JUGGILAL KAMLAPAT …PETITIONER
Vs.
GENERAL FIBRE DEALERS LTD (AND CONNECTED APPEAL) …RESPONDENT

DATE OF JUDGMENT: 12/12/1961

BENCH: WANCHOO, K.N. SHAH, J.C.

CITATION: 1962 AIR 1123 1962 SCR Supl. (2) 101

ACT:

Arbitration-Award set aside-Reference to arbitration not superseded-Second reference to arbitration, if permissible-Arbitration Act. 1940 (10 of 1940), s. 19.

HEADNOTE:

Disputes which arose between the parties with respect to carrying out a contract were referred to the arbitration of the Bengal Chamber of Commerce in accordance with an agreement to refer disputes as and when they arose to the arbitration of the Chamber. The award of the Tribunal of Arbitration was set aside by the High Court. On an application for referring the matter for arbitration de novo another tribunal was constituted which made a fresh award. The questions which arose for decision were whether after the first award was set aside the reference to arbitration was exhausted and the arbitrator had become functus offcio and whether without a fresh arbitration agreement it was not possible to have the same dispute decided again by the arbitrator.

^

HELD, that the arbitrator became functus officio after he gave the award but that did not mean that in no circumstances could there be further arbitration proceedings where an award was set aside or that the same arbitrator could never have anything to do with the award with respect to the same dispute.

Section 19 of the Arbitration Act empowered the Court not to supersede the reference and to leave the arbitration agreement effective even when it set aside the award and thereupon it would depend upon the terms of the arbitration agreement whether the arbitration proceedings could go on with respect to the same dispute or with respect to some other dispute arising under the arbitration agreement.

Barangore Jute Factory v. Hulas Chand Rupchand. (1958) 62 C.W.N. 734, Rallis India Ltd.

v. B. V. Manickam Chetty, A.I.R. 1956 Mad. 369, and Firm Gulab Rai Girdhari Lal v. Firm Bansi Lal Hansraj, A.I.R. 1959 Punj. 102, approved.

Morder v. Paimer, (1870) 6 Ch. App. 22 and Sutherland and Co . v. Hannevig Bros. Ltd. [1921] 1. K. B. 336, referred to.

In the present case the first award was set aside but as the reference had not been superseded and the arbitration 102 agreement subsisted it was open to the Chamber to appoint another tribunal under r. X of the Chamber Rules.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 309 and 525 of 59.

Appeals by special leave from the judgment and orders and decree dated August 27, 1958, November 24, 1958, and March 10, 1958 of the Calcutta High Court, in Award Case No. 103 of 1955 and Appeal from Original order No. 26 of 1956 respectively.

N. C. Chatterjee and B. P. Maheshwari, for the appellant (in C. A. No. 309 of 59).

H.N. Sanyal, Additional Solicitor-General of India, S. K. Gupta and D. N. Mukherjee, for respondent (in C A. No. 309 of 59).

N. C. Chatterjee, M. G. Poddar. and S.N.

Mukerji, for the appellant (in C. A. No. 525 of 59).

H. N. Sanyal, Additional Solicitor General of India A N. Sinha and P.K. Mukherjee, for the respondent (in C. A. No. 525 of 59).

1961. December 12. The Judgment of the Court was delivered by WANCHOO J.-These two appeals by special leave from the judgments of the Calcutta High Court raise a common question of law and will be dealt with together. It will be convenient to set out the facts of appeal 309 and deal with them in connection with the point raised on behalf of the appellant. These facts are that a contract was entered into between the parties for supply of cornsacks on August 29, 1951. The contract contained an arbitration clause in the following terms:

“All matters, questions, disputes, difference and/or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract whether or not the obligation of either or both 103 parties under this contract be subsisting at the time of such dispute and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration of the Bengal Chamber of Commerce under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted.” Disputes arose with respect to carrying out of the contract and on October 25, 1951, the respondent referred these disputes to the arbitration of the Bengal Chamber of Commerce (hereinafter referred to as the Chamber). That case was numbered 217 of 1951 in the Chamber’s records. On April 17, 1952, the tribunal of Arbitration made an award disallowing the claim of the respondent. This award was filed in the High Court. On May 25, 1953, the award was set aside on the ground of misconduct on the part of the arbitrators by a learned Single Judge. That order was taken in appeal and on July 8, 1954 L the appeal was dismissed. Later, leave to appeal to this Court was refused and thus the order of the learned Single Judge setting aside the award finally stood.

Soon after the award had been set aside by the learned Single Judge, the respondent addressed a letter to the Chamber on September 7, 1953. It was said in this letter that as the award in case No. 217-G of 1951 had been set aside by the High Court, the respondent begged to refer the matter for arbitration de novo and enclosed its statement of the case. Thereupon another tribunal was constituted under the rules of the Chamber to decide the dispute afresh. The appellant appeared before the tribunal and contended that it had no jurisdiction to make an award on a second references in the same dispute. The tribunal, however, proceeded to decide the reference and made the award on 104 March 15, 1955. This time the award was in favour of the respondent. Thereupon on August 4, 1955, the appellant made an application to the High Court praying that the award be set aside. In the alternative, the appellant prayed that the award be declared null and void and the arbitration agreement between the parties be superseded on the ground that the second reference was incompetent.

The application was opposed by the respondent and its contention was that this was not a second reference, and what the respondent wanted was that the Chamber should in the event that had happened take up the dispute again and make a proper award.

Reliance in support of the plea that such a course was permissible was placed on behalf of the respondent on the decision of the Calcutta High Court in The Barangore Jute Factory Co. Ltd. v.

Messrs. Hulas Chand Rupchand (1).

The learned Single Judge relied on the decision in The Barangore Jute Factory (1) and held that from what that respondent said to the Chamber its letter of September 7, 1953, it was reasonably clear that all that it wanted was that the Chamber should in the event that had happened take up the dispute again and make a proper award.

It could not therefore be held because of some language used in the letter that the respondent was making a fresh reference. Consequently, it was held that the Chamber had jurisdiction to decide the dispute after the earlier award had been set aside and what the respondent had asked for was for the continuance of the original reference, which had not been superseded. The learned Single Judge then went into the question whether there was such misconduct as would justify setting aside the award and held that there were no grounds made out which would justify the setting aside of the award. Consequently, the application for setting aside the award was dismissed. Thereafter the appellant came to this Court for special 105 leave, which was granted; and that is how the matter has come up before us.

The main question that has been argued before us is that the first award was set aside on May 25, 1953, the reference was exhausted and the arbitrator had become functus officio and it was therefore not possible without a fresh arbitration agreement to have the same dispute decided again by the arbitrator, irrespective of whether the letter of September 7, 1953, amounted to a second reference or was a mere request for continuation of the proceedings in the original reference, which had proved abortive as the award originally made had been set aside. Reliance in this connection is placed on what are called certain fundamental principles governing all arbitrations.

It is urged that once an award is wholly set aside, the arbitrator is functus offico and thereafter he cannot function again to decide the same dispute. This is said to be a fundamental principle of all arbitrations, and reliance is placed on a passage in “Russel on Arbitration” (15th Edn., p. 298), where the effect of setting aside an award is stated thus- “If an award is wholly set aside, the arbitrator is functus officio.” Reliance is also placed on Morduse v.

Palmer (1), where it was held- “An arbitrator having signed his award is functus officio and cannot alter the slightest error in it, even though such error has arisen from the mistake of the clerk in copying the draft. The proper course in such a case is to obtain an order to refer the award back to the arbitrator.” Reliance is also placed on Sutherland and Company v. Hannevig Brothers Limited(2). That was a case under the English Arbitration Act of 1889 which provided that an arbitrator could correct in an award any clerical mistake or error from any 106 accidental slip or omission and had thus varied the rule laid down in Mordue’s case(1). It was however held in that case that the correction made by the arbitrator was not justified under the Arbitration Act. These cases in our opinion have not much bearing on the question before us. It is true that generally speaking, an arbitrator is functus officio after he has made the award; but this only means that no power is left in the arbitrator to make any change of substance in the award that he had made (except in certain circumstances which have been provided in the law). What we have to see however are the scheme and the provisions of the Arbitration Act, No. X of 1940 (hereinafter called the Act), which govern the proceedings in arbitration in this case. These provisions are to be found in Chap. II of the Act which deal with “arbitration without intervention of Court.” Sections 3 to 7 deal with various aspects of arbitration agreements with which we are not concerned in the present case. Sections, 8, 11 and 12 deal with the power of a court to appoint or remove arbitrators or umpire. Sections 9 and 10 deal with the right of a party to appoint a new arbitrator or sole arbitrator and also with the appointment of an umpire. Section 13 deals with the power of the arbitrator and s. 14 provides for the signing of the award and giving notice in writing to the parties of the making and signing of the award and filing the same in court. Section 15 gives power to the court to modify the award in the circumstances mentioned therein. Section 16 gives power to the court to remit the award for reconsideration under certain circumstances.

Section 17 provides for delivery of judgment in terms of the award where the court sees no cause to remit the award or to set it aside. Section 18 provides for making interim orders. Section 30 which is in Chap. V sets out the grounds on which an award may be set aside.

107 Finally, we come to s. 19, which is the section on the interpretation of which the decision of this case depends. Section 19 reads as follows:- “Where an award has become void under sub-section(3) of section 16 or has been set aside, the court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred.” Before we consider what s. 19; provides we might advert to two matters. In the first place, it is not disputed before us that the English Arbitration Act does not contain a provision similar to s. 19; the consequence of this is that the decisions on English Courts may not be of much assistance on this particular aspect of the matter before us. Secondly, there was a parallel provision in para. 15(2) of Sch. II of the Code of Civil Procedure before 1940 as to the order to be passed by the court when setting aside an award, which was in these terms:- “(2) Where an award becomes void or is set aside under clause (1), the court shall make an order superseding the arbitration and in such case shall proceed with the suit.” It will be seen from this provision that when a court set aside an award under Sch. II the reference had to be superseded also, and the court was enjoined to proceed with the suit, the provision being contained in that part of Sch. II which dealt with arbitration in suits. But the provision also applied to cases covered by para.

17 read with para. 19 and also by implication to arbitrations outside court under para 21. But s.

19 of the Act has clearly made a departure from the parallel provision contained in Sch. II, para.

15 (2) and we have therefore to see what is the extent of the departure made by it.

It is clear from s. 19 that there are three matters which have to be borne in mind in arbitration 108 proceedings. There is first the arbitration agreement. Next comes the reference to arbitration and lastly the award. Section 19 provides inter alia that where an award has been set aside, the court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred. The section therefore leaves it to the discretion of the court when it decides to set aside an award, whether to supersede the reference or not. It may not supersede the reference at all in which case though the award may be set aside the reference will continue. But if it supersedes the reference it has also inconsequence to order that the arbitration agreement on the basis of which the reference was made would cease to have effect with respect to the difference referred. It is only therefore when the court orders supersession of the reference that the consequence follows that the arbitration agreement ceases to have effect with respect to the subject matter of the reference. The intention of the legislature in making this change in the consequences to follow the setting aside of an award is clear in as much as the provision recognises that there may be different kinds of arbitration agreements, some of which might be exhausted by the reference already made and the award following thereon which has been set aside while others may be of a more comprehensive nature and may contemplate continuation of the reference relating to the same dispute or successive references relating to different disputes covered by the arbitration agreement. The legislature has therefore given discretion to the court under s. 19 to decide when it sets aside an award what the consequences of its order setting aside the award will be. If the court finds that the arbitration agreement is of the kind which exhausts itself after the first reference is made or if it finds on account of the reasons 109 which have impelled it to set aside the award that there should be no further reference of the dispute to arbitration, the court has the power to supersede the reference and thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred. On the other hand if the court finds that the arbitration agreement is of a general nature and contemplates continuation of the reference with respect to the same dispute or successive references with respect to different disputes arising under the terms of the arbitration agreement it may not supersedes the reference with the result that the reference as well as the arbitration agreement on which it is based survives. In such a case there can in our opinion be no doubt that there the reference and the arbitration agreement survive the same dispute may go before the arbitrators again provided there is machinery provided in the arbitration agreement which makes this possible. It will thus be seen that the discretion vested in the court under s.

19 depends upon the nature of the arbitration agreement in particular cases and it is on a consideration of those terms that the court may decide in one case to supersede the reference and order the arbitration agreement to cease to have effect after taking into account the reasons which have impelled it to set aside the award and another not to set aside the reference with the result that the reference and the arbitration agreement subsist; and if the arbitration agreement provides for machinery to have further arbitration on the same dispute or other disputes arising under the arbitration agreement it is permissible to have further arbitration on the same dispute or other disputes. The same discretion is given to the court with respect to arbitration under Chap. III of the Act dealing with “arbitration with intervention of a court where there is no suit pending,” as s. 20(5) provides that after the arbitration agreement has been ordered to be filed, the arbitration shall proceed 110 in accordance with, and shall be governed by, the other provisions of the Act so far as they can be made applicable. Further we find that the same discretion has been given to the court in the matter of arbitration in suits provided under Chap. IV, was s. 25 provides that “the provisions of the others Chapters shall, so far as they can be made applicable, apply to arbitration under this Chapter.” The proviso to s. 25 gives discretion to the court in any of the circumstances mentioned in ss. 8, 10, 11 and 12, instead of filling up the vacancies or making the appointments, to make an order superseding the arbitration and proceed with the suit, and where the court supersedes the arbitration under s. 19 it shall proceed with the suit. The scheme of the Act therefore is whether the arbitration is under Chap. II, Chap. III or Chap. IV, to give discretion to the court to decide whether to supersede the reference or not. Where it decides to supersede the reference it has to order that the arbitration agreement shall cease to have effect with respect to the difference referred;

but where it decides not to supersede the reference and the reference and the arbitration agreement subsist and if there is machinery provided in the arbitration agreement for making a further reference or for continuing the same reference, further arbitration can take place. The contention therefore urged on behalf of the appellant that once the award is set aside the arbitrator becomes functus officio and consequently there can be no further reference with respect to the dispute decided by the award which is set aside, must fail in view of the specific provisions of s. 19 of the Act.

We have already said that generally speaking, the arbitrator becomes functus officio after he has given the award; but that does not in our opinion mean that in no circumstances can there be further arbitration proceedings where an award 111 is set aside or that the same arbitrator can never have anything to do with the award with respect to the same dispute. Section 13 (d), for example, gives power to the arbitrator to correct in an award any clerical mistake or error arising from any accidental slip or omission. Further s. 16 gives power to the court; to remit the award to the arbitrator for reconsideration. Therefore, when it is said that the arbitrator is generally functus officio after he has made the award, it only means that he cannot change that award in any matter of substance himself. But that does not take away the court’s power to remit the award for reconsideration under s. 16 or to refuse to supersede the reference even though the award is set aside leaving it to the parties to take such further action under the arbitration agreement for further arbitration if it is possible so to do under the terms of a particular arbitration agreement. We are therefore of opinion that whatever may be the position in the absence of a provision similar to s. 19 of the Act there can be no doubt that s. 19 gives power to the court not to supersede the reference and so leave the arbitration agreement effective even when it sets aside award and thereupon, it will depend upon the terms of the arbitration agreement whether arbitration proceedings can go on with respect to the same dispute or with respect to some other disputes arising under the arbitration agreement.

This was the view taken in the Barangore Jute Factory case(1). Similar view has been taken in Rallis India Ltd. v. B.V. Manickam Chetti & Co.(2) and in Firm Gulab Rai Girdhari Lal v. Firm, Bansi Lal Hansraj(3). We think that this view is correct.

It is not in dispute that the reference was not superseded in this case when the award was set aside in May 1953. It will therefore depend upon 112 the terms of the arbitration agreement in this case whether it was possible to have further arbitration with respect to the same dispute. We have already set out the term in the contract relating to arbitration and it is clear that term is very wide in its amplitude and contemplates reference of disputes as and when they arise between the parties to the Chamber. Further as the Chamber is constituted the arbitrator in this term of the contract and as the Chamber consists of a large number of members and has its own rules for constituting arbitral tribunals. It is in our opinion quite possible on the terms of such an arbitration agreement to constitute another tribunal to decide the same dispute, where the reference remains pending and has not been set aside under s. 19, provided there is machinery for appointing different persons as arbitrators under the rules of the Chamber. It is however urged that this is a second reference of the same dispute and this at any rate is not contemplated by the term relating to arbitration in the contract. We are not impressed by this argument. Stress in this connection has been laid on the letter of September 7, 1953, in which the respondent said that it begged to refer the matter for arbitration de novo. Those words do not in our opinion show that a second reference was being made of the dispute. The letter begins by saying that the Chamber was aware that the previous award had been set aside. It was in those circumstances that the respondent told the Chamber that it begged to refer the matter for arbitration de novo. In the context this can only mean that the respondent was asking the Chamber to take up the reference again as the reference had not been superseded and arrange to continue the arbitration proceedings further. The only question therefore 113 that will arise is whether under the rules of the Chamber it was possible to constitute another tribunal to consider this dispute again. If that is possible, we fail to see why the arbitration proceedings should not go on further as the reference was not superseded in this case, and the arbitration agreement subsisted.

This brings us to the rules of the Chamber relating to the appointment of arbitral tribunal.

It is urged on behalf of the appellant that there is no provision in these rules for appointment of an arbitral tribunal where an award made by an earlier tribunal is set aside say, for misconduct.

If this contention is a justified it will certainly not be possible to appoint another arbitral tribunal to decide the reference after the award made on it by the earlier tribunal set aside. Reliance however is placed on behalf of the respondent on rr. V, VII and X made by the Chamber for the appointment of arbitral tribunals. It appears that no reliance was placed on r. V in the High Court; reliance however was placed on rr. VII and X in the High Court. The High Court held that r. VII justified the appointment of the tribunal in the present case, though it was of the view that r. X would not justify it. The appellant on the other hand contends that none of the three rules authorises the appointment of a fresh tribunal after an award is set aside and therefore there is no machinery under the terms of the arbitration agreement by which the arbitration can be further carried on, it being not disputed that the earlier tribunal whose award had been set aside on account of misconduct could not be again appointed.

Rule V(1) provides for an application for arbitration. Rule V(2) lays down that “on receipt of such application the Registrar shall constitute a court for the adjudication of the dispute.” It is urged on 114 behalf of the respondents that a fresh tribunal could be constituted under r. V (2) after the award of the earlier tribunal had been set aside, as the Registrar is authorised to constitute a court on receipt of an application by the Chamber under r. V (1). We are of opinion that this contention is not well founded. Rule V(2) applies to the first appointment after the receipt of the application and that appointment was made in this case and the award of the tribunal appointed under r. V (2) was set aside. Rule V (2) does not in our opinion contemplate a second appointment after the award of the court appointed under it on receipt of the application has been set aside. The respondent cannot sustain the appointment of a fresh tribunal under r. V(2).

Rule VII has been pressed into service by the High Court in this connection and it has been held on the basis of the Barangore Jute Factory’s case (1) that r. VII justified the appointment of a fresh tribunal in a case where an award made by the earlier tribunal is set aside. In that case the High Court was conscious that it was stretching the rule in applying it to the situation where an award is set aside. Rule VII says that “if the Court have allowed the time or extended time to expire without making any award, and without having signified to the Registrar that they cannot agree, the Registrar shall constitute in manner aforesaid another Court which shall proceed with the arbitration and shall be at liberty to act upon the record or the proceedings as then existing and on the evidence, if any, then taken in the arbitration or to commence the arbitration de novo.” Rule XXV makes provision that the award shall be made within four months or within such extended time as may be agreed to between the parties to the reference. Rule VII obviously refers to a case where the time or the extended time 115 allowed to the tribunal has been allowed to expire; it cannot refer to a case where the tribunal has made the award within the time fixed but later that award is set aside by court. It would in our opinion be stretching the language of r. VII too far to make it applicable to a case like the present. We cannot therefore agree with the High Court that r. VII justified the appointment of a fresh tribunal in the present case.

This brings us to r. X. The High Court thought that this rule could not apply. Rule X is in these terms:- “If any appointed arbitrator or umpire neglects or refuses to act or dies or become incapable of acting the Registrar shall substitute and appoint a new arbitrator or umpire as the case may be in manner aforesaid and the Court so reconstituted shall proceed with the arbitration with liberty to act on the record of the proceedings as then existing and on the evidence, if any then taken in the arbitration, or to commence the proceedings de novo.” We are of opinion that it was open to the Registrar under this rule to appoint a fresh tribunal because the earlier tribunal had become incapable of acting in view of the fact that its award had been set aside on the ground of misconduct. It has been urged on behalf of the appellant that the words “becomes incapable of acting” apply only to physical inability to act and in particular stress is laid on the collocation of words where these words follow the word “dies”. We are however of opinion that these words cannot take their colour from the word “dies” and are a separate category by themselves and must be interpreted on their own. Now there is no doubt that generally speaking an arbitrator may become incapable of acting because of some physical cause, for example, he may fell ill or may go mad and so 116 on. But we do not think that these words only refer to physical incapacity; in our opinion, they refer to any kind of incapacity, which may supervene after the appointment of the arbitrators, even to an incapacity from before but which was not known to the parties, or in this case to the Chamber before they are appointed. We may in this connection refer to the opinion of Russel (“Russel on Arbitration”, 15th Edn, p.7), where dealing with similar words in s. 10(b) of the English Arbitration Act of 1950, it has been said as follows:- “It would appear that the word ‘incapable’ in section 10(b) must refer to some incapacity arising after the date of the appointment, or not known to the parties at that date.” Clearly therefore, the words “becomes incapable of acting” do not merely refer to physical incapacity but to any kind of incapacity which arises after the appointment or which was there before the appointment but was not known to the parties or to the Chamber in this case. Take, for example, the case of persons appointed by the Chamber to decide a dispute; after the appointment, one arbitratior acquires an interest in the subject-matter of the dispute. Obviously such a person must be held to have become incapable of acting even though there is no question of any physical incapacity on his part. We are therefore of opinion that the words “becomes incapable of acting” in r. X are of wide amplitude and do not refer to cases only of physical incapacity but to any kind of incapacity arising after the appointment or even before the appointment provided it was not known to the parties, or to the Chamber in the present case. We cannot therefore agree with the High Court that r.

X will not apply to the present case.

What has happened in this case is that the previous tribunal made an award. That award has 117 been set aside on account of misconduct. In the circumstances we are of opinion that the previous tribunal has become incapable of acting as arbitrator to decide this dispute because of its misconduct. Further as the reference has not been superseded and the arbitration agreement subsists, it was in our opinion open to the Chamber, on the request of the respondent, to appoint another arbitral tribunal under r. X. Therefore, as there is a machinery by which fresh arbitrators can be appointed according to the terms of the arbitration agreement read with the rules of the Chamber and as the reference has not been superseded, the appointment of a fresh tribunal and the carrying on of the arbitration further were within the terms of the arbitration agreement.

No other point has been urged on behalf of the appellant in this appeal to challenge the correctness of the decision of the High Court.

Therefore, appeal No. 309 must fail.

Turning now to appeal No. 525, it is enough to say that it is similar to appeal No. 309 in all respects except one. The difference is that in this case the appellant objected to the appointment of a fresh tribunal and an application was made under s. 33 of the Act paying for the relief that no arbitration agreement existed after the earlier award had been set aside and therefore there could be no further arbitration. For reasons which we have already given this contention must fail, for it is not in dispute that this appeal also when the earlier award was set aside there was no supersession of the reference and the arbitration agreement is in the same terms as in the other appeal. What happened in this case was that the learned Single Judge allowed the application and revoked the authority of the Chamber to arbitrate. There was then an appeal by the present respondent 118 which was allowed on the basis of the Barangore Jute Factory case (1). Thereupon the present appeal has been brought to this Court by special leave. It has been contended on behalf of the appellant that the order under s. 33 was not appealable in view of the provisions of s. 39 of the Act and therefore the High Court had no jurisdiction in appeal to set aside the order of the learned Single Judge. This point as to jurisdiction was not taken before the appeal court nor has it been taken in the special leave petition to this Court or in the statement of case. It seems that the appeal was entertained in the High Court on the view that an appeal lay under the Letters Patent from an order of a Single Judge. Even if we were to entertain this argument the respondent will be entitled to ask for special leave to appeal against the order of the Single Judge and we will be justified having regard to the course of events and the view expressed in the companion appeal in granting leave after condoning the delay and in passing the same order which has been passed by the High Court in appeal. Technical requirements of procedure may of course be fulfilled by following the course suggested but no useful purpose will be served thereby. For reasons which we have already given the order of the appeal court is right. There is no reason to interfere with it and this appeal will also have to be dismissed.

We therefore dismiss the appeals with costs- one set of hearing costs.

Appeal dismissed.

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2153 OF 2010
M/S. DYNA TECHNOLOGIES PVT. LTD. …APPELLANT(S)
VERSUS
M/S. CROMPTON GREAVES LTD. …RESPONDENT(S)
JUDGMENT

N. V. RAMANA, J.

1. The question involved herein revolves around the requirement of reasoned award and the cautionary tale for the parties and arbitrators to have a clear award, rather than to have an award which is muddled in form and implied in its content, which inevitably leads to wastage of time and resources of the parties to get clarity, and in some cases, frustrate the very reason for going for an arbitration.

2. This appeal is filed against the final order and judgment dated 27.04.2007, passed by the High Court of Judicature at Madras whereby the High Court partly allowed the appeal filed by the respondent and set aside the award of Arbitral Tribunal relating to claim no. 2 for payment of compensation for the losses suffered due to unproductive use of machineries.

3. Brief facts of the case are that a contract was entered into between DCM Shriram Aqua Foods Limited (hereinafter referred to as ‘DCM’ in short) and M/s. Crompton Greaves Limited (hereinafter referred to as “CGL” in short) for an aquaculture unit to be set up by such Principal, namely, DCM. CGL invited tenders for carrying out certain works for construction of ponds, channels, drains and associated works. The appellant M/s Dyna Technologies Pvt. Ltd. gave its proposal, estimate and quotation for carrying out the work. Thereafter, the respondent CGL placed a letter of intent dated 25th July, 1994, relevant portions of which are as under:

“10. In the event that you are forced to keep your equipment and manpower idle due to non availability of work fronts due to reasons attributable to DCM or due to legal disturbances not connected with you, you shall be compensated as follows:
(i) Maximum seven days of stoppage of work without any compensation.
(ii) CGL reserves the right to advice you to demobilize partially or fully in lieu of paying compensation for such delays. Under such circumstances, you shall be paid such compensation towards transportation of equipment to Site at mutually agreed rates.
(iii) Suitable time extension shall be given to complete the work to compensate the delay caused due to the stoppage of work.
11. Storage & Security: you will be responsible to provide necessary stores, office and labour camps for your staff at site. Only open area for construction of above will be given to you. Electricity will be provided at one point on chargeable basis at actuals. You will be responsible to tap the same to your required place. A format work order will be charged subsequently which will cover other General Terms and Conditions. Labour rules, Workmen Compensation etc. which may not be covered by this LOI and the same shall also be part of this LOI.”

4. The appellant made certain queries and clarifications, and by letter dated 10th October, 1994, CGL amended the contract as suggested by the appellant company. Thereafter, CGL issued work order on 15th November, 1994 setting out the terms and conditions of the work, material portions of which are stated as under:
“2. Termination of contract: The Company reserves the right to terminate this work at any stage without payment of compensation due to any of the following reasons:
a. If the original contract between the client and the company is terminated/suspended.
b. The company is unable to proceed with the work due to reasons like non­availability of work fronts, delay in availability of materials or delay in receipt of payments from clients etc.
c. If the contractor is not able to carry out work to the satisfaction of the company’s clients representatives.
d. If the contractor is unable to ensure adequate progress as required by the company and their purchaser.
e. Upon termination of this contract/work order, all rights and obligation of the parties, shall cease provided that the termination shall not relieve the contractor of any of his obligations which may have accrued upto the date of termination.
Upon termination of this contract/work order due to default on the part of the contractor, he /it shall indemnify the company against all losses incurred by the company as a result of such termination.”

5. After commencement of the work, the respondent CGL on 5th January, 1995 instructed the employees of the appellant company to stop the work.

6. The appellant company claimed compensation for such premature termination of the contract and ultimately the dispute was referred to Arbitral Tribunal consisting of three Arbitrators.

7. The appellant­claimant made the following claims:­
(1)Losses due to idle charges.
(2)Losses due to unproductivity of the men and machineries which could not work due to hindrances.
(3)Loss of profit as the contract got dissolved and
(4)Interest on the above claims and
(5)Costs.

8. The aforementioned claims are listed in the statement of claims totalling to Rs. 54,21,170.45 initially on 21st June, 1997 and revised to Rs. 53,83,980.45 on 5th July, 1997.

9. The following is a summary of the final claims:­

10. It may be relevant to note at this stage that so far as claim no. 1 in reference to the losses due to idle charges is concerned, it was finally settled amicably by the parties and the balance towards the interest component also stands paid.

11. So far as claim no. 3 in reference to loss of profit is concerned, the same was disallowed by the Arbitral Tribunal and it was later not questioned by the appellant­claimant and that attained finality.
12. The only objection is in reference to claim no. 2, i.e., losses due to unproductive use of machineries which was accepted by the Arbitral Tribunal for a sum of Rs. 27,78,125/­ with interest @ 18% p.a. vide its award dated 30th April, 1998 and Correction to award dated 5th May, 1998.

13. Aggrieved by the award passed by the Tribunal, an original petition was filed before the learned Single Judge of the High Court of Judicature at Madras, questioning the award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter “Arbitration Act”), by the respondent. The learned Single Judge, while upholding the award of the Tribunal, observed as under:
“7. Thus the Arbitrators have given a specific finding that the amount paid as compensation is actually the amount expended by the fourth respondent and therefore the petitioner is liable to reimburse the loss sustained by the fourth respondent. Therefore, this contention is also not acceptable.
…
9. Further, the learned counsel for the petitioner took this court to various portions of the Award and tried to convince this Court that the Arbitrators have not decided the issue fully appreciating the evidence on record. In the judgment of the Supreme Court reported in M/s Sundarsan Trading Company v. Government of Kerala (AIR 1989 Supreme Court 890) it has been clearly held that the power of the Arbitrator in respect of the interpretation of the contract in a matter for arbitration, the Arbitrator can pass the Award by taking a particular view of the contract and hence, the Court cannot substitute its own decision. Therefore, this Court cannot reappraise the evidence and substitutes its views and set aside the Award. Also in the case of Tamil Nadu Civil Supplies Corporation Limited v. Albert and Company (2000 (III) CTC 83), this Court has held that as per Section 34 of the Act, the Award of the Arbitrator can be set aside only on the limited grounds and the Award cannot be interfered with simply because another view is possible on the available materials. The arbitrator is a Judge of choice of parties and this Court cannot set aside unless it suffers from error apparent on the face of the record. It cannot be set aside even if the Court can come to different conclusion on the same facts. The learned counsel for the petitioner has not pointed out any such ground. It cannot also be said that the Award is perverse or has error apparent on the face of the record. Therefore, the Award passed by the Arbitrator is not illegal or invalid and cannot be set aside. Therefore, the petition is dismissed.”
(emphasis supplied)

14. Aggrieved by the aforesaid decision of the learned Single Judge, the respondent appealed before the Division Bench in O.S.A No. 234 of 2001. As aforementioned, the High Court vide impugned order partly allowed the appeal and set aside the award of the Tribunal relating to claim no. 2. The High Court was of the opinion that the award does not contain sufficient reasons and the statements contained in paragraph 3.1 (a) to 3.1 (g) of the award does not provide any reasons, discussions or conclusion. The High Court has observed in the following manner:
“18. It is of course true that an Arbitrator cannot be expected to write a detailed judgment as in a law Court. However, the present Act contemplates that the award of the Arbitrator should be supported by reason. The decision relied upon by the counsel for the respondent, rendered on the basis of the Arbitration Act, 1940, cannot be pressed into service keeping in view the specific provision contained in the Act. Moreover, even assuming that the ratio of the said decision is applicable, we cannot cull out any underlying reason in the award for directing payment of compensation. The basis for the right of the claimant and the basis of the liability of the present appellant have not been indicated anywhere within four corners of the award and in spite of the best efforts it is not possible to discover even any latent reason in the award.
19. It was also contended that the discussion in para 3.1(g) of the award contains the basis and reason given by the Tribunal. We have carefully gone through such paragraph as well as the preceding and subsequent paragraphs. In our considered opinion, the statements recited in para 3.1 including para 3.1(g) are only substance of the submissions/claim made by the claimant and para 3.1(g) cannot be construed as a conclusion or even the reasoning given by the Tribunal.”

15. Having come to a conclusion that the arbitral award was deficient due to the lack of reasoning, the High Court proceeded further to note that the option of Section 34 (4) of the Arbitration Act was not necessary as the compensation could not have been claimed considering the fact that the work order has provision barring claim no. 2, in the following manner:
“20. Learned counsel for the respondent has relied upon Section 34(4) of the Arbitration Act and has submitted that in case if this Court finds that the Arbitral Tribunal has not given reason, even though it is so required under Section 31(3) by invoking jurisdiction under Section 31(4), this Court can give opportunity to the Arbitral Tribunal to resume the arbitral proceedings or to take action as in the opinion of the Arbitral Tribunal would eliminate the grounds for setting aside the arbitral award.
21. We do not think that the present case is a fit case where the Arbitral Tribunal can be called upon to give reasons in support of its conclusion. This is because, in our considered opinion, the terms of the contract clearly exclude the possibility of payment of any compensation on account of premature termination of the contract as envisaged in para C. 2(a).”

16. Thereafter, the High Court proceeded further to note that the arbitral proceeding was beyond the competence of the Tribunal by considering the conditions under the work order.

17. Learned counsel for the appellant submits that the Arbitral Tribunal comprising of three Arbitrators has looked into the entire material available on record and recorded a finding in reference to claim no. 2 (losses suffered due to unproductive use of machineries) based on the case set up by the parties taking note of Section 73 of the Indian Contract Act, 1872 (hereinafter “Contract Act”) and relying on the evidence including appraisal of the log books approved by the respondent and held that actual losses/expenses were incurred by the appellant. In the given circumstances it was not open for the High Court in appeal to reappraise and substitute its own view in contravention of the clause of the agreement pursuant to which the arbitral dispute was raised and a finding came to be recorded in acceptance of the claim with regard to the losses suffered by the appellant due to unproductive use of machineries and the interference made by the High Court is beyond the scope of Section 37 of the Arbitration Act.

18. Learned counsel further submits that the Division Bench of the High Court did not hold that the evidence relied upon by the Arbitral Tribunal, i.e., the log books were not proper or were lacking quality. As a matter of fact, there was no challenge to the same in the appeal filed by the respondent under Section 37 of the Arbitration Act and only the liability was questioned. The learned counsel further submitted that the only submission of the learned counsel for the respondent before the Arbitral Tribunal and also before the learned Single Judge of the High Court was that there was no provision under the contract granting compensation for loss incurred for unproductive use of machinery and that the Arbitral Tribunal has exceeded its jurisdiction. This issue was examined by the Tribunal and confirmed by the Single Judge of the High Court, after examining the objections raised by the respondent under Section 34 of the Arbitration Act. The learned counsel for the appellant contented that interference at the appellate stage is beyond the scope of Section 37 of the Arbitration Act and in the given circumstances, claim no. 2 which has been set aside by the Division Bench of the High Court under the impugned judgment deserves to be interfered by this Court.

19. Learned counsel also submits that Section 73 of the Contract Act confers a right which is for public interest/benefit and contractual clause, if any, which takes away such a right unilaterally of a party is violative of Section 23 of the Contract Act. The law which is made for an individual’s benefit can be waived by only by such individual, however, where law is for public interest or has policy element, then such rights cannot be waived by an individual person inasmuch as such rights are a matter of public policy/public interest.

20. Learned counsel further submits that a contractual provision which is in contravention of a specific statutory provision, if allowed to be implemented, the same will result in frustration of a right conferred by law or if the contractual clause is immoral or opposed to public policy, in such cases the contractual clause is invalid and void ab initio and cannot be enforced to disentitle appellant in claiming the actual loss which has been suffered by it and established before the Arbitral Tribunal and which the respondent is under an obligation to reimburse. In the given circumstances, claim no. 2 which has been set aside by the High Court needs interference by this Court. The learned counsel in support has placed reliance on the judgment of this Court in K.N. Sathyapalan (Dead) by Lrs. v. State of Kerala, (2007) 13 SCC 43.

21. Per contra, learned counsel for the respondent, while supporting the findings recorded by the High Court in the impugned judgment, submits that the claim which has been disallowed by the High Court in the impugned judgment is basically a claim for payment of compensation or damages on account of premature termination of contract and neither the Arbitral Tribunal nor the learned Single Judge of the High Court has considered/examined the terms of the contract in appreciating the right of the claimant to claim compensation of damages and the corresponding liability of the respondent to pay/settle the claim. According to him, as per the terms of contract, no such compensation was payable.

22. Learned counsel further submits that it is well settled that the Arbitral Tribunal cannot travel beyond the terms of contract to award compensation. As a matter of fact, in the present case, the terms of contract expressly prohibit that no compensation is payable if the contract is terminated on account of termination of the project. In the face of such express prohibition, the Arbitral Tribunal has exceeded its jurisdiction and committed a manifest error in directing the payment of compensation even without disclosing the basis of arriving at such a conclusion.

23. Learned counsel for the respondent submits that Section 34(2) (a)(iv) of the Arbitration Act clearly envisages that such an award can be set aside if the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration. When there is a specific exclusion/prohibition in the contract, it was not open for the Tribunal to travel beyond the terms of contract in passing an award which has been taken note of by the Division Bench of the High Court in the impugned judgment and has been rightly set aside, supported by cogent reasons. The learned counsel further submitted that what has been observed by the Division Bench of the High Court in the impugned judgment is based on settled principles of law and needs no interference.

24. We have heard learned counsel for the parties and with their assistance perused the material available on record.

25. Before we devolve into the contractual issues, we need to observe certain pointers on the jurisdiction of the court under Section 34 of the Arbitration Act. Section 34 as it stood before the Amendment Act of 2015, was as follows­
“34 Application for setting aside arbitral award. —
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub­section (2) and sub­section (3).
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application furnishes proof that—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that—
(i) the subject­matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. —Without prejudice to the generality of sub­clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub­section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

26. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

27. Moreover, umpteen number of judgments of this Court have categorically held that the Courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.

28. Having established the basic jurisprudence behind Section 34 of the Arbitration Act, we must focus on the analysis of the case. The primary contention of the learned counsel appearing on behalf of the appellant is that the award by the learned Tribunal was perverse for want of reasons. The necessity of providing reasons has been provided under Section 31 of the Arbitration Act, which reads as under:
“31. Form and contents of arbitral award.­
…
(3) The arbitral award shall state the reasons upon which it is based, unless—
(a) the parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under section 30.”
(emphasis supplied)
Under the UNCITRAL Model Law the aforesaid provision is provided as under:
“(2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under article 30.”

29. Similar to the position under the Model Law, India also adopts a default rule to provide for reasons unless the parties agree otherwise. As with most countries like England, America and Model Law, Indian law recognizes enforcement of the reasonless award if it has been so agreed between the parties.

30. There is no gainsaying that arbitration proceedings are not per se comparable to judicial proceedings before the Court. A party under Indian Arbitration Law can opt for an arbitration before any person, even those who do not have prior legal experience as well. In this regard, we need to understand that the intention of the legislature to provide for a default rule, should be given rational meaning in light of commercial wisdom inherent in the choice of arbitration.

31. A five­Judge Constitution Bench of this Court in the case of Raipur Development Authority v. Chokhamal Contractors, AIR 1990 SC 1426, considered the scope of Section 30 of the Arbitration Act, 1940 and held as under:
“It is now well settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made Under Section 20 or Section 21 or Section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so.”

32. A three­Judge Bench of this Court in another case of S. Harcharan Singh v. Union of India, (1990) 4 SCC 647, reiterated its earlier view that the arbitrator’s adjudication is generally considered binding between the parties for he is a Tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of the Arbitration Act, 1940.

33. However, the ratio of Chokhamal case (supra) has not found favour of the Legislature, and accordingly Section 31(3) has been enacted in the Arbitration Act. This Court in Som Datt Builders Ltd. v. State of Kerala, (2009) 4 ARB LR 13 SC, a Division Bench of this Court has indicated that passing of a reasoned award is not an empty formulation under the Arbitration Act.

34. It may be relevant to note Russell on Arbitration, 23rd edn. (2007), wherein he notes that:
“If the Court can deduce from the award and the materials before it, which may include extracts from evidence and the transcript of hearing, the thrust of the tribunal’s reasoning then no irregularity will be found….Equally, the court should bear in mind that when considering awards produced by nonlawyer arbitrators, the court should look at the substance of such findings, rather than their form, and that one should approch a reading of the award in a fair, and not in an unduly literal way.”
(emphasis supplied)

35. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the Courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regards to the speedy resolution of dispute.

36. When we consider the requirement of a reasoned order three characteristics of a reasoned order can be fathomed. They are: proper, intelligible and adequate. If the reasoning in the order are improper, they reveal a flaw in the decision­making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards.

37. At this juncture it must be noted that the legislative intention of providing Section 34 (4) in the Arbitration Act was to make the award enforceable, after giving an opportunity to the Tribunal to undo the curable defects. This provision cannot be brushed aside and the High Court could not have proceeded further to determine the issue on merits.

38. In case of absence of reasoning the utility has been provided under of Section 34(4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34 (4) of the Arbitration Act to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act. However, in this case such remand to the Tribunal would not be beneficial as this case has taken more than 25 years for its adjudication. It is in this state of affairs that we lament that the purpose of arbitration as an effective and expeditious forum itself stands effaced.

39. It may be noted that when the High Court concluded that there was no reasoned award, then the award ceased to exist and the Court was functus officio under Section 34 of the Arbitration Act for hearing the challenge to the award under the provisions of Section 34 and come to a conclusion that the arbitration award was not in terms of the agreement. In such case, the High Court ought to have considered remanding the matter to the Tribunal in the usual course. However, the High Court analyzed the case on merits, but, for different reasons and we need not go into the validity of High Court’s interference.

40. Coming back to the award, we need to see whether the award of the Arbitral Tribunal can be sustained in the instant case. Although the Arbitral Tribunal has dealt with the claims separately under different sub­headings, the award is confusing and has jumbled the contentions, facts and reasoning, without appropriate distinction. The Tribunal rendered the award with narration of facts with references to the annexures wherever it relied upon by it. The Tribunal abruptly concluded at the end of the factual narration, without providing any reasons, in the following manner:
“(3) Claim for unproductive usage of machineries
….
(g) All the above facts clearly establish that the machineries deployed by the Claimant had to do unproductive work by shifting from one place to another to suit the availability of work.The contract contemplates only payment for actual turnover of earthwork and for this they had received amount totaling to Rs. 1709782.88. The Claimant claims that the hire charges paid to the machineries, men and engineers should be reimbursed to him. He has given the actual expenses in his claim statement.
(emphasis supplied)

41. Interestingly, the factual narration is coupled with the claimant’s argument, which is bundled together. A close reading of the same is required to separate the same wherein the Arbitral Tribunal has mixed the arguments with the premise it intended to rely upon for the claimant’s claim. Further, it has reduced the reasons for respondent’s defense. In spite of our independent application of mind based on the documents relied upon, but cannot sustain the award in its existing form as there is a requirement of legal reasoning to supplement such conclusion. In this context, the complexity of the subject matter stops us from supplementing such legal reasoning and we cannot sustain the aforesaid award as being reasoned.

42. It may be beneficial to reduce the concluding paragraph of the award, which reads as under:
“3.4. The above arguments and various authorities quoted by them have been studied by the Tribunal and we are convinced that the compensation is payable on the hire charges and expenses incurred by the claimant based on the claims made by him in June 95 and now submitted by the claimant in his revised claim petition on 05.07.1997. We are convinced that the machineries have been actually mobilized from the letter R­3, R­8 and R­10 issued by DCM reporting on the number of machineries deployed by Claimant. The Claimants have produced the log books and bills for the various machineries and modified their claims. The tribunal had perused the log books and idle wages approved in C­7 by Respondent and the claims made in R­17.”
(emphasis supplied)

43. From the facts, we can only state that from a perusal of the award, in the facts and circumstances of the case, it has been rendered without reasons. However, the muddled and confused form of the award has invited the High Court to state that the arbitrator has merely restated the contentions of both parties. From a perusal of the award, the inadequate reasoning and basing the award on the approval of the respondent herein cannot be stated to be appropriate considering the complexity of the issue involved herein, and accordingly the award is unintelligible and cannot be sustained.

44. In any case, the litigation has been protracted for more than 25 years, without any end for the parties. In totality of the matter, we consider it appropriate to direct the respondents to pay a sum of Rs. 30,00,000/­ (Rupees Thirty Lakhs only) to the appellant in full and final settlement against claim No. 2 within a period of 8 weeks, failing which the appellant will be entitled to interest at 12% per annum until payment, for providing quietus to the litigation.

45. In view of the conclusions reached, the appeal is disposed of to the extent indicated herein. There shall be no orders as to the costs.

……………………………………….J.
(N.V. RAMANA)
……………………………………….J.
(MOHAN M. SHANTANAGOUDAR)
……………………………………….J.
(AJAY RASTOGI)

NEW DELHI
DECEMBER 18, 2019.

The post M/s. Dyna Technologies Pvt. Ltd. Vs M/s. Crompton Greaves Ltd. appeared first on B&B Associates LLP.

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9515 of 2018
(ARISING OUT OF SLP (CIVIL) NO.13913 OF 2018)
M/S SHRIRAM EPC LIMITED …APPELLANT
VERSUS
RIOGLASS SOLAR SA …RESPONDENT
J U D G M E N T

R.F. NARIMAN, J.

1. Leave granted.

2. The present appeal arises from the judgment of a Single Judge of the High Court of Judicature at Madras, dated 09.02.2017, in which a petition filed to enforce a foreign award was allowed. Several grounds were taken before the learned single Judge. We are concerned with only one ground that has been argued before us, namely, that as the award has not been stamped, it cannot be enforced under Sections 48 and 49 of the Arbitration and Conciliation Act, 1996 (“1996 Act”).

3. The brief facts that are necessary for determination of the present controversy are as follows:
3.1. An ICC award was delivered in London on 12.02.2015 by Mr. Christopher Style QC in the following terms:
“363. After consideration of all the factual and legal submissions which have been presented to me and for the reasons set out in full above, I award, declare and adjudge as follows:
(1) I declare that I have no jurisdiction over the Second and Third Respondents.
(2) I declare that Rioglass is not obliged to issue a Performance Bank Guarantee as provided for in clause 6 of the Agreement, as amended by Amendment No.1.
(3) I declare that Rioglass is entitled to sell as scrap the mirrors that it holds in storage in relation to Delivery Four.
(4) I declare that Shriram acted in breach of the Agreement in the respects set out above.
(5) I order Shriram to pay Rioglass €4,366,598.70, consisting of damages amounting to €4,151,570.52 and interest amounting to €215,028.18.”

3.2. Objections dated 21.07.2015 under Section 34 of the Arbitration and Conciliation Act, 1996 were filed by the Appellant which were dismissed on 27.09.2016, stating that a petition under Section 34 would not be maintainable as against a foreign award, citing this Court’s judgment in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552. Meanwhile, the Respondent filed a petition under Section 47 of the 1996 Act, dated 05.08.2015, to enforce the said award. As stated hereinabove, all objections to the said award were rejected by the learned Single Judge on 09.02.2017. An appeal to the Division Bench resulted in an Order dated 14.03.2018, stating that in view of Section 50 of the 1996 Act, the said appeal would not be maintainable. This is how the present SLP has been filed against the decision of the learned Single Judge.

4. Shri K.V. Viswanathan, learned senior advocate, appearing on behalf of the Appellant, has submitted before us, that given the provisions of the Indian Stamp Act, 1899, it is clear that a foreign award would be covered by the said Act. This being so, and stamp duty not having been paid, the said foreign award cannot be enforced. He relied strongly on a judgment of the Punjab and Haryana High Court reported in Gujrals Co. v. M.A. Morris, AIR 1962 P&H 167. According to him, the contrary judgments of the Delhi High Court reported in Naval Gent Maritime Ltd. v. Shivanath Rai Harnarain (I) Ltd., (2009) 163 DLT 391, and the Madhya Pradesh High Court judgment reported in Narayan Trading Co. v. Abcom Trading Pvt. Ltd., (2013) 2 MP LJ 252, are incorrect. According to the learned senior advocate, the Delhi High Court judgment is really a judgment on registration of a foreign award, even though it purports to speak about stamp duty payable. The judgment of the Madhya Pradesh High Court, on the other hand, is not correct in stating that a foreign award would not be included within the term “award” under Schedule I of the Indian Stamp Act, 1899. He relied upon the Gujarat High Court judgment reported in Orient Middle East Lines Ltd., Bombay and Anr. v. Brace Transport Corporation of Monrovia and Ors., AIR 1986 Guj 62, which stated that Article III of the New York Convention would make it clear that stamp duty, being in the nature of fees or charges for recognition and enforcement of a foreign award, can be enforced in accordance with the rules of procedure of the territory in which the award is sought to be enforced. This being so, the New York Convention itself recognizes that foreign awards may have to bear stamp duty for enforcement in the country in which they are sought to be enforced. He further relied upon the 194th Law Commission Report, which had suggested changes insofar as stamp duty is concerned in Part II of the 1996 Act.

5. Learned counsel appearing on behalf of the Respondent, on the other hand, relied strongly upon the judgment of the Delhi High Court as well as the Madhya Pradesh High Court referred to hereinabove. According to the learned counsel, the expression “award” which occurs in Schedule I of the Indian Stamp Act, 1899 applies only to a domestic award and not a foreign award. He relied on the fact that the Indian Stamp Act was enacted in 1899, in which “award” has never been enlarged so as to include foreign awards after the Arbitration (Protocol and Convention) Act, 1937 and/or the Foreign Awards (Recognition and Enforcement) Act, 1961 were enacted. Also, according to the learned counsel, the only requirement for the enforcement of a foreign award is laid down in Section 47 of the Act, which does not require the award to be stamped. A without prejudice argument was also made that under Section 48(2)(b), even if a foreign award were required to be stamped, but is not stamped, enforcement of such award would not be contrary to the fundamental policy of Indian law.

6. Having heard learned counsel for the parties, it is important to first set out the relevant provisions of the Indian Stamp Act, 1899. Section 1 of the Indian Stamp Act, 1899 as it originally stood, reads as follows:
“1. Short title, extent, and commencement.—(1) This Act may be called the Indian Stamp Act, 1899.
(2) It extends to the whole of British India inclusive of Upper Burma, British Baluchistan, the Santal Parganas, and the Pargana of Spiti; and
(3) It shall come into force on the first day of July 1899.” Section 2(14) defines “instrument” as follows:
“2. Definitions.—
xxx xxx xxx
(14) “Instrument” includes every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished, or recorded:”
“Instruments chargeable with duty” are dealt with by Section 3. Section 3 states as follows:
“3. Instruments chargeable with duty.—Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefore, respectively, that is to say—
(a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in India on or after the first day of July, 1899;
(b) every bill of exchange payable otherwise than on demand or promissory note drawn or made out of India on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in India; and
(c) every instrument (other than a bill exchange or promissory note) mentioned in that Schedule, which, not having been previously executed by any person, is executed out of India on or after that day relates to any property situate, or to any matter or thing done or to be done, in India and is received in India:
Provided that no duty shall be chargeable in respect of—
(1) any instrument executed by, or on behalf of, or in favour of, the Government in cases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument;
(2) any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel, registered under the Merchant Shipping Act, 1894, or under Act 19 of 1938, or the Indian Registration of Ships Act, 1841 (10 of 1841) as amended by subsequent Acts.
(3) any instrument executed, by, or, on behalf of, or, in favour of, the Developer, or Unit or in connection with the carrying out of purposes of the Special Economic Zone.
Explanation.—For the purposes of this clause, the expressions “Developer”, “Special Economic Zone” and “Unit” shall have meanings respectively assigned to them in clause (g), (za) and
(zc) of section 2 of the Special Economic Zones Act, 2005.”
Under Sections 33 and 35, instruments that are not duly stamped in accordance with the provisions of the Act are inadmissible in evidence, and any such instrument which is not duly stamped is liable to be impounded as provided in Section 33 of the Act. Item No.12 of Schedule I of the Indian Stamp Act, 1899 reads as follows:

Description of Instrument Proper Stamp-duty
“12. AWARD, that is to say, any decision in writing by an arbitrator or umpire, not being an award directing a partition, on a reference made otherwise than by an order of the Court in the course of a suit.—

Exemption

Award under the Bombay District Municipal Act, 1873 (Bom. Act 6 of 1873), Section 81, or the Bombay Hereditary Offices Act, 1874 (Bom. Act 3 of 1874), Section 18.”

7. The main bone of contention in the present appeal is whether the expression “award” would include a foreign award.

8. In order to determine this question, it is important to see the state of the law insofar as arbitration is concerned in the year of the Indian Stamp Act, 1899. At this point of time, there were two sets of laws dealing with arbitration. The first was contained in the Code of Civil Procedure, 1882. In Part V, Chapter XXXVII spoke of reference to arbitration. Under Sections 506 to 522 of the Code of Civil Procedure, 1882, parties to a suit may apply for an order of reference to arbitration, in which case, the arbitrator or umpire, as the case may be, may deliver an award which ultimately may be enforced by a judgment which is to be according to the award and a decree to follow. By Sections 523 to 526, agreements to refer disputes to arbitration may be filed in Court, and awards delivered thereon. Needless to add, the Civil Procedure Code, 1882 applied to British India.

9. Close on the heels of the Indian Stamp Act, 1899, comes the Indian Arbitration Act, 1899. As per Section 1(2) of this Act, this Act also extended to the whole of British India, but Section 2 made it clear that the Act will apply only in cases where the subject matter submitted to arbitration, if it were the subject of a suit, could be instituted in a Presidency Town. Section 2 of this Act states as follows:
“2. Application.—Subject to the provisions of section 23, this Act shall apply only in cases where, if the subject-matter submitted to arbitration were the subject of a suit, the suit could, whether with leave or otherwise, be instituted in a Presidency-town:
Provided that the Local Government, with the previous sanction of the Governor-General in Council, may, by notification in the local official Gazette, declare this Act applicable in any other local area as if it were a Presidencytown.” Section 4 of the said Act states as follows:
“4. Definitions.—In this Act, unless there is anything repugnant in the subject or context,-
(a) “the Court” means, in the Presidency-towns, the High Court, and, elsewhere, the Court of the District Judge; and
(b) “submission” means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not.”
Section 11 then states:
“11. Award to be signed and filed.—(1) When the arbitrators or umpire have made their award, they shall sign it, and shall give notice to the parties of the making and signing thereof, and of the amount of the fees and charges payable to the arbitrators or umpire in respect of the arbitration and award.
(2) The arbitrators or umpire shall at the request of any party to the submission or any person claiming under him, and upon payment of the fees and charges due in respect of the arbitration and award, and of the costs and charges of filing the award, cause the award, or a signed copy of it, to be filed in the Court; and notice of the filing shall be given to the parties by the arbitrators or umpire.
(3) Where the arbitrators or umpire state a special case under section 10, clause (b), the Court shall deliver its opinion thereon; and such opinion shall be added to, and shall form part of, the award.”
Section 15, which is important, states as follows:
“15. Award when filed to be enforceable as a decree.—(1) An award on a submission, on being filed in the Court in accordance with the foregoing provisions, shall (unless the Court remits it to the reconsideration of the arbitrators or umpire, or sets it aside), be enforceable as if it were a decree of the Court.
(2) An award may be conditional or in the alternative.”

10. On a reading of the aforesaid provisions of these Acts, it becomes clear that the only “award” that is referred to in the Indian Stamp Act, 1899 is an award that is made in the territory of British India provided that such award is not made pursuant to a reference made by an order of the Court in the course of a suit. At this point in time, it is important to note that there were several princely states in India governed by sovereign rulers which had their own laws. Arbitration laws, if any, in the aforesaid princely states, if they were to culminate in awards, would not be “awards” under either the Civil Procedure Code, 1882 or the Indian Arbitration Act, 1899. They would therefore be foreign awards insofar as British India is concerned. An award made in a princely state, or in a foreign country, if enforced by means of a suit in British India, would not be covered by the expression “award” contained in Item 12 of Schedule I of the Indian Stamp Act, 1899. Only awards which are decisions in writing by an arbitrator or umpire, made in British India, on a reference made otherwise than by an order of the Court in the course of a suit would be included.

11. This position continued even when the Code of Civil Procedure, 1908 contained a Second Schedule, which substituted the arbitration provisions contained in the Code of Civil Procedure, 1882. Here again, under the Second Schedule, parties to a suit may apply for an order of reference to arbitration and an award would follow. Section 16 of the Second Schedule is important, and states as follows:
“16. Judgment to be according to award.— (1) Where the Court sees no cause to remit the award or any of the matters referred to arbitration for re-consideration in manner aforesaid, and no application has been made to set aside the award, or the Court has refused such application, the Court shall, after the time for making such application has expired, proceed to pronounce judgment according to the award.
(2) Upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except insofar as the decree is in excess of, or not in accordance with, the award.” Under Sections 20 and 21, arbitration without the intervention of a Court is referred to, and awards delivered in such cases are to be incorporated in a judgment by a Court, after which a decree is to follow, which decree then becomes enforceable.

12. Next in line, chronologically speaking, is the Arbitration (Protocol and Convention) Act, 1937, in which, certain foreign awards governed by the Geneva Convention of 1923 were to be recognized and enforced in signatory countries, India being one. In this Act, “foreign award” is defined as follows:
“2. Interpretation.—In this Act “foreign award” means an award on differences relating to matters considered as commercial under the law in force in India, made after the 28th day of July, 1924,—
(a) in pursuance of an agreement for arbitration to which the Protocol set forth in the First Schedule applies;
(b) between persons of whom one is subject to the jurisdiction of some one of such powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Convention set forth in the Second Schedule, and of whom the other is subject to the jurisdiction of some other of the powers aforesaid; and
(c) in one of such territories as the Central Government being satisfied that reciprocal provisions have been may by like notification, declare to be territories to which the said convention applies, and for the purposes of this Act an award shall not be deemed to be final if any proceedings for the purposes of contesting the validity of the award are pending in the country in which it was made.”

13. The Arbitration Act, 1940 then came into force, repealing both the Arbitration Act, 1899 as well as the Second Schedule to the Code of Civil Procedure, 1908. This Act, under Section 1(2), extended to the whole of India except the State of Jammu and Kashmir. Under this Act, “award” was defined as follows:
“2. Definitions.—
xxx xxx xxx
(b) “award” means an arbitration award;”
Under this Act, Chapter II dealt with arbitration without the intervention of a Court. Section 17 is important, and is set out as follows:
“17. Judgment is terms of award.— 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, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.”
Under Chapter III, arbitration with intervention of a Court where there is no suit pending is dealt with, and in Chapter IV, arbitration which arises in references from suits is dealt with. This Act, like its predecessors, also applied only to awards that were made first in British India, and later in the territory of India except the State of Jammu and Kashmir.

14. In 1961, after the New York Convention of 1958, the Foreign Awards (Recognition and Enforcement) Act, 1961, came into force to recognize and enforce New York Convention Awards. Here again, such awards were referred to as “foreign awards” in Section 2 thereof which defines foreign awards as follows:
“2. Definition.—In this Act, unless the context otherwise requires, “foreign award” means an award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960—
(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the Schedule applies; and
(b) in one of such territories as the Central Government being satisfied that reciprocal provisions have been made, may, by notification in the official Gazette, declare to be territories to which the said Convention applies.”

15. As is well-known, the present Arbitration and Conciliation Act, 1996 then came into force and repealed the Arbitration (Protocol and Convention) Act, 1937, The Arbitration Act, 1940, and the Foreign Awards (Recognition and Enforcement) Act, 1961 bringing, with certain important changes, domestic awards within Part I, foreign awards relatable to the New York Convention within Chapter I of Part II, and foreign awards relatable to the Geneva Convention within Chapter II of Part II. In the present Act, under Section 2(1)(c), “arbitral award” is defined as follows:
“2. Definitions.—(1) In this Part, unless the context otherwise requires,—
xxx xxx xxx
(c) “arbitral award” includes an interim award;”
Section 44 in Chapter I of Part II defines a New York Convention award as follows:
“44. Definition.—In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960—
(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
(b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.”

Section 53 in Chapter II of Part II defines a Geneva Convention award as follows:

“53. Interpretation.—In this Chapter “foreign award” means an arbitral award on differences relating to matters considered as commercial under the law in force in India made after the 28th day of July, 1924,— (a) in pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies, and (b) between persons of whom one is subject to the jurisdiction of some one of such powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Convention set forth in the Third Schedule, and of whom the other is subject to the jurisdiction of some other of the powers aforesaid, and (c) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said Convention applies, and for the purposes of this Chapter an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made.”
The other important sections which have a bearing on the controversy before us are as follows:
“46. When foreign award binding.—Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set-off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award.
47. Evidence.—(1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the Court—
(a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;
(b) the original agreement for arbitration or a duly certified copy thereof; and
(c) such evidence as may be necessary to prove that the award is a foreign award.
(2) If the award or agreement to be produced under sub-section
(1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India.
Explanation.— In this section and in the sections following in this Chapter, “Court” means the High Court having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the same had been the subject-matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.”
xxx xxx xxx
“49. Enforcement of foreign awards.—Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court.”

16. It will thus be seen that “award” under Item 12 of Schedule I of the Indian Stamp Act, 1899 has remained unchanged till date. As has been held by us hereinabove, in 1899, this “award” would refer only to a decision in writing by an arbitrator or umpire in a reference not made by an order of the Court in the course of a suit. This would apply only to such award made at the time in British India, and today, after the amendment of Section 1(2) of the Indian Stamp Act, 1899 by Act 43 of 1955, to awards made in the whole of India except the State of Jammu and Kashmir. This being the case, we are of the view that the expression “award” has never included a foreign award from the very inception till date. Consequently, a foreign award not being includible in Schedule I of the Indian Stamp Act, 1899, is not liable for stamp duty. Shri Viswanathan also relied upon the Tamil Nadu Amendment of the Indian Stamp Act, 1899. The Tamil Nadu Amendment contains the identical definition of “award” as given in Item 12 thereof. The only difference is in the figures contained for stamp duty. Consequently, this does not take the matter very much further.

17. Shri Viswanathan then argued, based on Senior Electric Inspector and Ors. v. Laxminarayan Chopra and Anr., (1962) 3 SCR 146, that an Act must be construed as on date, despite the fact that the definition contained in an old Act may not literally fit the bill. We are afraid that this judgment is wholly distinguishable in that, in the aforesaid case, the definition of “telegraph line” in the Indian Telegraph Act, 1885, was construed as being wide enough to include electric lines used for the purpose of wireless telegraph. This Court held that in a modern progressive society, it would be unreasonable to confine the intention of the legislature to the meaning attributable to a word used at the time the law was made, and, unless a contrary intention appeared, an interpretation should be given to the words used in the statute to take in new facts and situations, if such words are capable of comprehending them. As stated hereinabove, this judgment is wholly distinguishable in that, given the factual scenario of 1899, and the fact that foreign awards existed even then, in princely states as well as foreign countries, no new fact situation has arisen subsequently in order to apply the ratio of the said judgment. Further, we must not forget that the Indian Stamp Act, 1899 is a fiscal statute which must be construed literally. Any ambiguity in the said statute would enure to the benefit of the assessee who has to pay stamp duty. This being the case, Shri Viswanathan’s argument based on the aforesaid judgment, must be rejected.

18. We now come to some of the judgments referred to by counsel for the parties. The Punjab and Haryana High Court judgment (supra), strongly relied upon by Shri Viswanathan, referred to and relied upon Section 3(c) of the Indian Stamp Act, 1899, and held that an instrument mentioned in the Schedule which is executed out of India, being a foreign award, would relate to a matter or thing done or not to be done in India, and that, therefore, stamp duty would be payable on such an award. It is important to note that this judgment does not refer to the definition of “award” in Item 12 of Schedule I at all. For this reason alone, this judgment cannot take us very much further, as it is clear that a foreign award, as has been held by us, is not contained within the expression “award” in Item 12 of Schedule I and is, therefore, not an “instrument” which is taxable under Section 3(c) of the Indian Stamp Act, 1899.

19. The Delhi High Court judgment (supra), strongly relied upon by learned counsel appearing on behalf of the Respondent also does not take us very much further. As has been rightly pointed out by Shri Viswanathan, the said judgment refers to the definition of “foreign award” contained in the 1996 Act, but then goes on to rely upon a Supreme Court judgment, stating that such foreign award would not require registration as it can be enforced as a decree. It further went on to rely upon the Supreme Court judgment in M. Anasuya Devi and Anr. v. M. Manik Reddy and Ors., (2003) 8 SCC 565, to state that the Court, while deciding enforceability of a foreign award under Sections 47 and 48, cannot hold the award non-enforceable on the ground of it being unstamped. This also, strictly speaking, is incorrect, as M. Anasuya (supra) merely stated, in the context of a domestic award, that the question as to whether an award is required to be stamped would be relevant only at the enforcement stage under Section 36 of the 1996 Act and not at the stage of challenge, which is governed by Section 34 of the 1996 Act. We cannot forget that there is no challenge stage so far as a foreign award is concerned – so long as none of the grounds in Section 48 are attracted, the award becomes enforceable as a decree. The stage of enforceability, therefore, has arisen in these cases, and it cannot be said that the ratio of M. Anasuya (supra) would apply so that stamp duty would become payable only at some subsequent stage. This judgment is equally incorrect in stating that Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356, would apply. One sentence in Fuerst Day Lawson (supra) reads, “[T]he only difference as found is that while under the Foreign Awards Act a decree follows, under the new Act the foreign award is already stamped as the decree.” This sentence does not lead to the conclusion, following the judgment in Thyssen Stahlunion GMBH v. Steel Authority of India Ltd., (1999) 9 SCC 334, that under the 1996 Act, a foreign award is considered to be stamped already. All that this sentence means is that the foreign award is to be regarded as a decree. The expression “stamped” means “regarded”. This judgment also does not carry us much further.

20. On the other hand, the Madhya Pradesh High Court judgment (supra) hits nearer home. This judgment, in paragraph 12 thereof, states why foreign awards do not have to suffer stamp duty in the following terms:
“12. The Law on Arbitration in India was substantially contained in three enactments namely, The Arbitration Act, 1940, The Arbitration (Protocol and Convention) Act, 1937 and The Foreign Awards (Recognition and Enforcement) Act, 1961. It was widely felt the 1940 Act, which contains the General Law of Arbitration, has become outdated. The Arbitration and Conciliation Act, 1996 came in force to consolidate and amend the Law relating to Domestic Arbitrations, International Commercial Arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, commission on international trade in short (UNCITRAL) Model Law and Rules. Apart from other object, the object of the Act is to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court. While Arbitration and Conciliation Act, 1996 was enforced, no amendment was made in the definition of award given in the Indian Stamp Act. Similarly, the Schedule which lays down the stamp duty payable on award was not amended by including the foreign award. It appears that law makers while enforcing the Arbitration and Conciliation Act, 1996 was of the view that foreign award shall be enforceable as if it were a decree of the Court, no amendment was brought either in the definition of award or in the Schedule relating to payment of stamp duty on award. Since the definition of award given at Entry No. 11 of the Schedule of the Indian Stamp Act does not cover the foreign award and one of the objects to enforce the new Act was to enforce final award as if it was a decree and keeping in view the law laid down by the Hon’ble Apex Court in the matter of Fuerst Day Lawson Ltd. (supra), wherein the Hon’ble Supreme Court has held that under the new Act the foreign award is already stamped as decree, this Court is of the view that the petition filed by the petitioner has no merits and deserves to be dismissed. In view of this, the petition filed by the petitioner is disposed of holding that foreign award is already stamped and is enforceable as decree.”

21. The reasoning contained in paragraph 12 has our approval, short of the reasoning contained following Fuerst Day Lawson (supra) which, as we have already stated above, did not indicate that foreign awards can never suffer stamp duty.

22. The other judgment heavily relied upon by Shri Viswanathan, namely the Gujarat High Court judgment (supra), merely refers to Article III of the New York Convention to state that so far as procedural aspects relatable to foreign awards are concerned, we must go by the Code of Civil Procedure, and going by the Code of Civil Procedure, the Court at Bhavnagar would have no jurisdiction to enforce the foreign award in the facts of that case. Since Article III of the New York Convention is strongly relied upon by Shri Viswanathan, we need to set it out. It states:
“Article III
Each Contracting State shall recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”

23. There is no doubt whatsoever that if stamp duties are leviable in India on foreign awards, the imposition should not be substantially more onerous than the stamp duty that is imposed on recognition or enforcement of domestic arbitral awards. For the said Article to apply, stamp duty must first be leviable on a foreign award, which, as we have held earlier in this judgment, is not the case. Equally, reliance upon the 194th Law Commission of India Report, insofar as stamp duty on domestic awards is concerned, would again have little bearing, given our finding that under the present state of the law, foreign awards are not liable to stamp duty under the Indian Stamp Act, 1899.

24. An argument was made by learned counsel for the Respondent that Section 47 of the Act requires three things and only three things to be produced before the Court for enforcement of a foreign award, and that therefore, stamp duty not being one of the three things required, cannot ever be levied. We are afraid that this again is an extreme argument. All that Section 47 deals with is production before the Court of proof of the fact that a foreign award is sought to be enforced. In no manner does Section 47 interdict the payment of stamp duty if it is otherwise payable in law. This argument must thus be rejected. Equally, the argument that under Section 48(2)(b), even if stamp duty is payable on a foreign award, it would not be contrary to the public policy of India, must be rejected. The fundamental policy of Indian law, as has been held in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, and followed in Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, makes it clear that if a statute like the Foreign Exchange Regulation Act, 1973 dealing with the economy of the country is concerned, it would certainly come within the expression “fundamental policy of Indian law”. The Indian Stamp Act, 1899, being a fiscal statute levying stamp duty on instruments, is also an Act which deals with the economy of India, and would, on a parity of reasoning, be an Act reflecting the fundamental policy of Indian law. This argument on behalf of the Respondent must also, therefore, be rejected.

25. We, therefore, hold that the learned Single Judge of the Madras High Court is correct, and the fact that a foreign award has not borne stamp duty under the Indian Stamp Act, 1899 would not render it unenforceable for the reasons given in our judgment. The appeal accordingly stands dismissed.

………..……………… J.
(R. F. Nariman)
…..…………………… J.
(Indu Malhotra)

New Delhi.
September 13, 2018.

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No. 9515 of 2018
(Arising out of SLP (Civil) No. 13913 of 2018)
M/S. SHRIRAM EPC LIMITED …Appellant(s)
VERSUS
RIOGLASS SOLAR SA …Respondent(s)

Date: 13.09.2018 This matter was called on for pronouncement of judgment today.
For Appellant(s) Mr. Snehasish Mukherjee, Adv.

For Respondent(s) Mr. Hiroo Advani, Adv.
Mr. Divyakant Lahoti, Adv.
Mr. Shashank Garg, Adv.
Ms. Amrita Grover, Adv.
Mr. Parikshit Ahuja, Adv.
Mr. Tariq Khan, Adv.

Hon’ble Mr. Justice Rohtinton Fali Nariman pronounced the judgment of the Bench comprising His Lordship and Hon’ble Ms. Justice Indu Malhotra.
Leave granted
The appeal is dismissed in terms of the signed reportable judgment.
Pending applications, if any, shall stand disposed of.

(Shashi Sareen)
AR­cum­PS

(Tapan Kumar Chakraborty)
Branch Officer

(Signed reportable judgment is placed on the file)

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7314 of 2018
(Arising out of SLP (Civil) No.4475 of 2017)
THE STATE OF BIHAR & ORS. …APPELLANTS
VERSUS
BIHAR RAJYA BHUMI VIKAS BANK SAMITI …RESPONDENT
J U D G M E N T

R.F. NARIMAN, J.

1. Leave granted.

2. The question raised in this appeal pertains to whether Section 34(5) of the Arbitration and Conciliation Act, 1996, inserted by Amending Act 3 of 2016 (w.e.f. 23rd October 2015), is mandatory or directory.

3. The present appeal arises out of an arbitration proceeding that commenced on 24.05.2015. An arbitral award was made on 06.01.2016. A Section 34 petition challenging the said award was filed on 05.04.2016 before the Patna High Court, in which notice was issued to the opposite party by the Court on 18.07.2016. Despite the coming into force of Section 34(5), the common ground between the parties is that no prior notice was issued to the other party in terms of the said Section, nor was the application under Section 34 accompanied by an affidavit that was required by the said sub-section.

4. A learned Single Judge of the Patna High Court, by a judgment dated 06.09.2016, held that the provision contained in Section 34(5) was only directory, following our judgment in Kailash v. Nanhku and Ors., (2005) 4 SCC 480. A Letters Patent Appeal to a Division Bench yielded the impugned order dated 28.10.2016, by which it was held, adverting to the Law Commission Report which led to the 2015 amendment, that the mandatory language of Section 34(5), together with its object, made it clear that the sub-section was a condition precedent to the filing of a proper application under Section 34, and, on the analogy of a notice issued under Section 80 of the Code of Civil Procedure, 1908, being a condition precedent to the filing of a suit against the Government, the Division Bench held that since this mandatory requirement had not been complied with, and as the period of 120 days had run out, the Section 34 application itself would have to be dismissed. In the end, it allowed the appeal and set aside the judgment of the learned Single Judge.

5. Shri Nagendra Rai, learned Senior Advocate appearing on behalf of the Appellants, has argued that the Letters Patent Appeal itself was not maintainable. He further went on to argue that in any event, Section 34(5) and (6) form part of a composite scheme, the object of which is that an application under Section 34 be disposed of expeditiously within one year. He points out that as no consequence is provided if such application is not disposed of within the said period of one year, the aforesaid provisions are only directory, despite the mandatory nature of the language used therein. He also added that procedural provisions ought not to be construed in such a manner that justice itself gets trampled upon. For this purpose, he referred to and relied upon various judgments of this Court.

6. Shri Parag P. Tripathi, learned Senior Advocate appearing on behalf of the Respondent, defended the High Court judgment, both on maintainability as well as on Section 34(5) being a mandatory provision. According to the learned Senior Advocate, despite the fact that no consequence has been provided if the time period of Section 34(6) goes, yet, an application that is filed under Section 34 without complying with the condition precedent as set out in Section 34(5), is an application that is non est in law. He further argued that the consequence that follows, therefore, follows not from sub-section (6) of Section 34 but from subsection (3) thereof, under which, such application cannot be considered if it is beyond the stipulated period and/or extended period mentioned in Section 34(3). He relied upon the Law Commission Report which led to the 2015 amendment, as well as the mandatory nature of the language of Section 34(5). Also, according to the learned Senior Advocate, the vast majority of High Courts have decided in favour of the provision being construed as mandatory, the only discordant note being struck by the Bombay High Court.

7. Section 34(5) and (6) are set out hereunder as follows:
“34. Application for setting aside arbitral award.— xxx xxx xxx (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.”

8. There is no doubt whatsoever that the language of Section 34 does lend itself in support of the argument of Shri Tripathi, as the expressions used are “shall”, “only after” and “prior notice” coupled with such application which again “shall” be accompanied by an affidavit endorsing compliance.

9. The 246th Law Commission Report, which introduced the aforesaid provision, also makes interesting reading, which is set out hereinbelow: “3. The Arbitration and Conciliation Act, 1996 (hereinafter “the Act”) is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980. The Act has now been in force for almost two decades, and in this period of time, although arbitration has fast emerged as a frequently chosen alternative to litigation, it has come to be afflicted with various problems including those of high costs and delays, making it no better than either the earlier regime which it was intended to replace; or to litigation, to which it intends to provide an alternative. Delays are inherent in the arbitration process, and costs of arbitration can be tremendous. Even though courts play a pivotal role in giving finality to certain issues which arise before, after and even during an arbitration, there exists a serious threat of arbitration related litigation getting caught up in the huge list of pending cases before the courts. After the award, a challenge under section 34 makes the award inexecutable and such petitions remain pending for several years. The object of quick alternative disputes resolution frequently stands frustrated.

4. There is, therefore, an urgent need to revise certain provisions of the Act to deal with these problems that frequently arise in the arbitral process. The purpose of this Chapter is to lay down the foundation for the changes suggested in the report of the Commission. The suggested amendments address a variety of issues that plague the present regime of arbitration in India and, therefore, before setting out the amendments, it would be useful to identify the problems that the suggested amendments are intended to remedy and the context in which the said problems arise and hence the context in which their solutions must be seen.
xxx xxx xxx
25. Similarly, the Commission has found that challenges to arbitration awards under sections 34 and 48 are similarly kept pending for many years. In this context, the Commission proposes the addition of sections 34(5) and 48(4) which would require that an application under those sections shall be disposed of expeditiously and in any event within a period of one year from the date of service of notice. In the case of applications under section 48 of the Act, the Commission has further provided a time limit under section 48(3), which mirrors the time limits set out in section 34(3), and is aimed at ensuring that parties take their remedies under this section seriously and approach a judicial forum expeditiously, and not by way of an afterthought …………”

10. There is no doubt that the object of Section 34(5) and (6) is, as has been stated by the Law Commission, the requirement that an application under Section 34 be disposed of expeditiously within a period of one year from the date of service of notice. We have to examine as to whether this, by itself, is sufficient to construe Section 34(5) as mandatory, keeping in view the fact that if the time limit of one year is not adhered to under Section 34(6), no consequence thereof is provided.

11. Some of the judgments of this Court throw considerable light on similar provisions being construed as being only directory in nature. Thus, in Topline Shoes v. Corporation Bank, (2002) 6 SCC 33, Section 13(2)(a) of the Consumer Protection Act, 1986, spoke of a reply being filed by the opposite party “within a period of 30 days or such extended period not exceeding 15 days, as may be granted by the District Forum”. This Court referred to the Statement of Objects and Reasons of the Consumer Protection Act, 1986, which is similar to the object sought to be achieved by the amendment made in Section 34(5) and (6) of the Arbitration and Conciliation Act, 1996, as follows:

“8. The Statement of Objects and Reasons of the Consumer Protection Act, 1986 indicates that it has been enacted to promote and protect the rights and interests of consumers and to provide them speedy and simple redressal of their grievances. Hence, quasi-judicial machinery has been set up for the purpose, at different levels. These quasi-judicial bodies have to observe the principles of natural justice as per clause 4 of the Statement of Objects and Reasons, which reads as under:
“4. To provide speedy and simple redressal to consumer disputes, a quasi-judicial machinery is sought to be set up at the District, State and Central levels. These quasi-judicial bodies will observe the principles of natural justice and have been empowered to give reliefs of a specific nature and to award, wherever appropriate, compensation to consumers. Penalties for noncompliance of the orders given by the quasijudicial bodies have also been provided.”
(emphasis in original)
Thus the intention to provide a time-frame to file reply, is really meant to expedite the hearing of such matters and to avoid unnecessary adjournments to linger on the proceedings on the pretext of filing reply. The provision, however, as framed, does not indicate that it is mandatory in nature. In case the extended time exceeds 15 days, no penal consequences are prescribed therefor. The period of extension of time “not exceeding 15 days”, does not prescribe any kind of period of limitation. The provision appears to be directory in nature, which the consumer forums are ordinarily supposed to apply in the proceedings before them. We do not find force in the submission made by the appellant-in-person, that in no event, whatsoever, the reply of the respondent could be taken on record beyond the period of 45 days. The provision is more by way of procedure to achieve the object of speedy disposal of such disputes. It is an expression of “desirability” in strong terms. But it falls short of creating any kind of substantive right in favour of the complainant by reason of which the respondent may be debarred from placing his version in defence in any circumstances whatsoever. It is for the Forum or the Commission to consider all facts and circumstances along with the provisions of the Act providing time-frame to file reply, as a guideline, and then to exercise its discretion as best as it may serve the ends of justice and achieve the object of speedy disposal of such cases keeping in mind the principles of natural justice as well. The Forum may refuse to extend time beyond 15 days, in view of Section 13(2)(a) of the Act but exceeding the period of 15 days of extension, would not cause any fatal illegality in the order.”

The Court further held:
“11. We have already noticed that the provision as contained under clause (a) of sub-section (2) of Section 13 is procedural in nature. It is also clear that with a view to achieve the object of the enactment, that there may be speedy disposal of such cases, that it has been provided that reply is to be filed within 30 days and the extension of time may not exceed 15 days. This provision envisages that proceedings may not be prolonged for a very long time without the opposite party having filed his reply. No penal consequences have however been provided in case extension of time exceeds 15 days. Therefore, it could not be said that any substantive right accrued in favour of the appellant or there was any kind of bar of limitation in filing of the reply within extended time though beyond 45 days in all. The reply is not necessarily to be rejected. All facts and circumstances of the case must be taken into account. The Statement of Objects and Reasons of the Act also provides that the principles of natural justice have also to be kept in mind.”

12. In Kailash (supra), this Court was faced with the question whether, after the amendment of Order VIII Rule 1 of the CPC by the Amendment Act of 2002, the said provision must be construed as being mandatory.
The provision is set out in paragraph 26 of the judgment as follows:
“26. The text of Order 8 Rule 1, as it stands now, reads as under:
“1. Written statement.—The defendant shall, within thirty days from the date of service of summons on him, present a written statement of his defence: Provided that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the same on such other day, as may be specified by the court, for reasons to be recorded in writing, but which shall not be later than ninety days from the date of service of summons.”
In an instructive judgment, this Court held:
“27. Three things are clear. Firstly, a careful reading of the language in which Order 8 Rule 1 has been drafted, shows that it casts an obligation on the defendant to file the written statement within 30 days from the date of service of summons on him and within the extended time falling within 90 days. The provision does not deal with the power of the court and also does not specifically take away the power of the court to take the written statement on record though filed beyond the time as provided for. Secondly, the nature of the provision contained in Order 8 Rule 1 is procedural. It is not a part of the substantive law. Thirdly, the object behind substituting Order 8 Rule 1 in the present shape is to curb the mischief of unscrupulous defendants adopting dilatory tactics, delaying the disposal of cases much to the chagrin of the plaintiffs and petitioners approaching the court for quick relief and also to the serious inconvenience of the court faced with frequent prayers for adjournments. The object is to expedite the hearing and not to scuttle the same. The process of justice may be speeded up and hurried but the fairness which is a basic element of justice cannot be permitted to be buried.
xxx xxx xxx
30. It is also to be noted that though the power of the court under the proviso appended to Rule 1 Order 8 is circumscribed by the words “shall not be later than ninety days” but the consequences flowing from non-extension of time are not specifically provided for though they may be read in by necessary implication. Merely because a provision of law is couched in a negative language implying mandatory character, the same is not without exceptions. The courts, when called upon to interpret the nature of the provision, may, keeping in view the entire context in which the provision came to be enacted, hold the same to be directory though worded in the negative form.
xxx xxx xxx
35. Two decisions, having a direct bearing on the issue arising for decision before us, have been brought to our notice, one each by the learned counsel for either party. The learned Senior Counsel for the appellant submitted that in Topline Shoes Ltd. v. Corpn. Bank [(2002) 6 SCC 33] a pari materia provision contained in Section 13 of the Consumer Protection Act, 1986 came up for the consideration of the Court. The provision requires the opposite party to a complaint to give his version of the case within a period of 30 days or such extended period not exceeding 15 days as may be granted by the District Forum. The Court took into consideration the Statement of Objects and Reasons and the legislative intent behind providing a time-frame to file reply and held: (i) that the provision as framed was not mandatory in nature as no penal consequences are prescribed if the extended time exceeds 15 days, and; (ii) that the provision was directory in nature and could not be interpreted to mean that in no event whatsoever the reply of the respondent could be taken on record beyond the period of 45 days.
xxx xxx xxx
46. We sum up and briefly state our conclusions as under:
xxx xxx xxx
(iv) The purpose of providing the time schedule for filing the written statement under Order 8 Rule 1 CPC is to expedite and not to scuttle the hearing. The provision spells out a disability on the defendant. It does not impose an embargo on the power of the court to extend the time. Though the language of the proviso to Rule 1 Order 8 CPC is couched in negative form, it does not specify any penal consequences flowing from the non-compliance. The provision being in the domain of the procedural law, it has to be held directory and not mandatory. The power of the court to extend time for filing the written statement beyond the time schedule provided by Order 8 Rule 1 CPC is not completely taken away.
xxx xxx xxx”

13. To similar effect are the observations of this Court in Salem Advocate Bar Association v. Union of India, (2005) 6 SCC 344 at paragraph 20, which is reproduced hereinbelow:
“20. The use of the word “shall” in Order 8 Rule 1 by itself is not conclusive to determine whether the provision is mandatory or directory. We have to ascertain the object which is required to be served by this provision and its design and context in which it is enacted. The use of the word “shall” is ordinarily indicative of mandatory nature of the provision but having regard to the context in which it is used or having regard to the intention of the legislation, the same can be construed as directory. The rule in question has to advance the cause of justice and not to defeat it. The rules of procedure are made to advance the cause of justice and not to defeat it. Construction of the rule or procedure which promotes justice and prevents miscarriage has to be preferred. The rules of procedure are the handmaid of justice and not its mistress. In the present context, the strict interpretation would defeat justice.”

14. However, a discordant note was struck by a Judgment dated 04.12.2015, reported in New India Assurance Co. Ltd. v. Hilli Multipurpose Cold Storage Pvt. Ltd., (2015) 16 SCC 20. A Bench of three learned Judges resurrected the judgment of J.J. Merchant (Dr.) v. Shrinath Chaturvedi, (2002) 6 SCC 635. J.J. Merchant (supra) was distinguished in Kailash (supra) as follows:
“38. The learned counsel for the respondent, on the other hand, invited our attention to a three-Judge Bench decision of this Court in J.J. Merchant (Dr.) v. Shrinath Chaturvedi [(2002) 6 SCC 635] wherein we find a reference made to Order 8 Rule 1 CPC vide paras 14 and 15 thereof and the Court having said that the mandate of the law is required to be strictly adhered to. A careful reading of the judgment shows that the provisions of Order 8 Rule 1 CPC did not directly arise for consideration before the Court and to that extent the observations made by the Court are obiter. Also, the attention of the Court was not invited to the earlier decision of this Court in Topline Shoes Ltd. case [(2002) 6 SCC 33].”
Despite this observation, New India Assurance Co. Ltd. (supra) went on to follow the judgment in J.J. Merchant (supra), and stated:
“25. We are, therefore, of the view that the judgment delivered in J.J. Merchant [J.J. Merchant v. Shrinath Chaturvedi, (2002) 6 SCC 635] holds the field and therefore, we reiterate the view that the District Forum can grant a further period of 15 days to the opposite party for filing his version or reply and not beyond that.
26. There is one more reason to follow the law laid down in J.J. Merchant (supra). J.J. Merchant (supra) was decided in 2002, whereas Kailash [Kailash v. Nanhku, (2005) 4 SCC 480] was decided in 2005. As per law laid down by this Court, while deciding Kailash (supra), this Court ought to have respected the view expressed in J.J. Merchant (supra) as the judgment delivered in J.J. Merchant (supra) was earlier in point of time. The aforestated legal position cannot be ignored by us and therefore, we are of the opinion that the view expressed in J.J. Merchant (supra) should be followed.”

15. J.J. Merchant (supra) arose out of a miscellaneous petition which was filed before the National Consumer Disputes Redressal Commission, praying that the complaint filed for alleged medical negligence be decided by the Civil Court, as complicated questions of law arise. A criminal prosecution against the said doctors was also pending. In paragraph 4 of the judgment, the Court stated that some guidelines need to be laid down with regard to the type of cases which the Consumer Forum will not entertain. After noticing that there was an inordinate delay of almost nine years in disposal of the complaint, this Court felt that such delay would not be a ground for rejecting the complaint and for directing the complainant to approach the Civil Court. In answering the contention that complicated questions of fact cannot be decided in summary proceedings, this Court held that speedy trial does not mean that justice cannot be done when questions of fact are to be dealt with and decided. It was in this context of speedy trial that the Court made an observation about the legislative mandate of not granting more than 45 days in submitting the written statement. In fact, the Court was alive to the fact that there was no time frame under the unamended Consumer Protection Act, 1986 for disposing of complaints, appeals and revisions. This Court, therefore, stated:

“23. For reducing the arrears and for seeing that complaints, appeals and revisions are decided speedily and within the stipulated time, we hope that the President of the National Commission would draw the attention of the Government for taking appropriate actions within the stipulated time and see that the object and purpose of the Act is not frustrated.
xxx xxx xxx
14
25. It can be hoped that the National Commission would ensure its best to see that District Forums, State Commissions and the National Commission can discharge its functions as efficiently and speedily as contemplated by the provisions of the Act. The National Commission has administrative control over all the State Commissions inter alia for issuing of instructions regarding adoption of uniform procedure in hearing of the matters etc. It would have also administrative control in overseeing that the functions of the State Commissions or District Forums are discharged in furtherance of the objects and purposes of the Act in the best manner.”
The Court then referred to the Consumer Protection (Amendment) Bill, 2002, which envisaged insertion of sub-section (3-A) in Section 13 of the Act, which reads as under:
“30. ……
“13. (3-A) Every complaint shall be heard as expeditiously as possible and endeavour shall be made to decide the complaint within a period of three months from the date of receipt of notice by opposite party where the complaint does not require analysis or testing of commodities and within five months if it requires analysis or testing of commodities: Provided that no adjournment shall be ordinarily granted by the District Forum unless sufficient cause is shown and the reasons for grant of adjournment have been recorded in writing by the Forum: Provided further that the District Forum shall make such orders as to the costs occasioned by the adjournment as may be provided in the regulations made under this Act.”
(emphasis in original)
31. From the wording of the aforesaid section, it is apparent that there is legislative mandate to the District Forum or the Commissions to dispose of the complaints as far as possible within the prescribed time of three months by ad- hering strictly to the procedure prescribed under the Act. The opposite party has to submit its version within 30 days from the date of the receipt of the complaint by him and the Commission can give at the most further 15 days for some unavoidable reasons to file its version.” The Court was, therefore, alive to the fact that no consequence is prescribed for non-adherence to the time limit of three months. In the result, the case was disposed of with certain directions for avoiding delay in disposal of proceedings under the Consumer Protection Act, 1986.

16. It will thus be seen that there was no focused argument in J.J. Merchant (supra) on whether the provisions of Section 13(2)(a) of the Consumer Protection Act, 1986 could be held to be directory in as much as no consequence was provided for a written statement being filed beyond 45 days. In point of fact, this Court’s judgment in Topline Shoes (supra) was not even cited before the Bench hearing J.J. Merchant (supra).

17. In this view of the matter, it is a little difficult to appreciate how the three-Judge Bench in Kailash (supra) ought to have respected an obiter dictum view of Order VIII Rule 1, CPC in J.J. Merchant (supra). Unfortunately, what was missed in New India Assurance Co. Ltd. (supra) is paragraph 38 of Kailash (supra) which has been extracted hereinabove. The fact that Topline Shoes (supra) was not cited before the three-Judge Bench in J.J. Merchant (supra), as has been held in paragraph 38 of Kailash (supra), would render the aforesaid judgment vulnerable on Section 13(2)(a) of the Consumer Protection Act, 1986 being held to be mandatory. An earlier judgment cannot be overruled sub silentio without upsetting the reasons on which it is based. J.J. Merchant (supra) does not deal with Topline Shoes’ (supra) ratio – namely, that no penal consequence was provided in case the extended time of 15 days was exceeded; that therefore, no substantive right accrued in favour of the claimant; and that the Statement of Objects and Reasons of the Act also provided that the principles of natural justice be kept in mind. The judgment in New India Assurance Co. Ltd. (supra) did not refer to paragraph 38 of Kailash (supra) or appreciate that J.J. Merchant (supra) was distinguished correctly on the ground that Order VIII Rule 1, CPC did not directly arise for consideration in J.J. Merchant (supra). The observations on Order VIII Rule 1, CPC in paragraphs 14 and 15 of J.J. Merchant (supra) were correctly held to be in the nature of obiter dicta, and therefore, not binding on the three-Judge Bench of Kailash (supra). Insofar as Kailash (supra) is concerned, it is a binding judgment on the effect of Order VIII Rule 1, CPC, whose reasoning has been confirmed by a three-Judge Bench in Salem Bar Association (supra).

18. In State v. N.S. Gnaneswaran, (2013) 3 SCC 594, this Court was concerned with whether Section 154(2) of the Code of Criminal Procedure, 1973 was mandatory or directory. The said Section reads as follows: “154. Information in cognizable cases.— xxx xxx xxx (2) A copy of the information as recorded under subsection (1) shall be given forthwith, free of cost, to the informant.” Despite the mandatory nature of the language used in the provision, no consequence was provided if the Section was breached. This Court referred to a number of judgments which laid down tests for determining whether a provision is mandatory or directory, and then held that Section 154(2) was directory.

19. However, Shri Tripathi has relied strongly upon the judgment of Bikhraj Jaipuria v. Union of India, (1962) 2 SCR 880. In that case, this Court held that the provision contained in Section 175(3) of the Government of India Act, 1935, which requires that contracts on behalf of the Government of India shall be executed in the form prescribed, was mandatory in nature, despite the fact that the Section did not set out any consequence for non-compliance. This Court referred to an instructive passage in Maxwell on Interpretation of Statutes, 10th Edn, p. 376, as follows:
“It has been said that no rule can be laid down for determining whether the command is to be considered as a mere direction or instruction involving no invalidating consequence in its disregard, or as imperative, with an implied nullification for disobedience, beyond the fundamental one that it depends on the scope and object of the enactment. It may perhaps be found generally correct to say that nullification is the natural and usual consequence of disobedience, but the question is in the main governed by considerations of convenience and justice, and when that result would involve general inconvenience or injustice to innocent persons, or advantage to those guilty of the neglect, without promoting the real aim and object of the enactment, such an intention is not to be attributed to the legislature. The whole scope and purpose of the statute under consideration must be regarded.”1
It then went on to hold that the provision was in the interest of the general public because the question whether a binding contract has been made between the State and the private individual should not be left open to dispute and litigation. We must not forget that, as has been laid down in Maxwell (supra), considerations of convenience and justice are uppermost, and if general inconvenience or injustice results, without promoting the real aim and object of the enactment, the provision must be declared to be directory.

20. It will thus be seen that Section 34(5) does not deal with the power of the Court to condone the non-compliance thereof. It is imperative to note that the provision is procedural, the object behind which is to dispose of applications under Section 34 expeditiously. One must remember the wise observation contained in Kailash (supra), where the object of such a provision is only to expedite the hearing and not to scuttle the same. All rules of procedure are the handmaids of justice and if, in advancing the cause of justice, it is made clear that such provision should be construed as directory, then so be it.

21. Take the case of Section 80 of the CPC. Under the said provision, the Privy Council and then our Court have consistently taken the view that a suit against the Government cannot be validly instituted until after the expiration of two months after the notice in writing has been delivered to the parties concerned in the manner prescribed by the said Section. If such suit is filed either without such notice or before the said two months’ period is over, such suit has to be dismissed as not maintainable. The reason for this is felicitously set out in Bihari Chowdhary and Anr. v. State of Bihar and Ors., (1984) 2 SCC 627, as follows:

“3. …… When we examine the scheme of the section it becomes obvious that the section has been enacted as a measure of public policy with the object of ensuring that before a suit is instituted against the Government or a public officer, the Government or the officer concerned is afforded an opportunity to scrutinise the claim in respect of which the suit is proposed to be filed and if it be found to be a just claim, to take immediate action and thereby avoid unnecessary litigation and save public time and money by settling the claim without driving the person, who has issued the notice, to institute the suit involving considerable expenditure and delay. The Government, unlike private parties, is expected to consider the matter covered by the notice in a most objective manner, after obtaining such legal advice as they may think fit, and take a decision in public interest within the period of two months allowed by the section as to whether the claim is just and reasonable and the contemplated suit should, therefore, be avoided by speedy negotiations and settlement or whether the claim should be resisted by fighting out the suit if and when it is instituted. There is clearly a public purpose underlying the mandatory provision contained in the section insisting on the issuance of a notice setting out the particulars of the proposed suit and giving two months’time to Government or a public officer before a suit can be instituted against them. The object of the section is the advancement of justice and the securing of public good by avoidance of unnecessary litigation.”

22. Section 80, though a procedural provision, has been held to be mandatory as it is conceived in public interest, the public purpose underlying it being the advancement of justice by giving the Government the opportunity to scrutinize and take immediate action to settle a just claim without driving the person who has issued a notice having to institute a suit involving considerable expenditure and delay. This is to be contrasted with Section 34(5), also a procedural provision, the infraction of which leads to no consequence. To construe such a provision as being mandatory would defeat the advancement of justice as it would provide the consequence of dismissing an application filed without adhering to the requirements of Section 34(5), thereby scuttling the process of justice by burying the element of fairness.

23. However, according to Shri Tripathi, an application filed under Section 34 is a condition precedent, and if no prior notice is issued to the other party, without being accompanied by an affidavit by the applicant endorsing compliance with the said requirement, such application, being a non-starter, would have to be dismissed at the end of the 120 days’ period mentioned in Section 34(3). Apart from what has been stated by us hereinabove, even otherwise, on a plain reading of Section 34, this does not follow. Section 34(1) reads as under:
“34. Application for setting aside arbitral award.—(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).” What is conspicuous by its absence is any reference to sub-section (5). The only requirement in Section 34(1) is that an application for setting aside an award be in accordance with sub-sections (2) and (3). This, again, is an important pointer to the fact that even legislatively, subsection (5) is not a condition precedent, but a procedural provision which seeks to reduce the delay in deciding applications under Section 34. One other interesting thing needs to the noted – the same Amendment Act brought in a new Section 29A. This provision states as follows:
“29A. Time limit for arbitral award.— (1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Explanation.— For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.
(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.
(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.
(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period: Provided that while extending the period under this subsection, if the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay.”

24. It will be seen from this provision that, unlike Section 34(5) and (6), if an Award is made beyond the stipulated or extended period contained in the Section, the consequence of the mandate of the Arbitrator being terminated is expressly provided. This provision is in stark contrast to Section 34(5) and (6) where, as has been stated hereinabove, if the period for deciding the application under Section 34 has elapsed, no consequence is provided. This is one more indicator that the same Amendment Act, when it provided time periods in different situations, did so intending different consequences.

25. Shri Tripathi then argued that Section 34(5) is independent of Section 34(6) and is a mandatory requirement of law by itself. There are two answers to this. The first is that sub-section (6) refers to the date on which the notice referred to in sub-section (5) is served upon the other party. This is for the reason that an anterior date to that of filing the application is to be the starting point of the period of one year referred to in Section 34(6). The express language of Section 34(6), therefore, militates against this submission of Shri Tripathi. Secondly, even if subsection (5) be construed to be a provision independent of sub-section (6), the same consequence in law is the result – namely, that there is no consequence provided if such prior notice is not issued. This submission must therefore fail.

26. We come now to some of the High Court judgments. The High Courts of Patna,2 Kerala,3 Himachal Pradesh,4 Delhi,5 and Gauhati6 have all taken the view that Section 34(5) is mandatory in nature. What is strongly relied upon is the object sought to be achieved by the provision together with the mandatory nature of the language used in Section 34(5). Equally, analogies with Section 80, CPC have been drawn to reach the same result. On the other hand, in Global Aviation Services Private Limited v. Airport Authorities of India, 7 the Bombay High Court, in answering question 4 posed by it, held, following some of our judgments, that the provision is directory, largely because no consequence has been provided for breach of the time limit specified. When faced with the argument that the object of the provision would be rendered otiose if it were to be construed as directory, the learned Single Judge of the Bombay High Court held as under:
“133. Insofar as the submission of the learned counsel for the respondent that if section 34(5) is considered as directory, the entire purpose of the amendments would be rendered otiose is concerned, in my view, there is no merit in this submission made by the learned counsel for the respondent. Since there is no consequence provided in the said provision in case of non-compliance thereof, the said provision cannot be considered as mandatory. The purpose of avoiding any delay in proceeding with the matter expeditiously is already served by insertion of appropriate rule in Bombay High Court (Original Side) Rules. The Court can always direct the petitioner to issue notice along with papers and proceedings upon other party before the matter is heard by the Court for admission as well as for final hearing. The vested rights of a party to challenge an award under section 34 cannot be taken away for non-compliance of issuance of prior notice before filing of the arbitration petition.”
The aforesaid judgment has been followed by recent judgments of the High Courts of Bombay8 and Calcutta.9

27. We are of the opinion that the view propounded by the High Courts of Bombay and Calcutta represents the correct state of the law. However, we may add that it shall be the endeavour of every Court in which a Section 34 application is filed, to stick to the time limit of one year from the date of service of notice to the opposite party by the applicant, or by the Court, as the case may be. In case the Court issues notice after the period mentioned in Section 34(3) has elapsed, every Court shall endeavour to dispose of the Section 34 application within a period of one year from the date of filing of the said application, similar to what has been provided in Section 14 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. This will give effect to the object sought to be achieved by adding Section 13(6) by the 2015 Amendment Act.

28. We may also add that in cases covered by Section 10 read with Section 14 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, the Commercial Appellate Division shall endeavour to dispose of appeals filed before it within six months, as stipulated. Appeals which are not so covered will also be disposed of as expeditiously as possible, preferably within one year from the date on which the appeal is filed. As the present appeal has succeeded on Section 34(5) being held to be directory, we have not found it necessary to decide Shri Rai’s alternative plea of maintainability of the Letters Patent Appeal before the Division Bench.

29. As a result, the appeal is allowed and the judgment of the Patna High Court is set aside. The Section 34 petition that has been filed in the present case will now be disposed of on its merits.

………..……………… J.
(R. F. Nariman)
…..…………………… J.
(Indu Malhotra)

New Delhi.
July 30, 2018.

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
CIVIL APPEAL No. 7314 of 2018
(Arising out of SLP (Civil) No. 4475 of 2017)
THE STATE OF BIHAR AND ORS. …Appellant(s)
VERSUS
BIHAR RAJYA BHUMI VIKAS BANK SAMITI JHARKHAND …Respondent(s)

Date : 30.07.2018 This matter was called on for pronouncement of judgment today.

For Appellant(s) Mr. N.Rai, Sr. Adv.
Mr. Gopal Singh , Adv.
Mr. Manish Kumar, Adv.
Mr. Shivam Singh, Adv.
Mr. Aditya Raina, Adv.
Mr. Shreyas Jain, Adv.
Ms. Aprajita Sud, Adv.
Mr. Kumar Milind, Adv.

For Respondent(s) Mr. Jayant Kumar Mehta, Adv.

Hon’ble Mr. Justice Rohinton Fali Nariman pronounced the judgment of the Bench comprising His Lordship and Hon’ble Ms. Justice Indu Malhotra.
Leave granted
The appeal is allowed in terms of the signed reportable judgment.
Pending applications, if any, shall stand disposed of.

(Shashi Sareen)
AR­cum­PS

(Saroj Kumari Gaur)
Branch Officer

(Signed reportable judgment is placed on the file)

FOOTNOTE
1. Bikhraj Jaipuria v. Union of India, (1962) 2 SCR 880, para 16.
2. Bihar Rajya Bhumi Vikas Bank Samiti v. State of Bihar and Ors., L.P.A. No. 1841 of 2016 in C.W.J.C. No. 746 of 2016 [decided on 28.10.2016].
3. Shamsudeen v. Shreeram Transport Finance Co. Ltd., Arb. A. No. 49 of 2016 [decided on 16.02.2017].
4. Madhava Hytech Engineers Pvt. Ltd. v. The Executive Engineers and Ors., O.M.P. (M) No. 48 of 2016 [decided on 24.08.2017].
5. Machine Tool (India) Ltd. v. Splendor Buildwell Pvt. Ltd. and Ors., O.M.P. (COMM.) 199- 200 of 2018 [decided on 29.05.2018].
6. Union of India and Ors. v. Durga Krishna Store Pvt. Ltd., Arb. A. 1 of 2018 [decided on 31.05.2018].
7. Commercial Arbitration Petition No. 434 of 2017 [decided on 21.02.2018].
8. Maharashtra State Road Development Corporation Ltd. v. Simplex Gayatri Consortium and Ors., Commercial Arbitration Petition No. 453 of 2017 [decided on 19.04.2018].
9. Srei Infrastructure Finance Limited v. Candor Gurgaon Two Developers and Projects Pvt. Ltd., A.P. No. 346 of 2018 [decided on 12.07.2018].

The post The State of Bihar & Ors. vs. Bihar Rajya Bhumi Vikas Bank Samiti appeared first on B&B Associates LLP.

1. We have heard learned counsel for the parties.

2. The matter arising out of a dispute in execution of a works contract was referred to the Arbitrator by the High Court on 4.09.2008. The Arbitrator made his Award dated 10.07.2010 in favour of the appellant. It was challenged under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) before the Seventh Additional District Judge, Bhopal by the respondent-State of M.P. The respondent sought to amend its objections after three years which was rejected by the trial Court. On a petition under Article 227 of the Constitution of India, the High Court has allowed the said amendment.

3. Learned counsel for the appellant submitted that the amendment could not be allowed beyond the period of limitation which affected the vested rights of a party. It 2 was also submitted that the objection having not been raised under Section 16(2) of the Act before the Arbitrator, could not be raised under Section 34 of the Act. In support of this submission reliance has been placed on MSP Infrastructure Ltd. vs. Madhya Pradesh Road Development Corporation Ltd. reported in (2015) 13 SCC 713.

4. Learned Advocate General for the State of M.P. submitted that the amendment sought is formal. Legal plea arising on undisputed facts is not precluded by Section 34(2)(b) of the Act. Even if an objection to jurisdiction is not raised under Section 16 of the Act, the same can be raised under Section 34 of the Act. It is not even necessary to consider the application for amendment as it is a legal plea, on admitted facts, which can be raised in any case. He thus submits the amendment being unnecessary is not pressed. Learned Advocate General also submitted that observations in M/s MSP Infrastructure Ltd. (supra), particularly in Paragraphs 16 and 17 do not laid down correct law.

5. We find merit in the contentions raised on behalf of the State. We proceed on the footing that the amendment being beyond limitation is not to be allowed as the amendment is not pressed.

6. We do not see any bar to plea of jurisdiction being raised by way of an objection under Section 34 of the Act even if no such objection was raised under Section 16.

7. We may quote the observations from M/s MSP Infrastructure (supra):

“16. It is not possible to accept this submission. In the first place, there is nothing to warrant the inference that all objections to the jurisdiction of the Tribunal cannot be raised under Section 16 and that the Tribunal does not have power to rule on its own jurisdiction.

Secondly, Parliament has employed a different phraseology in Clause (b) of Section 34. That phraseology is “the subject matter of the dispute is not capable of settlement by arbitration.” This phrase does not necessarily refer to an objection to ‘jurisdiction’ as the term is well known. In fact, it refers to a situation where the dispute referred for arbitration, by reason of its subject matter is not capable of settlement by arbitration at all. Examples of such cases have been referred to by the Supreme Court in Booz Allen and Hamilton Inc. V/s. SBI Home Finance Limited (2011) 5 SCC 532. This Court observed as follows:-

“36. The well-recognised examples of non-arbitrable disputes are:

(i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences;

(ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters;

(iv) insolvency and winding-up matters;

(v) testamentary matters (grants of probate, letters of administration and succession certificate); and

(vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.”

The scheme of the Act is thus clear. All 4 objections to jurisdiction of whatever nature must be taken at the stage of the submission of the statement of defence, and must be dealt with under Section

16 of the Arbitration Act, 1996. However, if one of the parties seeks to contend that the subject matter of the dispute is such as cannot be dealt with by arbitration, it may be dealt under Section 34 by the Court.

17. It was also contended by Shri Divan, that the newly added ground that the Tribunal under the Arbitration Act, 1996 had no jurisdiction to decide the dispute in question because the jurisdiction lay with the Tribunal under the M.P. Act of 1983, was a question which can be agitated under sub-clause (ii) of clause (b) of sub-section (2) of Section 34 of the Arbitration Act, 1996. This provision enables the court to set- aside an award which is in conflict with the public policy of India. Therefore, it is contended that the amendment had been rightly allowed and it cannot be said that what was raised was only a question which pertained to jurisdiction and ought to have been raised exclusively under Section 16 of the Arbitration Act, 1996, but in fact was a question which could also have been raised under Section 34 before the Court, as has been done by the Respondent.

This submission must be rejected. The contention that an award is in conflict with the public policy of India cannot be equated with the contention that Tribunal under the Central Act does not have jurisdiction and the Tribunal under the State Act, has jurisdiction to decide upon the dispute. Furthermore, it was stated that this contention might have been raised under the head that the Arbitral Award is in conflict with the public policy of India. In other words, it was submitted that it is the public policy of India that arbitrations should be held under the appropriate law.

It was contended that unless the arbitration was held under the State Law i.e. the M.P. Act that it would be a violation of the public policy of India. This contention is misconceived since the intention of providing that the award should not be in conflict with the public policy of India is referable to the public policy of India as a whole i.e. the policy of the Union of India and not merely the policy 5 of an individual state. Though, it cannot be said that the upholding of a state law would not be part of the public policy of India, much depends on the context. Where the question arises out of a conflict between an action under a State Law and an action under a Central Law, the term public policy of India must necessarily be understood as being referable to the policy of the Union. It is well known, vide Article 1 of the Constitution, the name ‘India’ is the name of the Union of States and its territories include those of the States.”

8. Both stages are independent. Observations in Paragraphs 16 and 17 in MSP Infrastructure (supra) do not, in our view, lay down correct law. We also do not agree with the observation that the Public policy of India does not refer to a State law and refers only to an All India law.

9. In our considered view, the public policy of India refers to law in force in India whether State law or Central law. Accordingly, we overrule the observations to the contrary in Paragraphs 16 and 17 of the judgment in MSP Infrastructures Ltd. (supra).

10. Since amendment application is not pressed, the appeal is rendered infructuous. The impugned order is set aside.

11. The matter may now be taken up by the trial court for consideration of objections under Section 34 of the Central Act. It will be open for the respondents to argue that its objection that the Act stands excluded by the M.P. Madhyastham Adhikaran Adhiniyam, 1983 could be raised even without a formal pleading, being purely a legal plea. It will also be open to the appellant to argue to the contrary. We leave the question to be gone into by the concerned court.

The appeals are disposed of accordingly.

…………………….J.
(ADARSH KUMAR GOEL)
…………………….J.
(ROHINTON FALI NARIMAN)
…………………….J.
(UDAY UMESH LALIT)

NEW DELHI,
MARCH 22, 2018

M/S MMC Projects India Pvt. Ltd. Vs. Gujarat State Electricity Corporation Ltd. & ANR.

[Special Leave Petition (C) No. 15059 of 2011]

O R D E R

It is not disputed that for purposes of decision of the question arising in the present case the provisions of Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 are in pari materia to the provisions of M.P. Madhyastham Adhikaran Adhiniyam, 1983 which have been considered by this Court vide Order dated 8.03.2018 in Civil Appeal No. 974/2012 titled as “Madhya Pradesh Rural Road Development Authority & Anr. vs. M/s L.G. Chaudhary Engineers and Contractors.”

In view of above, this petition is dismissed.

……………………..J.
(ADARSH KUMAR GOEL)
……………………..J.
(ROHINTON FALI NARIMAN)
……………………..J.
(UDAY UMESH LALIT)

NEW DELHI,

MARCH 22, 2018

The State of Bihar & Ors. Versus M/S. Brahmaputra Infrastructure Limited

[Civil Appeal No.3344 of 2018 arising out of SLP (C) No(S). 18212 of 2017]

The State of Bihar & Ors. Vs. M/S. Supreme Brahmaputra (JV)

[Civil Appeal No.3345 of 2018 arising out of SLP (C) No(S). 21434 of 2017]

O R D E R

(1) Leave granted. We have heard learned counsel for the parties.

(2) The State is aggrieved by the appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the Central Act) on the ground that the said Act is excluded by the Bihar Public Works Contracts Arbitration Tribunal Act, 2008 (Bihar Act 21 of 2008) (the State Act).

(3) To appreciate the plea raised, it is necessary to refer to the scheme of the State Act as reflected in some of the key provisions. Sections 8, 9 and 22 of the State Act are as follows:

“8. Act to be in addition to Arbitration & Conciliation Act, 1996. – Notwithstanding anything contained in this Act, and of the provisions shall be in addition to and supplemental to Arbitration & Conciliation Act, 1996 and in case any of the provision contained herein is construed to be in conflict with Arbitration Act, then the latter Act shall prevail to the extent of conflict.

9. Reference to Tribunal and making of award.-

(1) Where any dispute arises between the parties to the contract, either party shall, irrespective of whether such contract contains an arbitration clause or not refer, within one year from the date on which the dispute has arisen, such dispute in writing to the Tribunal for arbitration in such form and accompanied by such documents or other evidence and by such fees, as may be prescribed.

(2) On receipt of a reference under subsection (10, the Tribunal may, if satisfied after such inquiry as it may deem fit to make, that the requirements under this Act in relation to the reference are complied with, admit such reference and where the Tribunal is not so satisfied, it may reject the reference summarily.

(3) Where the Tribunal admits the reference under sub-section (2), it shall, after recording evidence if necessary, and after perusal of the material on record and on affording and opportunity to the parties to submit their argument, make an award or an interim award, giving its reasons therefor.

(4) The Tribunal shall use all reasonable dispatch in entering on and proceeding with the reference admitted by it and making the award, and an endeavour shall be made to make an award within four months from the date on which the Tribunal had admitted the reference.

(5) The award including the interim award made by the Tribunal shall, subject to an order, if any made under Section – 12 or 13, be final and binding on the parties to the dispute.

(6) An award including an interim award as confirmed or varied by an order, if any, made under Section- 12 or 13 shall be deemed to be a decree within the meaning of section-2 of the 10 Code of Civil Procedure, 1908 of the principal Court of original jurisdiction within the local limits whereof the award or the interim award has been made and shall be executed accordingly.

22. Overriding effect of this Act.- Notwithstanding any thing contained in any other Law, Rule, Order, Scheme, or Contract Agreement entered into before or after commencement of this Act, any dispute as defined in Section 2(e) of this Act shall be regulated under the provisions of this Act, Rules and Regulations framed thereunder, and absence of arbitration clause in any contract agreement shall not have effect excluding any dispute from the purview of this Act.”

(4) It is not in dispute that the parties have executed agreement dated 22nd June, 2012, providing for appointment of an arbitrator as per provisions of the Central Act. Relevant portion of Clause 25 of the said Agreement is as follows: “The arbitration shall be conducted in accordance with provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under the clause.”

(5) The scheme of Sections 8, 9 and 22 of the State Act shows that in the absence of an agreement stipulating the applicability of the Central Act, the State Act applies to works contracts. Since in the present cases, an arbitration agreement exists and stipulates applicability of the Central Act, the State Act will not apply. We, thus, do not find any ground to interfere with the impugned order.

(6) The appeals are dismissed. It will, however, be open to the appellant-State to move the High Court for change of Arbitrator, if a case to this effect is made out on an objection of neutrality, as submitted by learned counsel for the State.

(7) Before parting with this order, we consider it appropriate to deal with the submission raised by learned counsel for the respondent(s) that Section 4(3)(b) of the State Act is patently unconstitutional. The said section is as follows:

“Section 4. Terms and conditions of service of the Chairman and other members of Tribunal.-

(3) (b) The Chairman and any other member shall hold the office at the pleasure of the Government, provided that; in case of premature termination; they shall be entitled to three months pay & allowances in lieu of compensation.”

(8) We are of the view that a provision that the tenure of the Chairman and other members of the Arbitration Tribunal at the pleasure of the Government is inconsistent with the constitutional scheme, particularly Article 14 of the Constitution of India. Section 4(1) of the State Act provides for a three year tenure or till the age of 70 years whichever is earlier. Termination of the said tenure cannot be at pleasure within the term stipulated as the arbitration tribunal has quasi judicial functions to perform. Any termination of the service of such member by a party to the dispute would interfere directly with the impartiality and independence expected from such member. The said provision is, thus, manifestly arbitrary and contrary to the Rule of Law. Accordingly, we declare the said provision to be unconstitutional.

……………………..J.
(ADARSH KUMAR GOEL)
……………………..J.
(ROHINTON FALI NARIMAN)
……………………..J.
(UDAY UMESH LALIT)

New Delhi,
March 22, 2018.

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.11866 OF 2018
(@ SPECIAL LEAVE PETITION (C) NO 17521 OF 2017)
M/S SIMPLEX INFRASTRUCTURE LTD ..APPELLANT
VERSUS
UNION OF INDIA ..RESPONDENT
J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

1. The present appeal arises from the judgment of a learned Single Judge of the High Court of Calcutta by which the respondent’s application for condoning a delay of 514 days in filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (‘the 1996 Act’) was allowed.1

2. The appellant, who is a contractor, entered into an agreement for the construction of 821 units of permanent shelters in the tsunami-hit Andaman and Nicobar Islands with the Union of India, represented by the Executive Engineer, Andaman Central Division, Central PWD, Port Blair.2 The scope of work involved the construction of single storied permanent shelters, including internal water supply, sanitary installation and internal electrification. Due to differences with regard to the performance of the construction work, the parties were referred to arbitration. On 27 October 2014, the arbitrator made an award in favour of the appellant and directed the respondent to pay a sum of ₹9,96,98,355/- with simple interest @ 10% per annum from 1 January 2009 till actual payment. The respondent received the copy of the award on 31 October 2014.

3. Aggrieved by the award, the respondent filed an application3 under Section 34 of the 1996 Act on 30 January 2015 before the District Judge, Port Blair for setting aside the arbitral award. During the pendency of the arbitration proceedings, the appellant had filed an application4 under Section 9 of the 1996 Act before the High Court of Calcutta praying for an injunction on encashment of bank guarantee against the respondent and the application was duly contested by the respondent.

4. On 12 February 2016, the District Judge dismissed the respondent’s application under Section 34 of the 1996 Act for want of jurisdiction. The District Judge observed:
“…According to the provision of Section 42 of the Arbitration and Conciliation Act, when an application has been made regarding an arbitration agreement before any Court under the same part; that Court shall only have jurisdiction over the arbitration proceedings and all subsequent application arising out of that agreement and the arbitral proceedings shall be made in that court and in no other court.
In this case the parties have preferred an application under Section 9 of the Arbitration and Conciliation Act before the Hon’ble High Court of Kolkata… Thus, it is clear to me that this Appellant Court has no jurisdiction to entertain this appeal according to Section 42 of the Arbitration and Conciliation Act.”

5. On 28 March 2016, the respondent filed an application5 under Section 34 before the High Court of Calcutta for challenging the arbitral award dated 27 October 2014, along with an application6 for condonation of a delay of 514 days. The respondent justified the delay on ground of there being a bona fide mistake in filing the application before the wrong forum and the respondent’s counsel causing delay due to which necessary formalities were not complied with within the prescribed time.

6. On 27 April 2016, the learned Single Judge of the High Court allowed the respondent’s application and condoned the delay of 514 days. The High Court held:
“After considering the submissions made by the learned advocate for the applicant/petitioner and upon perusing the application for condonation of delay, it appears that sufficient cause has been shown to explain the delay in filing the application, being AP No. 224 of 2016 and as such the delay is condoned…”

7. The issue which has been raised before this Court is whether the learned Single Judge was justified in condoning a delay of 514 days by the respondent in filing the application under Section 34. In dealing with this issue, this Court needs to assess whether the benefit of Sections 5 and Section 14 of the Limitation Act can be extended to the respondent, and if so, whether a delay beyond the specific statutory limitation prescribed under Section 34(3) of the 1996 Act could be condoned.

8. Section 34 of the Arbitration and Conciliation Act, 1996 provides thus:
“34. Application for setting aside arbitral award.— (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3)… (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.”
Section 34 provides that recourse to a court against an arbitral award may be made only by an application for setting aside such award “in accordance with” sub-section (2) and sub-section (3). Sub-section (2) relates to the grounds for setting aside an award. An application filed beyond the period mentioned in sub-section 3 of Section 34, would not be an application “in accordance with” that sub-section. By virtue of Section 34(3), recourse to the court against an arbitral award cannot be beyond the period prescribed. Sub-section (3) of Section 34, read with the proviso, makes it abundantly clear that the application for setting aside the award on one of the grounds mentioned in sub-section (2) will have to be made within a period of three months from the date on which the party making that application receives the arbitral award. The proviso allows this period to be further extended by another period of thirty days on sufficient cause being shown by the party for filing an application. The intent of the legislature is evinced by the use of the words “but not thereafter” in the proviso. These words make it abundantly clear that as far as the limitation for filing an application for setting aside an arbitral award is concerned, the statutory period prescribed is three months which is extendable by another period of upto thirty days (and no more) subject to the satisfaction of the court that sufficient reasons were provided for the delay.

9. Section 5 of the Limitation Act, 1963 provides thus:
“5. Extension of prescribed period in certain cases. —Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.
Explanation. —The fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section.”
Section 5 of the Limitation Act, 1963 deals with the extension of the prescribed period for any appeal or application subject to the satisfaction of the court that the appellant or applicant had sufficient cause for not preferring the appeal or making the application within the prescribed period. Section 5 of the Limitation Act, 1963 has no application to an application challenging an arbitral award under Section 34 of the 1996 Act. This has been settled by this Court in its decision in Union of India v Popular Construction Company7 , where it held as follows –
“As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are “but not thereafter” used in the proviso to sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act. Parliament did not need to go further. To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose. No principle of interpretation would justify such a result.
…Here the history and scheme of the 1996 Act support the conclusion that the time-limit prescribed under Section 34 to challenge an award is absolute and unextendible by court under Section 5 of the Limitation Act… ”

10 Section 14 of the Limitation Act, 1963 provides thus:
“14. Exclusion of time of proceeding bona fide in court without jurisdiction. —
(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.
(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.
(3) Notwithstanding anything contained in Rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under Rule 1 of that Order, where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature.
Explanation. —For the purposes of this section,—
(a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted;
(b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding;
(c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction.”
Section 14 of the Limitation Act deals with the “exclusion of time of proceeding bona fide” in a court without jurisdiction, subject to satisfaction of certain conditions. The question whether Section 14 of the Limitation Act would be applicable to an application submitted under Section 34 of the 1996 Act has been answered by this Court in Consolidated Engineering Enterprises v Principal Secretary, Irrigation Department8 . This court observed thus:
“At this stage it would be relevant to ascertain whether there is any express provision in the Act of 1996, which excludes the applicability of Section 14 of the Limitation Act. On review of the provisions of the Act of 1996 this Court finds that there is no provision in the said Act which excludes the applicability of the provisions of Section 14 of the Limitation Act to an application submitted under Section 34 of the said Act. On the contrary, this Court finds that Section 43 makes the provisions of the Limitation Act, 1963 applicable to arbitration proceedings. The proceedings under Section 34 are for the purpose of challenging the award whereas the proceeding referred to under Section 43 are the original proceedings which can be equated with a suit in a court. Hence, Section 43 incorporating the Limitation Act will apply to the proceedings in the arbitration as it applies to the proceedings of a suit in the court. Sub-section (4) of Section 43, inter alia, provides that where the court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the court shall be excluded in computing the time prescribed by the Limitation Act, 1963, for the commencement of the proceedings with respect to the dispute so submitted. If the period between the commencement of the arbitration proceedings till the award is set aside by the court, has to be excluded in computing the period of limitation provided for any proceedings with respect to the dispute, there is no good reason as to why it should not be held that the provisions of Section 14 of the Limitation Act would be applicable to an application submitted under Section 34 of the Act of 1996, more particularly where no provision is to be found in the Act of 1996, which excludes the applicability of Section 14 of the Limitation Act, to an application made under Section 34 of the Act. It is to be noticed that the powers under Section 34 of the Act can be exercised by the court only if the aggrieved party makes an application. The jurisdiction under Section 34 of the Act, cannot be exercised suo motu. The total period of four months within which an application, for setting aside an arbitral award, has to be made is not unusually long. Section 34 of the Act of 1996 would be unduly oppressive, if it is held that the provisions of Section 14 of the Limitation Act are not applicable to it, because cases are no doubt conceivable where an aggrieved party, despite exercise of due diligence and good faith, is unable to make an application within a period of four months. From the scheme and language of Section 34 of the Act of 1996, the intention of the legislature to exclude the applicability of Section 14 of the Limitation Act is not manifest. It is well to remember that Section 14 of the Limitation Act does not provide for a fresh period of limitation but only provides for the exclusion of a certain period. Having regard to the legislative intent, it will have to be held that the provisions of Section 14 of the Limitation Act, 1963 would be applicable to an application submitted under Section 34 of the Act of 1996 for setting aside an arbitral award.”
The position of law is well settled with respect to the applicability of Section14 of the Limitation Act to an application filed under Section 34 of the 1996 Act. By applying the facts of the present case to the well settled position of law, we need to assess whether the learned Single Judge of the High Court was justified in condoning the delay for filing an application under Section 34 of the 1996 Act.

11 The respondent submitted an application under Section 34 of the 1996 Act on 30 January 2015 before the District Judge, Port Blair for setting aside the arbitral award dated 27 October 2014. On 12 February 2016, the District Judge dismissed the respondent’s application for want of jurisdiction. It was only on 28 March 2016, that the respondent filed an application under Section 34 of the 1996 Act before the High Court of Calcutta challenging the arbitral award, along with an application for condonation of delay of 514 days.

12 The contention of Mr Aryama Sundaram, learned senior counsel for the appellant is that even if the benefit of Section 14 of the Limitation Act is extended to the respondent in filing the application under Section 34 of the 1996 Act, there would still be a delay of 131 days which could not be condoned in view of the specific statutory limitation prescribed under Section 34(3) of the 1996 Act. The learned senior counsel has tendered the following tabulated chart:

DELAY CHART

The appellant has, in this connection, relied on Union of India v Popular Construction Company (supra) and Consolidated Engineering Enterprises v Principal Secretary, Irrigation Department (supra) to support its case. On the other hand, it is the respondent’s contention that there were no willful latches on its part and the delay was caused due to inevitable administrative difficulties of obtaining directions from higher officials.

13 A plain reading of sub-section (3) along with the proviso to Section 34 of the 1996 Act, shows that the application for setting aside the award on the grounds mentioned in sub-section (2) of Section 34 could be made within three months and the period can only be extended for a further period of thirty days on showing sufficient cause and not thereafter. The use of the words “but not thereafter” in the proviso makes it clear that the extension cannot be beyond thirty days. Even if the benefit of Section 14 of the Limitation Act is given to the respondent, there will still be a delay of 131 days in filing the application. That is beyond the strict timelines prescribed in sub-section (3) read along with the proviso to Section 34 of the 1996 Act. The delay of 131 days cannot be condoned. To do so, as the High Court did, is to breach a clear statutory mandate.

14 The respondent received the arbitral award on 31 October 2014. Exactly ninety days after the receipt of the award, the respondent filed an application under Section 34 of the 1996 Act before the District Judge, Port Blair on 30 January 2015. On 12 February 2016, the District Judge dismissed the application for want of jurisdiction and on 28 March 2016, the respondent filed an application before the High Court under Section 34 of the 1996 Act for setting aside the arbitral award. After the order of dismissal of the application by the District Judge, the respondent took almost 44 days (excluding the date of dismissal of the application by the District Judge and the date of filing of application before the High Court) in filing the application before the High Court. Hence, even if the respondent is given the benefit of the provision of Section 14 of the Limitation Act in respect of the period spent in pursuing the proceedings before the District Judge, Port Blair, the petition under Section 34 was filed much beyond the outer period of ninety days.

15 The respondent has relied on the decision of this Court in Union of India v Tecco Trichy Engineers & Contractors9 , where this Court had to decide the effective date from which the limitation within the meaning of subsection (3) of Section 34 of the Act shall be calculated. The Chief Project Manager on behalf of the Southern Railway had entered into a contract with a contractor for construction of a railway bridge. Disputes between the parties were referred to arbitration and an award was delivered in the office of the General Manager, Southern Railway. The Chief Engineer preferred an application against the award under Section 34 of the 1996 Act before the High Court. The learned Single Judge and the Division Bench of the High Court rejected the application holding it as barred by limitation. This Court reversed the order of the High Court and condoned the application for delay. This Court observed that in huge organisations like the Railways having different divisional heads and various departments within the division, the copy of the award had to be received by the person who had knowledge of the proceedings and who would be the best person to understand and appreciate the award and grounds for challenge. This Court found that all arbitral proceedings for the Railways were being represented by the Chief Engineer and the General Manager had simply referred the matter for arbitration as required under the contract. While condoning the delay of three months and 27 days, this Court found that the service of the arbitral award on the General Manager could not be taken to be sufficient notice to constitute the starting point of limitation for the purpose of Section 34(3) of the 1996 Act. The decision in this case has no applicability to the facts of the present case as there is no dispute with respect to the party who received the arbitral award. It is an admitted position that on 27 October 2014, the arbitrator made an award in favour of the appellant and on 31 October 2014, the Union of India received a copy of the award. One of the reasons stated by the respondent for delay in filing an application under Section 34 of the 1996 Act was that the departmental office was located at Port Blair, Andaman and it was a timeconsuming process for obtaining permission from the circle office at Chennai. Administrative difficulties would not be a valid reason to condone a delay above and beyond the statutory prescribed period under Section 34 of the 1996 Act.

16 Under the circumstances, we are of the considered opinion that in view of the period of limitation prescribed in Section 34(3), the learned Single Judge of the High Court was not justified in condoning the respondent’s delay of 514 days in filing the application. The judgment rendered by the learned Single Judge of the High Court of Calcutta on 27 April 2016, in GA No. 958 of 2016 is set aside and the appeal is allowed. The petition under Section 34 stands dismissed on the ground that it is barred by limitation. There shall be no order as to costs.

……………………………………………..J
[Dr Dhananjaya Y Chandrachud]
……………………………………………..J
[Vineet Saran]

New Delhi;
December 05, 2018

FOOTNOTE:
1 The High Court delivered judgment on 27 April 2016.
2 The date of the agreement is 5 January 2006
3 O.A No.2/2015
4 AP No 91 of 2008
5 A.P. No. 224/2016
6 G.A. No. 958/2016 in A.P. No. 224/2016
7 (2001) 8 SCC 470 at para 12 and 14
8 (2008) 7 SCC 169 at para 23
9 (2005) 4 SCC 239

The post M/s Simplex Infrastructure Ltd Vs Union Of India appeared first on B&B Associates LLP.

N.V. RAMANA, J.
1. These appeals are filed, aggrieved by the judgment and order dated 18.06.2012 in the Civil Revision Petition Nos. 2151, 2246, 2383 and 2458 of 2012 passed by the High Court of Judicature at Andhra Pradesh at Hyderabad.

2. An interesting question of law arises in this batch of petitions, concerning the applicability of Section 17 of the Limitation Act, 1963 [‘Limitation Act’] for condonation of a delay caused on the account of alleged fraud played on the objector (party challenging the award) beyond the period Reportable prescribed under Section 34 (3) of the Arbitration and Conciliation Act of 1996 [‘Arbitration Act’].

3. The facts which give rise to this question fall into a narrow compass. Originally one Mr. P. Kishan Lal carried on business and acquired several properties. On his death, Mr. P. Kishan Lal was survived by eight (8) legal heirs (Appellant Nos. 1 to 6 and Respondent Nos. 1 and 2).

4. After the death of Mr. Kishan Lal, several disputes have cropped up on the division of properties. Having failed to resolve the dispute, the parties turned towards arbitration to resolve the dispute. Five Arbitrators were appointed to adjudicate and distribute eleven properties belonging to them.

5. On 18.02.2010, the arbitrators passed a unanimous Award providing for the division of properties and businesses. The parties received the Award on 21.02.2010. There is no dispute on the receipt of the Award by the parties.

6. The Respondents allege that after the pronouncement of the award, the Appellants in bad faith entered into a Memorandum of Understanding (MoU) with the Respondents. According to the Respondents, the Appellants agreed to give certain additional properties to Respondent No. 1, which were more than what were provided in the Award. The Respondents alleged that after entering into the MoU, the Appellants were required to execute Gift and Release Deeds to give effect to the MoU. However, the Appellants delayed the execution of the Gift and Release Deeds as contemplated by the MoU.

7. In the meanwhile, the three­month period and the extended period of 30 days for challenging an Award under Section 34(3) of the Arbitration Act had expired. After the time limit expired, the Appellants filed an Execution Petition (EP) for execution of the Award. The trial court held that EP was not maintainable. On appeal, the High Court set aside the order of the trial court and held that the Execution Petition was maintainable and directed the trial court to decide it on merits.

8. When the Respondents realized that the Appellants were delaying the execution of the Gift Deed contemplated by the MoU, the Respondents on 08.02.2011 filed an application under Section 34(3) of the Arbitration Act for setting aside the Award. This filing was 236 days after the receipt of the Award by the Respondents. The application was accompanied by another application under Section 5 of the Limitation Act seeking condonation of the delay of 236 days. In the application for condonation of delay, the Respondents alleged that:
a. Award was served on the Respondents on 21.02.2010; b. They were laypersons and were not aware of the legal requirement of filing objections within the period prescribed under the Arbitration Act.
c. Since they were dissatisfied with the Award, they raised objections before the learned Arbitrators. The Arbitrators called upon all the parties and conducted conciliation. Accordingly, the parties entered into a MoU. The MoU contemplated for execution of Gift Deed and Release Deed in favour of Respondent No.1. However, the Appellants failed to execute the required documents as per the MoU with an intent to defeat their rights.
d. One of the Respondents was physically indisposed for one month.

9. During the pendency of the aforesaid interim application, seeking condonation of the delay, the Respondents filed another application being I.A. No. 1977 of 2011 in I.A. No. 598 of 2011, seeking an order of the trial court to summon the Sub­registrar, Charminar to prove the veracity of the Memorandum of Understanding and to counter the allegations raised by the Appellants herein, as to the falsification and fabrication of the Memorandum dated 09.04.2010. For completeness of narration, it may be stated that additional I.A.s, being I.A. No. 210 and 211 of 2012, were sought by the Respondent seeking certain documents to be brought on record.

10. By order dated 21.02.2012, the trial court dismissed the IA. No. 598 of 2011, pertaining to the condonation of delay in filing the Section 34 application. The Trial Court while dismissing the aforesaid application as indicated above, reasoned as under5
i. That the Court is not empowered to stretch the limitation period beyond the requisite period given under Section 34 of the Arbitration Act.
ii. Placing reliance on Union of India vs. Popular Construction Co., (2001) 8 SCC 470 and Consolidated Engineering Enterprises vs. Principal Secretary, Irrigation Department, (2008) 7 SCC 169, held that the language of Section 34 of the Arbitration Act mandated a strict adherence to the time period provided thereunder and the extension beyond the same was not possible under any circumstances. Therefore, Section 5 of the Limitation Act was not applicable to an application filed under Section 34 of the Arbitration Act.
iii. Based on the aforesaid judgments of this Hon’ble Court, and the provisions of Section 34 (3) of the Arbitration Act, the City Civil Court held that Section 5 of the Limitation Act, 1963, has no application, as the Court has no power to condone the delay beyond three months and thirty days. On this ground alone, the objections filed under Section 34 were liable to be dismissed.
iv. That the trial court rejected the contention that the Respondent (objector) was unable to file the objections within the period of limitation on the ground of illness and no medical certificate was provided to substantiate such claim.
v. That ignorance of law on behalf of the Respondents, to be not aware of the technicalities provided under Section 34 of the Arbitration Act was not excusable.
vi. Moreover, the trial court came to a conclusion that equitable grounds cannot be utilized to create exceptions not mandated under the statutory law.
We may note that the trial court although discussed about the existence of the Memorandum of Understanding dated 09.04.2010 and its impact on the Respondent’s delay in filing the Section 34 application, there is no specific discussion concerning the applicability of Section 17 of the Limitation Act in the trial court order. Moreover, other interim applications filed by the respondents were also dismissed consequentially.

11. Being aggrieved by the dismissal, respondents preferred four Civil Revision petitions, before the High Court of Andhra Pradesh under Article 227 of the Constitution of India, being C.R.P. No. 2151, 2246, 2383 and 2458 of 2012. By the impugned order dated 18.06.2012, the High Court remanded the matter to the trial court concerning the applicability of Section 17 of the Limitation Act in an application under Section 34 of the Arbitration Act. The High Court observed
“Even though Mr. K. Prabhakar, learned counsel for the respondents sought to argue that when Section 5 of the Act is excluded, automatically Section 17 of the Act also gets excluded, I refrain from expressing any opinion on this aspect, because this is required to be considered by the lower court at the first instance before this Court examines the same at an appropriate stage. On this short ground, I feel that it is just and appropriate to remand the matter back to the learned Chief Judge, City Civil Court, Hyderabad for considering the abovementioned pleadings of the petitioners and pronouncing upon the same with reference to the applicability or otherwise of the provision of Section 17 of the Act. Therefore, without expressing any opinion on these aspects, the learned Chief Judge is directed to reconsider the case only to this limited extent and pass a fresh order after hearing both parties, within a period of two months from the date of receipt of this order. It is made clear that the orders of the lower Court in respect of the other aspects stand confirmed”.
(emphasis supplied)

12. Aggrieved by the remand order passed by the High Court on the applicability of Section 17 of the Limitation Act to the proceedings, the Appellants have approached this Court in these appeals.

13. Before we delve into any other aspect of this case, it may be important to note that we would have agreed with the High Court wherein a remand may have been required in usual course for considering the applicability of Section 17 of the Limitation Act as there is an apparent insufficiency of reasons in the trial court order. But, in this case there has been a considerable delay in resolving the dispute. The very purpose of speedy justice delivery mechanism would be frustrated by such delays if the matter is allowed to linger before the courts. We had positively persuaded the parties several times to come to an amicable settlement and asked the advocates representing them to use their good offices to refer parties to mediation and avoid decades of litigation. But, our efforts were not met with much success in any event.

14. The High Court could have examined the legal issue of applicability of Section 17 of the Limitation Act to an application filed under Section 34 of the Arbitration Act. This is a pure question of law. Only if Section 17 of Limitation Act was applicable to a Section 34 application, the question of factual satisfaction of the ingredients of Section 17 to the present case and a consequent remand to the trial court would arise.

15. The learned counsel for the appellants, Mr. Devansh A. Mohta, argued thati. Limitation period provided under Section 34 (3) of the Arbitration Act begins ‘only’ upon the receipt of the award by the parties and the same cannot be diluted by a different starting point provided under the Limitation Act, in light of Section 29 (2) of the Limitation Act.
ii. The period of limitation under Section 34(3) of the Arbitration Act is ‘unbreakable’ and is meant to run continuously.
iii. Definitive time limit is necessary to ensure expeditious and effective resolution of disputes between the parties.
iv. The mandate of Popular Construction Case (supra) and Consolidated Engineering Case (supra) wherein the emphasis on ‘fixed period’ needs to be given effect to.
v. The expression ‘had received the arbitral award’ found in Section 34 (3) of the Arbitration Act expressly excludes applicability of Section 17 of the Limitation Act.
vi. This Court should appreciate the difference between concealment of right to action being different from preventing a person from taking action.

16. On the contrary, the learned counsel for the respondents, Mr. Yashraj Singh Deora, had contended thati. The reasoning provided under Popular Construction Case (supra) and Consolidated Engineering Case (supra) clearly indicates to the applicability of Section 17 of the Limitation Act, similar to the applicability of Section 14 of the Limitation Act. ii. Limitation Act is applicable to all proceedings before the court. iii. It is evident that the Arbitration Act under Section 34 (3) provides for a different time period than the one present under Article 137 of the Limitation Act, accordingly, the special law would therefore, prevail in so far as the issue of period of limitation is concerned. However, for ‘computation of the period of limitation’ or arriving at the ‘prescribed period’ the provisions of Section 4 to 24 of the Limitation Act would automatically apply unless they are expressly excluded by the special law. iv. That it has been highly inequitable for the respondents, who were victims of bad faith negotiation undertaken by the Appellants to derail the respondents from pursuing this case for enforcement of their rights.

17. We have heard the counsels for both the parties at length, and also perused the material available on record.

18. We are now to examine whether Section 17 of the Limitation Act is applicable while determining the limitation period under Section 34(3) of the Arbitration Act?

19. This analysis has to necessarily begin from Section 29(2) of the Limitation Act, which states 29 (2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of Section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in Sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law. (emphasis added)

20. Section 29(2) is divided into 2 limbs. This is evident from the conjunctive “and” in the said provision. The inter­relation between these two limbs was considered by a Bench of five Judges of this Court in Vidyacharan Shukla v. Khubchand Baghel, [1964] 6 SCR 129.

21. The first part stipulates that the limitation period prescribed by the special law or local law will prevail over the limitation period prescribed in the Schedule to the Limitation Act. In this case, the Arbitration Act is a “special law” which prescribes a specific period of limitation in Section 34(3) for filing objections to an arbitral award passed under the 1996 Act and consequently the provisions of Arbitration Act would apply. We also note that there is no provision under the Limitation Act dealing with challenging an Award passed under the Arbitration Act.

22. The second part mandates that Sections 4 to 24 of the Limitation Act will apply for determining the period of limitation “only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.” Thus the extent of the application of Sections 4 to 24 of Limitation Act will apply for determining the limitation period under the Arbitration Act only if they are not expressly excluded by Arbitration Act.

23. We are conscious that this Court in several pronouncements has extended Section 14 of Limitation Act to Section 34 of Arbitration Act and thereby excluded the time spent in bonafide pursuing proceedings in a Court which lacks jurisdiction. (State of Goa v. Western Builders (2006) 6 SCC 239 at para 25; Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department, (2008) 7 SCC 169 at para 27 and 29; Coal India Ltd. v. Ujjal Transport Agency, (2011) 1 SCC 117 at para 6; M.P. Housing Board v. Mohanlal & Co., (2016) 14 SCC 199 at para 13). Similarly, this Court also extended Section 12 of the Limitation Act to the Arbitration Act and excluded the day on which the Award was received from computing the starting period under Section 34(3). We note that none of these cases dealt with the question whether the scheme of Section 17 of the Limitation Act is consistent with Section 34 of the Arbitration Act.

24. Relying on these pronouncements, the Respondents’ counsel asserted that there is no express exclusion of Section 17 in the Arbitration Act and therefore the benefit of Section 17 of Limitation Act should be extended while determining the period of limitation under Section 34(3).

25. This requires us to consider the phrase “express exclusion” in Section 29(2) of the Limitation Act. This Court in a series of cases held that the express exclusion can be inferred either from the language of the special law or it can be necessarily implied from the scheme and object of the special law.

26. A Bench of five Judges in Vidyacharan Shukla v. Khubchand Baghel, AIR 1964 SC 1099, interpreting the phrase “express exclusion” observed: “The contention is that sub­section (3) of Section 116­A of the Act not only provides a period of limitation for such an appeal, but also the circumstances under which the delay can be excused, indicating thereby that the general provisions of the Limitation Act are excluded. There are two answers to this argument. Firstly, Section 29(2)(a) of the Limitation Act speaks of express exclusion but there is no express exclusion in sub­section (3) of Section 116­A of the Act; secondly, the proviso from which an implied exclusion is sought to be drawn does not lead to any such necessary implication”.

27. This principle was further crystallised in Hukumdev Narain Yadav v. Lalit Narain Mishra, (1974) 2 SCC 133 wherein a Bench of three Judges held that: “It is contended before us that the words “expressly excluded” would mean that there must be an express reference made in the special or local law to the specific provisions of the Limitation Act of which the operation is to be excluded. As usual the meaning given in the Dictionary has been relied upon, but what we have to see is whether the scheme of the special law, that is, in this case the Act, and the nature of the remedy provided therein are such that the Legislature intended it to be a complete code by itself which alone should govern the several matters provided by it. If on an examination of the relevant provisions it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act. In our view, even in a case where the special taw does not exclude the provisions of Sections 4 to 24 of the Limitation Act by an express reference, it would nonetheless be open to the Court to examine whether and to what extent the nature of those provisions or the nature of the subject­matter and scheme of the special law exclude their operation”. (emphasis added)

28. A Bench of three Judges in Commissioner of Customs and Central Excise v. Hongo India (P) Ltd., (2009) 5 SCC 791 reiterated this principle when it held:
“It was contended before us that the words “expressly excluded” would mean that there must be an express reference made in the special or local law to the specific provisions of the Limitation Act of which the operation is to be excluded. In this regard, we have to see the scheme of the special law which here in this case is the Central Excise Act. The nature of the remedy provided therein is such that the legislature intended it to be a complete code by itself which alone should govern the several matters provided by it. If, on an examination of the relevant provisions, it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act. In our considered view, that even in a case where the special law does not exclude the provisions of Sections 4 to 24 of the Limitation Act by an express reference, it would nonetheless be open to the court to examine whether and to what extent, the nature of those provisions or the nature of the subject­matter and scheme of the special law exclude their operation. In other words, the applicability of the provisions of the Limitation Act, therefore, is to be judged not from the terms of the Limitation Act but by the provisions of the Central Excise Act relating to filing of reference application to the High Court”.

29. These principles were reiterated by this Court in Union of India v. Popular Construction Co., (2001) 8 SCC 470 at page 474; Chhattisgarh State Electricity Board v. Central Electricity Regulatory Commission, (2010) 5 SCC 23 at para 32; Gopal Sardar v. Karuna Sardar, (2004) 4 SCC 252 at para 13.

30. Thus, the inquiry is ­ whether the text or the scheme and object of the Arbitration Act excludes the application of Section 17 of Limitation Act while determining the limitation period?

31. We therefore have to contrast Section 17 of the Limitation Act with Section 34(3) of the Arbitration Act. The relevant part of Section 17 states
17. Effect of fraud or mistake.—
(1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act,—
(a) the suit or application is based upon the fraud of the defendant or respondent or his agent; or
(b) the knowledge of the right or title on which a suit or application is founded is concealed by the fraud of any such person as aforesaid; or
(c) the suit or application is for relief from the consequences of a mistake; or
(d) where any document necessary to establish the right of the plaintiff or applicant has been fraudulently concealed from him, the period of limitation shall not begin to run until plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it; or in the case of a concealed document, until the plaintiff or the applicant first had the means of producing the concealed document or compelling its production:

32. Section 17 does not extend or break the limitation period. It only postpones or defers the commencement of the limitation period. This is evident from the phrase “the period of limitation shall not begin to run”.
33. In contrast, Section 34(3) of the Arbitration Act states
34. Application for setting aside arbitral award­
…
…
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal.
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (emphasis added)

34. Section 34(3) deserves careful scrutiny and its characteristics must be highlighted:
(a) Section 34 is the only remedy for challenging an award passed under Part I of the Arbitration Act. Section 34(3) is a limitation provision, which is an inbuilt into the remedy provision. One does not have to look at the Limitation Act or any other provision for identifying the limitation period for challenging an Award passed under Part I of the Arbitration Act.
(b) The time limit for commencement of limitation period is also provided in Section 34(3) i.e. the time from which a party making an application “had received the Arbitral Award” or disposal of a request under Section 33 for corrections and interpretation of the Award.
(c) Section 34(3) prohibits the filing of an application for setting aside of an Award after three months have elapsed from the date of receipt of Award or disposal of a request under Section 33. Section 34(3) uses the phrase “an application for setting aside may not be made after three months have elapsed”. The phrase “may not be made” is from the UNCITRAL Model Law1 and has been understood to mean “cannot be made”. The High Court of Singapore in ABC Co. Ltd v. XYZ Co. Ltd, [2003] SGHC 107)
“The starting point of this discussion must be the Model Law itself. On the aspect of time, Article 34(3) is brief. All it says is that the application may not be made after the lapse of three months from a specified date. Although the words used are ‘may not’ these must be interpreted as ‘cannot’ as it is clear that the intention is to limit the time during which an award may be challenged. This interpretation is supported by material relating to the discussions amongst the drafters of the Model Law. It appears to me that the court would not be able to entertain any application lodged after the expiry of the three months period as Article 34 has been drafted as the allencompassing, and only, basis for challenging an award in court. It does not provide for any extension of the time period and, as the court derives its jurisdiction to hear the application from the Article alone, the absence of such a provision means the court has not been conferred with the power to extend time”.
(d) The limitation provision in Section 34(3) also provides for condonation of delay. Unlike Section 5 of Limitation Act, the delay can only be condoned for 30 days on showing sufficient cause. The crucial phrase “but not thereafter” reveals the legislative intent to fix an outer boundary period for challenging an Award.
(e) Once the time limit or extended time limit for challenging the arbitral award expires, the period for enforcing the award under Section 36 of the Arbitration Act commences. This is evident from the phrase “where the time for making an application to set aside the arbitral award under Section 34 has expired”.2 There is an integral nexus between the period prescribed under Section 34(3) to challenge the Award and the commencement of the enforcement period under Section 36 to execute the Award.

35. If Section 17 of the Limitation Act were to be applied to determining the limitation period under Section 34(3), it would have the following consequences (a) In Section 34(3), the commencement period for computing limitation is the date of receipt of award or the date of disposal of request under Section 33 (i.e correction/additional award).
If Section 17 were to be applied for computing the limitation period under Section 34(3), the starting period of limitation would be the date of discovery of the alleged fraud or mistake. The starting point for limitation under Section 34(3) would be different from the Limitation Act.
(b) The proviso to Section 34(3) enables a Court to entertain an application to challenge an Award after the three months period is expired, but only within an additional period of thirty dates, “but not thereafter”. The use of the phrase “but not thereafter” shows that the 120 days period is the outer boundary for challenging an Award. If Section 17 were to be applied, the outer boundary for challenging an Award could go beyond 120 days. The phrase “but not thereafter” would be rendered redundant and otiose. This Court has consistently taken this view that the words “but not thereafter” in the proviso of Section 34 (3) of the Arbitration Act are of a mandatory nature, and couched in negative terms, which leaves no room for doubt. (State of Himachal Pradesh v. Himachal Techno Engineers & Anr., (2010) 12 SCC 210, Assam Urban Water Supply & Sewerage Board v. Subash Projects & Marketing Ltd., (2012) 2 SCC 624 and Anilkumar Jinabhai Patel (D) through LRs v. Pravinchandra Jinabhai Patel & Ors., (2018) SCC Online SC 276

36. In our view, the aforesaid inconsistencies with the language of Section 34(3) of Arbitration Act tantamount to an “express exclusion” of Section 17 of Limitation Act.

37. This Court in Popular Construction Case (supra) at page 474 followed the same approach when it relied on the phrase “but not thereafter” to hold that Section 5 of Limitation Act was expressly excluded.
12. As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are “but not thereafter” used in the proviso to sub­section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act. Parliament did not need to go further. To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose. No principle of interpretation would justify such a result.
(emphasis added)

38. Further, the exclusion of Section 17 is also necessarily implied when one looks at the scheme and object of the Arbitration Act.

39. First, the purpose of Arbitration Act was to provide for a speedy dispute resolution process. The Statement of Objects and Reasons reveal that the legislative intent of enacting the Arbitration Act was to provide parties with an efficient alternative dispute resolution system which gives litigants an expedited resolution of disputes while reducing the burden on the courts. Article 34(3) reflects this intent when it defines the commencement and concluding period for challenging an Award. This Court in Popular Construction Case (supra) highlighted the importance of the fixed periods under the Arbitration Act. We may also add that the finality is a fundamental principle enshrined under the Arbitration Act and a definitive time limit for challenging an Award is necessary for ensuring finality. If Section 17 were to be applied, an Award can be challenged even after 120 days. This would defeat the Arbitration Act’s objective of speedy resolution of disputes. The finality of award would also be in a limbo as a party can challenge an Award even after the 120 day period.

40. Second, extending Section 17 of Limitation Act to Section 34 would do violence to the scheme of the Arbitration Act. As discussed above, Section 36 enables a party to apply for enforcement of Award when the period for challenging an Award under S.34 has expired. However, if Section 17 were to be extended to Section 34, the determination of “time for making an application to set aside the arbitral award” in Section 36 will become uncertain and create confusion in the enforcement of Award. This runs counter to the scheme and object of the Arbitration Act.

41. Third, Section 34(3) reflects the principle of unbreakability. Dr. Peter Binder in International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions, 2nd Ed., observed: “An application for setting aside an award can only be made during the three months following the date on which the party making the application has received the award. Only if a party has made a request for correction or interpretation of the award under Art. 33 does the time limit of three months begin after the tribunal has disposed of the request. This exception from the three­month time limit was subject to criticism in the Working group due to fears that it could be used as a delaying tactics. However, although “an unbreakable time limit for applications for setting aside” was sought as being desirable for the sake of “certainty and expediency” the prevailing view was that the words ought to be retained “since they presented the reasonable consequence of article 33”. According to this “unbreakability” of time limit and true to the “certainty and expediency” of the arbitral awards, any grounds for setting aside the award that emerge after the three­month time limit has expired cannot be raised.

42. Extending Section 17 of the Limitation Act would go contrary to the principle of ‘unbreakability’ enshrined under Section 34(3) of the Arbitration Act.

43. The Respondents have argued that if Section 17 is not extended to Section 34, it would cause enormous injustice and provide scope for parties to play mischief. The Respondents have cited several illustrations where on account of fraud of the party, an objecting party can be precluded from challenging an Award and extending Section 17 would come to the rescue of such a party.

44. The Respondent’s contention proceeds on a misconceived notion of Section 17. Even if Section 17 were to be extended to Section 34, it would not address the Respondent’s grievance. Section 17 does not defer the starting point of the limitation period merely because the Appellants has committed fraud. Section 17 does not encompass all kinds of frauds and mistakes. Section 17(1)(b) and (d) only encompasses only those fraudulent conduct or act of concealment of documents which have the effect of suppressing the knowledge entitling a party to pursue its legal remedy. Once a party becomes aware of the antecedent facts necessary to pursue a legal proceeding, the limitation period commences.

45. This principle is illustrated by a ruling of this Court in Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari, 1950 SCR 852. The facts of this case are broadly similar. A decree holder files an execution petition after the expiry of limitation period (12 years of the passing of decree). To overcome the limitation bar, the decree­holder alleged that the judgement debtor prevented the execution of a decree by suppressing the ownership of certain assets (ownership of newspaper in those facts) and in support placed reliance on Section 18 of Limitation Act, 1908 (equivalent of Section 17)3 Rejecting this contention, this Court observed:
19. In our opinion, the facts necessary to establish fraud under Section 18 of the Limitation Act are neither admitted nor proved in the present case. Concealing from a person the knowledge of his right to apply for execution of a decree is undoubtedly different from preventing him from exercising his right, of which he has knowledge. Section 18 of the Limitation Act postulates the former alternative. …… The fraud pleaded, namely suppression of ownership of the Prabhat newspaper, did not conceal from him his right to make an application for execution of the decree.

46. Similarly in Pallav Sheth v. Custodian, (2001) 7 SCC 549, this Court observed that Section 17 comes to the rescue of a party for “failing to adopt legal proceedings when the facts or material necessary for him to do so have been willfully concealed from him”

47. In the context of Section 34, a party can challenge an award as soon as it receives the award. Once an award is received, a party has knowledge of the award and the limitation period commences. The objecting party is therefore precluded from invoking Section 17(1)(b) & (d) once it has knowledge of the Award. Section 17(1)(a) and (c) of Limitation Act may not even apply, if they are extended to Section 34, since they deal with a scenario where the application is “based upon” the fraud of the respondent or if the application is for “relief from the consequences of a mistake”. Section 34 application is based on the award and not on the fraud of the respondent and does not seek the relief of consequence of a mistake.

48. The fraudulent conduct where Section 17 of the Limitation Act would have helped the objecting party is where there was a fraud in the delivery of the award. However, in such a scenario, resort to section 17 is not necessary. If there is any fraud in the delivery of Award, the requirement of receipt of Award under Section 34(3) itself is not satisfied. Any receipt of Award must be effective receipt. This Court in Union of India v. Tecco Trichy Engineers & Contractors, (2005) 4 SCC 239 held that:
“8. The delivery of an arbitral award under sub­section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be “received” by the party. This delivery by the Arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings.
9. In the context of a huge organisation like the Railways, the copy of the award has to be received by the person who has knowledge of the proceedings and who would be the best person to understand and appreciate the arbitral award and also to take a decision in the matter of moving an application under sub­section (1) or (5) of Section 33 or under sub­section (1) of Section 34”.

49. In view of the above, we hold that once the party has received the Award, the limitation period under Section 34(3) of the Arbitration Act commences. Section 17 of the Limitation Act would not come to the rescue of such objecting party.

50. In the present case, the Respondents had a right to challenge the Award under Section 34 the moment they received it. In this case, Respondents received the Award on 21.02.2010. The alleged MoU was executed on 09.04.2010. Once the Respondents received the Award, the time under Section 34(3) commenced and any subsequent disability even as per Section 17 or Section 9 of Limitation Act is immaterial. Merely because the Appellant had committed some fraud, it would not affect the Respondents right to challenge the Award if the facts entitling the filing of a Section 34 Application was within their knowledge. The moment the Respondents have received the Award, the three months period prescribed under Section 34(3) begins to commence. It was incumbent on the Respondents to have instituted an application under Section 34 challenging an award. Therefore, in light of the discussion above, there would not have been any point for meaningful remand as the question of law is answered against the Respondents herein.

51. In light of the aforesaid legal position, the judgment and order of the High court dated 18.06.2012, in Civil Revision Petition Nos. 2151, 2246, 2383 and 2458 of 2012 are setaside, and also the order allowing I.A. No. 598 of 2011 condoning the delay of 236 days in filing the objections is set aside, accordingly these appeals are allowed with no order as to costs.

………………………J.
(N. V. Ramana)
………………………J.
(S. Abdul Nazeer)

New Delhi,
September 26, 2018

FOOTNOTE
1. “ An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal”.

2. 36. Enforcement.—Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.

3. Although there is a slight difference in the text of S.18 of Limitation Act, 1908 and S.17 of Limitation Act, 1963, the relevant provision for the present case remains the same.

The post P. Radha Bai and Ors. Vs P. Ashok Kumar and Anr. appeared first on B&B Associates LLP.

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3313 OF 2018
(Arising out of SLP(C) No.15668 of 2012)
ANILKUMAR JINABHAI PATEL (D) THR. LRs. …Appellants
Versus
PRAVINCHANDRA JINABHAI PATEL AND ORS. …Respondents
WITH
CIVIL APPEAL NO. 3314 OF 2018
(Arising out of SLP(C) No.15741 of 2012)
J U D G M E N T

R. BANUMATHI, J.

Leave granted.

2. Appellants have filed these appeals challenging the judgment dated 27.03.2012 of the High Court of Judicature at Bombay Bench at Aurangabad in W.P. No. 4669 of 2011 in and by which the High Court held that challenge to the arbitral award dated 07.07.1996 was time barred under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Act”).

3. The facts of the case are that the appellant No.1/Anilkumar Patel and respondent No.1/Pravinchandra Patel are real brothers and sons of Jinabhai.
Pravinchandra Patel and Anilkumar Patel together started the business of fertilizer manufacturing, chemical and real estate at Jalgaon. In the course of business, they set up number of companies and partnership concerns and acquired numerous immovable and movable properties. Pravinchandra Patel has three daughters, who are married and settled outside Jalgaon. Anilkumar Patel has three sons, who are residing with him at Jalgaon. As children of Pravinchandra Patel and Anilkumar Patel grew up and in order to avoid any possible litigation, both the brothers and their family members decided to make division of the assets of the family. For this purpose, they approached Latikaben (respondent No.12) and Bhikhalal Nathalal Patel (respondent No.11) who is the sister and brother-in-law of Pravinchandra Patel and Anilkumar Patel and parties have agreed to appoint them as arbitrators. It culminated into an MOU dated 21.05.1996 appointing Latikaben and Bhikhalal Nathalal Patel as arbitrators which was signed by all the members of the family that is the appellants and respondents.

4. While arbitrators were away to Rajkot due to emergency work, both Pravinchandra Patel and Anilkumar Patel decided to streamline the ongoing business of firms and companies by signing of an interim MOU on 29.06.1996 (IMOU). The covenants of the said IMOU covered the matters relating to bank accounts and withdrawal power, NPK allocation etc. The said IMOU was signed by Pravinchandra Patel for himself and on behalf of his family members. Similarly, Anilkumar Patel signed in the IMOU for himself and also as a power of attorney holder for his wife, his all sons and daughter-in-law.

5. The arbitrators arrived at Jalgaon on 04.07.1996 and continued with the arbitration proceeding and passed the award on 07.07.1996 (with a mention of IMOU dated 29.06.1996) under which certain properties were given to Pravinchandra Patel and Anilkumar Patel whereas some other assets were kept undivided with equal rights and interest thereon of both groups. The award was written in Gujarati language by hand by the arbitrators and signed by the arbitrators. The copy of the award was given to Pravinchandra Patel and Anilkumar Patel by arbitrators in person which was duly acknowledged by them. Copy of the award bears signature of both Pravinchandra Patel and Anilkumar Patel with recital that they and their family members will act as per the award and will give effect to the same. Then by an award dated 03.11.1996, the issues between appellants and respondents were finally decided taking note of earlier awards. According to Pravinchandra Patel, Anilkumar Patel accepted and acted upon the awards on more than one occasion.

6. However, Anilkumar Patel and his family members (appellant Nos. 1(a) to 1(d) and respondent No.10) filed an arbitration petition No.202 of 2005 under Section 34 of the Act before the District Judge, Jalgaon on 29.11.2005 challenging the award dated 07.07.1996 contending that they learnt about the arbitral award only on 11.08.2005 when they were served with the notice of execution petition filed by Pravinchandra Patel alongwith the xerox of the award dated 07.07.1996. Therefore, as per the appellant-Anilkumar Patel, period of limitation starts only from 11.08.2005, from the date of their receipt of copy of the award. It was further alleged that, appellant Nos. 1(a) to 1(d) and respondent No.10 were not included as party in the award dated 07.07.1996 and the award is not binding on them. They have, inter alia, alleged that the award is a false and fraudulent document. They also emphasized that the signature of Anilkumar Patel in the arbitral award showing his acknowledgement was forged and therefore, could not be acted upon.

7. Later on, an application came to be filed by Anilkumar Patel for himself and on behalf of his family members for an amendment under Order VI Rule 17 C.P.C. stating that the arbitration petition No.202 of 2005 filed initially, did not contain the challenge to award dated 03.11.1996 and hence, by an amendment sought to challenge award dated 03.11.1996 as well. The said application was dismissed on 30.06.2006 by the District Court on the ground of limitation which was further challenged through W.P. No.5502 of 2006 before the High Court. The same was remanded to the District Judge on 21.08.2006 for consideration of the matter afresh. After remand, the District Judge by order dated 28.09.2006 again dismissed the amendment application on the ground of limitation. The said order dated 28.09.2006 was again challenged by Anilkumar Patel under W.P. No.7614 of 2006. The High Court vide order dated 13.11.2006 dismissed the writ petition observing that Anilkumar Patel is adopting tactics of approbate and reprobate and Anilkumar Patel is acting as per his convenience by denying the knowledge of award dated 03.11.1996 in some court proceedings though in some other proceedings, he has relied on the said award and sought to take advantage on the basis of the said award.

8. Insofar as the challenge to the award dated 07.07.1996, the District Judge vide order dated 14.02.2011 allowed the application under Section 34 of the Act inter alia, holding that the period of limitation prescribed under Section 34(3) of the Act is to be computed from the point of time when the party concerned received the copy of the arbitral award. The District Judge set aside the award holding that number of serious issues have been raised in application under Section 34 and there is nothing to show that Anilkumar Patel was authorised by the other applicants to receive a copy of the award on their behalf and it cannot be said that the appellant Nos.1(a) to 1(d) and respondent No.10 had received the award in terms of Section 31(5) of the Act.

9. Being aggrieved, Pravinchandra Patel filed W.P. No.4669 of 2011. The High Court by the impugned judgment dated 27.03.2012 set aside the order of the District Judge holding that the petition filed in the year 2005 under Section 34 of the Act was time barred. The High Court held that sofaras the award dated 03.11.1996, the findings in W.P.No.7614 of 2006 have attained finality which has foreclosed the right of Anilkumar Patel to challenge the award dated 07.07.1996. The High Court enumerated various circumstances to hold that Anilkumar Patel and his family members were well aware of the award dated 07.07.1996. The High Court also relied upon various correspondence between the parties, legal proceedings etc. (O.A. No.298A/2001 etc.) to arrive at the conclusion that Anilkumar Patel received the award dated 07.07.1996. On those findings, the High Court held that the petition filed in the year 2005 under Section 34 of the Act is time barred and the petition filed under Section 34 of the Act challenging the award dated 07.07.1996 came to be dismissed.

10. On behalf of legal heirs of Anilkumar Patel, it was contended that as contemplated under Section 31(5) of the Act, copy of the award dated 07.07.1996 was not served upon the family members of Anilkumar Patel and mere knowledge as to the existence of the award would not in any manner result in the commencement of period of limitation. The learned senior counsel for the appellants contended that the limitation period can be computed only from the day on which the original signed copy of the arbitral award is received under the provision of Section 31(5) of the Arbitration and Conciliation Act, 1996.

11. Per contra, learned senior counsel for the respondents has drawn our attention to number of documents to refute appellant’s contention wherein appellant-Anilkumar Patel himself admitted many times that the arbitral award was within his knowledge and used the awards dated 07.07.1996 and 03.11.1996 on number of occasions including legal proceedings. Further contention of Pravinchandra Patel is that arbitrators who were none other than their sister Latikaben (respondent No.12) and Bhikhalal Nathalal Patel (respondent No.11) husband of Latikaben who came from Rajkot to Jalgaon to settle the matter amicably between two brothers which was at the instance of both the parties and while so, the award cannot be assailed as fabricated or a biased one.

12. On the aforesaid rival contentions advanced on behalf of both the parties and upon perusal of the impugned judgment and materials placed on record, the following points arise for consideration:-
(1) Whether Anilkumar Patel represented his family in the arbitration proceedings and whether respondents are right in contending that receipt of copy of award by Anilkumar Patel was for himself and on behalf of his family members?
(2) Whether the High Court was right in holding that the application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award was barred by limitation?

13. Section 34 of the Act provides for filing of an application for setting aside an arbitral award. Sub-section (3) of Section 34 of the Act lays down the period of limitation for making the application. Section 34(3) of the Arbitration and Conciliation Act, 1996, reads as follows:-
34. Application for setting aside arbitral award.-(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub-section (3).
(2) ………
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

14. Section 34(3) provides that an application for setting aside an award shall not be entertained by the court if it is made after three months have elapsed from the date on which the applicant had received the arbitral award. The proviso to Section 34 further provides that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the prescribed time, it may entertain the application within a further period of thirty days ‘but not thereafter’. (vide State of Arunachal Pradesh v. Damini Construction Co. (2007) 10 SCC 742). The words ‘but not thereafter’ in the proviso are of mandatory nature, and couched in the negative, and leave no room for doubt. Proviso to Section 34 gives discretion to the court to condone the delay for a sufficient cause, but that discretion cannot be extended beyond the period of thirty days, which is made exclusively clear by use of the words ‘but not thereafter’.

15. In Union of India v. Tecco Trichy Engineers and Contractors (2005) 4 SCC 239, a three Judge Bench of this Court, in respect to the issue of limitation for filing application under Section 34 of the Act for setting aside the arbitral award, held that the period of limitation would commence only after a valid delivery of an arbitral award takes place under Section 31(5) of the Act. In para (8), this Court held as under:-
“8. The delivery of an arbitral award under sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be “received” by the party. This delivery by the Arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings.”

16. In State of Maharashtra and Ors. v. Ark Builders Pvt. Ltd., (2011) 4 SCC 616, while following the judgment in Tecco Trichy Engineers case, held that the expression “…party making that application had received the arbitral award…” cannot be read in isolation and it must be understood that Section 31(5) of the Act requires a signed copy of the award to be delivered to each party. By cumulative reading of Section 34(3) and Section 31(5) of the Act, it is clear that the limitation period prescribed under Section 34(3) of the Act would commence only from the date of signed copy of the award delivered to the party making the application for setting it aside.

17. Contention of the appellants is that the other members of Anilkumar’s family viz., appellant Nos. 1(a) to 1(d) and respondent No.10, appellant No.1(d) and respondent No.10 did not receive the copy of the award and that they had knowledge of the award only when the execution petition was filed and when they received the notice in the execution petition. Contention of appellant Nos. 1(a) to 1(d) and respondent No.10 is that in terms of Section 31(5) of the Act, copy of the award to be delivered to each party to enable them to challenge the award and since the copy of the award not individually served to them, the period of limitation would start only from the date when they got the copy of the award.

18 As pointed out earlier, Anilkumar Patel has signed the award and received the copy of the award with the following endorsement:- “For myself and on behalf of my family members”. Whether the receipt of the award by Anilkumar Patel with the above endorsement could be construed as the receipt of the award by his family members- appellant Nos.1(a) to 1(d) and respondent No.10, is the point falling for consideration.

19. In MOU dated 21.05.1996, Pravinchandra Patel and Anilkumar Patel have appointed their sister Latikaben and her husband Bhikhalal Nathalal Patel for effecting partition between the two families and both the families have consented for the same. The MOU was signed by Pravinchandra Patel and his wife and daughters (respondents No.1 to 5) and Anilkumar Patel and his wife and his three sons and one daughter-in-law (appellant No.1 (dead) and appellant Nos. 1(a) to 1(d) and respondent No.10). The MOU appointing arbitrators (21.05.1996) stipulates that: (i) the award to be in writing; and (ii) to furnish copy of the award to each of the members of the families. The relevant portion of MOU reads as under:-
“…..The arbitrators shall write down the particulars of the partition as well as the terms and conditions for effecting the partition and the arbitrators shall sign it. The arbitrators shall make as many copies of it as there are members and shall give each member a copy of it. And after that both the families shall act as per the particulars of partition given by the arbitrators and get the properties and business properties partitioned….”

20. As pointed out earlier, while arbitrators were away to Rajkot due to emergency work, both Pravinchandra Patel and Anilkumar Patel decided to streamline the ongoing business of firms and companies by signing an interim MOU on 29.06.1996 (IMOU). The covenants of the said IMOU covered the matters relating to bank account and withdrawal of power, NPK allocation etc. The said IMOU was signed by Pravinchandra Patel with the following endorsement:-
“P.J. Patel (Group No.1) for self and also as Power of Attorney Holder for wife and all daughters”.
Similarly in the said IMOU, Anilkumar Patel signed for himself and on behalf of his family members, as seen from the following endorsement:-
“A.J. Patel (Group No.2) for Self and also as Power of Attorney Holder for wife, all sons and daughter-in-law.”

21. The award dated 07.07.1996 was signed by both the arbitrators. The award was also signed by Pravinchandra Patel and Anilkumar Patel. Both of them have undertaken to implement the award with their free will and pleasure, as seen from the following:-
“As per this Arbitration “Award”, both the groups and their family members have to honestly, wholeheartedly and faithfully act in accordance with and implement the transaction of the property, the IMOU which is now considered as MOU and the accounting chart in respect of the companies and the firms.
The aforesaid Arbitration Award I agreed to and approved of by and our descendant guardian and heirs. We undertake to implement the same with free-will and pleasure.”
After their signature in the award which is in Gujarati language for having received the copy of the award, Pravinchandra Patel and Anilkumar Patel have stated as under:-
“….For ourselves and on behalf of our family members.”
It is pertinent to note that the award also referred to IMOU dated 29.06.1996 in and by which the members of the respective families have authorized Pravinchandra Patel and Anilkumar Patel to act on behalf of their family members.

22. The award dated 03.11.1996 also refers to the award dated 07.07.1996. The award dated 03.11.1996 was also signed by Pravinchandra Patel and Anilkumar Patel and both of them have undertaken that the arbitration award is duly agreed and approved by them and their family members and further undertaken to act in accordance with the award and to give effect to the same. The said endorsement in the award dated 03.11.1996 reads as under:-
“The aforesaid arbitration award is duly agreed to and approved of by me and my family members, descendants heirs and other. My family members and I absolutely assure to act in accordance with the award and to give effect to same.”
As discussed earlier, Anilkumar Patel was unsuccessful in his attempt to challenge the award dated 03.11.1996 which has attained finality in terms of the findings in W.P.No.7614 of 2006. Anilkumar Patel’s undertaking in the award dated 03.11.1996 that he and his family members agreed and approved the award shows that Anilkumar Patel was acting for himself and on behalf of his family members.

23. Award dated 07.07.1996 was received by Anilkumar Patel for himself and on behalf of his family members. In interim MOU dated 29.06.1996, Anilkumar Patel signed for self and as a power of attorney holder for his wife and his all sons and daughter-in-law. Challenging the award dated 07.07.1996, Anilkumar Patel and his family members have filed a single petition under Section 34 of the Act. Likewise they have also filed a single petition for amending the arbitration petition No.202 of 2005. Anilkumar Patel, being the head of his family, was a person directly connected with and involved in the proceeding and was also in control of the proceeding. Being head of the family, Anilkumar Patel would have been the best person to understand and appreciate the arbitral award and take a decision as to whether an application under Section 34 of the Act was required to be filed or not. In such facts and circumstances, in our considered view, service of arbitral award on Anilkumar Patel amounts to service on the other appellant Nos.1(a) to 1(d) and respondent No.10 and they cannot plead non-compliance of Section 31(5) of the Act.

24. The High Court has enumerated various circumstances which indicate that Anilkumar Patel was well aware of the award dated 07.07.1996 and also relied upon the award in internal communication between the parties and various legal proceedings. “Inter Office Memo”dated 22.07.1996, sent by Anilkumar Patel to Pravinchandra Patel, seeking for delivery of file of Gat No.266/2 of Bambhori, Taluka Brandol. Anilkumar Patel has stated that in Gat No.266/2 of Bambhori, agricultural land has come to his share and since some dispute has been raised by the party by whom the sale-deed is to be executed, Anilkumar Patel requested to handover the file maintained in connection with the agricultural land mentioned in Gat No.266/2. The said Inter Office Memo clearly shows that even on 22.07.1996, Anilkumar Patel had acted upon the award dated 07.07.1996.

25. Central Bank of India has filed recovery proceeding in O.A.No.298-A/2001 against Pravinchandra Patel, M/s. Patel Narayandas Bhagwandas Fertilizers Private Limited and others. In the said proceeding before DRT, Anilkumar Patel has referred to the arbitration award passed in July, 1996 and that he has no interest in M/s. Patel Narayandas Bhagwandas Fertilizers Private Limited. Based on such stand taken by Anilkumar Patel in O.A.No.298-A/2001, DRT observed that Anilkumar Patel had resigned from the Directorship of the said company and exonerated him from the liability to the bank and dismissed O.A.No.298-A/2001 against Anilkumar Patel and Atulkumar Maganlal Patel. The High Court referred to the said DRT proceedings and various other circumstances in which Anilkumar Patel had taken advantage of arbitration award and the High Court held as under:- “….The respondents, obviously, wherever it was possible for them, at several places, took advantage of the arbitration award and now since obligation on their part is to be complied in favour of the petitioner, have started challenging the award, after nine years…..”Various circumstances brought on record clearly show that Anilkumar Patel was authorized by other appellant Nos. 1(a) to 1(d) and respondent No.10 to receive copy of the award and act on their behalf and we find no reason to take a different view from that of the High Court.

26. As rightly observed by the High Court, Anil kumar Patel has gone to the extent of even disputing his signature in the award dated 07.07.1996 by drafting choreographed petition. Having accepted the award through Anil kumar Patel, being the head of the family, appellant Nos. 1(a) to 1(d) and respondent No.10 cannot turn round and contend that they had not received the copy of the award. The High Court rightly held that “….Receiving the copy by Anilkumar on behalf of himself and respondent nos. 2 to 6, under an acknowledgment, is in terms of compliance of Section 31(5) of the Act and Section 34(3) thereof…..”and that the application filed under Section 34 of the Act by Anil kumar Patel and appellant Nos. 1(a) to 1(d) and respondent No.10 was barred by limitation. We do not find any good ground to interfere with the impugned judgment.

27. In the result, the appeals are dismissed. No costs.

…….……………………J.
[R.K. AGRAWAL]
…………….……………J.
[R. BANUMATHI]

New Delhi;
March 27, 2018

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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5172 OF 2017
(Arising out of SLP (Civil) No. 2370 of 2015)
Kinnari Mullick and Another …. Appellants
Versus
Ghanshyam Das Damani …. Respondent
J U D G M E N T

A.M.KHANWILKAR, J.
1. This appeal raises a short question as to whether Section 34 (4) of the Arbitration and Conciliation Act, 1996 (for short “the Act”) empowers the Court to relegate the parties before the Arbitral Tribunal after having set aside the arbitral award in question and moreso suo moto in absence of any application made in that behalf by the parties to the arbitration proceedings?

2. The Appellants, being joint owners of premises No.4 Wood Street, Kolkata, known as 4C, Dr. Martin Luther King Sarani, Kolkata, entered into two development agreements with the Respondent for a construction of a multi storied building. On completion of construction of the building sometime in 2003, the Appellants entered into a further agreement with the Respondent in terms of which the Respondent, for better enjoyment of the property, distributed the owner’s allocation. In terms of the said agreement, the Respondent fully sold and transferred his share of the premises to various prospective buyers with proportionate area of the land to them as well as in common areas. According to the Appellants, the Respondent is not in possession of any portion of the suit premises. The Appellants have also executed and registered the conveyance along with the proportionate right in common areas and land of the said premises to various transferees, save and except two flats. The said agreement contained an Arbitration clause which reads thus:
“21. That all disputes and/or differences between the parties herein shall be referred to arbitration in terms of the provisions of the Arbitration & Conciliation Act, 1996.”

3. The Respondent asserted that he was entitled to execution and registration of conveyance in respect of 50% built up area on the ground floor of such premises. That claim was rejected by the Appellants. The Respondent, through his advocate’s letter dated 21.11.2009 addressed to the Appellants, inter alia informed them about the appointment of one Siddhartha Sankar Mandal, Advocate as arbitrator and further, that the said arbitrator would send intimation to the Appellants about the date, time and venue in respect of the arbitration proceedings to be held by him. The said letter, however, did not specify that Siddhartha Sankar Mandal was appointed as Sole Arbitrator nor did it call upon the Appellants to appoint their nominee arbitrator. The Appellants then received communication through Siddhartha Sankar Mandal dated 01.11.2009 stating that he has been appointed as arbitrator to arbitrate the dispute between the Appellants and the Respondent and that he would enter upon the reference on 10.11.2009. By this letter, the Appellants were called upon to remain present so as to hold a meeting as scheduled. According to the Appellants, the letter did not even provide for 30 days’ time between the date of meeting and the receipt of the communication by the Appellants. Nevertheless, the arbitrator proceeded with the arbitration proceedings and held meetings. The Appellants did not file their statement of defence. Instead, they filed an application on 10.05.2010 before the arbitrator under Section 16 of the Act, inter alia challenging the composition of the Arbitral Tribunal and also raising the issue of jurisdiction to proceed with the arbitration as a Sole Arbitrator. The arbitrator, however, rejected the said application on 27.08.2010 by an interim award.

4. The Appellants then filed their counter statement in November 2010 to the statement of claim in the said arbitral proceedings without prejudice to their contention that, the Arbitral Tribunal has not been properly constituted and that the arbitrator had no jurisdiction to adjudicate the alleged dispute referred to him. The Appellants were also advised to file an application under Section 14 before the High Court, alleging bias on the part of the arbitrator and for a declaration that the arbitrator had become incompetent to perform his functions. The learned Single Judge of the High Court at Calcutta vide judgment dated 17.09.2012 disposed of the said application by reserving the right of the Appellants to raise all grounds mentioned in the application regarding the competence of the Arbitral Tribunal at the time of challenging the award under Section 34 of the Act, if such occasion arose.

5. The Appellants then received a copy of the purported award dated 18.06.2013 passed by the Arbitral Tribunal. The arbitrator allowed the claim of the Respondent and directed the Appellants to execute and register appropriate deed and/or deeds as proposed by the Respondent vide its Advocate’s letter dated 29.06.2009; and further directed that conveyance and/or conveyances was/were to be executed and registered by the Appellants, costs and expenses thereof were to be borne by the Respondent within a period of 30 days from the date of the award irrespective of any intervening holiday and/or holidays. The said award, however, did not contain any reason for allowing the claim of the Respondent.

6. Being dissatisfied with the interim award dated 27.08.2010 and final award dated 18.06.2013 passed by the Arbitral Tribunal, the Appellants filed an application under Section 34 of the Act, for setting aside of the said awards. The learned Single Judge was pleased to allow the said application on the finding that the impugned award did not disclose any reason in support thereof. The impugned award was accordingly set aside and the parties were left to pursue their remedies in accordance with law. The relevant portion of the decision of the learned Single Judge reads thus: “Since the present award is completely lacking in reasons and is littered with the unacceptable expressions like “I feel that the claim is justified”, “I find no basis” and the like which cannot be supplement for reasons that the statute demands, A.P. No.1074 of 2013 is allowed by setting aside the award dated June 18, 2013. The parties are left free to pursue their remedies in accordance with law.”

7. Against the aforementioned decision the Respondent preferred an appeal before the Division Bench of the High Court at Calcutta. The Appellants also filed a cross objection in respect of the adverse findings recorded by the learned Single Judge against them. The cross objection bearing APO No.223 of 2014 and APOT No.318 of 2014, were heard and decided together by the Division Bench vide impugned judgment dated 13.08.2014. The Division Bench affirmed the findings and conclusion recorded by the learned Single Judge that the award did not contain any reason whatsoever and thus rejected the appeal preferred by the Respondent, in the following words:
“We have considered the rival contentions. Section 31 is clear that would require the Tribunal to assign reason. The award would suffer from such lacunae. We would not be in a position to agree with Mr. Sharma when he would contend, it was reasoned, but reasons might have been insufficient. The learned Judge observed, “The award does not indicate a line or sentence of reasons and notwithstanding the petitioners herein, having pulled out of the reference and not urging their counter-statement or any defence to the claim, it was still incumbent on the arbitrator to indicate the grounds on which the respondents were entitled to succeed”. We fully endorse what his Lordship would say as quoted (supra). Hence, the appeal fails on such count.”
While considering the cross objection filed by the Appellants, the Division Bench negatived the ground urged before it about the inappropriate and illegal constitution of the Arbitral Tribunal. As a result, the cross objection filed by the Appellants was also rejected. Having decided as above, the Division Bench suo moto decided to relegate the parties before the Arbitral Tribunal by sending the award back with a direction to assign reasons in support of its award. It will be useful to reproduce the observations of the Division Bench in this regard. The same reads thus:
“On the cross-objection we would, however, agree with Mr. Sharma when he would draw our attention to Section 13. The learned Judge, in our view, rightly rejected the contention of the respondents. The challenge procedure as spelt out in Section 13 would refer to constitution of the Tribunal as well. Section 4 would clearly provide, if a party knowing his right does not take any step that would debar him to object at a later stage as if he shall be deemed to have waived his right to object. Section 34 would empower the Court to remit the award to the Arbitrator, at a stage when the award was under challenge, to eliminate the ground for setting aside of the arbitral award. Applying such provision we send the award back to the Arbitrator with a direction, he must assign reason to support his award. However, we wish to give the Arbitrator a free hand. If he feels, further hearing to be given to the parties, he may do so and upon hearing, he may publish his award in accordance with law adhering to the norms and procedures laid-down under the said Act 1996 without being influenced by the award that the learned Judge already set aside. The appeal is dismissed without any order as to costs.”
(emphasis supplied)

8. Aggrieved by the highlighted operative part of the direction issued by the Division Bench to send back the award to the Arbitral Tribunal for assigning reasons in support of the award, the Appellants have approached this Court by way of present appeal.

9. Indeed, the Appellants have also challenged the approach of the Division Bench and of the learned Single Judge in rejecting the contention of the Appellants about the jurisdiction of the Arbitral Tribunal. According to the Appellants, that objection could be raised by the Appellants and ought to be answered in their favour, keeping in mind, the decision of this Court in BSNL Vs. Motorola India Pvt. Ltd.1 . It is contended that the Appellants could raise the plea, that the Arbitral Tribunal did not have jurisdiction. Further, the Appellants had submitted the submission of defence without prejudice and thus the participation of the Appellants in the proceedings before the Arbitral Tribunal would not come in the way of the Appellants to raise that contention. The Appellants have also relied on the decisions of this Court in the case of Konkan Railway Corporation Limited Vs. Rani Construction Private Limited2 and GAIL Vs. Keti Construction (I) Ltd.3 . However, it may not be necessary for us to examine this argument if we were to accept the challenge set up by the Appellants to the concluding part of the impugned judgment of the Division Bench of having relegated the parties before the Arbitral Tribunal with a direction to assign reasons in support of the impugned award. As regards this contention, the Appellants have relied on the dictum in the case of MMTC Vs. Vicnivass Agency4 of the High Court of Madras, Raitani Engineering Works Pvt. Ltd. Vs. The Union of India and Others5 decided by the Gauhati High Court dated 28.05.2015, Bhaskar Industrial Development Limited Vs. South Western Railway6 decided by the High Court of Karnataka, Dharwad Bench and lastly in McDermott International Inc. Vs. Burn Standard Ltd.7

10. The Respondent, on the other hand, submits that ample power is bestowed upon the Court to relegate the parties to the award under challenge back to the Arbitral Tribunal to eliminate the ground for setting aside of the arbitral award, in terms of Section 34 of the Act. It is submitted that no jurisdictional error has been committed by the Division Bench in exercising that power for sending the award back to the Arbitral Tribunal with a direction to assign reasons in support of the award. It is submitted that the dismissal of the appeal preferred by the Respondent against the judgment of the learned Single Judge will not come in the way of the Respondent muchless to participate in the proceedings before the Arbitral Tribunal as has been remitted by the Division Bench for the limited purpose of assigning reasons in support of the award. It is submitted that no interference is warranted with the concluding part of the judgment of the Division Bench which intends to facilitate rectification of the deficiencies in the award already pronounced by the Arbitral Tribunal.

11. We have heard the learned counsel for the parties. At the outset, we may note that, if the plea taken by the Appellants in relation to the concluding part of the impugned judgment – of sending the award back to the Arbitral Tribunal for recording reasons – was to be accepted, we may not be required to dilate on any other argument. Inasmuch as the learned Single Judge allowed the application under Section 34 of the Act for setting aside of the award preferred by the Appellants; and the Division Bench has already affirmed the conclusion recorded by the learned Single Judge while dismissing the appeal preferred by the Respondent. Thus, the award has been set aside on that count. The Respondent has not challenged that part of the impugned judgment and has allowed it to become final.

12. In this backdrop, the question which arises is: whether the highlighted portion in the operative part of the impugned judgment of the Division Bench can be sustained in law? For that, we may advert to Section 34(4) of the Act which is the repository of power invested in the Court. The same reads thus:
“Section 34…………. (4). On receipt of an application under sub-section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.”

13. On a bare reading of this provision, it is amply clear that the Court can defer the hearing of the application filed under Section 34 for setting aside the award on a written request made by a party to the arbitration proceedings to facilitate the Arbitral Tribunal by resuming the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. The quintessence for exercising power under this provision is that the arbitral award has not been set aside. Further, the challenge to the said award has been set up under Section 34 about the deficiencies in the arbitral award which may be curable by allowing the Arbitral Tribunal to take such measures which can eliminate the grounds for setting aside the arbitral award. No power has been invested by the Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in sub-section 4 of Section 34. This legal position has been expounded in the case of McDermott International Inc. (supra). In paragraph 8 of the said decision, the Court observed thus:
“8…..parliament has not conferred any power of remand to the Court to remit the matter to the arbitral tribunal except to adjourn the proceedings as provided under sub-section (4) of Section 34 of the Act. The object of sub-section (4) of Section 34 of the Act is to give an opportunity to the arbitral tribunal to resume the arbitral proceedings or to enable it to take such other action which will eliminate the grounds for setting aside the arbitral award.”
(emphasis supplied)

14. In any case, the limited discretion available to the Court under Section 34(4) can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings. It is crystal clear that the Court cannot exercise this limited power of deferring the proceedings before it suo moto. Moreover, before formally setting aside the award, if the party to the arbitration proceedings fails to request the Court to defer the proceedings pending before it, then it is not open to the party to move an application under Section 34(4) of the Act. For, consequent to disposal of the main proceedings under Section 34 of the Act by the Court, it would become functus officio. In other words, the limited remedy available under Section 34(4) is required to be invoked by the party to the arbitral proceedings before the award is set aside by the Court.

15. In the present case, the learned Single Judge had set aside the award vide judgment dated 07.03.2014. Indeed, the Respondent carried the matter in appeal before the Division Bench. Even if we were to assume for the sake of argument, without expressing any opinion either way on the correctness of this assumption, that the appeal was in continuum of the application under Section 34 for setting aside of the award and therefore, the Division Bench could be requested by the party to the arbitral proceedings to exercise its discretion under Section 34(4) of the Act, the fact remains that no formal written application was filed by the Respondent before the Division Bench for that purpose. In other words, the Respondent did not make such a request before the learned Single Judge in the first instance and also failed to do so before the Division Bench rejected the appeal of the Respondent.

16. In the case of MMTC (supra), the Madras High Court, while dealing with the purport of Section 34(4) of the Act in paragraph 22 (C) of the reported judgment, observed thus:
“(C)……On the other hand, Section 34(4) of the new Act, does not prescribe any condition precedent on the substance of the matter but prescribes three procedural conditions namely that there should be an application under Section 34(1) of the new Act and that a request should emanate from a party and the Court considers it appropriate to invoke the power under Section 34(4) of the new Act.”
Again, in paragraph 22 (e) (IV) of the reported judgment, it observed thus:
“But under the 1996 Act, the Court has only two sets of powers after the award is pronounced viz.,
(i) to set aside the award under Section 34(2); or
(ii) to adjourn the proceedings to enable the arbitral tribunal to resume the proceedings or take such other action as in the opinion of the tribunal will eliminate the grounds for setting aside the arbitral award.”
In the case of Raitani Engineering Works Pvt. Ltd. (supra), the Gauhati High Court, placing reliance on the decision in MMTC (supra) in paragraph 8 of its decision, observed thus:
“But unfortunately in the present case, the award given by the arbitration panel on 13.07.2012 was quashed in its entirety and the appeal under Section 34 is no more pending before the Court. Therefore, invoking the powers conferred under sub-section (4) of Section 34 of the Arbitration Act to facilitate the arbitration panel to take rectificatory steps is not an option in this matter. Moreover neither of the contesting party in this dispute have applied for an additional award and therefore it may not be appropriate to direct the arbitration panel to re-decide on the six un-decided claims of the contractor.”
The Division Bench of the High Court of Karnataka in the case of Bhaskar Industrial Development Limited (Supra) has expounded that the power of the Court under Section 34 of the Act is not to remand the matter to the Arbitral Tribunal after setting aside the arbitral award.

17. A priori, it must follow that the Division Bench committed manifest error in issuing direction in the concluding part of the impugned judgment, as reproduced hereinbefore in paragraph No.7. Such direction could not have been issued in the fact situation of the present case. The impugned direction suffers from the vice of jurisdictional error and thus cannot be sustained. We have no option but to quash and set aside the same.

18. As the Respondent has not challenged the decision of the Division Bench, we are left with the situation where the award has been set aside, and as observed by the learned Single Judge, with liberty to the parties to pursue their remedies in accordance with law.

19. Accordingly, we allow this appeal to the extent indicated above with no order as to costs.

…..……………………………..J.
(Dipak Misra)
.…..…………………………..J.
(A.M.Khanwilkar)
.…..…………………………..J.
(Mohan M. Shantanagoudar)

New Delhi,
Dated: April 20, 2017

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 5172 of 2017
KINNARI MULLICK AND ANR. Appellant(s)
VERSUS
GHANSHYAM DAS DAMANI Respondent(s)

Date: 20/04/2017 This Appeal was called on for judgment today.
For Appellant(s) Mr. Shekhar Kumar, AOR
For Respondent(s) Mr. M.C. Dhingra, AOR

Hon’ble Mr. Justice A.M. Khanwilkar pronounced the judgment of the Bench consisting of Hon’ble Mr. Justice Dipak Misra, His Lordship and Hon’ble Mr. Justice Mohan M. Shantanagoudar.
The appeal is allowed to the extent indicated in the signed reportable judgment with no order as to costs.
(Gulshan Kumar Arora)
Court Master

(H.S. Parasher)
Court Master

(Signed reportable judgment is placed on the file)

FOOTNOTE:
1 (2009) 2 SCC 337
2 (2002) 2 SCC 388
3 (2007) 5 SCC 38
4 (2009) 1 MLJ 199
5 Arbitration Petition No.13 of 2015 [2015 (2) GLD 615 (Gau)]
6 MFA No.103528 of 2015
7 (2006) 11 SCC 181

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1) Leave granted.

2) Heard the learned Counsel appearing for the parties.

3) By an Award dated 28.02.2007, the Sole Arbitrator held that limitation would not stand in the way of a decision on merits, as a result of which an Award was made for a sum of Rs. 21,60,440/- together with 12% interest.

4) In a Section 34 petition filed before the learned Single Judge, the learned Single Judge found that the point of limitation had not been decided correctly and, therefore, remanded the matter to the Arbitrator in order that this point is decided afresh. He also went on to add that a new Arbitrator would have to be appointed in order to decide this afresh as he did not know about the whereabouts of the original Arbitrator. From this, an Appeal was referred to the Division Bench, which, by the impugned judgment dated 06.11.2017, dismissed the Appeal against the learned Single Judge’s judgment.

5) This Court in a series of judgments culminating in Kinnari Mullick and Another vs. Ghanshyam Das Damani, (2018) 11 SCC 328 held that the court while deciding a Section 34 petition has no jurisdiction to remand the matter to the Arbitrator for a fresh decision. It is, therefore, clear that the learned Single Judge’s judgment is contrary to this judgment as a result of which both the judgments of the Single Judge as well as the Division Bench have to be set aside.

6) We, therefore, set aside both the judgments and relegate the matter to the stage of the original Section 34 petition, which now has to be heard, on its merits in accordance with the parameters laid down by this Court for decision under Section 34 of the Arbitration and Conciliation Act, 1996.

7) Accordingly, we remand the matter to the Single Judge, who is requested to take up the matter and decide the same at the earliest considering that the Award, in this case, has been passed over ten years ago.

8) The Appeal is allowed in the aforesaid terms.

…………………….. J.
(ROHINTON FALI NARIMAN)
…………………….. J.
(NAVIN SINHA)

New Delhi;
October 10, 2018.

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 2334/2018
(Arising out of impugned final judgment and order dated 06-11-2017 in APO No. 466/2017 passed by the High Court At Calcutta)
RADHA CHEMICALS Petitioner(s)
VERSUS
UNION OF INDIA Respondent(s)

Date : 10-10-2018 This petition was called on for hearing today.

CORAM :
HON’BLE MR. JUSTICE ROHINTON FALI NARIMAN
HON’BLE MR. JUSTICE NAVIN SINHA

For Petitioner(s) Mr. Partha Chakraborty, Adv.
Mr. Pawan Upadhyay, Adv.
Mr. Nishant Kumar, Adv.
Ms. Paulomi Dutta, Adv.
Mr. Surender Kumar, Adv.
Ms. Shaila Arora, Adv.
Ms. Anisha Upadhyay, AOR

For Respondent(s) Mr. Aman Lekhi, ASG
Mr. Atulesh Kumar, Adv.
Mr. S.K. Pathak, Adv.
Mr. Raj Bahadur, Adv.
Ms. Priyanka Dass, Adv.
Mrs. Anil Katiyar, AOR
UPON hearing the counsel the Court made the following

O R D E R

Leave granted.
The Appeal is allowed in terms of the signed order.
(R. NATARAJAN)
COURT MASTER (SH)

(TAPAN KUMAR CHAKRABORTY)
BRANCH OFFICER

(Signed order is placed on the file)

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