Service Of Arbitral Award Through Spouse At Same Address Triggers Limitation: Bombay High Court

The Bombay High Court on 28 July held that delivery of a signed copy of an arbitral award to one party on behalf of another party residing at the same address constitutes valid delivery under Section 31(5) of the Arbitration and Conciliation Act, 1996, and triggers the limitation period for challenging the award.

Justice Sharmila U. Deshmukh held that K. Samad had received the signed copy of the arbitral award passed in favour of Reliance Capital Limited on behalf of his wife Mekarunisa Samad S. at their shared residential address in October 2013, and dismissed their challenge filed nearly nine years later as barred by limitation. She observed:

“The Applicants were therefore in receipt of the arbitration Award and it would do violence to the provisions of Section 31(5) read with Section 3 of Arbitration Act, if it is held that though Applicant No. 1 had received the Award on behalf of Applicant No. 2, as his own acknowledgment card is signed by some one else, there is non compliance of Section 31(5) of Arbitration Act.”

The dispute arose from a loan transaction between K. Samad, Mekarunisa Samad S. and Reliance Capital Limited. The lender invoked arbitration, which resulted in an ex parte arbitral award dated 10 October 2013 in its favour. In 2015, the couple filed a civil suit before the Chennai City Civil Court, claiming that they had repaid the loan and that the account showed a nil balance.

Reliance Capital then filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (which allows a court to refer parties to arbitration where an arbitration agreement exists), seeking reference of the dispute to arbitration. The application was allowed.

The couple challenged the order before the Madras High Court, where they claimed that they first became aware of the arbitral award on 11 January 2022 and received a copy on 26 January 2022. Subsequently, they filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (which provides for setting aside an arbitral award) seeking to challenge the award. After the petition was returned on the ground that Mumbai was the seat of arbitration, they re-filed it before the Bombay High Court on 22 September 2022.

They contended that they had never received notices of the arbitration proceedings or the arbitral award. They argued that the signatures on the postal acknowledgments did not belong to them. Reliance Capital, however, relied on postal records showing dispatch of the statement of claim, hearing notices and the arbitral award to the couple's admitted address. It submitted that K. Samad had repeatedly acknowledged receipt on behalf of his wife.

The Court found that the applicants had not approached the Court with clean hands as they had suppressed receipt of the statement of claim and hearing notices while claiming complete ignorance of the arbitration proceedings. It further held that the applicants could not blame Reliance Capital for not disclosing the arbitral award in earlier proceedings when they themselves had withheld material facts.

It held that the applicants could not merely dispute the signature on the acknowledgment card without explaining how it came to be signed, particularly when K. Samad had accepted delivery on behalf of his wife at the same address. The Bench observed:

“It is for the Applicants who are residing at the said address to explain as to how the acknowledgment card came to be signed and whose signature appears on the said acknowledgment card, particularly when Applicant No. 1 has signed on the acknowledgment card of Applicant No. 2 at the same address.”

Further, the Court cautioned that accepting the applicants' contention would allow parties to avoid limitation by denying or changing their signatures after an arbitral award had been delivered to the correct address. It held:

“If such a contention is accepted, it is possible for the party to the proceedings to distort its own signature or sign differently in order to claim that the arbitral Award was never served upon the Applicants though dispatched at the correct address and delay the process of execution of the arbitral Award.”

Lastly, the Bench held that the limitation period began in October 2013 when the arbitral award was delivered, making the Section 34 challenge hopelessly barred by limitation.

Accordingly, the High Court dismissed the application seeking condonation of delay.

For the Applicants: Advocates Mr. Malhar Zatakia, with Mr. Shantanu Shetty, instructed by Sangram Chinnappa.

For the Respondents: Advocates Mr. Omar Khaiyam Shaikh, with Mr. Sahil Salvi, instructed by Vikas Salvi & Associates.