Union of India Vs. Tecco Trichy Engineers & Contractors [2005] Insc
180 (16 March 2005)
Cji
R.C. Lahoti, G.P. Mathur & P.P. Naolekar
(@ SLP
(C) No. 20446 of 2002) P.P. Naolekar, J.
Leave
granted.
The
Southern Railway entered into a contract with respondent No. 1 for gauge
conversion from Madras Beach to Trichchirappalli Villupuram Section construction of a
bridge being agreement No. 136/Cn/95 dated 29.9.95. On behalf of the Southern
Railway, the contract was signed by the then Chief Project Manager, presently,
the Chief Engineer. Disputes arose touching the claims arising out of the
execution of works under the contract and in exercise of the power conferred by
the arbitration clause contained in the contract, the General Manager, Southern
Railway appointed an arbitrator as also a Presiding Arbitrator, while
respondent No. 1 nominated its arbitrator. The arbitral tribunal so constituted
gave its award on 10/11.03.2001 and signed the same. A copy of the award was
delivered in the office of the General Manager, Southern Railway on 12.3.2001.
The receipt seems to have been acknowledged by someone in the office, probably
the inwards clerk. The Chief Engineer received the copy of the award from the
tribunal on 19.3.2001.
On
10.7.2001, the Chief Engineer presented an application for setting aside the
arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996
(hereinafter 'the Act' for short). An application seeking condonation of delay
under sub- Section (3) of Section 34 was also filed. The delay sought to be
condoned was of 27 days only based on an assumption that the copy of the award
was received on 19.3.2001. The application for condonation of delay was
contested by respondent No. 1 on the ground that arbitral award was delivered
on 12.3.2001 and calculated from that date there was a delay of 34 days in
filing the application beyond the period of limitation prescribed by sub-
Section (3) of Section 34 of the Act while the proviso appended to the said
provision does not permit any delay beyond the period of 30 days being condoned
by the Court. The objection raised by respondent No. 1 has found favour with
the learned Single Judge of the High Court, who rejected the application
holding it as barred by limitation. The decision has been upheld by the
Division Bench of the High Court. Feeling aggrieved, the appeal has been filed
by special leave.
The
short question which arises for decision in this appeal is : which is the
effective date on which the appellant was delivered with and received the
arbitral award as that would be the date wherefrom the limitation within the
meaning of sub- Section (3) of Section 34 of the Act shall be calculated.
Sub-sections
(1) and (3) of Section 34 are relevant for our purpose and are reproduced
hereunder:
34.
Application for setting aside arbitral award.___
(1)
Recourse to a Court against an arbitral award may be made only by an
application for setting aside such award in accordance with sub-section (2) and
sub- section (3). xxx xxx xxx xxx
(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." Form and contents of arbitral award are provided by Section
31 of the Act. The arbitral award drawn up in the manner prescribed by Section
31 of the Act has to be signed and dated. According to sub-Section (5), "after
the arbitral award is made, a signed copy shall be delivered to each
party". The term "party" is defined by clause (h) of Section 2
of the Act as meaning 'a party to an arbitration agreement'. The definition is
to be read as given unless the context otherwise requires.
Under
sub-Section (3) of Section 34 the limitation of 3 months commences from the
date on which "the party making that application" had received the
arbitral award. We have to see what is the meaning to be assigned to the term
"party" and "party making the application" for setting
aside the award in the context of the State or a department of the Government,
more so a large organization like the Railways.
It is
well-known that the Ministry of Railways has very large area of operation
covering several Divisions, having different Divisional Heads and various
departments within the Division, having their own Departmental Heads. The
General Manager of Railways is at the very apex of the Division with a
responsibility of taking strategic decisions, laying down policies of the Organisation,
giving administrative instructions and issuing guidelines in the organisation.
He is from elite managerial cadre which runs entire Organisation of his
Division with different Departments, having different Departmental Heads. The
day to day management and operations of different departments rests with
different Departmental Heads.
Departmental
Head is directly connected and concerned with the departmental functioning and
is alone expected to know the progress of the matter pending before the
arbitral Tribunal concerning his department. He is the person who knows exactly
where the shoe pinches, whether the arbitral award is adverse to Department's
interest. Departmental Head would naturally be in a position to know whether
the Arbitrator has committed a mistake in understanding Departmental's line of
submissions and the grounds available to challenge the award. He is aware of
the factual aspect of the case and also the factual and legal aspects of the
questions involved in the arbitration proceedings. It is also a known fact and
Court can take judicial notice of it that there are several arbitration
proceedings pending consideration concerning affairs of the Railways before
arbitration. The General Manager, with executive work load of entire Division
cannot be expected to know all the niceties of the case pending before the
arbitral tribunal or for that matter the arbitral award itself and to take a
decision as to whether the arbitral award deserves challenge, without proper
assistance of the Departmental Head.
General
Manager, being the head of the Division, at best is only expected to take final
decision whether the arbitral award is to be challenged or not on the basis of
the advise and the material placed before him by the person concerned with
arbitration proceedings. Taking a final decision would be possible only if the
subject matter of challenge namely, the arbitral award is known to the
Departmental Head, who is directly concerned with the subject matter as well as
arbitral proceedings. In the large organizations like Railways,
"party" as referred to in Section 2(h) read with Section 34(3) of the
Act has to be construed to be a person directly connected with and involved in
the proceedings and who is in control of the proceedings before the Arbitrator.
The
delivery of an arbitral award under sub-Section (5) of Section 31 is not a
matter of mere formality. It is a matter of substance. It is only after the
stage under Section 31 has passed that the stage of termination of arbitral
proceedings within the meaning of Section 32 of the Act arises. The delivery of
arbitral award to the party, to be effective, has to be "received" by
the party. This delivery by the arbitral tribunal and receipt by the party of
the award sets in motion several periods of limitation such as an application
for correction and interpretation of an award within 30 days under Section
33(1), an application for making an additional award under Section 33(4) and an
application for setting aside an award under Section 34(3) and so on. As this
delivery of the copy of award has the effect of conferring certain rights on
the party as also bringing to an end the right to exercise those rights on
expiry of the prescribed period of limitation which would be calculated from
that date, the delivery of the copy of award by the tribunal and the receipt
thereof by each party constitutes an important stage in the arbitral
proceedings.
In the
context of a huge organization like Railways, the copy of the award has to be
received by the person who has knowledge of the proceedings and who would be
the best person to understand and appreciate the arbitral award and also to
take a decision in the matter of moving an application under sub- Section (1)
or (5) of Section 33 or under sub-Section (1) of Section 34.
In the
present case, the Chief Engineer had signed the agreement on behalf of Union of
India entered into with the respondent. In the arbitral proceedings the Chief
Engineer represented the Union of India and the notices, during the proceedings
of the Arbitration, were served on the Chief Engineer. Even the arbitral award
clearly mentions that the Union of India is represented by Deputy Chief
Engineer/Gauge Conversion, Chennai. The Chief Engineer is directly concerned with
the Arbitration, as the subject matter of Arbitration relates to the department
of the Chief Engineer and he has direct knowledge of the arbitral proceedings
and the question involved before the arbitrator. The General Manager of the
Railways has only referred the matter for arbitration as required under the
contract. He cannot be said to be aware of the question involved in the
arbitration nor the factual aspect in detail, on the basis of which the
arbitral tribunal had decided the issue before it unless they are all brought
to his notice by the officer dealing with that arbitration and who is in-charge
of those proceedings.
Therefore,
in our opinion, service of arbitral award on the General Manager by way of
receipt in his inwards office cannot be taken to be sufficient notice so as to
activate the Department to take appropriate steps in respect of and in regard
to the award passed by the arbitrators to constitute starting point of
limitation for the purposes of Section 34(3) of the Act. The service of notice
on the Chief Engineer on 19.3.2001 would be the starting point of limitation to
challenge the award in the Court.
We
cannot be oblivious of the fact of impersonal approach in the Government
departments and organizations like Railways.
In the
very nature of the working of Government departments a decision is not taken
unless the papers have reached the person concerned and then an approval, if
required, of the competent authority or official above has been obtained. All
this could not have taken place unless the Chief Engineer had received the copy
of the award when only the delivery of the award within the meaning of
sub-Section (5) of Section 31 shall be deemed to have taken place.
The
learned Single Judge of the High Court as also the Division Bench have erred in
holding the application under Section 34 filed on behalf of the appellant as
having been filed beyond a period of 3 months and 30 days within the meaning of
sub-Section (3) of Section 34. There was a delay of 27 days only and not of 34
days as held by the High Court. In the facts and circumstances of the case, the
delay in filing the application deserves to be condoned and the application
under sub-Section (1) of Section 34 of the Act filed on behalf of the appellant
deserves to be heard and decided on merits.
The
appeal is allowed. The application under Section 34(1) filed on behalf of the
appellant shall stand restored in the High Court, to be heard and decided in
accordance with law by the learned Single Judge. No order as to costs.
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