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CASE NO.: Appeal (civil)  1784 of 2005

PETITIONER: Union of India

RESPONDENT: Tecco Trichy Engineers & Contractors

DATE OF JUDGMENT: 16/03/2005

BENCH: CJI R.C. Lahoti, G.P. Mathur & P.P. Naolekar

JUDGMENT: J U D G M E N T

(@ SLP (C) No. 20446 of 2002)

P.P. Naolekar, J.

       Leave granted.         The Southern Railway entered into a contract with  respondent No. 1 for gauge conversion from Madras Beach to  Trichchirappalli Villupuram Section \026 construction of a bridge  being agreement No. 136/Cn/95 dated 29.9.95.  On behalf of  the  Southern Railway, the contract was signed by the then Chief  Project Manager, presently, the Chief Engineer.  Disputes arose   touching the claims arising out of the execution of works under  the contract and in exercise of the power conferred by the  arbitration clause contained in the contract, the General  Manager, Southern Railway appointed an arbitrator as also a  Presiding Arbitrator, while respondent No. 1 nominated its  arbitrator. The arbitral tribunal so constituted gave its award on  10/11.03.2001 and signed the same. A copy of the award was  delivered in the office of the General Manager, Southern Railway  on 12.3.2001. The receipt seems to have been acknowledged by  someone in the office, probably the inwards clerk. The Chief  Engineer received the copy of the award from the tribunal on  19.3.2001.           On 10.7.2001, the Chief Engineer presented an application  for setting aside the arbitral award under Section 34 of the  Arbitration and Conciliation Act, 1996 (hereinafter ’the Act’ for  short).  An application seeking condonation of delay under sub- Section (3) of Section 34 was also filed.  The delay sought to be  condoned was of 27 days only based on an assumption that the  copy of the award was received on 19.3.2001.  The application  for condonation of delay was contested by respondent No. 1 on  the ground that arbitral award was delivered on 12.3.2001 and   calculated from that date there was a delay of 34 days in filing  the application beyond the period of limitation prescribed by sub- Section (3) of Section 34 of the Act while the proviso appended  to the said provision does not permit any delay beyond the  period of 30 days being condoned by the Court.   The objection  raised by respondent No. 1 has found favour with the learned  Single Judge of the High Court, who rejected the application  holding it as barred by limitation. The decision has been upheld  by the Division Bench of the High Court.  Feeling aggrieved, the  appeal has been filed by special leave.         The short question which arises for decision in this appeal  is : which is the effective date on which the appellant was

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delivered with and received the arbitral award as that would be  the date wherefrom the limitation within the meaning of sub- Section (3) of Section 34 of the Act shall be calculated.           Sub-sections (1) and (3) of Section 34 are relevant for our  purpose and are reproduced hereunder:         34.  Application for setting aside  arbitral award.___ (1) Recourse to a Court  against an arbitral award may be made only by  an application for setting aside such award in  accordance with sub-section (2) and sub- section (3).

   xxx         xxx             xxx             xxx

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

       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."

       Form and contents of arbitral award are provided by  Section 31 of the Act.  The arbitral award drawn up in the  manner prescribed by Section 31 of the Act has to be signed and  dated.   According to sub-Section (5), "after the arbitral award is  made, a signed copy shall be delivered to each party".  The term  "party" is defined by clause (h) of Section 2 of the Act as  meaning ’a party to an arbitration agreement’.  The definition is  to be read as given unless the context otherwise requires.   Under sub-Section (3) of Section 34 the limitation of 3 months  commences from the date on which "the party making that  application"  had received the arbitral award.  We have to see  what is the meaning to be assigned to the term "party" and  "party making the application" for setting aside the award in the  context of the State or a department of the Government, more  so a large organization like the Railways.             It is well-known that the Ministry of Railways has very  large area of operation covering several Divisions, having  different Divisional Heads and various departments within the  Division, having their own Departmental Heads.  The General  Manager of Railways is at the very apex of the Division with a  responsibility of taking strategic decisions, laying down policies  of the Organisation, giving administrative instructions and  issuing guidelines in the organisation.   He is from elite  managerial cadre which runs entire Organisation of his Division  with different Departments, having different Departmental  Heads.  The day to day management and operations of different  departments rests with different Departmental Heads.   Departmental Head is directly connected and concerned with the  departmental functioning and is alone expected to know the  progress of the matter pending before the arbitral Tribunal  concerning his department.  He is the person who knows exactly  where the shoe pinches, whether the arbitral award is adverse to  Department’s interest.  Departmental Head would naturally be in  a position to know whether the Arbitrator has committed a  mistake in understanding Departmental’s line of submissions and  the grounds available to challenge the award.  He is aware of the

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factual aspect of the case and also the factual and legal aspects   of the questions involved in the arbitration proceedings.  It is  also a known fact and Court can take judicial notice of it that  there are several arbitration proceedings pending consideration  concerning affairs of the Railways before arbitration. The General  Manager, with executive work load of entire Division cannot be  expected to know all the niceties of the case pending before the  arbitral tribunal or for that matter the arbitral award itself and   to take a decision as to whether the arbitral award deserves  challenge, without proper assistance of the Departmental Head.   General Manager, being the head of the Division, at best is only  expected to take final decision whether the arbitral award is to  be challenged or not on the basis of the advise and the material  placed before him by the person concerned with arbitration  proceedings.  Taking a final decision would be possible only if the  subject matter of challenge namely, the arbitral award is known  to the Departmental Head, who is directly concerned with the  subject matter as well as arbitral proceedings.  In the large  organizations like Railways, "party" as referred to in Section 2(h)  read with Section 34(3) of the Act has to be construed to be a  person directly connected with and involved in the proceedings  and who is in control of the proceedings before the Arbitrator.  The delivery of an arbitral award under sub-Section (5) of  Section 31 is not a matter of mere formality.  It is a matter of  substance.  It is only after the stage under Section 31 has  passed that the stage of termination of arbitral proceedings  within the meaning of Section 32 of the Act arises.  The delivery  of arbitral award to the party, to be effective, has to be  "received" by the party.  This delivery by the arbitral tribunal  and receipt by the party of the award sets in motion several  periods of limitation such as an application for correction and  interpretation of an award within 30 days under Section 33(1),  an application for making an additional award under Section  33(4) and an application for setting aside an award under  Section 34(3) and so on.  As this delivery of the copy of award  has the effect of conferring certain rights on the party as also  bringing to an end the right to exercise those rights on expiry of  the prescribed period of limitation which would be calculated  from that date, the delivery of the copy of award by the tribunal  and the receipt thereof by each party constitutes an important  stage in the arbitral proceedings.         In the context of a huge organization like Railways, the  copy of the award has to be received by the person who has  knowledge of the proceedings and who would be the best person  to understand and appreciate the arbitral award and also to take  a decision in the matter of moving an application under sub- Section (1)  or (5) of Section 33 or under sub-Section (1) of  Section 34. In the present case, the Chief Engineer had signed the  agreement on behalf of Union of India entered into with the  respondent.  In the arbitral proceedings the Chief Engineer  represented the Union of India and the notices, during the  proceedings of the Arbitration, were served on the Chief  Engineer.  Even the arbitral award clearly mentions that the  Union of India is represented by Deputy Chief Engineer/Gauge  Conversion, Chennai.  The Chief Engineer is directly concerned  with the Arbitration, as the subject matter of Arbitration relates  to the department of the Chief Engineer and he has direct  knowledge of the arbitral proceedings and the question involved  before the arbitrator.  The General Manager of the Railways has  only referred the matter for arbitration as required under the  contract.  He cannot be said to be aware of the question involved  in the arbitration nor the factual aspect in detail, on the basis of  which the arbitral tribunal had decided the issue before it unless  they are all brought to his notice by the officer dealing with that

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arbitration and who is in-charge of those proceedings.   Therefore, in our opinion, service of arbitral award on the  General Manager by way of receipt in his inwards office cannot  be taken to be sufficient notice so as to activate the Department  to take appropriate steps in respect of and in regard to the  award passed by the arbitrators to constitute starting point of  limitation for the purposes of Section 34(3) of the Act.  The  service of notice on the Chief Engineer on 19.3.2001 would be  the starting point of limitation to challenge the award in the  Court. We cannot be oblivious of the fact of impersonal approach  in the Government departments and organizations like Railways.   In the very nature of the working of Government departments a  decision is not taken unless the papers have reached the person  concerned and then an approval, if required, of the competent  authority or official above has been obtained.  All this could not  have taken place unless the Chief Engineer had received the  copy of the award when only the delivery of the award within the  meaning of sub-Section (5) of Section 31 shall be deemed to  have taken place.         The learned Single Judge of the High Court as also the  Division Bench have erred in holding the application under  Section 34 filed on behalf of the appellant as having been filed  beyond a period of 3 months and 30 days within the meaning of  sub-Section (3) of Section 34.   There was a delay of 27 days  only and not of 34 days as held by the High Court.  In the facts  and circumstances of the case, the delay in filing the application  deserves to be condoned and the application under sub-Section  (1) of Section 34 of the Act filed on behalf of the appellant  deserves to be heard and decided on merits.          The appeal is allowed.  The application under Section 34(1)  filed on behalf of the appellant shall stand restored in the High  Court, to be heard and decided in accordance with law by the  learned Single Judge.  No order as to costs.