Pradeep
Anand Vs. I.T.C.Ltd. & Ors [2002] Insc 308 (29 July 2002)
D.P.Mohapatra
& Brijesh Kumar. D.P.Mohapatra,J.
Appeal (civil) 4357 of 2002
Leave
granted in both the SLPs.
These
appeals filed by Shri Pradeep Anand, son of late Shri C.L.Anand are directed
against the orders passed by the High Court of Delhi on the interim application
No.7558/98 in OMPNo.197/98 by the learned single Judge and the order passed by
the Division Bench in FAO (OS) No.134/99 dismissing the appeal. In the former
order the learned single Judge granted stay of further proceedings before the
arbitrator appointed by the International Chamber of Commerce in Arbitration
Case No.8080/BGD/OLG till decision of the objections to the award dated
28.4.1998 rendered by the arbitrator in the matter. M/s.ITC Ltd., a 'company'
within the meaning of the Companies Act, 1956 is the main contesting party in
the case.
On
11.9.1990 an agreement styled as 'co-operation agreement' was made in Tokyo
(Japan) between M/s.Toshiba Corporation (hereinafter called 'Toshiba'), M/s.Toshiba
Battery Co. Ltd. (hereinafter called 'TABCL'), M/s.ITC Ltd.(hereinafter called
'ITC') having its registered office at 37, Chowringhee, Calcutta, M/s.Toshiba Anand
Batteries Ltd. (hereinafter called 'Toshiba Anand') having its registered
office at M.G.Road, Ernakulam, Kerala and Shri C.L.Anand (hereinafter called 'Shri
Anand') representing his family and his associated companies.
The
terms of the agreement were set out under Articles 1 to 12 of the document. In
Article 5 of the agreement the following stipulation was made: "It is
agreed to release all personal guarantees given by Shri Anand and Shri Pradeep Anand
to the bankers and financial institutions on behalf of Toshiba Anand with
assistance and cooperation by ITC or its associates or by its friends and/or by
Toshiba and/or by TBCL as soon as possible but not later than 31st March,
1991". Under Article 8 of the agreement it was stipulated that "Shri Anand
agrees that he will not raise nor cause his associates including subsidiaries
to raise any claim against Toshiba and/or TBCL in any manner whatsoever in
connection with his share transfer, his resignation from Chairman of Toshiba Anand,
or any other matter as contemplated herein". Under Article 10 dealing with
'Specific Performance' it was stipulated that :"The parties hereto shall
be entitled to specific performance of the terms of this Agreement and their
respective obligations including the use of their voting right and also the
exercise of their powers as set out in article 9 of this Agreement."
Article 11 in which was dealt with 'Duration' of the agreement, it was stated :"(a)Toshiba
Anand is wound up or otherwise than for amalgamation or reconstruction approved
by the parties hereto, or (b) This agreement is terminated by mutual agreement
in writing of the parties hereto." In Article 12 of the agreement certain
general provisions were made. Clause (b) thereof provided that :"Any
unresolved dispute arising in connection with this Agreement shall be settled
under the Rules of Conciliation and Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in accordance with those rules
and the arbitration shall be held at Bombay, India. The award of the
arbitrator(s) shall be final and binding upon the parties hereto." In
course of implementation of the agreement certain disputes arose between the
parties particularly relating to release of personal guarantees given by Shri Anand
and Shri Pradeep Anand as provided under Article 5 of the agreement. On the
application filed by Shri Anand the ICC appointed Mr.Datuk George K.S.Seah as
Arbitrator by the order dated 30th August, 1995.
In course of the arbitration proceedings Shri Anand died when the terms of
reference had come into effect and before the arbitration could be set down for
hearing in Mumbai. The Arbitrator allowed the application filed by Shri Pradeep
Anand, Son of the deceased to be substituted as claimant and to continue with
the arbitration proceedings. Vide an interim order dated 20th March, 1997, ITC Ltd., Toshiba Corporation,
TBCL and Toshiba Anand were arraigned as defendants 1 to 4 respectively in the
arbitration proceedings. The arbitrator after considering the case set out by
the parties passed the partial award on 24th April, 1998 at Mumbai.
The
terms of reference as quoted in the judgment of the learned single Judge reads
as follows :
"4.12.
In the foregoing circumstances, the Claimant prays the arbitral tribunal may be
pleased to take steps for settling the disputes and make the undermentioned
Award directing the Defendants;
(a)
Jointly and severally to take immediate and appropriate steps to ensure that
all personal guarantees given by the Claimant SHRI C.L.ANAND and his son,
PRADEEP ANAND to the Banks and Financial Institutions are returned to the
Claimant duly discharged and cancelled;
(b)
Alternatively to award to the Claimant the amounts that he and his son, PRADEEP
ANAND are called upon to reimburse to the Banks and Financial Institutions in
respect of the said personal guarantees;
(c)
Alternatively, to hold the Defendants liable for all losses and consequences
arising to the Claimant and his son, PRADEEP ANAND, as a result of any legal
actions taken by the Banks and Financial Institutions pursuant to the personal
guarantees;
(d) To
award costs of this Reference to Arbitration, and (e) Any other relief, as may
be prayed for, from time to time, in the circumstances of the case." Summarising
his answers to the issues contained in Clause 13 of the reference the
Arbitrator in paragraph 54.1.1 stated as follows:- 54.2.1 Clause 13.1(a) No
54.2.2 Clause 13.1(b) Not applicable 54.2.3 Clause 13.2(a)(i) Yes 54.2.4 Clause
13.2(a)(ii) Yes 52.2.5 Clause 13.2(a)(iii) No 54.2.6 Clause 13.2(a)(iv) No
54.2.7 Clause 13.2(b) Not applicable 54.2.8 Clause 13.3(a) According to
Claimant 54.2.9 Clause 13.3(b) Not applicable 54.2.10 Clause 13.4(a) No 54.2.11
Clause 13.4(b) No 54.2.12 Clause 13.5(a) Would not debar of estop the 1st
Defendant, ITC Limited from raising the same pleas, contentions or defences
before the Arbitrator in this Reference.
54.2.13
Clause 13.5(b) No 54.2.14 Clause 13.6(a) Declaratory relief to the Claimant for
compensation for breach of Article 5 of the Co-operation Agreement dated
11.09.1990 against 1st, 2nd and 3rd Defendants, jointly and severally, damages
to be assessed.
54.2.15
Clause 13.6(b) The Claimant, Shri C.L.Anand was representing his family members
and associated companies when he signed the Co-operation Agreement dated
11.09.1990 and also in this Reference. The answer is therefore Yes.
54.2.16
Clause 13.7(a) No 54.2.17 Clause 13.7(b) Only 1st Defendant, ITC Limited
committed breach of Article 1 of the Co-operation Agreement dated 11.09.1990.
Claimant is entitled to claim against 2nd and 3rd Defendants, Toshiba
Corporation and Toshiba Battery Company Ltd. in this Reference under Article 5
of the Co-operation Agreement.
The
Extracts from the Partial Award noted by the learned single Judge read as follows
:
50.11.2
Having regard to the abovenamed factors I decline to order specific performance
in terms of clause 4.12(a) of the Terms of Reference, in the exercise of my
discretion.
50.11.3
In my opinion, an Arbitrator should not direct specific performance when the
contract was no longer in existence.
50.11.4
Another reason for refusing, specific performance of clause 4.12(a) of the TOR
is that, if granted, it would indirectly involve the Banks and Financial
Institutions to hand over the personal guarantees to the Claimant duly
discharged and cancelled when both the Banks and Financial Institutions have
not been made parties to this Reference.
50.12.1
I now pass to consider clause 4.12(b) of the TOR.
50.12.2
I am inclined to agree with the contention of Counsel for ITC that this relief
claimed by the Claimant is premature in as much as no court action has been
taken by the Banks and Financial Institutions against the Claimant and his son,
SHRI PRADEEP ANAND in respect of the said personal guarantees.
50.12.3
In short, the Claimant is asking the Arbitrator to make an award on matter
which did not exist yet.
50.12.4
For this reason I refuse to make an award in terms of the relief claimed in
clause 4.12(b) of the TOR.
50.13.1
I turn to deal with clause 4.12(c) of the TOR and sub-section 2 of the section
21 of the Specific Relief Act of the 1963 may be relevant and it reads :
50.13.2
"21(1) In a suit for specific performance of a contract, the plaintiff may
also claim compensation for its breach, either in addition to, or in
substitution of, such performance.
(2)
If, in any such suit, the court decides that specific performance ought not to
be granted, but that there is a contract between the parties which has been
broken by the defendant, and that the plaintiff is entitled to compensation for
that breach, it shall award him such compensation accordingly.
(3)
(4) In determining the amount of any compensation awarded under this section,
the court shall be guided by the principles specified in section 73 of the
Indian Contract Act 1872 (9 of 1872).
(5)
50.13.3 And section 73 of the 1872 Act is in the following terms:
"When
a contract has been broken, the party who suffers by such breach is entitled to
receive, from the party who has broken the contract, compensation for any loss
or damage caused to him thereby, which naturally arose in the usual course of
things from such breach, or which the parties knew, when they made the
contract, to be likely to result from the breach of it.
50.13.4
Such compensation is not to be given for any remote and indirect loss or damage
sustained by reason of the breach.
50.14.1
Counsel for ITC has further argues that section 73 of the Contract Act 1872
imposes on the Claimant a duty of taking all reasonable steps to mitigate the
loss consequent on the breach of contract and debars the Claimant from claiming
any part of the damage which is due to his neglect to take such steps.
50.14.2
Counsel also submits that it is well settled that the loss to be ascertained is
the loss as on the date of the breach Sons & Co. (1915) AC 175) in terms of
Article 5 of the Co-operation Agreement dated 11.09.1990 the personal
guarantees given by the Claimant and his son, Shri Pradeep Anand to the Banks
and Financial Institutions were required to be discharged by 31.03.1991.
50.15.1
I have already held and adjudged based on the documents produced before me in
this Reference ITC had committed a breach of Article 5 of the Co-operation
Agreement dated 11.09.1990 in that ITC had failed to arrange for the release of
all Personal guarantees given by Shri C.L.Anand and his son, Shri Pradeep Anand
to the Banks and Financial Institutions on behalf of TOSHIBA ANAND BATTERIES
LTD. (TABL) as agreed.
50.15.2
And I have also held and adjudged that ITC had refused to assist and co-
operate with the release of the said personal guarantees when the Consortium Banks
proposed that ITC gave corporate guarantee instead in order to secure the
discharge of the said personal guarantees given by Shri C.L.Anand and his son, Shri
Pradeep Anand to the said Banks.
50.16.1
In my opinion, the appropriate relief to be awarded to the Claimant for breach
of Article 5 of the Co-operation Agreement dated 11.09.1990 is for compensation
for breach of contract, with damages to be assessed under section 21(2) of the
Indian Specific Relief Act, 1963.
50.16.2
I hereby reserve powers to make a Final Award on the quantum of monetary
compensation (if any) to be awarded to the Claimant after having invited and
received further submissions from the parties and/or their Counsel in this
regard at a later date.
50.17.1
Since ITC, TOSHIBA and TABL had agreed under Article 5 of the said Co-
operation Agreement to assist and Co- operate to release all personal
guarantees given by Shri C.L.Anand and his son, Shri Pradeep Anand to the Banks
on behalf of TOSHIBA ANAND BATTERIES LTD. (TABL) in my opinion, it is fair and
equitable that all three parties should be held jointly and severally, liable
to the Claimant. I have therefore so held and adjudged.
50.70.2
To avoid any doubt I have to make it clear that I am granting to the Claimant
declaration relief under clause 4.12(c) of the Terms of Reference for breach of
Article 5 of the Co-operation Agreement dated 11.09.1990. The relief is for
compensation for breach of contract, with damages to be assessed under section
21(2) of the Indian Specific Relief Act, 1963 at a later date." On receipt
of the notice of the Award made by the arbitrator ITC Ltd. (respondent no.1
herein) filed a suit, Suit No.1084-A of 1998 under Section 14 of the
Arbitration Act, 1940 (hereinafter referred to as 'the Act') for a direction to
the arbitrator (respondent no.5 herein) and ICC (respondent no.6 herein) to
file the Award (partial Award) dated 24.4.1998 in ICC arbitration Case and on
1.8.1998 filed an application for stay of the arbitration proceedings.
Considering
the application for stay in IA No.3658 of 1997 in OMP No.10 of 1996 filed by
Toshiba (respondent no.2 herein) and TBCL (respondent no.3 herein), the learned
single Judge passed the order to the effect that though the arbitration
proceedings may go on no final award shall be passed till the next date of
hearing which was fixed on 16th July, 1998. Against the said order the
appellant moved the Division Bench an appeal, FAO (OS) No.146 of 1998 in which
the Division Bench vide order dated 29.5.1998 granted stay of operation of the
order dated 22.5.1998. The said order was disposed of by a consent order on
22.7.1998 to the effect that the final award may be passed but the same shall
not be implemented till the disposal of the I.A. filed by respondents 2 and 3
which was pending before the learned single Judge. The arbitrator on being
informed about the order passed by the Division Bench proceeded further in the
arbitration proceedings and called upon the parties to send their witness
statements, documentary evidence etc.
While
Suit No.1084-A of 1998 filed by respondent no.1 was pending the said respondent
filed OMP No.197 of 1998 under Sections 30 and 33 of the Act inter alia
challenging the legality and validity of the 'Co-operation Agreement' dated
11.9.1990. Both the suit and the OMP are pending before the High Court. It is
relevant to note here that previously when the ICC had decided that the
arbitration shall be conducted by the sole arbitrator but the arbitrator had
not entered upon the reference, the respondent no.1 had filed Suit No.50 of
1995 and OMP No.16 of 1995 in the Delhi High Court challenging the legality and
validity of the 'Co-operation Agreement' dated 11.9.1990 as well as the
legality and validity of the arbitration clause in the said agreement and had
prayed for a declaration that the same were illegal and null and void.
Respondent no.1 had sought stay of further proceedings in the petition OMP
No.16 of 1995. When Suit No.50 of 1995 and OMP No.16 of 1995 were pending for
trial the respondent no.1 filed an application under Order 23 Rule 1 of the
Code of Civil Procedure, unconditionally withdrawing the said two proceedings.
By the order dated 17.10.1995 passed by the High Court the suit and the OMP
were dismissed as withdrawn. The respondent no.1 also filed IA No.7558 of 1998
seeking stay of further arbitration proceedings alleging certain illegalities
in the procedure followed by the arbitrator which, according to it had vitiated
the award passed by the arbitrator. The respondent no.1 also questioned the
jurisdiction of the arbitrator to award monetary compensation in the case in favour
of the appellant. The validity of the Co- operation Agreement was also
challenged by the said respondent. The appellant herein refuted the allegations
and contentions raised on behalf of the respondent no.1 in the counter
affidavit.
The
learned single Judge after hearing the counsel appearing for the parties and
considering the contentions raised on their behalf took the view that the
validity of the impugned partial award should first be decided and only after
it was found to be in order and valid, further proceedings for making the final
award be undertaken. In support of the view the learned Judge noted that
according to him the petitioner had prima facie case as, prima facie, the grounds
of challenge to the impugned partial award were not, on the face of the same,
devoid of merits; rather the same appeared to have substance and were required
to be heard and decided in proper proceedings.
Thereafter
the learned Judge proceeded to give reasons in support of his finding that the
balance of convenience lies in favour of the respondent no.1 herein. It appears
from the discussions in the order the learned Judge took exception as the
arbitrator had not filed the partial award in court promptly despite a
direction by the court and proceeded to quantify the damages on the basis of
the partial award in which a declaratory order was made. From this the learned
single Judge inferred that the respondent no.1 was rendered remediless and thus
gagged.
However,
the learned Judge himself observed in the order:
"However,
the situation has changed because before the application under consideration
for stay could be decided, the Arbitrator filed the award in S.No.1084A/98,
though very late, and also authorised the petitioner to file its copy on his
behalf." The learned single Judge has discussed in detail the merits of
the partial award; the further steps being taken by the arbitrator in the
proceeding for quantification of damages; inconvenience likely to be created to
the respondent no.1 if the proceeding continued since he will have to bear the
burden of expenditure, passed the order of stay on following terms :
"Thus
after having found prima facie case and the balance of convenience in favour of
the petitioner and also having come to a prima facie view that presently
respondent no.1 is not going to be prejudiced by grant of stay, I allow the
application and direct that further arbitration proceedings for making final
award shall remain stayed till the impugned partial award is made rule of the
Court.
Before
parting with the order, it is made clear that any observations made in this
order shall not affect the merits of the respective contentions of the parties
relating to the impugned partial award dated 24.4.1998." Being aggrieved
by the stay order passed by the learned single Judge, the appellant filed the
appeal FAO (OS) No.134/99 which was decided by a Division Bench of the High
Court vide the judgment dated 13th March, 2000. From the discussions in the judgment
it is clear that the Division Bench, considering the contention raised on
behalf of the respondents against maintainability of the petition for stay
filed before the learned single Judge and the appeal assailing the stay order,
opined that the application for stay was maintainable and the order passed on
the application was an order under the Arbitration Act ( 'the Act' for short).
Regarding the question of maintainability of the appeal the Division Bench held
that the order under challenge being not one of the orders specified in Section
39 of the Act the appeal was not maintainable. The Division Bench further
observed that having held the appeal to be not maintainable it was not
necessary for the Court to go into the questions as to whether the learned
single Judge was right in passing the order staying the proceedings before the
arbitrator;
however,
as the matter was fully argued by the parties the Division Bench proceeded to
consider the matter on merits. In that regard the Division Bench made the
following observations :
"It
is not in dispute that the Arbitrator had written a letter on 21st November,
1997 informing the parties that he had prepared the draft final Award and sent
the same to the ICC International Court for its scrutiny. It is also not in
dispute that the Secretariat of the ICC in its letter dated 5th February, 1998
had informed the parties that the draft final Award was under the scrutiny
process of the ICC Court of Arbitration. It is also not in dispute that
ultimately the Award which was sent to the parties was described as a partial
Award.
The
question, therefore, naturally coming to the mind of the court is how the draft
final Award prepared by the Arbitrator and sent to the ICC Court of Arbitration
was changed to partial Award. The other question which comes to the mind of the
Court is as to how and under which provision of law the Arbitrator can send the
Award for scrutiny or approval to another forum which has nothing to do with
Arbitration. It is admitted between the parties that Indian laws were
applicable to the Arbitration proceedings. It is well settled that under the
Indian laws the Award of the Arbitrator leaving a matter in dispute to be
decided by a third person is invalid as it is not open to the Arbitrators to
delegate their authority to a stranger. Even a partial delegation of authority
vitiates the Award if the defective part cannot be separated from the rest.
Delegation of his authority and functions by an Arbitrator amounts to judicial
misconduct. Such an Award suffers for a serious infirmity and as such is liable
to be set aside. In this case, it is not denied that the Arbitrator did send
the Award for scrutiny to the International Court of Arbitration.
In our
view, therefore, prima facie, it appears to us that the whole approach of the
Arbitrator in sending the Award to the ICC Court of Arbitration amounted to
delegation of authority to a third party. Prima facie, the Award is suffering
from serious infirmity. At the time of deciding this Application for stay, it cannot
be said whether or not the Arbitrator has committed mis-conduct by sending the
Award to a third party. It may also not be possible for this Court to decide at
this stage as to how and in what circumstances the final Award was changed to a
partial Award. There is nothing before the Court also to find out as to what
was written in the draft final Award sent to the International Court of
Arbitration for scrutiny and to what extent this draft final Award was changed
so as to be described as a partial Award. All these questions have to be gone
into during the hearing of the main petition." Proceeding further the
Division Bench also took exception to the conduct of the arbitrator in not
filing the depositions and documents before the Court on the ground of confidentiality
and claim of privilege. The Division Bench observed:
"The
objections filed by the ITC to the Award described as a partial Award cannot be
decided without such deposition and documents before the Court. It is,
therefore, but natural that it was incumbent upon the Arbitrator to file the
same on being so required either by the parties or by the Court. Non-filing of
the depositions and documents and claiming privilege and confidentiality about
the same, prima facie, show that the Arbitrator is being influenced by the
opinion of a third party, may be in the present case the International Court of
Arbitration. That being the position, in our view, the Arbitrator could not be
permitted to continue with the Arbitration proceedings till such time the objections
to the partial Award were decided by the Court. In our opinion, therefore,
there was a prima facie case for the stay of further proceedings before the
Arbitrator. We are, therefore, in complete agreement with the view of the
learned Single Judge that in the interest of justice, further proceedings
before the Arbitrator should be stayed." Finally, the Division Bench
dismissed the appeal holding that it was devoid of merit and clarified that any
observation made in the order shall not have any bearing on the merits of the
objections under Sections 30, 31 and 33 of the Act pending before the learned
Single Judge.
From
the discussions made in the foregoing paragraphs, it is manifest that the
disputes raised in the proceeding arises from and relates to the Cooperation
Agreement dated 11.9.1990 entered into between the parties. In the said
agreement it was agreed by the parties under Article 12 that 'any unresolved
dispute' arising in connection with this Agreement shall be settled under the
Rules of Conciliation and Arbitration of the International Chamber of Commerce
by one or more arbitrators appointed in accordance with those rules and the
arbitration shall be held at Bombay, India. The arbitration proceeding was
initiated in pursuance of the express provision made in the agreement and the
arbitrator was appointed by the ICC under the stipulation in the agreement. On
the materials on record the position has to be accepted, prima facie, that the
Indian law is applicable to the proceeding. The proceeding is to be conducted
and decided in accordance with the provisions of the Arbitration Act, 1940. We
make it clear that our observation in this regard will not prevent any of the
parties to raise the question, at the appropriate stage of the proceedings before
the Court and if such contention is raised the Court will decide the same in
accordance with law. The Arbitration Act, 1940 is fairly comprehensive and
contains provisions from the stage of appointment of arbitrator till the award
being made rule of the Court where after it becomes a decree of the Court and
executable as such. In Section 34 of the Act power is vested in the Court to
order stay of legal proceedings, where there is an arbitration agreement
therein. It is laid down therein that :
"Where
any party to an arbitration agreement or any person claiming under him
commences any legal proceedings against any other party to the agreement or any
person claiming under him in respect of any matter agreed to be referred, any
party to such legal proceedings may at any time before filing a written
statement or taking any other steps in the proceedings, apply to the judicial
authority before which the proceedings are pending to stay the proceedings; and
if satisfied that there is no sufficient reason why the matter should not be
referred in accordance with the arbitration agreement and that the applicant
was, at the time when the proceedings were commenced, and still remains, ready
and willing to do all things necessary to the proper conduct of the arbitration,
such authority may make an order staying the proceedings." From the
provision in the section it is clear that in case there is an arbitration
agreement entered between the parties, they should ordinarily be held by their
agreement and should not be permitted to initiate any legal proceeding other
than arbitration proceeding relating to any dispute coming within the
arbitration clause. This principle was taken note of by this Court in Uttar
Pradesh Co- operative Federation Ltd. vs. M/s.Sunder Brothers of Delhi, 1966
Supp. SCR 215, in which it was observed inter alia that :
"It
is, of course, the normal duty of the court to hold the parties to the contract
and to make them present their disputes to the forum of their choice, but the
strict principle of sanctity of contract is subject to the discretion of the
Court under s.34 of the Indian Arbitration Act.
A
party may be released from the bargain if he can show that the selected
arbitrator is likely to show bias or there is sufficient reason to suspect that
he will act unfairly or that he has been guilty of unreasonable conduct."
This position is also clear from the provision in Section 18 of the Act in
which it is laid down inter alia that :
"Power
of Court to pass interim orders
(1)Notwithstanding
anything contained in Section 17, at any time after the filing of the award,
whether notice of the filing has been served or not, upon being satisfied by
affidavit or otherwise that a party has taken or is about to take steps to
defeat, delay or obstruct the execution of any decree that may be passed upon
the award, or that speedy execution of the award is just and necessary, the
Court may pass such interim orders as it deems necessary.
(2)Any
person against whom such interim orders have been passed may show cause against
such orders, and the Court, after hearing the parties, may pass such further
orders as it deems necessary, and just. "
These
provisions, in our view show that the legislative policy is to ensure proper
enforcement of an arbitration award and to assist a party who apprehends that
he may face serious difficulties in execution of the award passed in his favour
on account of the conduct of the other party. Be it noted here that different
provisions of the arbitration Act leaves little scope for doubt that an
arbitration proceeding is to be conducted by the arbitrator with reasonable
dispatch and after the award is passed the Court should also dispose of the
proceedings and decide the question whether the award should be made a rule of
Court expeditiously so that the party in whose favour the award has been passed
gets the benefit of the arbitration clause. In the present case the order
passed by the learned single Judge gives rise to a converse situation. The
Court has intervened to stay further proceedings in a proceeding which is
continuing before the arbitrator giving the reason inter alia that the
petitioner applying for stay may be put to unnecessary expenses in defending
the proceeding before the arbitrator. As noted earlier, the respondent no.1
herein, has initiated proceedings before the Court to direct the arbitrator to
file the Partial Award and has also filed an application under Sections 30 and
33 of the Act challenging the validity of the award and has also raised the
question of validity of the agreement itself in the petition. The said
proceedings are pending in the Court. The questions raised therein will be
decided by the Court on merit after hearing the parties. In such circumstances,
the view taken by the High Court that the arbitrator should not proceed further
in the arbitration proceeding is unnecessary, uncalled for and erroneous. The
observation of the learned single Judge that 'since the arbitrator did not file
the Partial Award in Court immediately on being directed by the Court the respondent
no.1 was made remediless and was 'gagged', is equally uncalled for and
erroneous. It may be noted here that no party will be entitled to get any
benefit in any final award passed by the arbitrator until the same is made rule
of the Court and before this is done the Court is duty-bound to give notice to
the parties and consider objections if any raised by any of the parties against
the award.
On
perusal of the judgment/order passed by the learned single Judge, we are
constrained to observe that the learned Judge travelled beyond the limited
jurisdiction vested in him in deciding the question of stay and has discussed
the merits of the case and made observations which may prejudice the parties of
any of them in a proceeding before the arbitrator and at subsequent stages in
the proceeding before the Court.
The
judgment of the Division Bench, we are constrained to observe, suffers from
similar error of approach as the learned Single Judge. Being aware of the
position that the respondent no.1 has challenged the partial Award by filing
objections under Sections 30, 31 and 33 of the Act and proceeding is pending
before the trial Court, the Division Bench thought it appropriate to make
observations regarding the alleged misconduct of the Arbitrator in sending the
draft Award to the ICC International Court of Arbitration for advise and also
in declining to send up the depositions and the documents to the Court on
certain grounds the Division Bench appears to have lost sight of the fact that
all these questions may come up for decision before the trial Court in the
proceeding under Sections 30 and 33 of the Act and parties will have
opportunity to have their say in the matter. The Division Bench failed to
appreciate that in the context of facts of the case it is in the interest of
the parties that the Arbitration proceeding should be concluded and the
challenge against the draft Award/final Award should be decided as
expeditiously as possible. The observations made by the Division bench in the
judgment are not only unnecessary but also uncalled for keeping gin view the
limited question that came up for consideration before it i.e. whether the
further proceeding before the Arbitrator should be stayed or it should
continue. Any observation touching upon the merits of the case particularly,
the allegations relating to alleged misconduct of the Arbitrator at the stage
of consideration of the application for interim order of stay does not commend
us. It appears from the record that the respondent no.1 has also filed an application
before the Court for removal of the Arbitrator and the same is also pending. We
are conscious of the position that grant of stay is a matter of discretion of
the Court and if the Trial Court on consideration passes the order of stay the
Appellate Court should be slow to interfere with the same. But that does not
mean that if the order of stay passed by the Trial Court is based on
non-judicial consideration such order is not liable to be interfered with by
the Appellate Court. However, since the Division Bench held that the appeal was
not maintainable we need say no further on merits of the observations/findings
in the judgment.
On
consideration of the entire matter, we are not persuaded to maintain the order
granting stay of further proceedings before the arbitrator passed by the
learned single Judge, which was confirmed in appeal by the Division Bench. The
judgment/order dated 22.4.1999 passed by the learned single Judge which was
confirmed by the Division Bench in the judgment/order dated 13th March, 2000 in
FAO (OS) No.134 of 1999 are set aside and accordingly, the appeals are allowed
with costs. Hearing fee is assessed at Rs.25,000/-.
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