Calcutta High Court
Damodar Valley Corporation vs Reliance Infrastructure Ltd on 7 December, 2021
ODC 1 & 2
IN THE HIGH COURT AT CALCUTTA
In Appeal from its
ORDINARY ORIGINAL CIVIL JURISDICTION
CIVIL APPELLATE JURISDICTION
(Commercial Division)
APOT No. 171 of 2021
AP No. 40 of 2020
IA No. GA 1 of 2021
Damodar Valley Corporation
Versus
Reliance Infrastructure Ltd.
And
APOT No. 179 of 2021
Damodar Valley Corporation
Versus
Reliance Infrastructure Ltd.
Before:
The Hon'ble Justice I. P. MUKERJI
And
The Hon'ble Justice ANIRUDDHA ROY
Date: 7th December 2021
(via Video Conference)
Appearance:
Mr. Tushar Mehta, Ld. SGI
Mr. Ratnanko Banerjee, Sr. Advocate
Ms. Vineeta Meharia, Advocate
Mr. Amit Meharia, Advocate
Mr. Santanu Chatterjee, Advocate
Ms. Urmila Chakraborty, Advocate
Ms. Tannistha Singh, Advocate
Ms. Paramita Banerjee, Advocate
Ms. Subika Paul, Advocate
for the appellant
Mr. Sudipto Sarkar, Sr. Advocate
Mr. Surojit Nath Mitra, Sr. Advocate
Mr. Jay Saha, Sr. Advocate
Mr. Prateek Sakseria, Advocate
Mr. A.Roy Chowdhury, Advocate
Mr. Prashun Majumdar, Advocate
Ms. Asmita Raychoudhuri, Advocate
for the respondent
The Court: APOT No. 171 of 2021
By the order of the Supreme Court dated 3rd December 2021 we
were requested to decide this appeal (APOT No. 171 of 2021). With
deference to this mandate we have heard out the appeal on the available
papers as expeditiously as possible, dispensing with all formalities.
This appeal arises from a judgment and order dated 18th November
2021 made by a learned single judge of this court sitting in its
commercial division. It was made on an application by the
appellant/award-debtor for stay of an arbitral award.
By the impugned judgment and order the learned judge "rejected the
prayer of the petitioner.....for stay on the direction for return of the bank
guarantee" furnished by the respondent/award-holder to the appellant.
There is no difficulty in understanding that the direction referred to in
the said order was of the arbitral tribunal in the award on the award-
debtor to return the subject bank guarantees. The order clarified that
there was no obligation on the part of the award-holder to furnish any
counter guarantee or to keep the bank guarantees alive.
What is the purport, scope and effect of this order is the main point
under consideration in this appeal? A preliminary objection has been
made on behalf of the respondent that the appeal is not maintainable.
Mr. Sarkar, learned senior advocate appearing for the respondent
has taken us through section 13 of the Commercial Courts Act, 2015
which is inserted hereunder:
"13. Appeals from decrees of Commercial Courts
and Commercial Divisions.- [(1) Any person aggrieved by
the judgment or order of a Commercial Court below the
level of a District Judge may appeal to the Commercial
Appellate Court within a period of sixty days from the date
of the judgment or order.
(1A) Any person aggrieved by the judgment or order of
a Commercial Court at the level of District Judge exercising
original civil jurisdiction or, as the case may be,
Commercial Division of a High Court may appeal to the
Commercial Appellate Division of that High Court within a
period sixty days from the date of the judgment or order:
Provided that an appeal shall lie from such orders
passed by a Commercial Division or a Commercial Court
that are specifically enumerated under Order XLIII of the
Code of Civil Procedure, 1908 (5 of 1908) as amended by
the Act and section 37 of the Arbitration and Conciliation
Act, 1996 (26 of 1996).]
2. Notwithstanding anything contained in any other
law for the time being in force or Letters Patent of a High
Court, no appeal shall lie from any order or decree of a
Commercial Division or Commercial Court otherwise than
in accordance with the provisions of this Act."
He contended that the impugned order was passed on an
application for stay of the award under section 36(2) of the Arbitration
and Conciliation Act, 1996. No appeal lay from that order under Section
13 of the Commercial Courts Act, 2015. Even an order in execution was
not appealable under the said section read with Section 37 of the
Arbitration and Conciliation Act, 1996.
He argued, anticipating the arguments of the appellant that they
would try to justify this appeal on the ground that the impugned order
was in the nature of an execution under the Civil Procedure Code. An
appeal under clause 15 of the Letters Patent lay from such an order, as
execution was a different procedure under the Civil Procedure Code, from
the scheme of things envisaged by the Commercial Courts Act, 2015.
Even then, it was not appealable as the said Acts constituted a complete
code, learned counsel urged. The counter-claim of the appellant had
been rejected by the arbitral tribunal. The court, even if it allowed the
section 34 application could not re-write or modify the award. If
successful in that application the appellant would have to seek another
legal remedy by way of a new arbitration or a civil proceeding to urge its
counter-claim and seek orders for retention of the bank guarantees.
Hence, the impugned order which has been passed in an application for
stay of the award, could be justified, even if an appeal lay from such an
order.
At this stage it is most important to notice sections 36 and 37 of the
Arbitration and Conciliation Act, 1996 which are set out hereinbelow:
"[36. Enforcement.-(1) Where the time for making an
application to set aside the arbitral award under Section 34
has expired, then, subject to the provisions of sub-section (2),
such award shall be enforced in accordance with the
provisions of the Code of Civil Procedure, 1908 (5 of 1908), in
the same manner as if it were a decree of the court.
(2) Where an application to set aside the arbitral award
has been filed in the court under Section 34, the filing of such
an application shall not by itself render that award
unenforceable, unless the court grants an order of stay of the
operation of the said arbitral award in accordance with the
provision of sub-section (3), on a separate application made
for that purpose.
(3) Upon filing of an application under sub-section (2) for
stay of the operation of the arbitral award, the court may,
subject to such conditions as it may deem fit, grant say of the
operation of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the
application for grant of stay in the case of an arbitral award
for payment of money, have due regard to the provision for
grant of stay of a money decree under the provisions of the
Code Civil Procedure, 1908 (5 of 1908).]
37.-(1) [Notwithstanding anything contained in any other
law for the time being in force, an appeal] shall lie from the
following orders (and from no others) to the court authorized
by law to hear appeals from original decrees of the Court
passing the order, namely:-
[(a) refusing to refer the parties to arbitration under
Section 8;
(b) granting or refusing to grant any measure under
Section 9;
(c) setting aside or refusing to set aside an arbitral
award under Section 34.]
2. An appeal shall also lie to a court from an order of the
arbitral tribunal-
(a) accepting the plea referred to in sub-section (2) or
sub-section (3) of Section 16; or
(b) granting or refusing to grant an interim measure
under Section 17.
(3) No second appeal shall lie from an order passed in
appeal under this section, but nothing in this section shall
affect or take away any right to appeal to the Supreme Court."
We shall deal with the authorities cited by Mr. Sarkar at the time we
deal with this point.
Mr. Ratnanko Banerjee, learned senior advocate while dealing with
the submissions of Mr. Sarkar was more emphatic in his argument based
on wrongful assumption of jurisdiction by the court. He said that if an
order was passed by a court inherently lacking jurisdiction or wholly
without jurisdiction, then a party enjoying the benefit of an order
ostensibly made under a provision, which is not appealable cannot take
shelter behind that order to resist an appeal, which might otherwise lie.
If an order is made by a Court ostensibly exercising jurisdiction, under
the Arbitration and Conciliation Act, 1996 but in reality wholly without
jurisdiction, then the appeal lies under Clause 15 of the Letters Patent.
He also submitted that execution in arbitration matters under the
Commercial Courts Act, 2015 cannot be taken differently from the
procedure prescribed under the Code of Civil Procedure. When an award
was under execution the procedure under the code was followed under
Section 36(1) of the Arbitration & Conciliation Act, 1996. The substantive
and procedural law governing the application for execution of decrees
and orders, under the code would apply. Therefore, the appeal was
maintainable under clause 15 of the Letters Patent.
OUR VIEWS
Section 13 of the Commercial Courts Act, 2015 makes it absolutely
plain that an appeal will lie from such orders passed by a Commercial
Division or a Commercial Court that are specifically enumerated under
Order XLIII of the Code of Civil Procedure, 1908 as amended by the
Commercial Courts Act, 2015 and the Arbitration and Conciliation Act,
1996.
Now Order XLIII of the Code refers to an order in execution in sub-
rule (1)(ja) thereof. Sub-section (2) of Section 13 of the said Act in no
uncertain terms states that notwithstanding anything contained in any
other law for the time being in force or Letters Patent of a High Court, no
appeal would lie from any order or decree of a Commercial Division or
Commercial Court otherwise than in accordance with the provisions of
the Act. Therefore, when a particular class of order in execution has been
specified to be appealable, beyond question, any other order passed in
execution in a commercial matter would not be appealable.
The Supreme Court in Fuerst Day Lawson Limited versus Jindal
Exports Limited reported in (2011)8 SCC 333; Kandla Export Corporation
and Another Versus OCI Corporation and Another reported in (2018)14
SCC 715 followed in BG & SG and Soma JU vs. NHPC Limited reported in
(2020) 4 SCC 234 has clearly laid down the dictum that apart from
appeals from orders specifically provided in Section 13 of the Commercial
Courts Act, 2015, read with Section 37 of the Arbitration & Conciliation
Act, 1996 an appeal does not lie from any other order. In relation to the
appeals under the Arbitration & Conciliation Act, 1996, appealability of
an order is mandated by Section 37 thereof and in case of any ambiguity
or conflict between the said Act and any other law, the Act will prevail.
Similarly the Commercial Courts Act, 2015 will prevail over the code in
case of any ambiguity or conflict (see Pam Development (P) Ltd. vs. State
of West Bengal reported in (2019) 8 SCC 112 and BG & SG and Soma JU
vs. NHPC Limited (supra). All these cases were cited by Mr. Sarkar.
When an order under an Act is passed by a court, wholly without
jurisdiction, the exercise of jurisdiction by it takes the order passed by it
wholly out of the Act under which it purports to exercise jurisdiction.
The order even if not appealable under the Act would be appealable
under the general law, if such appeal is provided.
The impugned order cannot be said to have been passed by a court
lacking inherent jurisdiction or by a court wholly without jurisdiction.
The court was competent to consider and pass orders for stay of the
award or in execution thereof. Therefore, the two judgments relied upon
by Mr. Banerjee in Modi Korea Telecommunication Ltd. vs. Appcon
Consultants Pvt. Ltd. reported in (1999) 2 CHN 107 and the unreported
decision of this Court dated 16th September, 2021 in Fair Deal Supplies
Limited Vs. R. Piyarelall Iron and Steel Pvt. Ltd. have no application.
Now we come to the most important question in the case. Thus, in
our view, if the order under appeal is held to be an order in execution or
in the exercise of the court's jurisdiction to stay the award, then certainly
it is not appealable. Now, we have to examine the nature of this order.
What does the order say? It says that the court does not stay the
direction for return of the bank guarantee. In other words, the court does
not think it fit to stay the direction of the learned arbitrator in the
impugned award for return of the bank guarantee. It follows that as a
logical consequence of that order, as the appellant has rightly
anticipated, it would be obliged under the award to return the bank
guarantee to the bank. As a corollary, the bank would have the power to
cancel the bank guarantee if it is not returned.
What is the nature of the impugned order? It is certainly in
implementation of the award.
Did the award become executable or enforceable?
Here, the submission of the learned Solicitor General backed by the
submissions of Mr. Banerjee are most relevant and crucial for the
determination of this matter.
The award was made and published on 21st December, 2019.
Section 36(1) of the Arbitration and Conciliation Act, 1996 provides that
the award could be enforced only when the time for making an
application to set aside the order under Section 34 had expired.
Did this time expire?
The application to set aside the award under Section 34 of the
Arbitration and Conciliation Act,1996 was filed by the appellant on 20th
January, 2020. On the same day the application under Section 36(2) of
the said Act was filed by the appellant for stay of the award. On or about
23rd March, 2020, lockdown as a consequence of the Covid-19 pandemic
was imposed throughout the country. The Supreme Court suo motu
passed an order after imposition of the lockdown extending the period of
limitation in all proceedings under the general and special law and this
continued till 3rd October, 2021 when a final extension was made for 90
days. This extended period of limitation for all proceedings expires on 3rd
January, 2022. Therefore, as rightly pointed out by learned Solicitor
General the time to file the application to set aside the award has not
expired till date. Therefore, if that time has not expired and a Section 34
application has been filed together with an application for stay etc., the
award cannot be put into execution, in our opinion, till 3rd January,
2022.
Now, if the award could not be put into execution till 3rd January,
2022, what was the nature of the impugned order that the court had
passed? If one considers Section 37 of the Arbitration and Conciliation
Act, 1996 together with Section 13 of the Commercial Courts Act they
refer to a class of orders which are appealable.
In our view, the court should carefully and purposively scrutinize
the type, nature and depth of orders that fall in the ambit of the
provisions of Section 37, rather than taking a microscopic view based on
the section on which the application is made and the section under
which the order is described to have been passed.
Just because an application is styled as having been made under
Section 36, it does not follow that all orders passed thereunder must
have been made strictly within the four corners of Section 36. One has to
penetrate the order, dissect it and examine its effect.
In the instant case, when the award was not executable, the only
order that the court could have passed was under Section 9 of the
Arbitration and Conciliation Act. The impugned order is a mandatory
order of injunction which is appealable under section 37 (1)(b) of the Act
read with Section 9(1)(ii)(d) of the Arbitration and Conciliation Act, 1996.
We hold so and come to the conclusion that this appeal is
maintainable. Nonetheless there is another most important point to be
considered and in this respect the submission of Mr. Sarkar was most
instructive in our opinion.
By the impugned award the learned arbitrator has directed return of
the bank guarantees. Now, admittedly, these bank guarantees were
furnished by the respondent as performance guarantees. Mr. Sarkar
contended that the respondent had a counter claim before the learned
Arbitrator which was dismissed. Even, if the appellant succeeds in the
Section 34 application, the Court cannot modify or rewrite the award. We
agree with this submission. See McDermott International INC vs. Burn
Standard Co. Ltd. & Others reported in (2006) 11 SCC 181, Dakshin
Haryana Bijli Vitran Nigam Limited vs. Navigant Technologies Private
Limited reported in (2021) 7 SCC 657, National Highways Authorities of
India vs M. Hakeem and Another reported in (2021) 9 SCC 1.
Mr. Banerjee submitted that the bank guarantees were not
furnished to secure the counter claim but related to performance of the
contract by the respondent and if his client was successful in the Section
34 application, the Court could direct retention of the bank guarantee.
We are satisfied on the authorities above, that even if Mr. Banerjee's
client succeeds in the Section 34 application the Court shall have no
power to order retention of the bank guarantees as that would amount to
modifying the award or returning it. The Supreme Court made it
absolutely clear that in such a case a party would have to avail its
remedy by new arbitral proceeding or before a civil court.
In that view of the matter, the learned judge's view in the impugned
order is plausible and the impugned order is partly supportable. However
it needs to be set aside and substituted by a substantially modified
order. We dispose of the appeal by directing the appellant to retain the
subject bank guarantees. We direct the respondent to keep the same
renewed for a period of eight weeks from date only. The issuing bank will
also take no steps towards the cancellation of the bank guarantees for a
period of eight weeks from date, subject to any orders that may be
passed by the Supreme Court or by an arbitral tribunal or by a civil
Court.
The impugned order dated 8th November, 2021 is set aside. The
connected application is disposed of accordingly.
APOT 179 of 2021
This appeal is disposed of in terms of this order.
(I. P. MUKERJI, J.)
(ANIRUDDHA ROY, J.)
R. Bose/cs/sb
