Dismissed

Harikishan Daga HUF v. Hrim Finance and Securities Pvt. Ltd.

Bombay HC14 Aug 2014NMS/57/2014

Case brief

AI extract

What is this about?

This judgment considers whether an arbitration petition filed 21 days after the special limitation period was barred. The court held that limitation runs from receipt of the award. It further dismissed the petition because the petitioner failed to show sufficient cause, given the Karta's capacity to delegate or the son's ability to file while maintaining other affairs.

What did the court decide?

Notice of Motion and Arbitration Petition (L.) No.2084 of 2013 dismissed; other petitions adjourned.

Harikishan Daga HUF Vs Hrim Finance and Securities Pvt. Ltd. — Arbitration | Bombay HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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NOTICE OF MOTION NO.57 OF 2014 IN

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ARBITRATION PETITION (L.) NO.2084 OF 2013

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M/s. Harikishan Daga HUF … Petitioner

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Vs.

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HRIM Finance & Securities P. Ltd.

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… Respondent

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ALONGWITH

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ARBITRATION PETITION NO.1389 OF 2013

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HRIM Finance & Securities P. Ltd.

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… Petitioner

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Vs.

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M/s. Gopikishan Daga HUF … Respondent

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ALONGWITH

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ARBITRATION PETITION NO.1406 OF 2013

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HRIM Finance & Securities P. Ltd. … Petitioner

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Vs.

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Mrs Sarojdevi Daga … Respondent

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ALONGWITH ARBITRATION PETITION NO.328 OF 2014

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HRIM Finance & Securities P. Ltd. … Petitioner

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V/s.

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Mr. Harikishan Daga … Respondent

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ALONGWITH ARBITRATION PETITION NO.334 OF 2014

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HRIM Finance & Securities P. Ltd. … Petitioner

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Vs.

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M/s. Harikishan Daga HUF … Respondent

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Mr. Harish Pandya, Adv. a/w. Mr. Rajendra Foofala, Adv. i/b. Sheela Mistry, Adv. for Petitioner.

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Ms. Anita Castelino, Adv. a/w. Mr. Vikas K. Singh, Adv. i/b. Lambay & Co. for respondents.

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CORAM : MRS. ROSHAN DALVI, J. DATE : 14th August, 2014.

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P.C. :

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This Notice of Motion is for condonation of 25 days delay in filing the arbitration petition. There is much dispute between the parties with regard to the relevant dates to compute the period of

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limitation as also with regard to the sufficient cause for the condonation of delay which is mandatorily required to be shown. Both these aspects must be considered separately.

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Chronology of Dates

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The award was passed on 26^th June, 2013 which is come to be challenged in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act).

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The award was received by the parties on 4th July, 2013.

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Both parties applied for rectification of the award on 8th July, 2013 and 22nd July, 2013.

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Further award came to be passed rejecting the applications of both the parties on 30th July, 2013.

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The further award merged into the earlier award. Consequently that challenge would be with regard to both the awards. However, in this case the rectification application not being granted, the earlier award itself will only be challenged.

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The award was received under the letter of the arbitrator dated 6^th August, 2013 and 8^th August, 2013.

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The petition has been signed and verified on 28^th November, 2013 and lodged on 29^th November, 2013.

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The petitioner would contend that the petition would fall within the proviso to Section 34 (3) of the Act. The respondent would contend that it does not.

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The petitioner has computed the period of 3 months and 30 days as required under Section 34 (3) from the date of the receipt of the further award on 8^th August, 2013. Counsel on behalf of the petitioner argued that under Section 12 (4) of the Limitation Act, 1963 the time required for obtaining the copy of the award would have to be excluded. The copy of the award was received on 8^th August, 2013 though the further award was passed on 30^th July, 2013 and hence time from 30^th July, 2013 and 8^th August, 2013 would have to be excluded. Further under Section 12(1) of the Limitation Act in computing period on limitation the day from which the period began to run is to be excluded. Hence counsel on behalf of the petitioner contended that 8 th August, 2013 would have to be excluded and limitation period would begin to run from 9^th August, 2013. The limitation period would be 3 months plus 30 days. The first three months would expire on 8^th November, 2013. The petitioner would be entitled to further 30 days under provision of 34(3) of the Act. The petitioner has filed petition on 21^st day after the three month period. Hence the petition would fall within the proviso to Section 34(3) of the Act.

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It is argued on behalf of the petitioner that the calculation of the period of three months and 30 days from the 8^th August, 2013 is erroneous. Counsel on behalf of respondent would contend that the period of three months and 30 days must be computed from 30^th July, 2013 which is day of the further award. She drew attention of the Court specially to the last part of Section 34(3) which runs thus :

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34 (3) An application for setting aside may not be made after three months have elapsed from the date on which the party

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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.

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She would contend that though for the initial arbitral award the date of computation would be from the receipt of the award, for the disposal of the request under Section 33, which is for correction and interpretation of the award or for additional award, the date of the disposal of the request is the material date. Indeed a plain reading of sub section would require an acceptance of this contention. The sub section (3) has to be read as whole since this sub section deals with the entire special limitation period under the Act. The initial period of limitation is from the date of the receipt of the arbitral award. This is one of the several requirements of the form and contents of arbitral award under section 31 (1) to (5) of the Act, the relevant part of which runs thus :

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31. Form and contents of arbitral award. –

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(1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal.

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(2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated.

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(3) The arbitral award shall state the reasons upon which it is based, unless –

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(a) the parties have agreed that no reasons are to be given, or

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(b) the award is an arbitral award on agreed terms under section 30.

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(4) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place.

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(5) After the arbitral award is made, a signed copy shall be delivered to each party.

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Section 31, therefore, requires five specific acts of the arbitrator to be complied in the award. This would be enumerated thus :

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1)Award to be hand written, 2) Award to be signed, 3) Award to give reasons, 4) Award to contain the date and place and 5) the Award to be delivered to each of the parties in the form of signed copy.

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The delivery of the award is the most essential part of its form and contents. It is only upon the delivery of the of the party knowledge of the award. It is only upon such knowledge that a party may decide to challenge the award or accept it. It is upon such knowledge that the party would know when to execute the award.

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It goes without saying that every order which is passed by any adjudicating authority is required to be served upon the party for it to be effectuated. Such is the provision for arbitration award in ascertaining the terms under Section 31(1) to (5). The interpretation of clause 34(3) would require this mandatory position to be borne in mind not for the initial award but also for any further award.

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The further award would be passed upon an application made under Section 33 of the Act for correction and interpretation of the award or for additional award. Once the application is made the parties would have to be heard and the application would have to culminate in a further award. Consequently under Section 33(7) it is specified that Section 31 shall apply. Section 33(7) runs thus :

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33(7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.

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Consequently for any further award by way of correction or interpretation or any additional award if any aspect was left out of the consideration of the arbitrator, the aforesaid provisions of the form and contents of the arbitration award would have to be complied. Such a further award would also, therefore, required it to be:

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(1) in writing ;

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(2) signed;

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(3) with reasons;

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(4) containing the date and place; and

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(5) delivered to each of the parties in the form of signed copy.

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Consequently the later part of Section 34(3) cannot be read without considering it alongside section 33(7) and Section 31 (1).

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A statute has to be read as whole.

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Maxwell on Interpretation of Statutes Twelfth Edition at page 47 sets out the basis of this jurisprudence from the earliest case of Lincon College, 1595 (3) Co. Rep. 58B thus :

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the good expositor of an Act of Parliament should “make construction on all the parts together, and not of one part only by itself.” Every clause of a statute is to “be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enactment of the whole statute.”

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The principles for regarding the Act as whole and reading words in context set out in Maxwell on Interpretation of Statutes run thus :

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i) individual words cannot be considered in isolation. Their meaning is to be determined by other words in the section by which are governed

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ii) The meaning of the section is controlled by other sections in the same Act.

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iii)The meaning of the words in statute is to be determined by the segment of the Act in general.

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In this case there are no other words in Section 34(3) which call for interpretation. In fact the last part of section shows that certain words though meant to have been incorporated are not expressly stated. Those are the words relating to the delivery / service of the award upon the parties so that the parties can obtain knowledge thereof. However, the other sections in the Act would offer a ready mode of interpreting the last part of section 34(3). These are section 33(7) and 31(1) to 31(5) with regard to the service of the awards. One of the intentions of the Act is the adjudication of dispute by the mode of arbitration. After disputes are adjudicated by an arbitrator appointed by the parties, specially when after hearing the parties the awards are reserved for being passed on a future date, the parties would not have knowledge of the fact of the passing of the awards and the contents of the awards until the award is served upon each of them. This would be true as much of the initial award as of additional award or modification made in the award by way of clarification therein. It is only when that is brought to the knowledge

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of the parties that the parties may take recourse of law either for challenging the award or for executing the award.

¶101

Consequently the interpretation of the last part of section 34(3) would require to see how the legislator has dealt with the similar aspect initially under Section 31(1) to (5) in terms of object of the act in informing the parties of the ultimate result of the arbitrator. The statement of objects and reasons (SOR) of the Act show inter-alia that the proposals for the amendment of the earlier Arbitration Act of 1940 was to make arbitration more responsive to contemporary requirements. The object of the bill set out in clause 4 of the SOR is inter-alia to make the procedure fair and efficient with reasoned awards which can be enforced as decree of the Court. All the orders and decrees of the Court are to be served upon the parties against whom they are sought to be enforced. The parties must know the reasons behind the order or decree that is passed against them. The procedure to be fair and efficient require service of the award after which the arbitrator becomes functus officio . Objections could not be taken if the awards are not ultimately delivered to the party who seeks to challenge the award. Consequently the legislator could not have contemplated that limitation would begin to run even before an award is served upon a party or delivered to that party since no award unknown to the party including its reasons would be enforceable as a decree of the Court.

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In the cases of Canad Sugar Refining Co. Ltd. V. R. (1898) A C 735 and Cf. Midland Bank Ltd. V. Conway, B C (1965) 1 W L R 1165 . It was held that the words were required to be read

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taking into account the purpose of the proviso in which they were.

¶107

In the case of Moyle V Jenkins (1881) 8 A B D. 116 , one part of the statute only showed the requirement of the notice to be given. It was argued that verbal notice was sufficient. The court saw another section which provided for notice to be “served” on the person in a particular manner or place. The Court held that the notice was meant to be a written notice.

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The requirement of the expression “the date on which the request was disposed off” in section 34(3) would, therefore, have to be construed as the date when the request was disposed of which was written, signed, with reasons, showing the date and place, delivered to the parties and received by parties which is as much as the initial award would be.

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This aspect has been considered by the Delhi High Court in the case of Vindhya Telelinks Ltd. Vs. Bharat Sanchar Nigam Ltd. & Anr. 2003(3) Arb L r 284 (Delhi) to which my attention has been drawn by counsel on behalf of the petitioner. The Delhi High Court has considered all the aforesaid provisions and held in paragraph 18 of the judgment that :

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… Disposal in the case of such a request, in terms of Section 33(7) has to be in the manner similar to that of an arbitral award. As such the disposal would require a certain formality about it. It will have to be in writing and to be signed by the members of the arbitral tribunal. It shall have to state the reasons on which it is based. It shall have to contain the date and place where that decision regarding disposal has been taken, and it shall be delivered to each of the parties in the

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form of a signed copy.

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Consequently the Court held that the execution of the award must await such period. An execution prior to the expiry of receipt of the communication issued by arbitrator with regard to the further award was held to be premature. The parameters for the consideration of the period of limitation for challenging award under Section 34 by one party and for accepting award by the other party would be the same.

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Consequently it is seen that this petition has been filed three months and 21 days after the receipt of the further award by the petitioner. The petition is, therefore, not barred by the special provision contained in section 34(3) of the Act.

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Consequently under the proviso the petitioner would have to show the sufficient cause for filing the petition within the further period of 30 days after the three month period expired. The proviso to Section 34(3) runs thus :

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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.

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The affidavit in support of the Notice of Motion sets out the sufficient cause sought to be made out by the petitioner. It is his case that the Karta of the HUF, who is shown as the petitioner, underwent bypass surgery. Nine blockages were to be removed. He was discharged on 29^th April, 2013. The petitioner was admitted to the

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hospital in Belgaum, Karnataka on 16^th April, 2013 and was discharged on 29^th April, 2013. The papers of hospitalisation show his medical condition. The discharge summary of the hospital does not show any period of rest required when the petitioner was discharged from the hospital. The petitioner has relied upon a later medical certificate dated 31^st May, 2013 showing that he was advised complete rest for two months “henceforth”. This two months period would expire on or about 30^th July, 2013, the date of the further award.

¶124

After the service of the further award when the petitioner was required to file this petition, the petitioner has relied upon a further medical certificate dated 30^th August, 2013. There is no medical certificate between the period from 30^th July, 2013 and 30^th August, 2013 during which the limitation period had began to run – from 9^th August, 2013. The petitioner would require rest for the part of the aforesaid limitation period of 3 months and 30 days. The period of rest would expire on or about 29^th October, 2013. The petitioner would still have about two weeks from the three month period under Section 34(3) of the Act to file this petition before claiming the extended period of limitation under the proviso.

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The respondent has contended that the plea of health and advise of rest is frivolous. The respondent has sought to show that the petitioner has been more than active in the same period during which he was stated to be having “complete rest” or “rest” as per the aforesaid two medical certificates respectively.

¶126

The respondent has shown that the petitioner himself has filed a petition before Company Law Board (CLB) under Section 398

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of the Companies Act, 1956 alleging mismanagement of the respondent company against him. This was about a fortnight after the second medical certificate dated 30^th August, 2013. An application for interim relief made by the petitioner in the CLB petition has been refused. The petition was filed not only by the minority shareholders being his family members, the shareholders in the respondent company including his wife and 2 sons.

¶131

The respondent has also shown that the petitioner filed arbitration proceedings under Sections 9 and 11 affirmed on 17^th October, 2013 and filed on 29^th October, 2013. This was in respect of the dispute which were referred to arbitration in a partnership firm between the parties.

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Counsel on behalf of the petitioner states that the petitions under Section 9 and 11 have been merely filed and no interim relief has been sought or obtained.

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There has been another arbitration before National Stock Exchange (NSE) between the parties herein. Form No.1 of arbitration application was filed by the son of the petitioner against the respondent company with regard to another arbitration on 25^th July, 2013. Interestingly in that arbitration the son of the petitioner executed a POA in favour of the petitioner on 29^th October, 2013 within the period of limitation concerned in this petition. The petitioner is stated to have appeared once before NSE on 30^th October, 2013.

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The petitioner would claim that those were the dates of

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Diwali when he came from his permanent residence in Ichalkaranji, Kolhapur, to Mumbai to meet the family members. It was at that time he attended the arbitration proceeding before the NSE.

¶139

This travel would be almost at the fag end of the two month period of rest medically advised to the petitioner under the second medical certificate dated 30^th August, 2013.

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The respondent pointed out that the petitioner has attended before Economic Offences Wing (EOW), General Branch Crime Branch, CID in criminal complaint by the respondent company on 12^th April, 2010 which was before the petitioner was hospitalised.

¶141

The petitioner has been called by the EOW to attend its office to produce certain documents being certain ledger accounts, balance sheet, bank account details, Income Tax returns etc. The petitioner has shown several notices received by the petitioner as also members of the family who are members of the HUF on 27^th June, 2013, 5^th July, 2013 and 6^th July, 2013. All these parties have been directed to produce the documents to attend office within two days of the receipt of the letter. They have been allowed to contact the investigating officer on his mobile number.

¶142

The petitioner would contend that the petitioner was constrained to attend before EOW because of the complaint of the respondent company.

¶143

These letters have been received by the petitioner prior to further award being passed. The letter addressed to the Karta of the

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petitioner dated 5^th July, 2013 is a day after the receipt of the initial award which was passed on 26^th June, 2013. It is stated to have been left at the Bombay address of the petitioner. The petitioner responded to the said letter as the Karta on 16^th July, 2013, about a fortnight after the receipt of the initial award and between the period that the respondent and the petitioner applied for rectification thereof. This was during the two month period of “complete rest” that the Karta of the petitioner was advised under the first medical certificate dated 31^st May, 2013. The reply to the EOW has been signed by the son of the petitioner who is a coparcener of the petitioner on behalf of the HUF. Certain bank records have been produced before the EOW, copies of which have been annexed to the affidavit in rejoinder of the petitioner.

¶148

It is hence the case of the respondent that the petitioner was not fully medically indisposed and attended to various business matters, but did not file this arbitration proceeding within the three month limitation period. The respondent would, therefore, contend that sufficient cause for not filing the petition cannot be stated to have been shown. Of course, if the petitioner can or would undertake similar acts viz. to file other litigations of various types, the petitioner must file arbitration proceeding also within time. If the arbitration proceeding is not filed, the petitioner must show the priority required for filing the other legal proceedings. The refusal of the interim relief in the CLB and the fact that the no interim relief was applied for under the petition filed under Section 9 of the Act with regard to another family partnership firm (which is a petition for interim relief itself) as also the fact that even in an application made by the son of

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the petitioner in another arbitration before NSE, the petitioner as the Karta was to give the POA and attended proceedings would show that those matters were not of higher priority than the filing of the arbitration proceeding which allowed the special limitation period of only three months plus 30 days.

¶153

The petitioner would contend that this petition is special petition which required only the expertise of the petitioner or the Karta of the HUF with regard to shares and securities and the F & O segment of the NSE. It is the case of the petitioner that certain mediation proceedings related to arbitration proceedings were attended by the petitioner before the family friend one Mr. Agarwal who was mediator. The affidavit in support of the Notice of Motion does not show the special technical expertise required of only the Karta of the HUF as the other coparceners, more specially the son of the Karta, used to attend to various business matters.

¶154

My attention has been drawn to the specific averments in paragraph 15 to 19 of the petition to show the specific position of the Karta as also his son. The Karta is stated to be 66 years of age who came to Mumbai in 1968 and carried on business as cloth merchant. The respondent company is shown to be in the business of shares and securities as member of the joint family. The petitioner's younger son Achlesh Daga (who has executed the POA in favour of the petitioner and who has written the letter dated 16^th July, 2013 to the Senior Inspector of Police, EOW) is the compliance officer of the respondent company. Each branch of the joint family had authorised its authorised dealer, who alone was dealing in the transactions of those

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family members on the NSE. The last sentence of paragraph 19 of the petition shows that the said Achlesh Daga was alone authorised by the petitioner to execute trades on NSE on behalf of his branch or family members. This sentence would seal the fate of the petitioner.

¶159

The petitioner need not have waited as long as he did if the son who was the authorised dealer of the petitioner's family was available but did not file the petition within 3 months. Reliance upon the medical condition of the petitioner, his father who is the Karta of the HUF is, therefore, misconceived.

¶160

Consequently sufficient cause required to be shown under proviso 34(3) obliged the Court to see the bonafide reason why a party could not have taken recourse to the provision at all. When a party has coparcener, as the right person to file petition, the reliance upon the medical condition of his father is not bonafide. Consequently sufficient cause is not shown to file this petition 21 days after the initial period of limitation expired.

¶161

Hence the Notice of Motion No.57 of 2014 is dismissed.

¶162

Consequently the Arbitration Petition (L.) No.2084 of 2013 also dismissed.

¶163

Arbitration Petition Nos.1389 & 1406 of 2013 and 328 & 334 of 2014 are adjourned to 28^th August, 2014.

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( ROSHAN DALVI, J. )

Harikishan Daga HUF v. Hrim Finance and Securities Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Harikishan Daga HUF v. Hrim Finance and Securities Pvt. Ltd.

Case brief

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