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17 January 2024

Delhi High Court Emphasizes Direct Delivery of Arbitral Awards to Parties for Valid Service

In a recent ruling, the High Court of Delhi has underscored that the delivery of a signed arbitral award exclusively to the lawyer or agent of a party does not constitute valid delivery unless served directly on the party itself. The bench comprising Justices Rajiv Shakdher and Tara Vitasta Ganju clarified that under Section 31(5) of the Arbitration and Conciliation Act, 1996, the term 'party' refers specifically to the entity that executed the arbitration agreement, excluding agents or lawyers representing the party.
Background of the Dispute

The legal dispute originated from an agreement dated 07.05.2010 between the Ministry of Health and Family Welfare (MoHFW), the appellant, and Hosmac Projects Division of Hosmac India Pvt. Ltd. (Hosmac), the respondent. This agreement focused on the construction of Emergency Care Services and the renovation of VIP Rooms at Dr. Ram Manohar Lohia Hospital, New Delhi, under MoHFW's jurisdiction.

As conflicts surfaced, Hosmac invoked the arbitration clause, leading to the appointment of Retd. Justice Devinder Gupta as the Sole Arbitrator. The Arbitral Award, initially rendered in favour of Hosmac, underwent correction through a Corrigendum Order.

Challenging both the Arbitral Award and the Corrigendum Order under Section 34 of the Act, MoHFW contended that the delivery of these documents to the authorized representative of the hospital did not constitute proper service on the appellant. They argued that, as per Section 31(5) of the Act, a signed copy of the Arbitral Award should be delivered to each party, emphasizing that the term 'party' pertains to the parties themselves, excluding their representatives.

Legal Arguments and Counter-arguments

MoHFW based its challenge on the grounds that the delivery did not comply with the statutory requirement, and the limitation period for filing the Section 34 Petition should commence from the date they received the Arbitral Award, which they claimed to be 14.03.2019.

The respondent, Hosmac, countered by asserting that the service on Dr. Ram Manohar Lohia Hospital should be considered as service on MoHFW, as the hospital actively participated and contested in the arbitration proceedings. They also contended that MoHFW's objection to the service was an attempt to extend the delay in filing the Section 34 Petition.

Court's Legal Analysis

The Court meticulously examined the relevant provisions of the Act, emphasizing the necessity for effective service of the Arbitral Award directly to the party, not its agent or advocate. Referring to legal precedents, the Court elucidated that the term 'party' in this context refers to the entity that is a direct party to the arbitration agreement.

The Court unequivocally stated, "A copy of the signed arbitral award served only on the lawyer or the agent of the party does not constitute a valid delivery in the absence of delivery on the party itself."

It reiterated that the term 'party' under Section 31(5) of the Act excludes agents or lawyers representing the party, emphasizing the importance of direct delivery to ensure proper compliance.

In rejecting the argument that service on Dr. Ram Manohar Lohia Hospital amounted to service on MoHFW, the Court delved into the records and found no evidence of the Arbitral Award being directly served on MoHFW before 14.03.2019.

Consequently, the Court concluded that the Section 34 Petition, filed on 10.05.2019, fell within the statutory limitation period.

Court's Decision and Future Proceedings

In light of its analysis, the Court allowed the appeal, overturning the impugned order. The Court directed the Section 34 petition to be listed before the Single Bench for a thorough consideration of the merits.

Case Title and Legal Representatives

The case, titled Ministry of Health & Family Welfare and Anr v. M/s Hosmac Projects, bears the reference FAO(OS)(COMM) 236 of 2019.

The legal representation for the appellants included Mr. Praveen Kumar Jain, Mr. Naveen Kumar Jain, Mr. Sachin Kumar Jain, Ms. Shalini Jha, Ms. Rashmi Kumari, and Ms. Sheetal Raghuvanshi, Advs., along with Dr. Yashwant Singh, A.R. of Appellants.

On behalf of the respondents, Mr. Nakul Dewan, Sr. Adv. appeared along with Mr. Pradhuman Gohil, Ms. Ranu Purohit, Ms. Neelu Mohan, and Mr. Alapati Sahithya Krishnan, Advs.

This ruling establishes a significant precedent, emphasizing the importance of direct delivery to parties in arbitration cases, ensuring adherence to the statutory requirements outlined in the Arbitration and Conciliation Act, 1996.