Delhi High Court
Progressive Career Academy Pvt. ... vs Fiit Jee Ltd. on 16 May, 2011
Author: Vikramajit Sen
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP No.297/2006
Progressive Career Academy Pvt. Ltd. ...Petitioner through
Mr. S.K. Maniktala &
Mr. V.M. Chauhan,
Advs.
versus
FIIT JEE Ltd. ....Respondentthrough
Mr. T.K. Pradhan, Adv.
WITH
FAO(OS) No.128/2008
Oriental Structural Engineers ...Appellant through
Mr. P.V. Kapur, Sr.
Adv. with Mr. Anil Airi,
Ms. Ekta Kalra Sikri &
Ms. Sadhana Sharma,
Advs.
versus
Alcove Industries Ltd. ....Respondent through
Mr. Anil Sapra, Sr.
Adv. with Mr. Rajendra
Singvi & Mr. Sanjay
Abbot, Advs.
WITH
FAO(OS) No.129/2008
Oriental Structural Engineers ...Appellant through
Mr. P.V. Kapur, Sr.
Adv. with Mr. Anil Airi,
Ms. Ekta Kalra Sikri &
Ms. Sadhana Sharma,
Advs.
versus
Alcove Industries Ltd. ....Respondent through
Mr. Anil Sapra, Sr.
Adv. with Mr. Rajendra
Singvi & Mr. Sanjay
Abbot, Advs.
WITH
OMP No.297/2006 Page 1 of 33
FAO(OS) No.334/2009 & CM Nos.11087/2009, 11089/2009
& 22580-81/2010
Neeru Walia ...Appellant through
Mr. Deepak
Bhattacharya,
Mr.Rajesh Kumar &
Mr. Mithlesh Kumar,
Advs.
versus
Inderbir Singh Uppal ....Respondent through
Mr. Vijay K. Mehta &
Mr. S.S. Parashar,
Advs.
WITH
FAO(OS) No.525/2010
Suvidha Adlakha ...Appellant through
Mr. Vikas Mahajan,
Adv.
versus
Raj Kumar Dua ....Respondent through
None
% Date of Hearing : May 03, 2011
Date of Decision : May 16, 2011
CORAM:
* HON'BLE MR. JUSTICE VIKRAMAJIT SEN
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
1. Whether reporters of local papers may be
allowed to see the Judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the Judgment should be reported
in the Digest? Yes
OMP No.297/2006 Page 2 of 33
VIKRAMAJIT SEN, J.
1. The question in this bunch of Appeals concerns the legal
proprietary of judicial directions for the removal of an arbitrator
even before the publishing of an Award. Several judgments of our
esteemed Single Benches have been cited before us, a perusal of
which manifests the existence of a polarity of opinion. On one side
of the watershed is the view that assertions as to the de jure or de
facto incompetence of the Arbitral Tribunal must immediately be
addressed by the Court, and in deserving cases remedied, whilst
on the other side is the contrary view that the statutorily provided
procedure postulates an immediate remonstration but a deferred
assailment of the Award, inter alia on this ground, by way of an
invocation of Section 34 of the Arbitration & Conciliation Act, 1996
(A&C Act for short).
2. At the threshold, an objection has been lodged to the
maintainability of the Appeals on the ground that Section 37 of the
A&C Act provides for such remedy only against orders (a) granting
or refusing to grant any measure under Section 9 or (b) setting
aside or refusing to set aside an arbitral award under Section 34 of
the A&C Act. In Cref Finance Ltd. -vs- Puri Construction Ltd.,
AIR 2001 Delhi 414 the controversy which had arisen before this
Court concerned the competency of a Second Appeal; and the
Division Bench held that it was forbidden in terms of Section 37(3)
of the A&C Act. We are mindful that this aspect of law does not
directly arise before us. However, it is a worthy preface to our
analysis inasmuch as it records the non-availability of Letters
Patent even in these circumstances. The Division Bench, inter alia,
took note of the Five-Judge Bench decision in Union of India -vs-
A.S. Dhupia, AIR 1972 Delhi 108 which pithily provides a
perspicuous perusal of the annals of the establishment of the Delhi
High Court. The Division Bench also observed that Shah Babulal
Khimji -vs- Jayaben, AIR 1981 SC 1786 was distinguishable for the
simple reason that their Lordships were not concerned with the
maintainability of an Appeal against the Order/Judgment of a
Single Bench of the Delhi High Court exercising original
jurisdiction.
3. In Dharam Prakash -vs- Union of India, 138 (2007) DLT
118 (DB), 2007(1) Arb. LR 308(Del.) (DB), the challenge was laid to
the vires of Section 13 of the A&C Act which was repelled because
of the existence of a remedy via filing of Objections under Section
34 of the A&C Act. The said Bench applied the previous
enunciation of the law in Bharat Heavy Electricals Ltd. -vs- C.N.
Garg, 88 (2000) DLT 242(DB). Yet another Division Bench of this
Court in Canbank Financial Services Ltd. -vs- Haryana
Petrochemicals Ltd., 2008(2)Arb.LR 365 Delhi (DB) had concluded
that a challenge concerning controversies raised in a plaint/suit
was not maintainable in view of Section 37 of the A&C Act. This
decision was applied in Tandav Films Entertainment Pvt. Ltd. -vs-
Four Frames Pictures, 2010(1) Arb. LR 79(Delhi) DB), albeit in that
case, it was Section 8 of the A&C Act which was at the fulcrum of
the controversy. The abiding bedrock of these decisions remains
Union of India -vs- Mohindra Supply Co., [1962] 3 SCR 497
which reiterates that the right of appeal is essentially a creature of
a statute; ergo a litigant does not possess an inherent right to
appeal. Accordingly, Section 39 of the repealed Arbitration Act,
1940 which had provided for a limited scope of appeal before the
appellate Court, superseded the provisions of Letters Patent. This
opinion is evident from a perusal of the following paragraphs:-
16. There is in the Arbitration Act no provision similar to
Section 4 of the Code of Civil Procedure which preserves
powers reserved to courts under special statutes. There is
also nothing in the expression ―authorised by law to hear
appeals from original decrees of the Court‖ contained in
Section 39(1) of the Arbitration Act which by implication
reserves the jurisdiction under the Letters Patent to
entertain an appeal against the order passed in
arbitration proceedings. Therefore, in so far as Letters
Patent deal with appeals against orders passed in
arbitration proceedings, they must be read subject to the
provisions of Section 39(1) and (2) of the Arbitration Act.
17. Under the Code of 1908, the right to appeal under the
Letters Patent was saved both by Section 4 and the clause
contained in Section 104(1), but by the Arbitration Act of
1940, the jurisdiction of the Court under any other law for
the time being in force is not saved; the right of appeal
can therefore be exercised against orders in arbitration
proceedings only under Section 39, and no appeal (except
an appeal to this Court) will lie from an appellate order.
18. There is no warrant for assuming that the reservation
clause in Section 104 of the Code of 1908 was as
contended by counsel for the respondents, ―superfluous‖
or that its ―deletion from Section 39(1) has not made any
substantial difference‖: the clause was enacted with a
view to do away with the unsettled state of the law and
the cleavage of opinion between the Allahabad High
Court on the one hand and Calcutta, Bombay and Madras
High Courts on the other on the true effect of Section 588
of the Code of Civil Procedure upon the power conferred
by the Letters Patent. If the legislature being cognizant of
this difference of opinion prior to the Code of 1908 and
the unanimity of opinion which resulted after the
amendment, chose not to include the reservation clause
in the provisions relating to appeals in the Arbitration Act
of 1940, the conclusion is inevitable that it was so done
with a view to restrict the right of appeal within the strict
limits defined by Section 39 and to take away the right
conferred by other statutes. The Arbitration Act which is
a consolidating and amending Act, being substantially in
the form of a code relating to arbitration must be
construed without any assumption that it was not
intended to alter the law relating to appeals. The words of
the statue are plain and explicit and they must be given
their full effect and must be interpreted in their natural
meaning, uninfluenced by any assumptions derived from
the previous state of the law and without any assumption
that the legislature must have intended to leave the
existing law unaltered. In our view the legislature has
made a deliberate departure from the law prevailing
before the enactment of Act 10 of 1940 by codifying the
law relating to appeals in Section 39.
4. This decision was followed by their Lordships in State of
West Bengal -vs- Gourangalal Chatterjee, (1993) 3 SCC 1. The
argument that the ratio of Mohindra Supply Co. would not apply
where the order of the learned Single Judge was passed not in
exercise of Appellate jurisdiction but of Original jurisdiction was
roundly rejected. The Supreme Court went on to hold in
Gourangalal Chatterjee that - ―the order passed by learned
Single Judge revoking the authority of the Chief Engineer on his
failure to act as an arbitrator was not covered under any of the six
clauses mentioned in Section 39. It is obvious that no appeal could
be filed against the order of the learned Single Judge‖. This
decision definitively sounds the death knell for the Appeals before
us since it directly deals with the removal of an arbitrator. To avoid
prolixity, we shall go no further than to mention that our research
has encompassed Jugal Kishore Paliwal -vs- Sat Jit Singh, (1984) 1
SCC 358, Vanita M. Khanolkar -vs- Pragna M. Rai, AIR 1998 SC
424, P.S. Sathappan -vs- Andhra Bank Ltd., AIR 2004 SC 5152,
Groupe Chimique SA -vs- Southern Petrochemicals Industries
Corpn. Ltd., (2006) 5 SCC 275 and RITES Limited -vs- JMC
Projects (India) Ltd., 2009(2) Arb. LR 64 (Del.) (DB). It appears
that keeping in perspective the views of the Hon'ble Supreme
Court and of this High Court, the only conclusion possible is that
the present Appeals are incompetent.
5. Faced with this predicament, Mr. P.V. Kapur, learned Senior
Advocate appearing for the Appellants, has contended that where
an order has palpably been passed de hors the A&C Act, an Appeal
assailing such an order should nevertheless be entertained. He has
sought support from a decision of the Division Bench of this Court
in Jindal Exports Ltd. -vs- Fuerst Day Lawson Ltd., 1999(51) DRJ
170 (DB). In that case, an objection to the maintainability of
execution proceedings had been canvassed on the premise that the
learned Single Judge had erred in converting the execution
proceedings into a petition seeking enforcement of a foreign
award. Our learned Brothers had noted that an Appeal against
such an order would not lie under Section 50 of the A&C Act.
However, the impugned Order was ―treated as one having been
passed by learned Single Judge not under any of the provisions of
the A&C Act, but in exercise of his inherent jurisdiction on Original
Side of this Court. Thus, the impugned order is such, which would
be deemed to have been passed de hors the provisions of the Act‖.
It was opined that such an order could be scrutinized for its
proprietary under Clause 10 of the Letters Patent and would
constitute a judgment in the mould of Shah Babulal Khimji. Our
learned Brother duly discussed Gourangalal Chatterjee but
distinguished it on the dialectic that execution proceedings, unlike
the removal of an arbitrator, were not envisaged under the A&C
Act. It is debatable whether this approach has been approved by
the Supreme Court inasmuch as in the Appeal their Lordships have
not specifically affirmed the view of the Division Bench on the
jurisdictional aspect (See Fuerst Day Lawson -vs- Jindal Exports
Ltd., AIR 2001 SC 2293).
6. It is topical to advert to the opinion of the Division Bench in
Shivnath Rai Harnarain India Co. -vs- Glencore Grain Rotterdam,
164 (2009) DLT 197(DB) which is in these words:-
8. Very recently, in RFA (OS) No. 9/2006 titled ITE
India (P) Ltd. -vs- Mukesh Sharma, another Division
Bench of this Court has categorically held that Section 10
of the DHC Act does not confer a right of appeal. Drawing
support from a detailed judgment of a Division Bench of
Madras High Court in OSA No.52/2008 titled Bharat Salt
Refineries Ltd. -vs- M/s. Compania, our learned Brothers
categorically concluded that an Appeal under Section
50(1) (a) of the Arbitration and Conciliation Act lies only
in cases where the Court below refuses to refer the
parties to arbitration. These observations were made
because the question before our learned Brothers was
restricted to that conundrum alone. The present dispute
would, however, encompass Section 50 (1)(b), but the
reasoning of our esteemed Brothers nevertheless is
applicable on all fours. The Appeal was dismissed as not
maintainable. Apart from the pronouncements of the
Supreme Court on the Arbitration Act, 1940, it is obvious
that several Division Benches of this Court, as well as of
the Madras High Court, have not entertained appeals at
least pertaining to arbitration disputes under Section 10
of the Letters Patent.
9. In P.S. Sathappan -vs- Andhra Bank Ltd., (2004) 11
SCC 672 : AIR 2004 SC 5152 the Constitution Bench, by a
majority of 3 to 2, held that the application of Letters
Patent enabling appeals from certain orders continued
unabated despite later legislation, yet clarified that where
―a statue does not permit an appeal, it will not lie. Thus,
for example, in cases under the Land Acquisition Act, the
Guardians and Wards Act and the Succession Act, a
further appeal is permitted whilst under the Arbitration
Act a further appeal is barred‖ (emphasis added by us).
This would apply a fortiori to the Delhi High Court which
came into existence as a distinct entity by virtue of
parliamentary enactment and not by Letters Patent, a
distinguishing feature which is not always recognized.
This is extremely significant keeping in perspective the
fact that the avowed purpose of Letters Patent was to
establish High Courts in India, restrict appeals to the
House of Lords/Privy Council, and to provide intra court
appeals within the High Courts so established. So far as
the Delhi High Court is concerned this is the very
objective of the enactment of Parliament and therefore
reverting to a previous document such as Letters Patent
could well be seen as superfluous or futile. It seems to us
that the Delhi High Courts Act, 1976 completely
substitutes or subsumes the Letters Patent.
7. Section 36 of the A&C Act covers execution or rather
enforcement of an Award. If a picturisation is permitted, we can
visualize the curtain coming down, so far as arbitral proceedings
are concerned, to be followed by quite another Act/scene of the
play, in which the Civil Procedure Code becomes the focal
dialogue. Application for adjournments or for amendment of
pleadings etc. would fall in this genre; on any consideration, the
A&C Act neither attempted nor intended to cover these projects. It
would be apposite to draw attention once again to Cref Finance
Ltd. in which another Division Bench has categorically concluded
that the Letters Patent are inapplicable to proceedings under the
arbitration legislation. Similar is the tenor of two Division Bench
Judgments of Calcutta High Court, namely, Modi Korea
Telecommunication Ltd. -vs- Appcon Consultants Pvt. Ltd., 2000
(Suppl.) R.LR 618(Cal) (DB) which came to be applied in Great
Eastern Shipping Co. Ltd. -vs- Board of Trustees for the Port of
Calcutta, 2005(1) Ar. LR 389 (Cal) (DB). The Division Bench of the
Calcutta High Court had come to the conclusion that the orders
assailed before them did not partake of the character of orders
passed under the A&C Act. It would be virtually impossible to
inventories all instances of orders passed de hors the A&C Act. We
are not called upon to cogitate upon this issue since the
controversy is covered on all fours by Gourangalal Chatterjee.
For this very reason, it appears to us that V.M. Manohar Prasad -
vs- N. Ratnam Raju, (2004) 13 SCC 610 does not further the
argument that the present batch of cases are amenable to
correction under Clause 10 of the Letters Patent. Their Lordships
had repelled the view taken by the High Court that an appeal was
prohibited under the Contempt of Courts Act, 1971 since the
Contempt Judge had not imposed any punishment. The learned
Single Judge had directed that all those employees who had not
completed five years of regular service would not be considered for
regularization in the contempt proceedings. An appeal was held to
be maintainable against this part of the Order. A similar conclusion
was reached in Midnapore Peoples' Co-op. Bank Ltd. -vs- Chunilal
Nanda, AIR 2006 SC 2190 where their Lordships held that if orders
of a civil nature or having civil ramifications came to be passed in
contempt proceedings, they would be appealable.
8. Returning to the facts of the Appeals before us, all of them
directly deal with the removal of an arbitrator and/or with
terminating the mandate of the Arbitral Tribunal. These questions
have been dealt with under the fasciculus of Sections 12 to 15 of
the A&C Act. We find that there can be no conceivable
considerations for concluding that such orders can be perceived as
being unconnected with any of the provisions of the A&C Act. We
are not dealing with an order directing a lower Court to conclude
proceedings under Section 8 of the A&C Act expeditiously. We
make no observations regarding maintainability of an Appeal
against them since they would essentially be in the nature of obiter
dicta. In any event, it would be relevant to recall the enunciation of
the law in SBP & Co. -vs- Patel Engineering Limited, (2005) 8 SCC
618 to the effect that an aggrieved party could, in deserving cases,
approach the Hon'ble Supreme Court under the plenary powers
contained in Article 136 of the Constitution of India to correct a
grievous error. In fact, Section 37 of the A&C Act explicitly
explains this position.
9. In Progressive Career Academy Pvt. Ltd. -vs- FIIT JEE Ltd.
(OMP No.297/2006), a learned Single Judge has referred the
Petition to the Division Bench because of the existence of the two
divergent and diametrically different conceptions and persuasions
which have already been dissected by us above. Hence, even
though it is our opinion that the Appeals are not maintainable, we
must answer the queries raised by the Referral Order. We are
mindful of the fact that our decision shall put to rest the
controversial and conflicting verdicts of Single Benches of this
Court.
10. In the present analysis of the law, we cannot concur with the
ratio of Interstate Constructions -vs- NPCC Limited, 2004(3)
R.A.J. 672 (Del) in which one of us (Vikramajit Sen, J.) had
terminated the authority of the Arbitrator keeping in mind the
directions of the latter requiring the claimants to travel from New
Delhi to Andhra Pradesh solely to carry out inspection of
documents. Bias was found to pervade the arbitral proceedings in
that the Arbitrator was manifestly functioning to the detriment of
the Claimant and to the advantage of the party who had appointed
him. This dialectic appears to have found favour with another
learned Single Judge in Indira Rai -vs- Vatika Plantations (P) Ltd.,
127 (2006) DLT 646. The mandate of the Arbitrator was
accordingly terminated and another Arbitrator was appointed in
his stead. Our Learned Brother had also drawn support from the
decision of the Division Bench in Sushil Kumar Raut -vs- Hotel
Marina, 121(2005) DLT 433. While doing so, the Bench was
cautious to record that its action ―may not be technically or strictly
in tune with the provisions of the Act‖. The Division Bench
considered it necessary to ―break the impasse‖ and accordingly
removed the existing arbitrator and appointed a third person as
the Arbitrator. In National Highways Authority of India -vs-
K.K.Sarin, 159 (2009) DLT 314, a Single Bench of this Court (Rajiv
Sahai Endlaw, J.) has concluded that the ―party alleging bias is
required to first follow the procedure in Sections 12 and 13 and if
unsuccessful has choice of either waiting till the stage of Section
34 or if he feels that bias can be summarily established or shown to
the Court, approach the Court immediately under Section 14, after
the challenge being unsuccessful, for the Court to render a
decision.‖ In Shyam Telecom Ltd. -vs- Arm Ltd., 113 (2004) DLT
778 a Single Bench (R.C.Jain, J.) has concluded that Section 14(2)
of the Act empowers the Court to decide the question of
termination of the mandate if a controversy arises concerning the
termination of the Arbitrator's mandate on one or the other
grounds.
11. Our research reveals that another Single Bench, while
declining to interfere in Pinaki Das Gupta -vs- Publicis (India)
Communications, 115 (2004) DLT 345, has favoured the view that
interference under Section 14 is not warranted even in the face of
allegations of the bias of the Arbitrator. A reference was made by
the learned Single Judge to his previous decision in Prasar Bharati
-vs- Stracon (India) Limited, 114(2004) DLT 562 which interpreted
the powers vested in the Court under Section 11 of the A&C Act.
Both the decisions were predicated on the earlier view of the
Supreme Court in Konkan Railway Corporation Ltd. -vs- Rani
Construction, (2002) 2 SCC 388, which no longer holds the field
because of subsequent enunciation of law in SBP & Company -vs-
Patel Engineering, (2005) 8 SCC 618.
12. In G.Vijayaraghavan -vs- M.D.Central Warehousing
Corporation, 86 (2000) DLT 844, the Court had been approached
under Sections 12 and 13 of the Act with the prayer to set aside
the appointment of the Arbitrator on the premise that his name
was on the panel of the Arbitrators drawn up by the opposite
party. The prayer was declined without going into the legal nodus
whether the Court possessed the power of interference in the
proceedings of the Arbitral Tribunal even at the pre Award stage.
Our attention has also been drawn to a Single Bench decision of
the Punjab and Haryana High Court reported as
O.P.B.K.Construction Pvt. Ltd. -vs- Punjab Small Industries &
Export Corporation Ltd., 2008 (3) Arb.LR 189 (P&H) wherein the
Court found it fit to terminate the mandate of the Arbitrator
without addressing the question whether this power had been
bestowed upon it by the Act. As in all other cases, the verdict
proceeds on the presumption that the Court possesses power to
terminate the mandate of the Arbitrator prior even to the
publication of the Award. In Jas Enterprises -vs- The Karanpara
Dev. Co. Ltd., (1997) 2 CalLT 277, a Single Bench of the Calcutta
High Court rejected a challenge to the impartiality of the
Arbitrator without rendering asunder the guardian knot whether
such a challenge had been made available under the A&C Act. This
is also what transpired in State of Jharkhand -vs- Indian Builders,
2003(3) JCR 718 (Jhar.) where the learned Single Judge directed
the Arbitrator to refund fees drawn from the Government even
though he was in its employment; the learned Single Judge
assumed he had powers to direct so. In E. Logistics -vs- Financial
Technologies India Ltd., MANU/TN/7554/2006, interference was
declined on merits without questioning the power to do so under
the statute.
13. In Surinder Pal Singh -vs- HPCL, 2006(4) Arb. LR 109, the
question for determination, inter alia, was the maintainability of
suit for declaration and injunction to the effect that the mandate of
the Arbitrator had come to an end since the Award had not been
published within the agreed period of ten months. The Division
Bench of this Court concluded that the Suit was incompetent and
the legal proceedings ought to have been initiated under Section
14 of the A&C Act. A Division Bench of the Gauhati High Court has
,in State of Arunachal Pradesh -vs- Subhash Projects and
Marketing Ltd., 2007(1) Arb. LR 564 (Gau), returned a categorical
finding to the effect that if grounds of challenge to the
independence and impartiality of the Arbitrator have been
articulated, an application under Section 14(1)(a) of the Act is
maintainable. The opinion of the Division Bench becomes evident
in that it distinguished the decision of the Bombay High Court in
Hasmukhlal H.Doshi -vs- Justice M.L.Pendse, 2001(1) Arb.LR 87
(Bombay) in which the learned Single Judge was of the persuasion
that ―when a specific challenge is provided and the forum which
has to decide the challenges is also provided, it would not be open
to this Court to decide and consider that the mandate of the
Arbitrator has been terminated under Section 14. That challenge
in a case where Arbitrator decides the objection will have to be
taken as a ground in a challenge to the Award under Section 34.
The object seems to be to allow the Arbitral proceedings to be
concluded at the earliest. If the challenge is successful finally, the
remedy is not lost as time is saved by virtue of Section 43(4) of the
Act.‖ This conclusion was also adopted in Vilas -vs- Ganesh
Builders, 2005(2) AllMR 634, following Doshi.
14. There are a few judgments which clearly and unequivocally
hold that the Applications filed in a Court of Law assailing arbitral
proceedings on the grounds of bias, thus making out a case of de
jure and de facto failure to perform arbitral functions, are not
maintainable at the pre Award stage. The decisions brought to our
notice laid before us emanating from the High Court of Delhi are
those of S.N.Dhingra, J. in Neeru Walia -vs- Inderbir Singh Uppal,
160(2009) DLT 55 and of Aruna Suresh J. in Ahluwalia Contracts
(India) Ltd. -vs- Housing and Urban Development Corporation,
2008 (100) DRJ 461. We have already noted Pinaki Das Gupta
where Mukul Mudgal, J. has concluded that ―de jure and de facto,
the authority of the Arbitrator cannot be questioned under Section
14‖. This is also the position in Newton Engineering and
Chemicals Ltd. -vs- Indian Oil Corporation Ltd., where Reva
Khetrapal, J. expressed the view that where the Arbitrator does not
recuse from the proceedings, the Award must be published and the
challenge under Section 34 would thereafter provide complete
remedy.
15. We think it relevant to revert to C.N. Garg, which deserves
to be dealt with in some detail. The challenge before the Division
Bench of this Court was to the vires of Section 13 of the A&C Act,
principally on the contention that remedial recourse has not been
provided by the statute. Our learned Brothers had laid emphasis on
Section 5 which bars interference by a judicial authority except
where so provided by the Act. We are in respectful agreement
with their opinion that - ―if there is no provision to deal with a
particular situation, Courts cannot assume jurisdiction and
interfere. Comparing this legislation with the earlier legislation on
the subject namely the Arbitration Act, 1940, the message is loud
and clear. The legislature found mischief in various provisions
contained in the Arbitration Act, 1940 which would enable a party
to approach the Court time and again during the pendency of
arbitration proceedings resulting into delays in the proceedings. ...
A statute is an edict of the legislature and the conventional way of
interpreting or construing a statute is to seek the intention of its
maker. .... The function of the Courts is only to expound and not to
legislate‖. After a detailed discussion, the verdict was that Section
34 of the A&C Act provided sufficient remedy even in those
instances where the grievance of a party was that the arbitrator
was inimical or biased towards it. In Dharam Prakash, the
Division Bench pointedly relied on C.N. Garg in addition to the
dictum in Union of India -vs- Harnam Singh, (1993) 2 SCC 162 to
the effect that it is the duty of the Courts to promote the intention
of the legislature by an intelligible and harmonious interpretation.
The Division Bench, in Hotel Marina, had also expressed the
doubts as to whether an arbitrator could be removed during the
currency of the arbitration, followed by a fresh appointment.
16. On a reading of Section 13(5), the legislative intent becomes
amply clear that Parliament did not want to clothe the Courts with
the power to annul an Arbitral Tribunal on the ground of bias at an
intermediate stage. The Act enjoins the immediate articulation of a
challenge to the authority of an arbitrator on the ground of bias
before the Tribunal itself, and thereafter ordains that the
adjudication of this challenge must be raised as an objection under
Section 34 of the Act. Courts have to give full expression and
efficacy to the words of the Parliament especially where they are
unambiguous and unequivocal. The golden rule of interpretation
requires Courts to impart a literal interpretation and not to deviate
therefrom unless such exercise would result in absurdity. In
Raghunath Rai Bareja -vs- Punjab National Bank, (2007) 2 SCC
230, the Hon'ble Supreme Court, while emphasizing on the rule of
literal interpretation, held as under:
40. It may be mentioned in this connection that the first
and the foremost principle of interpretation of a statute
in every system of interpretation is the literal rule of
interpretation. The other rules of interpretation e.g. the
mischief rule, purposive interpretation, etc. can only be
resorted to when the plain words of a statute are
ambiguous or lead to no intelligible results or if read
literally would nullify the very object of the statute.
Where the words of a statute are absolutely clear and
unambiguous, recourse cannot be had to the principles
of interpretation other than the literal rule, vide Swedish
Match AB v. Securities and Exchange Board of India
(2004) 11 SCC 641 : AIR 2004 SC 4219. As held in
Prakash Nath Khanna v. CIT (2004) 9 SCC 686, the
language employed in a statute is the determinative
factor of the legislative intent. The legislature is
presumed to have made no mistake. The presumption is
that it intended to say what it has said. Assuming there is
a defect or an omission in the words used by the
legislature, the court cannot correct or make up the
deficiency, especially when a literal reading thereof
produces an intelligible result, vide Delhi Financial
Corpn. v. Rajiv Anand, (2004) 11 SCC 625. Where the
legislative intent is clear from the language, the court
should give effect to it, vide Govt. of A.P. v. Road Rollers
Owners Welfare Assn. (2004) 6 SCC 210 and the court
should not seek to amend the law in the garb of
interpretation.
41. As stated by Justice Frankfurter of the US Supreme
Court (see ―Of Law & Men : Papers and Addresses of
Felix Frankfurter‖):
―Even within their area of choice the courts are not at
large. They are confined by the nature and scope of the
judicial function in its particular exercise in the field of
interpretation. They are under the constraints imposed
by the judicial function in our democratic society. As a
matter of verbal recognition certainly, no one will
gainsay that the function in construing a statute is to
ascertain the meaning of words used by the legislature.
To go beyond it is to usurp a power which our democracy
has lodged in its elected legislature. The great judges
have constantly admonished their brethren of the need
for discipline in observing the limitations. A judge must
not rewrite a statute, neither to enlarge nor to contract
it. Whatever temptations the statesmanship of policy-
making might wisely suggest, construction must eschew
interpolation and evisceration. He must not read in by
way of creation. He must not read out except to avoid
patent nonsense or internal contradiction.‖
42. As observed by Lord Cranworth in Gundry v. Pinniger
(1852) 21 LJ Ch 405 : 42 ER 647
― ‗To adhere as closely as possible to the literal
meaning of the words used', is a cardinal rule from which
if we depart we launch into a sea of difficulties which it is
not easy to fathom.‖
43. In other words, once we depart from the literal
rule, then any number of interpretations can be put to a
statutory provision, each judge having a free play to put
his own interpretation as he likes. This would be
destructive of judicial discipline, and also the basic
principle in a democracy that it is not for the Judge to
legislate as that is the task of the elected representatives
of the people. Even if the literal interpretation results in
hardship or inconvenience, it has to be followed (see G.P.
Singh's Principles of Statutory Interpretations, 9th Edn.,
pp. 45-49). Hence departure from the literal rule should
only be done in very rare cases, and ordinarily there
should be judicial restraint in this connection.
44. As the Privy Council observed (per Viscount
Simonds, L.C.): (IA p. 71)
―Again and again, this Board has insisted that in
construing enacted words we are not concerned with the
policy involved or with the results, injurious or
otherwise, which may follow from giving effect to the
language used.‖ (See King Emperor v. Benoari Lal Sarma
(1944-45) 72 IA 57 : AIR 1945 PC 48, AIR at p. 53.)
45. As observed by this Court in CIT v. Keshab Chandra
Mandal AIR 1950 SC 265 : (AIR p. 270, para 20)
―Hardship or inconvenience cannot alter the meaning
of the language employed by the legislature if such
meaning is clear on the face of the statute....‖
46. The rules of interpretation other than the literal rule
would come into play only if there is any doubt with
regard to the express language used or if the plain
meaning would lead to an absurdity. Where the words
are unequivocal, there is no scope for importing any rule
of interpretation vide Pandian Chemicals Ltd. v. CIT
(2003) 5 SCC 590.
47. It is only where the provisions of a statute are
ambiguous that the court can depart from a literal or
strict construction vide Nasiruddin v. Sita Ram Agarwal
(2003) 2 SCC 577 : AIR 2003 SC 1543. Where the words
of a statute are plain and unambiguous effect must be
given to them vide Bhaiji v. Sub-Divisional Officer (2003)
1 SCC 692.
48. No doubt in some exceptional cases departure can be
made from the literal rule of the interpretation e.g. by
adopting a purposive construction, Heydon's mischief
rule, etc. but that should only be done in very exceptional
cases. Ordinarily, it is not proper for the court to depart
from the literal rule as that would really be amending the
law in the garb of interpretation, which is not
permissible vide J.P. Bansal v. State of Rajasthan (2003)
5 SCC 134 : 2003 SCC (L&S) 605 : AIR 2003 SC 1405,
State of Jharkhand v. Govind Singh (2005) 10 SCC 437 :
2005 SCC (Cri) 1570 : JT (2004) 10 SC 349. It is for the
legislature to amend the law and not the court vide State
of Jharkhand v. Govind Singh(supra). In Jinia Keotin v.
Kumar Sitaram Manjhi (2003) 1 SCC 730 this Court
observed (SCC p.733, para 5) that the court cannot
legislate under the garb of interpretation. Hence there
should be judicial restraint in this connection, and the
temptation to do judicial legislation should be eschewed
by the courts. In fact, judicial legislation is an oxymoron.
17. In the context of the A&C Act, especially keeping in mind the
alternations, modifications or deviations with regard to the
UNCITRAL Model Law, the following speech of the Earl of
Halsbury in Eastman Photographic Materials Co. -vs-
Comptroller General of Patents, (1898) AC 571 readily comes to
mind - ―My lords, it appears to me that to construe the Statute in
question, it is not only legitimate but highly convenient to refer
both to the former Act and to the ascertained evils to which the
former Act had given rise, and to the later Act which provides the
remedy‖.
18. For facility of reference, Sections 12 to 15 are reproduced:-
―12. Grounds for challenge.--(1) When a person is
approached in connection with his possible
appointment as an arbitrator, he shall disclose in
writing any circumstances likely to give rise to
justifiable doubts as to his independence or
impartiality.
(2) An arbitrator, from the time of his appointment and
throughout the arbitral proceedings, shall, without
delay, disclose to the parties in writing any
circumstances referred to in sub-section (1) unless they
have already been informed of them by him.
(3) An arbitrator may be challenged only if--
(a) circumstances exist that give rise to justifiable
doubts as to his independence or impartiality; or
(b) he does not possess the qualifications agreed to by
the parties.
(4) A party may challenge an arbitrator appointed by
him, or in whose appointment he has participated, only
for reasons of which he becomes aware after the
appointment has been made.
13. Challenge procedure.--(1) Subject to sub-section
(4), the parties are free to agree on a procedure for
challenging an arbitrator.
(2) Failing any agreement referred to in sub-section (1),
a party who intends to challenge an arbitrator shall,
within fifteen days after becoming aware of the
constitution of the arbitral tribunal or after becoming
aware of any circumstances referred to in sub-section
(3) of Section 12, send a written statement of the
reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under sub-section
(2) withdraws from his office or the other party agrees
to the challenge, the arbitral tribunal shall decide on
the challenge.
(4) If a challenge under any procedure agreed upon by
the parties or under the procedure under sub-section
(2) is not successful, the arbitral tribunal shall continue
the arbitral proceedings and make an arbitral award.
(5) Where an arbitral award is made under sub-section
(4), the party challenging the arbitrator may make an
application for setting aside such an arbitral award in
accordance with Section 34.
(6) Where an arbitral award is set aside on an
application made under sub-section (5), the Court may
decide as to whether the arbitrator who is challenged is
entitled to any fees.
14. Failure or impossibility to act.--(1) The mandate
of an arbitrator shall terminate if--
(a) he becomes de jure or de facto unable to perform his
functions or for other reasons fails to act without undue
delay; and
(b) he withdraws from his office or the parties agree to
the termination of his mandate.
(2) If a controversy remains concerning any of the
grounds referred to in clause (a) of sub-section (1), a
party may, unless otherwise agreed by the parties,
apply to the Court to decide on the termination of the
mandate.
(3) If, under this section or sub-section (3) of Section
13, an arbitrator withdraws from his office or a party
agrees to the termination of the mandate of an
arbitrator, it shall not imply acceptance of the validity
of any ground referred to in this section or sub-section
(3) of Section 12.
15. Termination of mandate and substitution of
arbitrator.--(1) In addition to the circumstances
referred to in Section 13 or Section 14, the mandate of
an arbitrator shall terminate--
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a
substitute arbitrator shall be appointed according to
the rules that were applicable to the appointment of the
arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an
arbitrator is replaced under sub-section (2), any
hearings previously held may be repeated at the
discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or
ruling of the arbitral tribunal made prior to the
replacement of an arbitrator under this section shall
not be invalid solely because there has been a change
in the composition of the arbitral tribunal.‖
19. The Preamble to the A&C Act refers to the UNCITRAL Model
Law on International Commercial Arbitration adopted by the
General Assembly of the United Nations in 1985. The Preamble
further recites that the General Assembly has recommended that
all countries give due consideration to the said UNCITRAL Model
Law and Rules. The Preamble further recognizes the expediency of
making laws with regard to arbitration, keeping in perspective the
said UNCITRAL Model Law and Rules. The English Arbitration Act,
1996 is also predicated on the UNCITRAL Model Law and Rules.
The Sections corresponding to the Indian statute are to be found
in Sections 23 to 27 thereof. The Uniform Arbitration Act, 1989
passed by the Canadian Parliament, at its very commencement,
mentions the UNCITRAL Model Laws and Rules. Section 12
prescribes the revocation of the appointment of an arbitrator.
Section 13, containing provisions pertaining to the challenge of an
arbitrator's authority, broadly corresponds to the same Section in
the Indian statute. Thereafter, Section 14 postulates situations in
which the arbitrator's mandate would terminate. The Canadian
Act, however, in its Section 15, provides for an approach to the
Court for the removal of the arbitrator. So far as Australia is
concerned, its International Arbitration Act, 1974 prescribes in
Section 16(1) that the UNCITRAL Model Law shall have the force
of law in that country. Furthermore, Section 18A clarifies that it is
necessary to locate ―a real danger of bias‖ and that justifiable
doubts as to the impartiality or independence of the arbitrator may
be insufficient for the Courts to interfere. We think it would be
advantageous, for ease of reference, to reproduce the provisions of
the UNCITRAL Model Law for the reason that a departure
therefrom cannot but be read as our Parliament's resolve to ordain
its own and distinct arbitral regime:-
Article 12 - Grounds for challenge
1. When a person is approached in connection with his
possible appointment as an arbitrator, he shall disclose
any circumstances likely to give rise to justifiable doubts
as to his impartiality or independence. An arbitrator, from
the time of his appointment and throughout the arbitral
proceedings, shall without delay disclose any such
circumstances to the parties unless they have already
been informed of them by him.
2. An arbitrator may be challenged only if circumstances
exist that give rise to justifiable doubts as to his
impartiality or independence, or if he does not possess
qualifications agreed to by the parties. A party may
challenge an arbitrator appointed by him, or in whose
appointment he has participated, only for reasons of which
he becomes aware after the appointment has been made.
Article 13 - Challenge procedure
1. The parties are free to agree on a procedure for
challenging an arbitrator, subject to the provisions of
paragraph (3) of this article.
2. Failing such agreement, a party which intends to
challenge an arbitrator shall, within fifteen days after
becoming aware of the constitution of the arbitral tribunal
or after becoming aware of any circumstance referred to
in article 12(2), send a written statement of the reasons
for the challenge to the arbitral tribunal. Unless the
challenged arbitrator withdraws from his office or the
other party agrees to the challenge, the arbitral tribunal
shall decide on the challenge.
3. If a challenge under any procedure agreed upon by the
parties or under the procedure of paragraph (2) of this
article is not successful, the challenging party may
request, within thirty days after having received notice of
the decision rejecting the challenge, the court or other
authority specified in article 6 to decide on the challenge,
which decision shall be subject to no appeal; while such a
request is pending, the arbitral tribunal, including the
challenged arbitrator, may continue the arbitral
proceedings and make an award.
Article 14 - Failure or impossibility to act
1. If an arbitrator becomes de jure or de facto unable to
perform his functions or for other reasons fails to act
without undue delay, his mandate terminates if he
withdraws from his office or if the parties agree on the
termination. Otherwise, if a controversy remains
concerning any of these grounds, any party may request
the court or other authority specified in article 6 to decide
on the termination of the mandate, which decision shall be
subject to no appeal.
2. If, under this article or article 13 (2), an arbitrator
withdraws from his office or a party agrees to the
termination of the mandate of an arbitrator, this does not
imply acceptance of the validity of any ground referred to
in this article or article 12 (2).
20. A comparison of the provisions dealing with the challenge to
the arbitrator's authority in the A&C Act and the UNCITRAL Model
Law discloses that there are unnecessary and cosmetic differences
in these provisions, except for one significant and far-reaching
difference. The UNCITRAL Model Law, in Article 13(3), explicitly
enables the party challenging the decision of the Arbitral Tribunal
to approach the Court on the subject of bias or impartiality of the
Arbitral Tribunal. However, after making provisions for a challenge
to the verdict of Arbitral Tribunal on the aspect of bias, the
UNCITRAL Model Law prohibits any further Appeal. It seems to us,
therefore, that there is no room for debate that the Indian
Parliament did not want curial interference at an interlocutory
stage of the arbitral proceedings on perceived grounds of alleged
bias. In fact, Section 13(5) of the A&C Act indicates that if a
challenge has been made within fifteen days of the concerned
party becoming aware of the constitution of the Arbitral Tribunal
or within fifteen days from such party becoming aware of any
circumstances pointing towards impartiality or independence of
the Arbitral Tribunal, a challenge on this score is possible in the
form of Objections to the Final Award under Section 34 of the A&C
Act. Indeed, this is a significant and sufficient indicator of
Parliament's resolve not to brook any interference by the Court till
after the publication of the Award. Indian Law is palpably different
also to the English, Australia and Canadian Arbitration Law. This
difference makes the words of Lord Halsbury in Eastman
Photographic Materials Co. all the more pithy and poignant.
21. In this analysis, we must immediately observe that the
approach taken by one of us ( Vikramajit Sen, J.) in Interstate
Constructions is not correct as it transgresses and infracts the
provisions of the A&C Act. Learned Single Benches have interfered
and removed arbitrators obviously on pragmatic considerations,
viz. the futility and idleness of pursuing arbitral proceedings
despite lack of faith therein because of justifiable doubts as to the
independence or impartiality of the arbitrators. Clearly, Parliament
has also proceeded on the compelling expediency and advisability
of expeditious conclusion of these proceedings. Relief against
possible mischief has been provided by making clarification in
Section 13(5) that apart from the challenges enumerated in
Section 13(4), an assault on the independence or impartiality of the
Arbitral Tribunal is permissible by way of filing Objections on this
aspect after the publishing of the Award. We, therefore, affirm the
approach in Pinaki Das Gupta, Neeru Walia, Ahluwalia
Contracts (India) Ltd. and Newton Engineering and
Chemicals Ltd.. We are of the opinion that the Single Benches
who interfered with the progress of the proceedings of the Arbitral
Tribunal in the pre-Award stage fell in error. Humans often fall
prey to suspicions which may be proved to be ill-founded on the
publication of an Award. There is compelling wisdom in
Parliament's decision to allow adjudication on grounds of bias, lack
of independence or impartiality of the Tribunal only on the
culmination of the arbitral proceedings.
22. Having arrived at the conclusion that curial interference is
not possible at the pre-Award stage on the allegations of bias or
impartiality of the Arbitral Tribunal on the one hand, and our
understanding that the Appeals are not maintainable on the other
hand, is any further relief to be granted? We think it expedient to
abjure from passing any further orders for several reasons
including - firstly, the reality that arbitration proceedings would
inevitably have already come to an end in those instances where
the arbitrator had been removed by orders of the Court, and
secondly the availability of redress under Article 136 of the
Constitution of India. All pending applications stand disposed of.
The Referral Order is answered by reiterating that the statute does
not postulate judicial interference in arbitral proceedings till the
Award is published, whereupon Objections can be raised also on
the platform of the alleged bias of the Tribunal. This challenge is
possible provided the grievance is articulated in consonance with
Section 13 of the A&C Act.
23. We refrain from imposing costs.
( VIKRAMAJIT SEN )
JUDGE
( SIDDHARTH MRIDUL )
JUDGE
May 16, 2011
tp/nt
