Simplex Engineering & Foundry ... vs Ministry Of Railways & ...
2011 Latest Caselaw 4397 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     FAO(OS) No.252/2010

Simplex Engineering & Foundry ...     Appellant through
Works Pvt. Ltd.                       Mr. Pramod B.
                                      Agarwala & Mr. P.J.
                                      Mehta, Advs.
                             versus

Ministry of Railways & Anr.           ...Respondent through
                                      Dr. Ashwani Bhardwaj
                                      & Dr. S.P. Sharma, Advs.

                      WITH

FAO(OS) No.437/2010 & CM No.11636/2010

TDI International India Ltd.          ...Appellant through
                                      Mr. Ashish Mohan, Adv.

                             versus

Delhi Metro Rail Corporation          ...Respondent through
                                      Mr. Satyavan Kudawal, Adv.

                      WITH

FAO(OS) No.655/10 & CM Nos.20061-62/10, 20064/10

Delhi Development Authority           ...Appellant through
                                      Mr. Bhupesh Narula, Adv.

                      versus

Naraindas R Israni                    ...Respondent through
                                      Mr. Amit Punj, Adv.

                      WITH

      FAO(OS) No.178/2011

AR Communication                      ...Appellant through
                                      Mr. B.K. Singh, Adv.

                      versus



FAO(OS) No.252/2010                                          Page 1 of 12
 Mahanagar Telephone Nigam Ltd.          ...Respondent through
                                        Mr. Ayusha Kumar &
                                        Mr. Vaibhav Kalra, Advs.

                      WITH

      FAO(OS) No.383/2011

National Highways Authority of India          ...Appellant through
                                              Mr. Mukesh Verma,
                                              Adv.
                      versus

AFCONS Infrastructures Ltd.                   ...Respondent through
                                              Mr. Manu Seshadhar,
                                              Adv.

                             Date of Hearing : September 06, 2011

%                            Date of Decision: September 09, 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

VIKRAMAJIT SEN, J.

1. In these Appeals, a neat question of law has been raised

which is of grave general importance. Some learned Single Judges

have adopted the practice, while dealing with Objections under

Section 34 of the Arbitration & Conciliation Act, 1996 (A&C Act for

short), to consider all the grounds at the threshold, but restrict

issuance of notice in respect of only some of them. While doing so,

our learned Brothers have diligently disposed of some of the

Objections by articulating reasons which have prompted the Court

to reject them at the very threshold. The reason for adopting this

practice is manifestly clear. One of the avowed objectives of the

A&C Act is to expedite the culmination of arbitral proceedings.

Unfortunately, the provisions of the A&C Act postulate, under

Section 36, that where the time for making an application to set

aside the arbitral award under Section 34 has expired, or such

application having been made, has been refused, the award shall

be enforced under the Code of Civil Procedure (CPC for short) in

the same manner as if it were a decree of the Court.

2. Well intended and conscientious, as it may be, the practice of

restricting notice to only some of the grounds ventilated in the

Objections, in actuality, proves to be futile unless the application

under Section 34 of the A&C Act is refused. Obviously, in totality,

the Award cannot be enforced by initiation of execution

proceedings. Despite the best intentions of the Judges, the award

does not ripen to fruition unless such time as the application under

Section 34 of the A&C Act is refused.

3. Yet another practical problem has made itself obvious.

Section 37 of the A&C Act provides that an appeal (obviously only

one) shall lie from an order setting aside or refusing to set aside an

arbitral award under Section 34 of the A&C Act. If the party filing

Objections is aggrieved by the refusal of the Court to issue notice

on some of the grounds on which the award has been assailed by

him, would he have to file an appeal within the period specified in

Section 34 of the A&C Act, that is, three months and thirty days

from the passing of such order. If that party would do so, would it

be precluded from filing a second appeal in the event that the

grounds were also rejected for the reason that Section 37 of the

A&C Act envisages only "an appeal". Assuming that only one

appeal is postulated by the said Section, would not the failure to

file an appeal within the prescribed time in respect of the grounds

rejected at the threshold be barred by limitation. It is palpably

clear that myriad complexities are created in the practice of

issuance of restricted notice in respect of an application under

Section 34 of the A&C Act.

4. Our attention has been drawn to Section 2(e) of the A&C Act

which defines "Court" to mean the principal Civil Court of original

jurisdiction in a district, including the High Court in exercise of its

original civil jurisdiction, having jurisdiction to decide the

questions forming the subject-matter of the arbitration if the same

had been the subject-matter of a suit. Mr. B.K. Singh, learned

counsel for the Appellant in FAO(OS) No.178/2011, has drawn the

inference from the said definition as indicating that the CPC would

apply unless contrary provisions are contained in the statute itself.

Learned counsel for the Respondent has endeavoured to dilute this

argument by drawing attention to Section 5 of the A&C Act

which states that notwithstanding anything contained in any

other law for the time being in force, in matters governed by this

Part, no judicial authority shall intervene except where so

provided in this Part. We are unable to find any logic in the

Respondent's argument since Section 5 of the A&C Act contains a

prohibition on the intervention of a judicial authority and does not

speak directly or obliquely of the applicability of the CPC. In ITI

Ltd. -vs- Siemens Public Communications Network Ltd., 2002 (5)

SCC 510, Their Lordships have enunciated that there is no specific

exclusion of the CPC in the A&C Act; that the jurisdiction of a Civil

Court can be circumscribed in the statute. Bhatia International

Ltd. -vs- Bulk Trading S.A., (2002) 4 SCC 105 was pressed into

service. A similar exposition of the law had earlier been expressed

by the Coordinate Bench in Nirma Ltd. -vs- Lurgi Lentjes

Energietechnik GMBH, (2002) 5 SCC 520 wherein it was observed

that only "because a second appeal against an appellate order is

barred by Section 37(3), the remedy of revision does not cease to

be available to the petitioner, for the City Civil Court deciding an

appeal under Section 37(2) remains a Court subordinate to the

High Court within the meaning of Section 115 CPC". This is

especially so since several provisions of the A&C Act, in terms,

refer to the CPC. Section 19 of the A&C Act, for instance, ordains

that the Arbitral Tribunal shall not be bound by the CPC or the

Indian Evidence Act, 1872 which does not mean that either or both

of these statutes must be ignored. We have already mentioned

that Section 36 of the A&C Act, in terms, refers to the CPC. A

learned Single Judge, in Jindal Steel & Power Ltd. -vs- N.S. Atwal,

2010 (117) DRJ 358, has rejected the argument that a Review is

impermissible in the context of Section 11 of the A&C Act on the

dialectic that the Court exercises ordinary original civil jurisdiction

even under Section 11 of the A&C Act. The Division Bench has

opined in Goel Associates -vs- Jivan Bima Rashtriya Avas Samati

Ltd., 114(2004) DLT 478(DB) that whilst "the provisions like Order

38 Rule 5, Code of Civil Procedure are not contained in the

Arbitration & Conciliation Act but its principles are to be

applicable as such. However, one cannot lose sight of that the

provisions of Code of Civil Procedure would be the guiding

principles as has been held by the Supreme Court in ITI Ltd. -vs-

Siemens Public Communications Network Ltd., 2002 (5) SCC 510."

5. We will proceed on the foundation that the provisions of the

CPC are available unless the A&C Act provides to the contrary. On

this assumption, the observations of the Full Bench in Krishnaji

Shrinivas Jalvadi -vs- Madhusa Appansa Ladaba, AIR 1934 Bombay

207 are apposite inasmuch as it prescribes that where "an appeal

is severable it is open to the Judge, hearing the appeal under R. 11,

to dismiss it in part and admit it in part; just as at the final hearing

the court may dismiss the appeal in part and allow in part. But it is

not open to a Judge hearing an appeal under R.11, O.41 to admit it

and at the same time to restrict the grounds on which the appeal is

to be heard." An example of severability that immediately comes to

mind is that of a decree for mesne profits as well as for possession.

Where both the reliefs are granted, it may be possible that the

Appellate Court finds no error in the grant of the relief of

possession and accordingly chooses to severe it from the relief of

mesne profits. The CPC does not expressly bar the executability of

the decree for possession as Section 36 of the A&C Act does. In

such cases, therefore, the dicta in Krishnaji would become

relevant. The opinion of the Full Bench in Vattipalle Eswariah -vs-

Vattipalle Rameshwarayya, AIR 1940 Madras 483 has been the

foundation of several subsequent decisions. The Full Bench

encapsulates the issue before it in these words :- "This second

appeal has been placed before this Full Bench as it raises the

important question whether the Court in dealing with an appeal

under O.41, R.11, Civil P.C., can direct that it be admitted in part

only." Disagreeing with Krishnaji, the answer to the question was

that - "There is nothing in O.41 which permits of severance. ..... It

may be desirable to provide for such a course but as the question

has to be decided on the present wording of O.41 in my judgment

there are only two courses open to the Court, namely to dismiss or

admit the appeal as a whole". So far as this Court is concerned, the

opinion in Eswariah was applied by the learned Single Judge in

Motia Kaur -vs- Shanti Devi, 1974 RLR 231 (Delhi). We affirm the

reasoning of the learned Single Judge which is to the effect that if

only a restricted notice is issued in an appeal, when it comes up for

final determination all the points raised therein can be agitated, a

decision thereon must be pronounced by the court. This

conundrum is no longer res integra in view of Ramji Bhagala -vs-

Krishnarao Karirao Bagre, AIR 1982 SC 1223 where concurrent

opinions of the learned Single Judges and of the Division Benches

were not affirmed and Their Lordships remanded the matter to the

High Court with a view to considering "whether the appeal should

be admitted wholly or rejected wholly". Mr. B.K. Singh, learned

counsel for the Appellant, is also right in relying on Bolin Chetia -

vs- Jogadish Bhuyan, (2005) 6 SCC 81 in that the Supreme Court

has opined that where "the appeal is admitted, the appellate court

may not, except in very exceptional cases, restrict any grounds on

which the appeal should be heard."

6. Learned counsel for the Respondents have relied on the

Division Bench decision in National Buildings Construction Corpn.

Ltd. -vs- Lloyd Insulations India Ltd., AIR 2004 Delhi 235 wherein

it had been held that if only a part of the award was not under

challenge, which had not been assailed, become final and,

therefore, enforceable under Section 36 of the A&C Act regardless

of the pendency of the application under Section 34 of the A&C Act

challenging and seeking the setting aside of the other part of the

award which was under challenge. Even if this decision was still

holding the field, it would be distinguishable so far as the purposes

before us are concerned. This is for the reason that the

uncontested segments of the Award would be impervious to any

further appeal. A complex question which has arisen before us

would then be absent. However, the Division Bench did not have

the benefit of perusing National Aluminium Co. Ltd. -vs- Pressteel

& Fabrications (P) Ltd., (2004) 1 SCC 540. Their Lordships have

firstly explained that because of the mandatory language employed

in Section 34 of the A&C Act, no sooner a challenge is filed under

Section 34 of the A&C Act, the award becomes unexecutable as the

statute leaves no discretion with the Court to pass any

interlocutory order; the statute expects the Court to adjudicate on

the correctness of the award. Secondly, it was pithily noted that

the automatic suspension of the execution of the award upon the

filing of Objections under Section 34 of the A&C Act defeats the

very objective of arbitration. Although eight years have passed

since Their Lordships had expressed the hope that this provision of

the Act would be amended, the requisite steps have not been

taken. This decision has been followed in National Buildings

Construction Corporation Ltd. -vs- Lloyds Insulation India Ltd.,

(2005) 2 SCC 367 by the Three-Judge Bench which allowed the

Appeal against the decision of the Division Bench rendered

between the same parties. Their Lordships held that the Court is

powerless to direct execution of an award when an application

under Section 34 of the A&C Act challenging the award is still

pending; the Court cannot go behind the awarded amount as the

Award as a whole, remains unenforceable. For pragmatic reasons,

therefore, no useful purpose is served in directing notice, pursuant

to an application under Section 34 of the A&C Act, limited to only

some grounds articulated therein.

7. It seems to us that this opinion would fortify us in taking the

view that the principles contained in the CPC with regard to

appeals should be applied, and if so applied, would dictate that

unless all the grounds raised in the application under Section 34 of

the A&C Act are dismissed at the threshold, a composite notice

comprehending all the grounds must be issued.

8. We need to consider one more aspect which has been raised

before us concerning the maintainability of the Appeals. Learned

counsel for the Respondents contend that a perusal of Section

37(1)(b) of the A&C Act will make it manifestly clear that the

present Appeals are not maintainable for the reason that so far as

application under Section 34 of the A&C Act is concerned, the

Court has neither set aside the Arbitral Award nor has refused or

declined to set it aside. This objection, in fact, fortifies our view

that a limited notice is impermissible in law. Learned counsel for

the Appellants have endeavoured to rely on Section 96 read with

Order XLI of the CPC. Cogitation on this question helps to clarify

the view expressed by us above, which is that the provisions and

principles of the CPC can always be pressed into action so long as

their operation does not stand excluded by the statute.

Section 37(1)(b) specifies circumstances in which an appeal is

maintainable. Hence, it excludes the operation of Section 96 or

Order XLI of the CPC. The Constitution Bench of this Court in

Union of India -vs- A.S. Dhupia, AIR 1972 Delhi 108 applied the

landmark decision of the Supreme Court in Union of India -vs- The

Mohindra Supply Co., AIR 1962 SC 256 which, with regard to

Arbitration Act, 1940, lays down that Section 39(1) of the A&C Act

specifies situations which can lead to an appeal. Their Lordships

have held that - "The legislature has plainly expressed itself that

the right of appeal against the order passed under the Arbitration

Act may be exercised only in respect of certain orders. The right of

appeal against other orders is expressly taken away. If by express

provision contained in S.39(1) a right to appeal from a judgment

which may otherwise be available under the Letters Patent is

restricted, there is no ground for holding that clause (2) does not

similarly restrict the exercise or appellate power granted by the

Letters Patent." This reasoning was once again upheld by the

Supreme Court in Fuerst Day Lawson -vs- Jindal Exports Ltd.,

2011(7) SCALE 513 which, in fact, dismisses the appeal against the

decision of a Division Bench of this Court in Shivnath Rai

Harnarain India Company -vs- Glencore Grain Rotterdam, 2009 X

AD (Delhi) 357, of which one of us (Sen, J.) was the author. We

reiterate that an appeal is not possible unless the Court seised with

the application/Objections under Section 34 of the A&C Act has

either set aside the Award or has refused to set aside the Award.

However, the question which has been raised before us is of such

grave general importance that we do not think it advisable but rest

on legal punctilio to dismiss these Appeals. The issue of non-

maintainability of the Appeals has been raised at the fag end of the

hearings by the Respondents.

9. In the circumstances of the case, we dispose of the Appeals

as well as pending applications by clarifying that it is

impermissible for the Court to issue notice on an application under

Section 34 of the A&C Act restricted to only some or one of the

grounds for the assailment of the Award articulated therein. The

quandary or impasse is solved by adopting the approach by further

directing that in all circumstances where only a limited or

restricted notice has been issued, at the time when Objections

under Section 34 of the A&C Act are taken up for Final Disposal,

all grounds raised therein would not be traversed and decided.

( VIKRAMAJIT SEN ) JUDGE

( SIDDHARTH MRIDUL ) JUDGE September 09, 2011 tp