Delay in receipt of signed arbitral award not grounds for defense in lapse of limitation period: Delhi High Court
An inordinate delay in the receipt of the signed copy of arbitral award by one of the parties cannot be held as a defense in the event of a lapse of limitation period for challenging the arbitral award. A bench constituting Manmohan J. and Menon J. delivered the judgment in Hindustan Petroleum Corporation Ltd v Delhi Transport Corporation [CM APPLs. 9555-58/2021] which dealt with the question of lapse of the limitation period and commercial unviability of the contract.
The appellant and respondent companies had entered into an agreement for the supply of lubricants following the appellant’s tender bid acceptance on October 23, 2007. Due to an increase in the price of oils internationally, the appellant requested for higher purchase to which the respondent did not agree following which the appellant did not continue the order. The parties again entered into an agreement following a tender bid inquiry dated July 29, 2008. The respondent, on May 13 2010, informed the appellant through a legal notice about the damages incurred under the first tender; to which both consented to refer the dispute to arbitration. The award was passed in the favour of the respondent on 28th November 2019, who filed a petition for the execution of arbitral award on 14th August, 2020; following which the appellant challenged the arbitral award.
The core issue around which the case pivots is limitation period as mentioned under S.34(3) of the Arbitration & Conciliation Act, 1996 which states that any challenge to an arbitral award shall be made within three months of the receipt of the award. In Union of India vs. Techno Trichy Engineers and Contractors [(2005) 4 SCC 239], the Supreme Court emphasized on the valid receipt of the award by the party and noted that Section 31(5) of the said Act requires a signed copy of the award to be delivered to each party. Adding further clarifications in the case of State of Himachal Pradesh vs. Himachal Techno Engineers [(2010) 12 SCC 210], the Court held that deliverance of the award in the office of a party on a non-working day, the date of such physical delivery is not the date of “receipt” of the award by that party.
In the present case, the appellant made an inordinate delay in the receipt of the award itself which the Court highlighted as being contrary to the swift process of the arbitration itself. The Court observed that, “Further, even though the Appellant was informed by the learned Arbitrator that a signed copy of the award had been sent to Appellant’s office, the Appellant had sent an employee to the office of the learned Arbitrator on 6th June, 2020 i.e. much after the limitation for filing the Award had expired on 2nd March, 2020. This Court is of the view that the delay of more than two and a half months in asking for a signed copy of the award and thereafter sending an office boy to collect a copy of the signed award after four months is inexcusable as the essence of arbitration is expeditious disposal of the dispute.”
The Court further reiterated the distinction of performance by the parties in the event of frustration of contracts and commercial unviability whence it stated that, “In the present case, the contract was not frustrated but it definitely ceased to be a commercially viable proposition for the Appellant after the increase of international oil prices. However, commercial unviability of a contract is not a ground to evade performance of a contract. Consequently, neither the impugned award nor the impugned order of the learned Single Judge calls for any interference.”
Accordingly the Court dismissed the appeal based on prior reasoning.