Chief
Engineer of B.P.D.P./R.E.O., Ranchi Vs. M/S Scoot Wilson Kirpatrick India Pvt.
Ltd [2006] Insc 777 (10
November 2006)
Arijit
Pasayat & Lokeshwar Singh Panta
Arising
out of S.L.P. (C) No. 15033 of 2005 ARIJIT PASAYAT, J.
Leave
granted.
Challenge
in this appeal is to the order passed by a learned Single Judge of the Jharkhand
High Court holding that the appeal filed by it was not maintainable as the same
does not fall within the ambit of Section 37 of the Arbitration and
Conciliation Act, 1996 (in short the 'Act').
Learned
counsel for the appellant submitted that the appeal is clearly maintainable
under Section 37(1)(b) of the Act.
Per
contra, learned counsel for the respondent submitted that the case is covered
by the decision of this Court in Union of India v. Popular Construction Co.
(2001 (8) SCC 470) and State of Goa v. Western Builders (2006 (6) SCC 239), and
the High Court was justified in holding that the appeal was not maintainable.
Therefore, it is submitted that certain aspects which have not been raised
specifically in the grounds raised before this Court but submitted during the
course of arguments cannot be taken note of.
Section
37(1)(b) of the Act is in pari materia to Section 39(1)(vi) of the Arbitration
Act, 1940 (in short 'Old Act'). The provisions in the Acts read as follows:
"1996
Act:
Section
37(1)(b) "An appeal shall lie from the following orders of the Court
authorized by law to hear appeals from original decrees of the Court passing
the order, namely :- b. Setting aside or refusing to set aside an arbitral
award under Section 34 of the Act".
1940
Act:
Section
39. Appealable orders:
"(1)
An appeal shall lie from the following orders passed under this Act (and from
no others) to the Court authorized by law to hear appeal from original decrees
of the Court passing the order :- An order:
xxx xxx
xxx xxx (vi) Setting aside or refusing to set aside an award".
In
Dharma Prathishthanam v. Madhok Construction (P) Ltd. (2005 (9) SCC 686) it has
been held by this Court as follows:
"27.
In the event of the appointment of an arbitrator and reference of disputes to
him being void ab initio as totally incompetent or invalid the award shall be
void and liable to be set aside de hors the provisions of Section 30 of the
Act, in any appropriate proceedings when sought to be enforced or acted upon.
This
conclusion flows not only from the decided cases referred to hereinabove but
also from several other cases which we proceed to notice.
28. In
Chhabba Lal v. Kallu Lal and Ors., (AIR 1946 P.C. 72 )their Lordships have held
that an award on a reference presupposes a valid reference. If there is no
valid reference, the purported award is a nullity.
29. On
this point, there is near unanimity of opinion as amongst the High Courts of
the country as well. Illustratively, we may refer to a few cases. In Union of India v. Ajit
Mehta and Associates, Pune and Ors. (AIR 1990 Bom 45), the Division Bench held
that the Court has suo motu power to set aside an award on ground other than
those covered by Section 30 such as an award made by arbitrators who can never
have been appointed under Section 8, as such an award would undoubtedly be ab initio
void and no nest. In Union of India v. South Eastern Railway (AIR 1992 M.P. 47) and Rajendra Dayal
v. Govind (1970 MPLJ 322), both Division Bench decisions, the High Court of
Madhya Pradesh has held that in certain situations the Court may set aside an
Award even without there being an application under Section 30 or even if the
petition under Section 30 has not been filed within the period of limitation if
the Court finds that the award is void or directs a party to do an act which is
prohibited by law or is without jurisdiction or patently illegal. We need not
multiply the number of authorities on this point as an exhaustive and
illuminating conspectus of judicial opinion is found to be contained in Law of
Arbitration and Conciliation - Practice and Procedure by S.K. Chawla (Second
Edition, 2004 at pp. 181-184) under the caption - "Whether the Court has suo
motu power to set aside an Arbitral Award - " and the answer given in the
discussion thereunder is in the affirmative.
30.
Though it has been held in The Union of India v. Shri Om Prakash (1976 (4) SCC
32), that an objection on the ground of invalidity of a reference is not
specifically covered by Clauses (a), (b) and (c) of Section 30, yet it is
included in the residuary expression "or as otherwise invalid" and
could have been set aside on such an application being made.
However,
the above decision cannot be treated as an authority to hold that an award
which is void ab initio and hence a nullity consequent upon an invalid
appointment and an invalid reference in clear breach of the provisions
contained in Sections 8, 9 and 20 of the Act, can still be held to be valid if
not objected to through an objection preferred under Section 30 of the Act
within the prescribed period of limitation.
31.
Three types of situations may emerge between the parties and then before the
Court. Firstly, an arbitration agreement, under examination from the point of
view of its enforceability, may be one which expresses the parties' intention
to have their disputes settled by arbitration by using clear and unambiguous
language then the parties and the Court have no other choice but to treat the
contract as binding and enforce it. Or, there may be an agreement suffering
from such vagueness or uncertainty as is not capable of being construed at all
by culling out the intention of the parties with certainty, even by reference
to the provisions of the Arbitration Act, then it shall have to be held that
there was no agreement between the parties in the eye of law and the question
of appointing an arbitrator or making a reference or disputes by reference to
Sections 8, 9 and 20 shall not arise. Secondly, there may be an arbitrator or
arbitrators named, or the authority may be named who shall appoint an
arbitrator, then the parties have already been ad idem on the real identity of
the arbitrator as appointed by them before hand; the consent is already spelled
out and binds the parties and the Court. All that may remain to be done in the
event of an occasion arising for the purpose, is to have the agreement filed in
the Court and seek an order of reference to the arbitrator appointed by the
parties. Thirdly, if the arbitrator is not named and the authority who would
appoint the arbitrator is also not specified, the appointment and reference
shall be to a sole arbitrator unless a different intention is expressly spelt
out. The appointment and reference - both shall be by the consent of the
parties. Where the parties do not agree, the Court steps in and assumes
jurisdiction to make an appointment, also to make a reference, subject to the
jurisdiction of the Court being invoked in that regard. We hasten to add that
mere inaction by a party called upon by the other one to act does not lead to
an inference as to implied consent or acquiescence being drawn. The appellant
not responding to respondent's proposal for joining in the appointment of a
sole arbitrator named by him could not be construed as consent and the only
option open to the respondent was to have invoked the jurisdiction of Court for
appointment of an arbitrator and an order of reference of disputes to him. It
is the Court which only could have compelled the appellant to join in the
proceedings." Reference may be made to some observations in Essar
Constructions v. N.P. Rama Krishna Reddy (2000 (6) SCC 94), where it was held
that appeal is maintainable against the dismissal of objections on the ground
of limitation. Similar views were expressed in Union of India and Ors. v.
Manager, M/s Jain and Associates (2001 (3) SCC 277). Para 11, 12 and 19 read as follows:
"11.
In view of the aforequoted Sections, it can be stated that—
(a) after
receipt of an award, the Court can suo motu refuse to make award rule of the
Court on the ground that
(i) part
of the award is upon a matter not referred to arbitration; and
(ii) the
award is imperfect in form or contains any obvious error. The Court can also
remit the award to arbitrator in case
(i) where
the award has left undetermined any matter referred to arbitration; or
(ii)
where it has determined any matter not referred to arbitration; or
(iii) the
award is so indefinite as to be incapable of execution; or
(iv) is
on the face of it illegal.
This
is also provided under parenthesis clause of section 17 which provides
"Where the Court sees no cause to remit the award or any of the matters
referred to arbitration for reconsideration or to set aside the award, the
Court shall .. proceed to pronounce judgment.." Therefore, it cannot be
stated that in case where objections under Section 30 or 33 are not filed the
Court is bound to pass decree in terms of the award.
(b)
Section 5 of Limitation Act gives discretion to the Court to extend the time
for filing application under Section 30 or 33 raising objections to the award.
(c)
The Civil Procedure Code including Order IX Rule 13 is applicable to the
proceedings initiated by producing award before the Court for passing a decree.
(d)
The power of the Court to modify the award under Section 15 or to remit the
award to the arbitrator for reconsideration under Section 16 varies from the
jurisdiction of the Court to set aside the award under Section 30 or to
determine the validity of the arbitration agreement or an award under Section
33.
12.
The result is--before pronouncing judgment, the Court has to apply its mind to
arrive at the conclusion whether there is any cause to modify or remit the
award. Further the phrase 'pronounce judgment' would itself indicate judicial
determination by reasoned order for arriving at the conclusion that decree in
terms of award be passed. One of the meaning given to the word
"Judgment" in Webster's Comprehensive Dictionary [International
Edition, Vol. 1 (1984)] reads thus: "the result of judging; the decision
or conclusion reached, as after consideration or deliberation". Further,
Order XX Rule 4(2) C.P.C. in terms provides that 'Judgment' shall contain a
concise statement of case, the points for determination, the decision thereon,
and the reasons for such decision.
This
is antithesis to pronouncement of non- speaking order.
19.
Further, large part of the controversy involved in this appeal is covered by
the decision rendered by this Court in Essar Constructions v. N.P. Rama Krishna
Reddy (2000 (6) SCC 94). The Court observed that because of the applicability
of Section 5 of the Limitation Act, 1963, if the court has not pronounced
judgment for whatever reason, although the time prescribed for making the
application has expired and an application for setting aside the award is made
with a prayer for condonation of delay, the court cannot pronounce judgment
until the application is rejected. The Court also observed that even after a
decree is passed under Section 17, an application under Section 30 can be
entertained provided sufficient cause is established. In either case, the
rejection of the application would be a refusal to set aside the award. In case
where such application is rejected on the ground that it is delayed and no
sufficient cause has been made out under Section 5 of the Limitation Act, it
would be an appealable order under Section 39(1)(vi) of the Act".
The
decision in Popular Construction's case (supra) did not deal with specific
issues in this case. In that decision it was held that in respect of
"sufficient cause cases" the provisions of Section 34(3) of the Act
which are special provisions relating to condonation of delay override the
general provisions of the Section 5 of the Limitation Act, 1963 (in short
'Limitation Act'). The position was reiterated in the Western Builders case
(supra) and also in Fairgrowth Investment Ltd. v. Custodian (2004 (11) SCC
472). There can be no quarrel with the proposition that Section 5 of the
Limitation Act providing for condonation of delay is excluded by Section 34(3)
of the Act.
But
the question in the instant case is not about the applicability of Section 5 of
the Limitation Act, and question really is whether the appeal was maintainable.
The High Court did not consider this aspect. The appeal is clearly
maintainable. Therefore, the order of the High Court is set aside. The High
Court shall deal with the matter and examine the respective stand on merits
treating the appeal to be maintainable.
The
appeal is accordingly disposed of with no order as to costs.
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