Itc Ltd. vs Pradeep Anand & Ors.
1999 Latest Caselaw 326 Del

ORDER

A.K. Srivastava, J.

1. This application has been moved on behalf of ITC Ltd. under Order XXXIX Rules 1 and 2 read with Section 151 of the Code of Civil Procedure and read with Section 41(b) of the Indian Arbitration Act, 1940 (for short 'the Arbitration Act'). By this application the petitioner seeks interim order of stay of any further proceedings before the Arbitrator being respondent No.5 (Mr. Datuk George K.S. Seah) pursuant to the partial award dated 24.4.1998 in ICC Arbitration No.8080/BGD/OLG till hearing and final disposal of OMP No.197/98. Respondent No.1 only has opposed this application. Respondents 2 and 3 are with the petitioner.

2. The facts of the case as appear to be from the record are that a Cooperation Agreement dated 11.9.1990 was entered into between Toshiba Corporation, Toshiba Battery Company Limited, ITC Limited, Toshiba Anand Batteries Ltd. and Shri C.L.Anand. It contained an arbitration clause. Certain disputes arose and Pradeep Anand S/o late Shri C.L. Anand sought reference of the disputes to arbitration and consequently in accordance with rules applicable Shri Datuk George K.S. Seah (respondent No.5 in the main petition) was appointed as sole Arbitrator. Learned Arbitrator gave his partial award (which the petitioner asserts as final award) on 24.4.1998. An original copy of the said award was received by the petitioner on 6.5.1998. The petitioner ITC Ltd. moved an application under Section 14(2) of the Arbitration Act in this Court on 22.5.1998 with a request that the learned Arbitrator be directed by this Court to file in this Court the said partial award dated 24.4.1998 made and issued by him. This petition was taken up by the concerned Joint Register on 27.5.1998 and notice was issued to respondent No.5 (the learned Arbitrator) to file the said award along with the proceedings.

3. OMP No.197/98, in which this application for interim stay has been moved, was filed on 12.9.1998. By that time the said award had not filed by the learned Arbitrator in Suit No.1084A/98. On perusal of the order-sheets of said suit it is to be found that the original partial award dated 24.4.1998 was filed by the learned Arbitrator as late as some time in the month of February, 1999. On 26.2.1999 I passed orders in the said suit (which is also pending before me) that original partial award dated 24.4.1998 had been filed and notice of filing of the award be issued to the parties and it was directed that they may file objections, if any, within the statutory period.

4. In OMP No.197/98, the aforesaid partial award has been challenged and it has been sought that the same be declared without jurisdiction, bad in law and null and void. In the petition it has also been sought that the said Co-operation Agreement dated 11.9.1990 be also declared void be initio and it be also declared that the arbitration clause forming part thereof has also perished therewith. The grounds of attack, inter alia, are that the Co-operation Agreement contravened the provisions of Section 13(B) of the MRTP Act, Section 16 of the Securities Contract (Regulation) Act and Section 372 of the Companies Act; that the learned Arbitrator had given a final award but the same was converted into a partial award by International Court of Arbitration without affording any opportunity of hearing to the petitioner; that the said co-operation Agreement is ex facie vague and uncertain and incapable of being made certain and thus in null and void as per provisions of Section 29 of the Indian Contract Act, 1872; that the said Co-operation Agreement is also vitiated by mutual mistake and the parties could not be at consensus ad idem; that the learned Arbitrator completely misconstrued and misunderstood Article 1 of the said co-operation Agreement; that the said Co-operation Agreement was signed by D.P. Barua purportedly on behalf of petitioner ITC Ltd. without any resolution of the Board of Directors of the ITC Ltd. and as such D.P. Barua could not bind the company; that the Co-operation Agreement did not in any way provide that the petitioner company would either take over the liabilities of Shri C.L.Anand and Shri Pradeep Anand under their personal guarantees, or that the petitioner company would indemnify them against any claim made in respect of the said personal guarantees; that the claim of Pradeep Anand was not tenable as he had not discharged his obligations under Article 6 of the said Co-operation Agreement; that the said Co-operation Agreement cannot be enforced specifically as per provisions of the Specific Relief Act, 1963; that the learned Arbitrator is not legally justified in giving opportunity to the claimant to place material on record to make out a case for grant of damages after the entire material was placed by the parties before the learned Arbitrator and the claimant/respondent No.1 had not made any prayer before the learned Arbitrator in givng material to assess the damages which may be granted; that as such the direction of the sole Arbitrator to do so is an error of law apparent on the face of the award and amounts to legal misconduct on his part; that the learned Arbitrator has no jurisdiction to unilaterally enlarge the scope of reference by permitting entertaining claim for damages subsequent to the reference of dispute to Arbitrator; that the claim for compensation now being made by respondent No.1 in ex face barred by limitation; that the award has been made beyond statutory limitation and time has never been extended to make the award by any court in India under Section 28 of the said Arbitrator Act.

5. In this IA 7558/98 for stay of further arbitration proceedings certain averments have been made to make out a case for stay. The averments are as follows:-

(1) As perthe terms of reference, the law to be applied to the dispute in arbitration proceedings shall be the laws of India and, therefore, the said partial award is barred by limitation as no consent was given by the parties for extending the time for making the award. Further no application has been made under Section 28 of the Arbitration Act, 1940 by any of the parties seeking for extension of time for making the impugned partial award or any final award and no Court in India has by an order, enlarged the time for making the said partial award under Section 28 of the said Arbitration Act. As such, the said partial award is a nullity in the eyes of law and the learned Arbitrator has no jurisdiction to proceed further for making a final award in furtherance of the said partial award.

(2) That despite acknowledging receipt of the notice issued by the Registry of this Court in S.No.1084A/98 by his letter dated 4.6.1998, the leaned Arbitrator has not yet filed the said partial award along with the record of the arbitration proceedings well before the date 16.9.1998 fixed for hearing of the said suit.

(3) That the learned Arbitrator neither filed the said partial award in Court before the said date of hearing i.e. on 16.9.1998 nor gave his consent to the petitioner to file its copy of the award on behalf of the learned Arbitrator despite lapse of more than three months in the meanwhile.

(4) that the learned Arbitrator in proceeding illegally and arbitrarily in furtherance of the partial award dated 24.4.1998 even though it has been brought to his notice that there has been no enlargement of time under Section 28 of the Arbitration Act even for making the partial award;

(5) That by his letter dated 5.8.1998, the sole Arbitrator without first filing the partial award in Court in pursuance of Court directions in Suit No.1084A/98 has issued a direction pursuant to his said partial award asking the petitioner to submit by 7.9.1998 documentary evidence/signed witnesses' statements in rebuttal to documentary evidence and statements of claimant/respondent No.1 in respect of his claim for damages and/or monetary compensation, if any, to be award to the claimant under Section 21(2) of the Specific Relief Act, 1963.

(6) That the claimant/respondent No.1 is seeking monetary compensation of approximately rupees forty one crores by way of damages in lieu of specific relief for the first time in the said arbitration reference and upon expiry of around five years from the date of submission of their claim to International Chambers of Commerce in September, 1993.

(7) That the learned Arbitrator has no jurisdiction to unilaterally enlarge the scope of the reference nor is it permissible for him to entertain the claim for alleged damages raised subsequent to submission of reference of disputes to Arbitrator and as such, the learned Arbitrator cannot continue with the arbitration proceedings.

(8) When the petitioner is challenging the legal validity of the said Co-operation Agreement of which the arbitration clause forms part thereof, the very basis of jurisdiction of the sole Arbitrator depends on the determination of such validity which can only be made by this Court.

6. Accordingly, in view of the aforesaid averments, the petitioner claims that interests of justice and balance of convenience require that pending determination of the challenge to the said partial award by this Court in the present OMP, the learned Arbitrator should be restrained from proceeding further pursuant to his impugned partial award dated 24.4.1998. It has further been stated in this application for stay that the petitioner will suffer irreparable loss and prejudice if the operation of the said impugned partial award dated 24.4.1998 is not stayed and respondent No.5 is not restrained by an interim order of temporary injunction pending disposal of the present OMP.

7. In reply to this application for stay respondent No.1 firstly filed preliminary objections on 19.11.1998 on the grounds, inter alia, that the petitioner had challenged validity of the said Co-operation Agreement by moving a petition under Section 33 of the Arbitration Act, 1940 being OMP No.16/95 and that in addition to the said OMP, the petitioner also filed a civil suit being No.50/95 for that very purpose. The said OMP and the suit were withdrawn by the plaintiff without reserving any liberty to file afresh a petition under Section 33 to challenge the said Co-operation Agreement. As such, the petitioner having withdrawn the previous petition as also the said suit unconditionally and having agreed to get the issues adjudicated by the Arbitrator, the present OMP in which this application has been moved, is not maintainable and the same is gross abuse of the process of the Court. Another preliminary objection taken in the reply is that the petitioner has also filed a petitioner under Section 14 of the Arbitration Act, 1940 being Suit No.1084A/98 for a direction to the learned Arbitrator to file the said partial award and in that suit also the petitioner has filed an application for stay of the further arbitration proceedings. It has further been contended that respondents 2 and 3, namely, Toshiba Corporation and Toshiba Battery Company Limited had filed an OMP being OMP No.10/96 and the same is pending before learned Single Judge of this Hon'ble High Court in which an interim order dated 22.5.1998 had been passed staying the passing of the final award till the next date of hearing without staying further arbitration proceedings. Against that interim stay an appeal was preferred being FAO(OS) No.146/98 in which a consent order dated 22.7.1998 was passed by a Division Bench of this Hon'ble Court directing that the final award, if given, shall not be implemented till the disposal of the petition in the said OMP No.10/96. The peal taken is that in view of the aforesaid consent order the present application filed by the petitioner for stay is liable to be dismissed. The respondent No.1 filed detailed reply to this application on 10.2.1999 in which all the contentions of the petitioner made in this application have been replied to.

8. It has specifically been contended on behalf of respondent No.1 that settled law is that under the scheme of the Arbitration Act an award can be challenged under Section 33 of the said Act on the grounds provided in Section 30 of the said Act only after the award is filed in Court by the Arbitrator or on the authority of the Arbitrator the same is filed by any of the party to the arbitration proceedings in a suit filed under Section 14 of the Arbitration Act and accordingly an independent OMP under Section 33 of the Arbitration Act is not maintainable and when the petition is not maintainable any application for stay moved in that petition is also not maintainable. Further it is settled law that application under Section 41(b) of the Arbitration Act is not maintainable in a petition under Section 33 of the said Act repudiating the agreement.

9. Mr. Anil B. Dewan, Senior Advocate submitted arguments on behalf of petitioner and Mr. G.L.Sanghi, Senior Advocate advanced arguments on behalf of respondent No.1. Arguments have been advanced at considerable length dealing with the merits and demerits of the challenge to the said partial award and in support reliance was also placed on several rulings of Hon'ble the Supreme Court as well as of this Court but I make it very clear that in this order I am not going to make any observations on the merits and demerits of the challenge to the partial award as it would not be appropriate for me to do so at this stage. I will only be dealing with this application for stay of further arbitration proceedings. For that the only points for consideration would be prima facie case, balance of convenience or irreparable loss.

10. Mr. Anil B. Dewan, Senior Advocate for the petitioner contended before me that the petitioner had strong prima facie case and the balance of convenience was also in its favour. According to him the partial award is time barred and further proceedings of arbitration are also beyond limitation; that the Co-operative Agreement relating to which the arbitration dispute is there is null and void; that in any case, whatever terms of reference were there before the learned Arbitrator have fully been dealt with and nothing is left for the Arbitrator to do in any further arbitration proceedings; that the learned Arbitraor has become functus officio; that the terms of reference do not speak of quantification of damages for which there should be further arbitration proceedings; that the claim in the claim petition given in the year 1993 never asked for a quantified damages and, therefore, there is no question of taking up further arbitration proceedings to quantify the damages and when the partial award which is a declaratory award, has itself been challenged, the learned Arbitrator should be stopped from proceeding further to quantify the damages on the basis of the declaratory award.

11. He further contended that if the Co-operation Agreement and the consequent partial award were found to be null and void, it would a futile exercise to have a final award by having further arbitration proceedings entailing further costs. He has invited my attention to a copy of the letter received by the petitioner from the Secretariat of the International Court of Arbitration which says that the International Court of arbitration will be invited to reconsider the advance on costs in light of the increase of the amount is dispute from an unquantified amount in dispute and estimated at U.S. $ 850,000 to US $ 1,668,063 at one of its next sessions. The contention of Mr.Dewan is that if the partial award itself is found to be invalid why all the parties of the arbitration case be saddled with extra costs of further arbitration proceedings. According to him, it would be in the interests of all the parties to the arbitration case that first the validity of the partial award is decided upon and in case the partial award is found to be in order only then further proceedings in the arbitration case for quantification of the damages in the form of a final award should be undertaken. He says that the parties have not only to bear the costs of arbitration incurred by the International Court of Arbitration which includes the fee of the Arbitrator but they have also to make heavy expenditure on each of the sittings made in the form of lawyers' fee, hotel expenses and other allied and miscellaneous expenses.

12. In his arguments, Mr. Anil B.Dewan, made great stress on an alleged fact that the Arbitrator had given a final award but later on the International Court of Arbitration converted it into a partial award which it could not do without hearing the petitioner. He also invited my attention to the terms of reference and the partial award in order to impress that now nothing is left to be done by the Arbitrator.

On the other hand, Mr.G.L. Sanghi, Senior Advocate, vehemently argued that on the grounds taken in the replies filed by respondent No.1 to this application for stay there should not be any stay of the further proceedings. He contended that even if a final award is made it cannot be executed unless it is made rule of the Court and , therefore, the petitioner would not be going to be prejudiced in any manner if the further proceedings were not stayed. He also contended that the rule is that the Court should least interfere in the arbitration proceedings and thus not to frustrate the same.

13. In the course of arguments, Mr. G.L. Sanghi, Senior Advocate, has also argued that looking to the nature of the agreement, the provisions of Section 3 of the Foreign Awards (Recognition & Enforcement) Act, 1961 (for short 'the Foreign Awards Act') would be attracted to it and, therefore, the arbitration proceedings having an international character ought not to be stayed by this Court.

14. I have carefully considered the aforesaid respective contentions of the parties and the arguments advanced by respective Senior Advocates appearing for them and I have come to a conclusion that the validity of the impugned partial award should first be decided and only after it is found to be in order and valid, further proceedings for making final award be undertaken. According to me the petitioner has a prima facie case as, prime facie, the grounds of challenge to the impugned partial award are not, on the face of the same, devoid of merits. Rather the same appear to have substance and require to be heard and decided in proper proceedings.

15. For the reasons given hereinafter I find that balance of convenience also lies in favour of the petitioner.

16. Learned counsel for respondent No.1 accepts that an award can be challenged in a suit filed under Section 14 of the Arbitration Act. It is to be found that the petitioner has already filed S.No.1084A/98 in which notice had been issued to the learned Arbitrator to file the award made by him. When this OMP No.197/98 was filed, in spite of service of notice from the Court for filing the award in the said suit, the learned Arbitrator had not filed the award by then though he had acknowledged to the parties vide his letter dated 4.6.1998 (may see Annexure Q, page 445) that J.B. Dadachandji and Company Advocates for ITC Ltd. had informed him that a suit had been filed in Delhi High Court under Section 14 of the Indian Arbitration Act for directions to ICC Arbitrator to file the award and that a notice had been issued by the Registrar of the Delhi High Court directing the Arbitrator to file the said award along with arbitration proceedings in Court before 16.9.1998. The petitioner stated in the main petition that its solicitors again requested the learned Arbitrator by fax dated 4.8.1998 to comply with the notice issued by this Court at the earliest or to authorise the petitioner to file its copy of the original partial award dated 24.4.1998 made by him. It is the case of the petitioner that despite notice of this Court and the request of the petitioner, the learned Arbitrator neither filed the said award in this Court nor authorised the petitioner to file its copy of the partial award on his behalf although three months had elapsed in the meanwhile. It is also the case that in utter disregard of the aforesaid request, the learned Arbitrator, on 5.8.1998, issued directions for further proceedings in term of his partial award dated 24.4.1998 (may see Annexure S at page 452). In pursuance of the directions of the learned Arbitrator dated 5.8.1998, the respondent No.1 submitted its affidavit in evidence dated 20.8.1998 raising a claim for alleged damages of Rs.411,970,742. It appears that in these circumstances, the petitioner was forced to file OMP No.197/98 under Section 33 of the Arbitration Act to challenge the partial award and to move the application under consideration with a request for stay of further arbitration proceedings.

17. Under the scheme of the Arbitration Act, awards made by the Arbitrators are dealt with in suits filed under Section 14 of the Arbitration act by a party to the arbitration agreements and only after the awards are filed either by the Arbitrators or by any party having the authority to file the same on behalf of the Arbitrators the parties to the arbitration case have the rights to file objections against the awards and a petition under Section 33 of the Arbitration Act may not lie independently. This scheme does not affect parties because under the Arbitration Act, an award becomes executable only after it is made rule of the Court and before it is made rule of the Court, the parties are given opportunity to file objections against the same and the award is not made rule of the Court unless objections are heard and decided. In the present case a peculiar situation arose due to the fact that despite directions to him by this Court, the learned Arbitration did not file the award in Court and chose to proceed for holding further arbitration proceedings in order to quantify the damages on the basis of the impugned partial award in which a declaratory order had been made. The petitioner could not challenge that partial award by filing objections against the same in S.No.1084A/98 as the award had not been filed. Therefore, it would appear that the petitioner had no alternative but to challenge the same by an independent petition by moving OMP No.197/98 and therein asking for stay of further proceedings by moving the application under consideration. In my view, by the aforesaid conduct of the learned Arbitrator, the petitioner could not have been rendered remedyless and thus gagged. The said scheme of the Arbitration Act does not envisage such a peculiar situation. However, the situation has now changed because before the application under consideration for stay could be decided, the Arbitrator filed the award in S.No.1084A/98, though very late, and also authorised the petitioner to file its copy on his behalf.

18. In the above circumstances now OMP 197/98 has no independent existence and it being challenge to the partial award it is to become part of S.No. 1984A/98 being merged in the same by treating it as objections to that award. In my view, Courts should not very much stick to the technicalities of the procedure and changed the rules where substantial justice otherwise requires. Sticking to the form, if it defeats justice, should not be followed. Therefore, in view of the facts and changed situation as stated above this application should not be thrown out by telling the petitioner that look here your OMP 197/98 was perhaps not maintainable when it was moved.

19. The question whether the petitioner can challenge the validity of the Co-operation Agreement should not be decided in this application for stay. There is the decision of the learned Arbitrator in the impugned partial award that the Co-operation Agreement is in order and is not void or invalid. The petitioner has a right to challenge the partial award. The petitioner is challenging the decision of the learned Arbitrator on this point as well. It is not to be found that the legal question of validity of the Co-operation Agreement was jointly referred to the learned Arbitrator and thus making his verdict on that legal question final. It is also to be found that some of the parties to the agreement had even not signed the terms of reference. Therefore, without expressing any opinion whether the petitioner can challenge the validity of the Co-operation Agreement or not, in my view, the application under consideration should not be rejected on the sole ground that the petitioner is debarred under Order 23 of the Code of Civil Procedure from challenging the decision of the learned Arbitrator on the question of validity of the Co-operation Agreement. That question would be decided while dealing with the objections to the decision of the learned Arbitrator. If ultimately it is found by this Court while deciding objections of the petitioner against the impugned award that the petitioner can legally challenge the decision of the learned Arbitrator on the point of validity of the Co-operation agreement and the Court comes to a view that the Co-operation Agreement is not valid any further arbitration proceedings for quantification of the damages would be a futile exercise.

20. Further if the Court finds that the award is time barred and it also, in order to validate the same, does not extend the time for making the award then the impugned partial award will have no existence and any further arbitration proceedings on the basis of the same would be a futile exercise. Further if it is found by this Court that the Arbitrator had only the jurisdiction to give a declaratory award and could not enlarge his scope of reference to quantification of the damages then the very jurisdiction of the learned Arbitrator for holding further arbitration proceedings to quantify the damages would be wanting.

21. It is well known that arbitration through International Court of Arbitration entails heavy expenditure. Therefore, if further arbitration would be rendered futile for the reasons given above, in my view, why such heavy expenditure be incurred. Thought it was urged before me from the side of respondent No.1 that he had already deposited the advance costs with International Court of Arbitration and, therefore, the petitioner had not to bother for the same but nobody can deny that apart from fee of the Arbitrator, the parties have to incur expenditure on many other items, like Lawyers fee, Hotel expenses, travel expenses etc. etc. Therefore, the petitioner's contention that why should the parties to the arbitration be saddled with extra costs of arbitration on further arbitration proceeding which may not be required cannot be brushed aside.

22. The partial award, prima facie, appears to be a declaratory award in the nature of a preliminary decree which may require a final decree. For that I may refer to the terms of reference and some portions of the partial award as extracted below:-

Terms of Reference

"4.12 In the foregoing circumstances, the Claimant prays the arbitral tribunal may be pleased to take steps for settling the disputes and make the undermentioned Award directing the Defendants:

(a) Jointly and severally to take immediate and appropriate steps to ensure that all personal guarantees give by the Claimant, SHRI C.L. ANAND and his son, PRADEEP ANAND to the Banks and Financial Institutions are returned to the Claimant duly discharged and cancelled:

(b) Alternatively to award to the Claimant the amounts that he and his son, PRADEEP ANAND are called upon to reimburse to the Banks and Financial Institutions in respect of the said personal guarantees;

(c) Alternatively, to hold the Defendants liable for all losses and consequences arising to the Claimant and his son, PRADEEP ANAND, as a result of any legal actions taken by the Banks and Financial Institutions pursuant to the personal guarantees;

(d) To award costs of this Reference to Arbitration, and

(e) Any other relief, as may be prayed for, from time to time, in the circumstances of the case.

Extracts from the Partial Award

"50.11.2 Having regard to the abovenamed factors I decline to order specific performance in terms of clause 4.12(a) of the Terms of Reference, in the exercise of my discretion.

50.11.3 In my opinion, an Arbitrator should not direct specific performance when the contract was no longer in existence.

50.11.4 Another reason for refusing, specific performance of clause 4.12(a) of the TOR is that, if granted, it would indirectly involve the Banks and Financial Institutions to hand over the personal guarantees to the Claimant duly discharged and cancelled when both the Banks and Financial Institutions have not been made parties to this Reference.

50.12.1 I now pass to consider clause 4.12(b) of the TOR.

50.12.2. I am inclined to agree with the contention of Counsel for ITC that this relief claimed by the Claimant is premature in as much as no Court action has been taken by the Banks and Financial Institutions against the Claimant and his son, SHRI PRADEEP ANAND in respect of the said personal guarantees.

50.12.3 In short, the Claimant is asking the Arbitrator to make an award on matter which did not exist yet.

150.12.4 For this reason I refuse to make an award in terms of the relief claimed in clause 4.12(b) of the TOR.

50.13.1 I turn to deal with clause 4.12(c) of the TOR and sub-section 2 of section 21 of the Specific Relief Act,1963 may be relevant and it reads:

50.13.2 "21(1) In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance.

(2) If, in any such suit, the Court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly.

(4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in section 73 of the Indian Contract Act 1872 (9 of 1972).

50.13.3. And section 73 of the 1872 Acts is in the following terms:

"When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it."

50.13.4 Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

50.14.1 Counsel for ITC has further argues that section 73 of the Contract Act 1872 imposes on the Claimant a duty of taking all reasonable steps to mitigate the loss consequent on the breach of contract and debars the Claimant from claiming any part of the damage which is due to his neglect to take such steps.

50.14.2 Counsel also submits that it is well settled that the loss to be ascertained is the loss as on the date of the breach (see KAS Jamal Vs. Moola Dawood Sons & Co (1915) AC 175) and in terms of Article 5 of the Co-Operation Agreement dated 11.09.1990 the personal guarantees given by the Claimant and his son, Shri Pradeep Anand to the Banks and Financial Institutions were required to be discharged by 31.03.1991.

50.15.1 I have already held and adjudged based on the documents produced before me in this Reference ITC had committed a breach of Article 5 of the Co-Operation Agreement dated 11.09.1990 in that ITC had failed to arrange for the release of all personal guarantees given by Shri C.L. Anand and his son, Shri Pradeep Anand to the Banks and Financial Institutions on behalf of TOSHIBA ANAND BATTERIES LTD. (TABL) as agreed.

50.15.2 And I have also held and adjudged that ITC had refused to assist and co-operate with the release of the said personal guarantees when the Consortium Banks proposed that ITC gave corporate guarantee instead in order to secure the discharge of the said personal guarantees given by Shri C.L. Anand and his son, Shri Pradeep Anand to the said Banks.

50.16.1 In my opinion, the appropriate relief to be awarded to the Claimant for breach of Article 5 of the Co-Operation Agreement dated 11.9.1990 is for compensation for breach of contract, with damages to be assessed under Section 21(2) of the Indian Specific Relief Act, 1963.

50.16.2 I hereby reserve powers to make a Final Award on the quantum of monetary compensation (if any) to be awarded to the Claimant after having invited and received further submissions from the parties and/or their Counsel in this regard at a later date.

50.17.1 Since ITC. TOSHIBA and TBCL had agreed under Article 5 of the said Co-Operation Agreement to assist and co-operate to release all personal guarantees given by Shri C.L. Anand and his son, Shri Pradeep Anand to the Banks on behalf of TOSHIBA ANAND BATTERIES LTD (TABL), in my opinion, it is fair and equitable that all three parties should be held jointly and severally, liable to the Claimant. I have therefore so held and adjudged.

50.17.2 To avoid any doubt I have to make it clear that I am granting to the Claimant declaratory relief under clause 4.12(c) of the Terms of Reference for breach of Article 5 of the Co-Operation Agreement dated 11.9.1990. The relief is for compensation for breach of contract, with damage to be assessed under Section 21(2) of the Indian Specific Relief Act, 1963 at a later date."

23. It may be seen that the material terms of reference were in para 4.12(a)(b)(c). The learned Arbitrator did not give relief to the claims in respect of terms of reference 4.12(a) and 4.12(b). The relief granted to the petitioner is only in respect of term of reference 4.12(c) which says that "alternatively, to hold the respondents liable for all losses and consequences arising to the claimant and his son, as a result of any legal actions taken by the Banks and Financial Institutions pursuant to the personal guarantees". In respect of this term of reference the learned Arbitrator in para 50.17.2 of the award says that "to avoid any doubt I have to make it clear that I am granting to the claimant declaratory relief under clause 4.12(c) of the terms of reference for breach of Article 5 of the Co-operation Agreement dated 11.9.1990.

24. By holding so the learned Arbitrator in para 50.16.2 of the Award reserved powers to make a final award on the quantum of monetary compensation, if any, to be awarded to the claimant after having invited and received further submissions from the parties and/or their counsel at a later date. In para 50.17.2 the learned Arbitrator further says that "the relief is for compensation for breach of contract, with damages to be assessed under Section 21(2) of the Indian Specific Relief Act, 1963 at a later date."

25. Reading terms of reference 4.12 (c) and para 17.2 of the award conjointly, it would appear that the damages would be assessed only as a result of any legal actions taken by the banks and financial institutions pursuant to the personal guarantees. There is nothing before me to indicate that on happening of any such event the respondent No.1 approached the learned Arbitrator for quantifying the damages. Rather it is to be seen that the learned Arbitrator has himself (suo moto) directed the claimant to prepare documents or documentary evidence and signed witnesses statements in respect of his claim for damages and/or monetary compensation, if any, against the first, second and third defendants respectively (may see Annexure S at page 452). In the circumstances, it may also be said that the further proceedings had been undertaken by the learned Arbitrator without any stage having arrived at for the same. Therefore, respondent No.1 would not be prejudiced if the further arbitration proceedings are deferred for some time and in the meantime, the validity of the partial award may be decided upon by this Court.

26. It may also he seen that the claimant Shri C.L. Anand in his claim petition before the learned Arbitrator had asked for making the award directing the respondents:-

(a) Jointly and severally to take immediate and appropriate steps to ensure that all personal guarantees given by the Claimant and his son to the Banks and Financial Institutions are returned to him duly discharged and cancelled;

(b) Alternatively, to award to the Claimant the amounts that he and his son are called upon to reimburse to the Banks and Financial Institutions in respect of the aforesaid guarantees.

(c) Alternatively,to hold the Respondents liable for all losses and consequences arising to the Claimant and his son, as a result of any legal actions taken by the Banks and Financial Institutions pursuant to the personal guarantees;"

27. There was no prayer for quantification of the losses. In para (c) the prayer was only to hold the respondents liable for all losses and consequences arising to the claimant and his son as a result of any legal action taken by the banks and financial institutions pursuant to the personal guarantees. Therefore, there is also a question mark on the jurisdiction of the learned Arbitrator to reserve powers to make a final award on the quantum of monetary compensation. This question mark would be decided while dealing with the challenge to the impugned partial award. If it is ultimately found that the learned Arbitrator had no jurisdiction to reserve powers to make final award then again any further arbitration proceedings for making a final award would be a futile exercise.

28. From the side of respondent No.1 it was vehemently urged that in OMP No.10/96 filed by respondents No.2 and 3, namely, Toshiba Corporation and Toshiba Battery Company Limited which is pending before this Court and which relates to this very partial award, the parties before the Division Bench in an appeal filed against interim order passed by learned Single Judge consented that the final award if given shall not be implemented till the disposal of the petition in the said OMP. The thrust of the argument is that when the Division Bench of this Court did not stay further arbitration proceedings in the matter this Court should not stay further arbitration proceedings. The facts of OMP No. 10/96 appear to be that in that OMP an IA No. 3658/97 for stay of arbitration proceedings was moved. It was taken up on 16.7.1998, by S.N. Kapoor, J. His Lordship heard the parties counsel and came to an opinion that till 16.7.1998, he should notstay the arbitration proceedings but by way of working arrangement till then His Lordship directed that the final award may not be given subject to the conditions that the petitioner will co-operate in arbitration proceedings. An appeal was preferred against that order and the Division Bench vide order dated July 22, 1998 disposed of the same by saying as follows:-

"We dispose of the appeal, as an interim measure, that if final award is made in the arbitration proceedings it will not be implemented till decision of Misc. Applications which are being heard by learned Single Judge. However, the learned single Judge would be free to make such order which the learned Single Judge may deem fit proper in the facts and circumstances of the case."

29. Thus it is to be found that the Division Bench made the learned Single Judge free to made such order which the learned Single Judge might deem fit and proper in the facts and circumstances of the case while disposing of the said miscellaneous application being No. 3658/97. Consequently it cannot be said that the Learned Single Judge of this Court could not in I.A. No. 3685/97 while disposing it of stay the arbitration proceedings. Accordingly, in my view, while disposing of the application under consideration the aforesaid Division Bench order dated July 22, 1998 would not come in way.

30. In respect of the contention made on behalf of respondent No.1 that the impugned award is governed by the provisions of the Foreign Awards Act and, therefore, Indian Courts should not interfere with further arbitration proceedings, it may be said that the question whether the impugned partial award is governed by the Foreign Awards Act or not would be decided while dealing with the objections to the same in S.No. 1084A/98. However since respondent No.1 himself has filed a petition in this Court under Section 14 of the Arbitration Act, 1940 being S.No. 1737A/98, it would not be appropriate to reject this application for stay on the grounds that the impugned partial award may be governed by the Foreign Awards Act.

31. I am conscious of the fact that any Civil Court should normally not interfere in the arbitration proceedings so as to frustrate the same and it should only deal with the awards after the same are made. Such is one of the reasons and objects of the new Arbitration Act as well. But this Rule is not mandatory in all cases. In my view, if it appears that in the interests of justice, the further arbitration proceedings should be stayed such order should be passed. In the facts and circumstances of the case before me and for the reasons stated above there appears to be a ground for stay of the further arbitration proceedings.

32. Before allowing this application it has also to be considered whether by staying the further arbitration proceedings the Respondent No.1 would be inconvenienced or he would suffer irreparable loss. In my opinion, neither there would be any inconvenience nor he would be put to any irreparable loss. The reasons being that the impugned award cannot be executed till it is made rule of the Court and the final award when made would not come into play till the impugned partial award is made rule of the Court. Admittedly, the impugned award has not been made rule of the Court and the suit for that purpose filed by him is still pending. Moreover, that award cannot be made rule of the Court without deciding the objections of the petitioner. Therefore, if further arbitration proceedings are stayed till the partial award is made rule of the Court, the respondent No.1 would neither be inconvenienced nor would suffer irreparable loss. Rather, in the event of the impugned award being not made rule of the Court he would be saved from unnecessary expenditure which may be incurred in the further arbitration proceedings.

33. Thus after having found prima facie case and the balance of convenience in favour of the petitioner and also having come to a prima facie view that presently respondent No.1 is not going to be prejudiced by grant of stay, I allow the application and direct that further arbitration proceedings for making final award shall remain stayed till the impugned partial award is made rule of the Court.

34. Before parting with the order, it is made clear that any observations made in this order shall not affect the merits of the respective contentions of the parties relating to the impugned partial award dated 24.4.1998.

35. With the aforesaid directions and observations this application is disposed of.