Amendment To Bring Additional Grounds U/S 34 Of A&C Act Is Maintainable If Objections Are Not Beyond Judicial Scrutiny Of Court: Delhi HC

Factual Matrix:

A Civil Works Contract Agreement (“CWC)" dated 06.12.2010, executed between the parties for the construction work of 6 towers and a non-tower area comprising 336 dwelling units to be undertaken by the respondent/claimant at Raheja Sampada, Gurgaon, Haryana. Before the Arbitral Tribunal, the respondent/claimant filed 10 claims, and thereafter filed three additional claims amounting to ₹2.20 crores. The petitioner, vide its Statement of Defence, disputed the claims and filed six counter-claims. The Court appointed Mr. Prem Kumar as the Sole Arbitrator vide order dated 14/02/2019, who later recused due to ill health. The Court vide order dated 03/11/2022 appointed Retd. Justice Jayant Nath as the Sole Arbitrator, and the proceedings recommenced from the stage of final arguments from 29/11/2022. The Sole Arbitral passed the impugned award on 29/04/2024.

The Arbitral Tribunal allowed the Claims Nos. A, B, C & J and partly allowed Claim Nos. D and E. Further, all the additional claims the respondent/claimant filed were also allowed. In essence, the Arbitral Tribunal passed the impugned award in favour of the respondent, awarding a total sum of ₹10.22 crores along with simple interest at 8% p.a. The petitioner initiated proceedings u/s 34 of the A&C Act on 26/07/2024. The present petition is filed to place additional grounds and documents on record.

Submissions:

The counsel for the petitioner made the following submissions:

• The present application was pursuant to the order dated 21/10/2024, wherein the petitioner had sought leave of the Court to file an appropriate amendment application. Furthermore, the grounds for the lack of inherent jurisdiction on account of the Arbitral Tribunal being functus officio at the passing of the award can be taken at any stage of the proceedings.
• Section 34 of the A&C Act enables the Court to allow an amendment when the peculiar circumstances so warrant in the interest of justice. This creates an exception to the rule of limitation, which is not absolute in nature.
• As no application for extension of the Arbitral Tribunal's mandate was preferred before the passing of the award, the Arbitral Tribunal became functus officio after 26/08/2023. The impugned award was passed on 26/07/2024, which was beyond the statutory period; this aspect goes to the crux of the matter and ought to be allowed to be pleaded while assailing the impugned award.

The counsel for the respondent made the following submissions:

• Firstly, the petition is barred by limitation as the amendment to the Section 34 petition cannot be filed after the expiry of the statutory limitation period of three months plus the 30-day grace period as provided u/s 34(3) of the A&C Act. Reliance was placed on Vastu Invest & Holdings Pvt. Ltd. v. Gujarat Lease Financing Ltd., Mumbai, to submit that the present application is not maintainable and is time-barred.
• Secondly, the additional grounds sought to be brought on record were never pleaded before the Arbitral Tribunal or in the original Section 34 petition. The attempt to introduce new grounds would result in presenting a new case beyond the contours of the original proceedings. Reliance was placed on State of Maharashtra v. Hindustan Construction and New Delhi Municipal Council v. Décor India Pvt Ltd.
• The Court has the power to extend the Arbitral Tribunal's mandate even after the expiry of the period prescribed u/s Section 29A(1) read with Section 29A(3).

Analysis of the Court:

The bench observed that the Supreme Court in State of Maharashtra v. Hindustan Construction has provided a small window for possible amendments to the Section 34 petitions, notwithstanding the limitation period. An amendment to a Section 34 petition is legally tenable provided the original filing was within the prescribed limitation period as provided u/s 34 of the A&C Act. The Supreme Court clarified in Hindustan Construction that if the amendment is intended to rectify a non-est filing, the same would not be permissible. The bench held:

“In Hindustan Construction (Supra), the Supreme Court has indicated that if the foundational pleadings for a ground sought to be amended do exist in the original petition, the grounds based on such pleadings can be incorporated by way of amendment.”

The bench further observed that the amendment sought in the present petition, when tested on the yardstick laid down in Hindustan Construction, is clear that the additional grounds raised are legal in nature, which are supported by the foundational facts pleaded in the Section 34 petition. The Arbitral Tribunal's jurisdictional competence to continue with the arbitral proceeding after the expiration of the statutory period enshrined u/s 29A of the A&C Act is a legal question which the Section 34 Court would have enquired into. The failure to raise an objection in the original Section 34 petition pertaining to the failure to adhere to the mandatory procedure u/s 29A for extension of the Arbitral Tribunal's mandate would not oust the Section 34 Court from examining whether the Arbitral Tribunal was functus officio at the passing of the award.

Lastly, the Court held that the omission to plead a ground of challenge in the original Section 34 petition, filed within the limitation period, would not put the objection beyond the judicial scrutiny of the Section 34 Court. Therefore, the amendment sought in the present application falls within the exceptions carved out in Hindustan Construction.

Case Name: Raheja Developers Limited v. Ahluwalia Contractors India Ltd

Case Title: COMMERCIAL ARBITRATION APPLICATION NO.28 OF 2017

Counsel for the Applicant: Mr. Rajshekhar Rao, Senior Advocate with Ms. Manmeet Kaur, Mr.Gurtejpal Singh, Ms.Aashna Chawla, Ms. Aashna Arora, Ms. Suditi and Mr. Debarshi Roy, Advocates

Counsel for the Respondent: Mr. Shashank Garg, Senior Advocate with Ms. Nishtha Jain, Advocates

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