3 September 2025 Legal Updates

ARBITRATION | DELIVERY OF AWARD TO GOVT OFFICIAL NOT CONNECTED WITH CASE DOESN'T AMOUNT TO VALID SERVICE ON STATE: SUPREME COURT

(a) Case Title:

• M/s. Motilal Agarwala v. State of West Bengal & Anr.

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• August 28, 2025

(d) Bench:

• Justice J.B. Pardiwala and Justice K.V. Viswanathan

Key Facts

• An arbitral award was passed in favor of M/s. Motilal Agarwala on November 12, 2013. The State of West Bengal's authorized representative collected a xerox copy of the signed award on the same date. However, this representative failed to inform the State about the award. The State only learned about the award when the company-initiated execution proceedings
• The State then filed a Section 34 application (to set aside the award) on March 20, 2014. The District Court dismissed the application as time-barred. The High Court allowed the State's appeal, holding the application was not time-barred

Legal Issue

Whether delivery of an arbitral award to an authorized representative constitutes valid service under Section 31(5) of the Arbitration and Conciliation Act, 1996, for the purpose of starting the limitation period under Section 34(3)?

Supreme Court's Decision

The Supreme Court dismissed the appeal and upheld the High Court's judgment.

Key Legal Principles

1. Definition of "Party":

• Under Section 2(1)(h) of the Arbitration Act, "party" means a party to the arbitration agreement. An authorized representative is NOT considered a "party" within this definition

2. Valid Service Requirements

• For government organizations, the award must be delivered to someone who has knowledge of the arbitration proceedings, can understand and appreciate the award, has decision-making authority to challenge the award and is in a position to take appropriate action.

3. Limitation Period

• Section 34(3) provides 3 months from receipt of award to file setting aside application
• Limitation starts only when the actual "party" receives the award, not when any representative receives it

Important Precedents Cited

• Union of India v. Tecco Trichy Engineers & Contractors (2005) 4 SCC 239 - Established that in large organizations, service must be on the person directly connected with proceedings
• Benarsi Krishna Committee v. Karmyogi Shelters (2012) 9 SCC 496 - Clarified that "party" cannot include agents or advocates
• State of Maharashtra v. ARK Builders (2011) 4 SCC 616 - Service must be by the arbitrator in prescribed manner

PENDENCY OF CRIMINAL PROCEEDINGS WITHOUT CONVICTION CAN'T BE GROUND TO WITHHOLD STATUTORY RIGHTS LIKE PENSION & GRATUITY: JHARKHAND HC

(a) Case Title:

• Ranchi University through its Registrar v. Shanti Devi & Others

(b) Court:

• High Court of Jharkhand at Ranchi

(c) Date of Decision:

• 25th August 2025

(d) Bench:

• Hon'ble Chief Justice Tarlok Singh Chauhan & Hon'ble Mr. Justice Rajesh Shankar

Facts

• Shanti Devi was appointed as a Hindi lecturer in 1984 on a temporary basis. She served at various colleges under Ranchi University and was even appointed to the Jharkhand Public Service Commission in 2003. While serving, six criminal cases were filed against her by the Vigilance Department in 2011, leading to her arrest and suspension.
• She was acquitted in three cases, while three remained pending. The University granted her compulsory retirement in 2019 under Section 67 of the Jharkhand State University Act, 2000, but withheld her retiral benefits (pension, gratuity, leave encashment) citing pending criminal cases.

Legal Issue

Whether pending criminal cases can justify withholding retiral benefits from an employee who has not been convicted or punished departmentally?

Court's Decision

The High Court dismissed the appeal filed by Ranchi University and upheld the lower court's direction to release retiral benefits.

Key Legal Principles Established

• Nature of Pension: Pension is not a bounty dependent on government's discretion. It is a valuable right vested in government servants. Pension is deferred salary and cannot be arbitrarily withheld.
• Withholding Retiral Benefits: Under Bihar Pension Rules 43(a) and 43(b), government has no power to withhold gratuity and pension during pendency of departmental proceedings and pendency of criminal proceedings. Leave encashment also cannot be withheld at any stage.
• Leave Encashment as Salary: The court clarified (based on a 5-judge bench decision from March 2025): Leave encashment is a form of salary. It cannot be denied even after conclusion of proceedings. However, dismissed employees are not entitled to leave encashment