UNION OF INDIAversusTECCO TRICHY ENGINEERS & CONTRACTORS

                           UNION OF INDIA                                     A
                                    v.
           TECCO TRICHY ENGINEERS & CONTRACTORS

                           MARCH 16, 2005

    [R.C. LAHOTI, CJ., G.P. MATHUR AND P.P. NAOLEKAR, JJ.]                    B


     Arbitration and Conciliation Act, 1996 :

      ss. 2(h), 31(5), 34(1) read with s.34(3) proviso-Limitation for filing
application for setting aside the award-Delivery ofcopy ofaward to "party"- C
 "Party" making application for setting aside award-Arbitration proceedings
between Railways and contractor-Copy ofaward delivered in office ofGeneral
Manager, Railways-Later, copy of award delivered by arbitral tribunal to
Chief Engineer concerned-Chief Engineer filing application for setting aside
the award alongwith an application for condonation of delay-Application D ·
contested as being beyond the period of limitation from the date of receipt of
copy of award in Office of General Manager-Held, in the context of State or
a department of Government, more so, a large organization like Railways,
"party" as referred to in s.2(h) read with s.31(5) and s.34(3) 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- E
On facts, the Chief Engineer was representing the Union of India and notices
of the proceedings were served on him-Subject matter of arbitration was
related to his department-He was directly concerned with the arbitration-
Delivery of copy of award within the meaning of s. 31 (5) shall be deemed :o
have taken place on the date Chief Engineer received copy of the award as F
that date would be the starting point of limitation to challenge the award-
Thus calculated, the delay in filing application uls 34(1) deserves to be
condoned-Judicial Notice.

     In a disputed claim arising out of a work contract between appellant-
Railways and respondent-contractor, the General Manager, Southern             G
Railways referred the matter to an arbitral tribunal, which gave its award,
a copy of which was delivered in the office of the General Manager,
Southern Railways on 12.3.2001. The Chief Engineer of the department
concerned received the copy of the award from the arbitral tribunal on

                                   983                                        H
    984                    SUPREME COURT REPORTS                 [2005] 2 S.C.R.

A 19.3.2000, and presented an application on 10.7.2001 for setting aside the
    said award under s.34 of the Arbitration and Conciliation Act, 1996,
    alongwith an application for condo nation of 27 days delay calculated from
    19.3.2001, the date on which he received the copy of the award. The
    contractor contested the application for condonation of delay on the
B   ground that limitation was to be calculated from 12.3.2001, the date on
    which copy of the award was delivered in the office of the General
    Manager, Southern Railways, and thus calculated, there being 34 days'
    delay, the proviso appended to sub-s.(3) of s.34 of the Act did not permit
    any delay beyond 30 days' to be condoned by the Court. The single Judge
    of the High Court accepted the stand of the contractor. In appeal, the
C   Division Bench of the High Court upheld the decision. Aggrieved, the
    Railways filed the present appeal.

          Allowing the appeal, the Court

          HELD : 1.1. In the instant case, it is to be seen as to what is the
D   meaning to be assigned to the term "party" and "party making the
    application" for setting the award in the context of the State or a
    department of the Government, more so, a large organization like the
    Railways. In such organizations "party" as rei'erred to in s.2 (h) read with
    s.34 (3) and sub-s. (5) ofs.31 of the Arbitration and Conciliation Act, 1996
    has to be construed to be a person directly connected with and involved        .._
                                                                                   .
                                                                                       ,
E   in the proceedings and who is in control of the proce..:dings before the
    arbitrator. 1987-E; 988-D-El

          1.2. Court can take judicial notice of it that there are several
    arbitration proceeaings pending consideration concerning affairs of the
F   Railways before arbitration. The General Manager, with executive
    workload of entire Division cannot be expected to know all the niceties of
    the case pending before the arbitral tribunals 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 who is directly concerned with the subject matter as well as arbitral
G   proceedings. (988-B-CI

          1.3. The delivery of an arbitral award under sub-s.(5) of s.31 is not
    a matter of mere formality. It is a matter of substance. The delivery of
    arbitral award to the party, to be effective, has to be "received" by the
    party. In the context of a huge organization like Railways, the copy of the
H   award has to be received by the person who has knowledge of the
  U.0.1. v. TECCO TRICHY ENGINEERS & CONTRACTORS [NAOLEKAR, J.] 985

proceedings and who would be the best person to understand and                 A
appreciate the arbitral award and also to take a decision in the matter of
moving an application under sub-s. (I) or (5) of s.33 or under sub-s.(1) of
s.34. (988-E-F; 989-AI

      1.4. In the present case, the Chief Engineer had signed the agreement
on behalf of Union of India entered into with the respondent. In the           B
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. 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              C
proceedings and the question involved before the arbitrator. The delivery
of the copy of the award within the meaning of sub-s. (5) of s.31 shall be
deemed to have taken place on the date the Chief Engineer received the
copy of the award. (989-B-G)

      1.5. The High Court erred in holding the application under s.34 filed    D
on behalf of the appellant as having been filed beyond a period of 3 months
and 30 days within the meaning of sub-s.(3) of s.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-s. (1) of s.34 of the Act filed
on behalf of the appellant deserves to be heard and decided on merits..        E
                                                          [989-H; 990-A-B]

     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1784 of 2005.

     From the Judgment and Order Dated 19.6.2002 of the Madras High
Court in O.S.A. No. 195 of 2002.                                               F
     K. Radhakrishnan, T.A. Khan, S.N. Terdal and Mrs. Anil Katiyar for
the Appellant.

     Arvind Kumar, Ms. Poonam Prasad and Ms. Laxmi Arvind for the
Respondent.                                                                    G
     The Judgment of the Court was delivered by

     P.P. NAOLEKAR, J. Leave granted.

     The Southern Railway entered into a contract with respondent No. I for
gauge conversion from Madras Beach to Trichchirappalli Villupuram Section      H
    986                     SUPREME COURT REPORTS                     [2005] 2 S.C.R.

A - 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
B   Arbitrator, while respondent No. I 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
C   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
D   to be condoned was of 27 days only based on an assumption that the copy
    of the awarg 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
E   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 Ne 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
F   appeal has been filed by specia: leave.

           The short question which arises for decision in this appeal is : which
    is the effective date on which the appellant was 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.
G
           Sub-sections (I) and (3) of Section 34 a~e 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
H               application for setting aside such award in accordance with sub-
  U.0.1. v. TECCO TRI CHY ENGINEERS & CONTRACTORS [NAOLEKAR. J.] 987

            section (2) and sub-section (3).                                       A
                 xxx          xxx          xxx               xxx
              (3) An application for setting aside may not be made after three
            months havP. elapsed from the date on which the party making
            that application had received the arbitral award or, if a request      B
            had been made under section 33, from the date on which that
            request had been disposed of by the arbitral •rib.;nal :

              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       C
            within a further period of thirty days, but not thereafter."

       Fonn 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 h3:s 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       D
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 tenn "party" and "party making the application"      E
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        p
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          G
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             H
    988                      SUPREME COURT REPORTS                    [2005] 2 S.C.R.

A   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 factual aspect of the case and also the factual and legal aspects of the
B   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 affrtirs 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
C   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
D   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 ~s 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
E   before the Arbitrator.

           The delivery of an arbitral award under sub-Section (5) of Section 31
    is not a matter of mere fonnality. It is a matter of substance. It is only after
    the stage under Section 3 I has passed that the stage of tennination of arbitral
F   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
G   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
H   thereof by each party constitutes an important stage in the arbitral proceedings.
   U.0.1. v. TECCO TRICHY ENGINEERS & CONTRACTORS [NAOLEKAR, J.] 989

     In the context of a huge organization like Railways, the copy of the           A
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 (I) or (5) of Section 33 or under sub-Section (I) of Section
34.
                                                                                    B
       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 oflndia and the notices,
during the proceedings of the Arbitrati~n, were served on the Chief Engineer.
Even the arbitral award clearly mentions that the Union of India is represented     C
 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        D
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 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              E
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
 19.3.200 l would be the starting point of limitation to challenge the award in
the Court.                                                                          F
      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      G
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         H
    990                     SUPREME COURT REPORTS                  [2005] 2 S.C.R.

A 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
B   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
C   costs,

    R.P.                                                         Appeal allowed.