ved Prakash Mithal and sonsvs Union of India¹ puts to rest the disputed interpretation of the expression ‘Disposed of’ in simple one line expression that “disposal” of the application can be either by allowing it or dismissing it. Consequently, the period of limitation for filing an application u/s 34 was held to be decided from date of decision of application u/s 33 of the Act, whether the same is allowed or dismissed.

Facts and Dispute -

The controversy rosefrom an Arbitral Award which was passed on 30th October 2015 and was received by the respondent on 7th November 2015. The respondent filed an application to correct the award on 16th November 2015 and a similar application on 22nd November 2015 under section 33 of the act. Both the applications were dismissed by the Arbitrator on 14th December 2015.

As a consequence, an application was filed by the respondent under Section 34 (3) of the Arbitration Act before the Additional District Judge on 11th March 2016, which was objected to be barred by limitation by the Claimant. The learned court held that the application was time barred as the arbitrator did not modify or correct the award u/s 33. It was held that in the event, the decision of application filed under section 33 of the Act do not modify or correct award, the period of limitation u/s 34 has to be counted from the date of original award. The said decision was rendered in view of the judgment of the Single Judge of the Bombay High Court in the case of AmitSuryakantLunavatvs. Kotak Securities, Mumbai². The Bombay High Court in said case, observes that in view of the scheme and purpose of Act, it is where the Arbitrator corrects or interprets and/or add or decide to add any additional claims and modified the award, the original award loses its originality and therefore, the limitation as stipulated in Section 34(3) can come to aid only in the situation the originality of the award is lost.

An appeal against the judgment of Additional District judge rejecting the application filed u/s 34 of the Act on the basis of limitation was preferred to the Delhi High Court. The Delhi Court reversed the order of the District Judge stating that as the Section 33 application had been disposed of only on 14.12.2015, the period mentioned in Section 34(3) would start running only from then, in which case, the Section 34 application could be said to be within time The controversy emanating from conflicting views of two High Courts was then referred to Supreme Court.

The Correct interpretation given by the Apex Court -

The contention of the appellant challenging the judgment of Delhi High Court was that the expression “disposed” mentioned in Section 34 (3)³ was to be read in consonance with Section 33⁴ of the Act. Therefore, the term ‘disposed of’ would only be interpreted as a situation where some positive step has taken place, i.e. the award has either been corrected or it does not include within its ambit an award which has been merely dismissed.
The Supreme Court gave a streamlined interpretation to the term ‘disposed’, and stated that the disposal of an application can be either by allowing it or dismissing it. It does not have anything to do with modification and/or correction. In view of plain and simple interpretation, the SLP was dismissed and the controversy was set to rest thereby overruling the decision of Bombay High Court in Kotak Securities case .⁶

Author’s Opinion

The referred controversy was nothing more than a result of overlooking the literal rule of statutory construction. To ensure that there are no unnecessary ambiguities, the juridical minds need to ensure that the oldest of the rules of construction be followed, wherever necessary, because judges are not to legislate. However, since the interpretation is largely influence by the thinking process of the adjudicator, we often experience conflicting views on simple propositions of law. Nonetheless, the judgment of the Apex Court in VedPrakashMithal case is progressive and enlightening. The view of the Apex Court supports the basic objective of imposing limitation, which is intended to only run against those who are neglectful of their rights, and who fail to use reasonable and proper diligence in the enforcement thereof. This reminds of famous words of Oliver Wendell Holmes, Jr. who asked, "What is the justification for depriving a man of his rights, a pure evil as far as it goes, in consequence of the lapse of time?" ⁶

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¹Petition(s) for Special Leave to Appeal (C) No(s). 20195/2017 (Arising out of impugned final judgment and order dated 10-07-2017 in FAO No. 286/2017 passed by the High Court Of Delhi At New Delhi)

²2010(6) Mh.L.J. 764

³34 Application for setting aside arbitral award. -
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

⁴33. Correction and interpretation of award; additional award.-
(1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties—
(a) a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award;
(b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award.
(2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award.
(3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award.
(4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award.
(5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request.
(6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5).
(7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.

⁵Supra.

⁶Oliver W. Holmes, Jr., The Path of the Law, 10 HARV. L. REv.457, 476 (1897).

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Authorship of Adv. Sonia Madan and Simran Syal