The Delhi High Court has imposed costs of Rs. 5 lakhs on Delhi Metro Rail Corporation (DMRC), taking into account the blatant misuse of Section 33 of the Arbitration and Conciliation Act, 1996 by a public sector undertaking, with directions that the costs be paid to HCC Samsung JV (respondent) within a period of twelve weeks from the date of pronouncement of the judgment. The Court held that the period of limitation under Section 34(3) of the Arbitration and Conciliation Act, must be reckoned from the date of disposal of a Section 33 application, regardless of whether such application is ultimately found to be frivolous or a sham.
The Court explained that the period of limitation for filing a Section 34 petition under the Arbitration Act, where a Section 33 application has been filed, must be computed from the date on which the Section 33 application is disposed of by the Arbitral Tribunal, provided that the Section 33 application was a formal application filed within thirty days of receipt of the arbitral award and with notice to the opposite party.
The Division Bench comprising Justice C. Hari Shankar and Justice Om Prakash Shukla noted that the Section 33 application filed by DMRC was, on a plain reading, not an application for correction of any clerical or typographical error in the award, but rather a thinly disguised attempt to seek a wholesale review of the findings returned by the Arbitral Tribunal on merits. The Bench observed that the perceived errors highlighted in the application related to substantive findings on contractual interpretation, computation of amounts, and appreciation of evidence, none of which fell within the narrow scope of Section 33.
The Bench further noted that the application appeared to have been filed with the singular objective of obtaining breathing space to launch a substantive challenge under Section 34, and that an organisation of DMRC’s stature could not have been unaware of the limited contours of Section 33. The Bench clarified that where a formal Section 33 application is filed within the prescribed period and with notice to the opposite party, the limitation under Section 34(3) must be computed from the date of disposal of such application, regardless of whether the application was ultimately found to be maintainable or even a sham.
Briefly, the dispute between Delhi Metro Rail Corporation (DMRC) and HCC Samsung JV arose out of a contract dated 28 February 2013 for execution of certain civil works. The contractor submitted a claim on 30 July 2018 seeking compensation on account of variations and delay in completion of the work, which was rejected by DMRC on 23 May 2019. The contractor thereafter invoked arbitration, leading to the constitution of a three-member Arbitral Tribunal on 24 September 2020. The majority award was rendered on 23 February 2024, with the dissenting award following on 28 February 2024.
On 22 March 2024, DMRC filed an application under Section 33 of the Arbitration and Conciliation Act, ostensibly seeking correction of the arbitral award, but the contents of the application made it abundantly clear that it was, in substance, a wholesale challenge to the merits of the award rather than a request to rectify any clerical or typographical error. The Arbitral Tribunal rejected this Section 33 application by order dated 3 June 2024. DMRC thereafter filed its Section 34 petition before the Delhi High Court on 29 August 2024, which was within the extended period reckoned from the disposal of the Section 33 application but well beyond the three-month period computed from the date of the original award. The Single Judge dismissed the Section 34 petition as barred by limitation.
