Legal Representatives Have Right To Challenge Arbitral Awards That Bind Them: Supreme Court

The Supreme Court on Monday held that if an arbitral award can be enforced against the legal representatives of a deceased party, they must also have the right to challenge it under the law, holding that such representatives “step into the shoes” of the deceased for the purposes of arbitral proceedings.

A bench of Justices Sanjay Karol and Vipul M. Pancholi observed that the Arbitration and Conciliation Act is a self-contained code and emphasises continuity of arbitral proceedings, particularly in situations where a party dies during the process.

“In our view, when the scheme of the Act is towards continuity of arbitral proceedings, in the event of death of a party, the natural corollary, evident from the definition clause itself, is that upon the death of a party, legal representatives' step into the shoes of a party for the purposes of the Act,” the court said.

The court further clarified that where an arbitral award is enforceable against legal representatives, the right to challenge such an award must also “naturally flow” to them.

“Moreover, in the considered view of this Court, when an award has been made enforceable against the legal representatives of a deceased party under the Act, the right to challenge such an award, which is available under the Act to the parties, also has to naturally flow to the said legal representatives,” the bench added.

The ruling came in a dispute arising from a 2007 agreement for sale of a subject property between Appu John and S. Mukanchand Bothra. An arbitral award dated February 21, 2011 had directed execution of a sale deed in favour of Bothra.

V.K. John, claiming to be a legal heir of Appu John, challenged the award through a civil revision petition. The Madras High Court dismissed the plea on February 3, 2023, holding that the Arbitration Act provides a specific statutory remedy and that a challenge under supervisory jurisdiction could not be entertained.

Upholding this view, the Supreme Court said denying legal representatives the right to challenge an award under Section 34 would leave them remediless despite being bound by the award, defeating the object of the law as a complete dispute resolution framework.

“Taking into view the above observations, denying a legal representative the right to challenge an award under Section 34, would defeat the very object of the Arbitration Act, and its purpose as a self-contained complete Code of dispute resolution. Furthermore, as discussed above, such an interpretation is also in furtherance of continuity of arbitral proceedings as envisioned under the Arbitration Act. Moreover, in our view, legal representatives of a deceased party cannot be made remediless under the statute on one hand, and on the other hand being made liable to fulfill the award. " the court said.

Accordingly, the court upheld the Madras High Court's order and dismissed the appeal. It, however, granted liberty to the appellant to avail remedies under the Arbitration Act, clarifying that the limitation period for filing such a challenge would run from the date of the present judgment.

Click Here To Read/Download Madras HC Judgment