Author Details – Aditi Goel,4th Year Student at Symbiosis Law School NOIDA.
Citation: OMP (Comm) No. 75/19
Bench: Sanjiv Jain
Original Copy: N/A
Issue in Question:
- Whether the principles of natural justice denied to the petitioner by the respondent and the arbitrator?
Background of the Case:
- The petitioner was teaching in wards of rural and remote areas of a village, which decided to have a smart class program in school. It entered into an agreement with the respondents.
- The respondents were obliged to supply the material, install the software and do other necessary actions as mentioned in the clause of the agreement. School issued cheques for the costs.
- The petitioner alleged that the respondent did not provide proper services and asked to take their equipment away. Petitioner also alleges that he did not receive any notice from the respondent, and filed the arbitration case after four years.
- The respondents had not provided proper training and the material remained unused.
- It is said that because the contents and hardware remained inoperable, it left a poor impression on the parents of the kids enrolled in the school. Respondents issued a legal notice seeking the money, which the petitioner did not receive.
- Finally, it is also alleged that the respondents filed false claims for a sum of Rs. 10,88,698.63 with an interest rate of 18% from February 2014. According to the petitioner, he was completely unaware of the arbitral processes and the ultimate award. It learned of the award after receiving notification from the Executing Court.
- Both respondents were deemed bankrupt, and the NCLT appointed the IRP to represent them.
- The counsel of the petitioner challenged the award on the grounds that:
- The contested award is unlawful, perverse, and in violation of the law.
- The arbitrator failed to deliver services in accordance with the agreement.
- The respondents claimed a lower sum in the legal notice they issued, but the claim petition they filed was for a greater amount.
- Section 34 (3) of the Arbitration & Conciliation Act leaves little question that the limitation period is three months. and a delay in filing may be tolerated for a period of not more than 30 days. The court may grant a stay of proceedings for further 30 days if the party can demonstrate that there was “sufficient reason” for the delay. Delays in first filing that exceed 30 days cannot be tolerated, even if just for one day.
- It was decided in the case of Union of India v Tecco Trichy Engineers that the delivering of an arbitral judgement under Section 31(5) of the Act is not merely a formality, it is a matter of fact. To be effective, the delivery of the arbitral award to the party must be “received” by the party.
- In the case of Benarsi Krishna Committee v Karmyogi Shelters Pvt Ltd, it was determined that the three-month limitation period begins on the day on which the party got the award, not the date on which its counsel or agent received it. If a copy of the signed award is not provided to the party, this does not constitute compliance with Section 31(5) of the Act. In the present case, there is no proof of delivery of the signed copy.
- The court was of the opinion that the limitation period specified in Section 34(3) of the Act would begin on the day the petitioner received the certified copy of the award, which was in March 2019.
- The court said that there was an arbitration clause contained in the agreement in case of a dispute. In the case, the respondents unilaterally appointed the arbitrator without taking the consent of the petitioner, nor did the respondent send a letter to the petitioner regarding the appointment of the arbitrator. Such individuals shall make the disclosure in the form provided in the Sixth Schedule. The appointment of an arbitrator may be contested by the parties only if any of the conditions referred to in Section 12(3) of the Act apply, subject to Section 13(4) of the Act, and the parties have agreed to such proceedings.
- Regarding the notifications, while the petitioner has disputed receiving the notices issued by the arbitrators, the dated mail receipts demonstrate that the notices were validly served on the petitioner.
- It cannot be claimed that the petitioner was not informed of the arbitral proceedings or given an opportunity to submit their case. Petitioner incorrectly claimed that the petition was filed four years after the legal notification.
- The court decided on allowing the petition because it was in violation of natural justice of the petitioner. This case dealt with technicalities of the dates and relied very hardly on the evidence provided.
- One thing to note in this judgement is that both the parties were declared bankrupt and had to be assigned with counsel by the court. The question arises here is that, how would these parties bear the costs? Had the respondent acted diligently in informing the petitioner of the procedure, costs or even the appointment of the arbitrator, they would not be in a position where the costs were to be borne without any finances in hand.
- Digitising the school is an expensive task, especially given that the school in this case was a school in a village. Knowing the budgetary constraints, the school could also use some due diligence in making sure the work is done.
- There were several areas in this case where the legal proceedings could have been avoided. The court would have not spent this time in solving the case and both the parties would have their work as per their requirements.