Case Note & Summary
The petitioner, Hindustan Petroleum Corporation Ltd., challenged an arbitral award dated 9 April 2012 under Section 34 of the Arbitration and Conciliation Act, 1996. The dispute arose from a contract for filling and site grading works awarded to the respondent, Associated Constructions, on 22 August 1991. The contract was terminated on 24 June 1992 after the respondent allegedly abandoned work in May 1992. The respondent invoked arbitration on 8 October 1997, nearly five years after final payment was made on 25 July 1992. The sole arbitrator was appointed on 26 November 2011. The petitioner raised a plea of limitation, which was argued on 12 August 2009. On 2 October 2010, the arbitrator rejected the limitation plea without providing reasons. The matter was fixed for hearing on 3 December 2010, but the petitioner contended that no hearing was given on that date, and the matter was closed for orders. The arbitrator passed the award granting Rs. 19,24,097.55 with interest. The petitioner challenged the award on grounds of violation of natural justice and erroneous rejection of the limitation plea. The court found that the arbitrator failed to give the petitioner an opportunity of hearing on 3 December 2010 and closed the matter without hearing the petitioner, which violated principles of natural justice. Additionally, the arbitrator rejected the limitation plea without assigning any reasons, which was unsustainable. The court set aside the award and remitted the matter back to the arbitrator for fresh consideration after giving both parties an opportunity of hearing.
Headnote
A) Arbitration Law - Setting Aside Award - Section 34 Arbitration and Conciliation Act, 1996 - Natural Justice - The petitioner challenged the award on grounds that the arbitrator did not give adequate opportunity of hearing and rejected the limitation plea without reasons. The court held that the arbitrator's failure to provide a hearing on 3 December 2010 and closing the matter for orders without hearing the petitioner amounted to a violation of natural justice, warranting setting aside of the award. (Paras 3-4) B) Arbitration Law - Limitation - Section 34 Arbitration and Conciliation Act, 1996 - The court noted that the claim was made after about 4 years from termination of contract and the arbitrator rejected the limitation plea without assigning reasons. The court held that such rejection without reasons is unsustainable and the award is liable to be set aside. (Paras 2-4)
Issue of Consideration
Whether the arbitral award dated 9 April 2012 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on grounds of violation of natural justice and erroneous rejection of limitation plea.
Final Decision
The court allowed the petition, set aside the impugned award dated 9 April 2012, and remitted the matter back to the arbitrator for fresh consideration after giving both parties an opportunity of hearing.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34
- Natural Justice
- Limitation
- Arbitral Award
- Setting Aside
