Delhi High Court

Nidhi Builders (P) Ltd vs Director General Md Accn Product on 2 December, 2014

*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+                               EX.P. 27/2014

%                               Judgment Reserved on: 18.11.2014
                                Judgement pronounced on: 02.12.2014

       NIDHI BUILDERS (P) LTD                               ..... Decree Holder
                                Through: Mr Arvind Sharma and Mr Mukund
                                Kumar, Advocates

                                versus

       DIRECTOR GENERAL MD ACCN PRODUCT.. Judgement Debtor
                    Through: Mr Jaswinder Singh, Advocate

CORAM:
HON'BLE MS. JUSTICE DEEPA SHARMA

JUDGMENT

1. The present execution petition has been filed for execution of the

award dated 28.08.2012 for a sum of Rs. 25,94,580.78/-. It is submitted that

vide this award, the Arbitrator has granted an amount of Rs.25,94,580.78/-

towards BGB. Although the BGB was for Rs.38,78,400/-, it was released

only to the extent of Rs. 25,94,580.78/-, after adjusting an amount of

Rs.12,83,819.22/- payable by the Contractor to the Union of India.

2. The respondent was served of the present execution petition. The

respondent has raised the contention that since a petition under Section 34 of

the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the

Act") has been filed by the petitioner himself, whereby he has challenged

the grant of sum of Rs.12,83,819.22/- in favour of the respondent-Union of

India, the award has become non-executable in view of Section 36 of the

Act and the petition is liable to be dismissed.

3. It is argued on behalf of the petitioner that the award has been

challenged by the petitioner himself. He has not challenged the entire award,

but has challenged only the grant of a sum of Rs. 12,83,819.22/- to the

respondent as part of their counter-claim. It is submitted that there is no

challenge by the Union of India of the directions of the Arbitrator in its

award, whereby a sum of Rs.25,94,580.78/- has been ordered to be released

to the applicant while upholding the claim of the petitioner. It is submitted

that both the claims are severable and independent of each other and,

therefore, part of the award, which is not under challenge is executable.

While the petitioner has relied on the findings in National Highways

Authority of India vs. Oriental Structure Engineers Ltd.-Gammon India

Ltd. (JV) AIR 2013 Delhi 67, the respondent has also relied on the findings

of the above case, including National Aluminium Co. Ltd. vs. Pressteel and

Fabrications (P) Ltd. and Anr.(2004) 1 SCC 540 and National Buildings

Construction Corporation Ltd. vs. Lloyds Insulation India Ltd.: (2005) 2

SCC 367.

4. I have heard the arguments and perused the records.

5. From the perusal of the award, it is clear that there were claims and

counter-claims before the Arbitrator. While the Arbitrator has rejected few

of the claims of the petitioner, it had awarded the counter-claim of the Union

of India. In its counter-claim, the Union of India has claimed a sum of

Rs.50,00,000/-. However, vide this award, the learned Arbitrator has

restricted this claim of the Union of India to Rs. 12,83,819.22/-. It is this

part of the award which the petitioner/Decree Holder before me has

challenged under Section 34 of the Act. While awarding this amount to the

Union of India, the Arbitrator has directed the release of BGB to the amount

of Rs.38,78,400/- in favour of the contractor. However, the learned

Arbitrator, while ordering the release of BGB, adjusted the claim of the

Union of India of Rs.12,83,819.22/- and thus ordered the release of sum of

Rs.25,94,580.78/- in favour of the Decree Holder. There is no dispute to the

fact that the respondent-Union of India has not challenged the order of the

Arbitrator, whereby he has ordered the release of BGB to the contractor, i.e.,

the applicant. This part of the award, therefore, has become final. The sole

question, therefore, is whether this part of the award which has become final

has become executable and, therefore, can be executed or merely because a

petition under Section 34 has been filed qua some other findings of the

learned Arbitrator, this part of the award also becomes non-executable and,

therefore, the execution petition is liable to be dismissed. The respondent

has relied on the findings of the Supreme Court in the case of National

Buildings Construction Corporation Ltd. (supra) and National Aluminium

Co. Ltd. (supra) and has argued that once an award becomes a subject

matter of petition under Section 34, it becomes non-executable in view of

Section 36 of the Act. However, the petitioner has relied on the findings of

this Court in National Highways Authority of India (supra) of Full Bench,

wherein the case of National Buildings Construction Corporation Ltd.

(supra) and National Aluminium Co. Ltd. (supra) have been discussed and

differentiated on the basis of the facts. The Division Bench of this Court has

held as under:-

"15. This brings us to the last question as to whether the Supreme Court by virtue of its decision in National Aluminum Company Ltd. (AIR 2005 SC 1514) and National Building Constructions Corporation Ltd. excluded the possibility of the award being executed viz-a-viz those claims on which adjudication under Section 37 is complete.

16. In this context, one would have to briefly advert to the facts obtaining in the two cases. In National Aluminium Company Ltd. (AIR 2005 SC 1514) the facts with which the court was concerned with were as follows: The court was adjudicating upon an application which was filed before it in 2003 in a civil appeal of 1999, which was disposed of by the Supreme Court after hearing, by appointing a sole arbitrator, with the consent of parties before it. The special leave petition, which was converted into a civil appeal on leave being granted, was preferred by one of the parties, i.e., the respondent in that case, assailing the decision of the opposing party in the unilateral appointment of an arbitrator under the 1940 Act. Before the arbitrator, both parties had consented to being governed by the 1996 Act, and it was on that basis, that the arbitrator proceeded and rendered a final award. In the interlocutory application filed in the Supreme Court, modification of the award was sought, based on the argument that since the dispute between the parties, and the agreement by which recourse was taken to arbitration proceedings, was prior to the 1996 Act, the court which was competent to modify the award, was the one which appointed the arbitrator. In other words, it was contended since the arbitrator had been appointed by the Supreme Court, the application for modification could be entertained and tried only by the Supreme Court. This contention was rejected by the court for the reasons articulated on that issue. We need not dwell on the reasons articulated on that issue, as they do not impact the case. What is noticeable is that, while the Supreme Court was dealing with the prayer of the applicant before it that it should consider directing the opposite party to deposit in the competent civil court at least the amount which represents that part of the award, which was in favour of the applicant, it made the following observations:

"....At one point of time, considering the award as a money decree, we were inclined to direct the party to deposit the awarded amount in the court below so that the applicant can withdraw it on such terms and conditions as the said court might permit to do as an interim measure. But then we noticed from the mandatory language of Section 34 of the 1996 Act, than an award, when challenged under Section 34 within the time stipulated therein, becomes unexecutable. There is no discretion left with the court to pass any interlocutory order in regard to the said award except to adjudicate on the correctness of the claim made by the applicant therein. Therefore, that being the legislative intent, any direction from us contrary to that, also become impermissible. On facts of this case, there being no exceptional situation which would compel us to ignore such statutory provision, and to use our jurisdiction under Article 142, we restrain ourselves from passing any such order, as prayed for by the applicant...."

(Emphasis supplied) 16.1 XXX XXX XXX 16.2 There is, therefore, in our view, nothing in the observations of the Supreme Court which would indicate that if a court while hearing a petition under Section 34 were to reject certain grounds set up to assail the award, which are relatable to "claims", which are severable, that proceedings cannot be taken out to execute that part of the award. This, of course, would be subject to any stay being granted by an appellate court. Read in this context, while it may not be possible to pass interlocutory orders qua the award impugned in the section 34 proceedings, it may still be open for the court to pass interim orders in terms of Section 9 of the 1996 Act. In particular, measures that the court views as necessary to protect the interest of parties, in terms of Section 9(a) to (e).

17. This brings us to the second judgment of the Supreme Court in the case of National Building Construction Co. Ltd. This was a case where on disputes having erupted between parties, the matter was referred to an arbitrator. The arbitrator, upon adjudication, allowed certain claims of the appellant before the Supreme Court and some claims of the respondent. Since the claims of the respondent, which were allowed, were of a higher value than those of the appellant, a direction was issued qua the appellant that it would have to pay a certain sum of money to the respondent. The respondent simultaneously filed an application both for challenging that part of the award which was in favour of the appellant as also an application to execute that part of the award which was in its favour. The application for execution filed by the respondent was allowed. The appellant being aggrieved preferred an appeal to the Division Bench. Pending the appeal, the Division Bench granted a stay of the order of the executing court subject to the appellant depositing the sum so directed by the Division Bench. The respondent on being submitted a security in the form of bank guarantee, withdrew the sums deposited by the appellant. The Division Bench came to the conclusion that since the appellant had not challenged that part of the award, which was in favour of the respondent, the respondent was entitled to execute the award for that amount. Based on this view, the Division Bench directed the appellant, while disposing of the appeal, to deposit a further sum in court, with liberty to the respondent to withdraw the said amount by furnishing a security. Aggrieved by the said order the appellant preferred an appeal to the Supreme Court. In the Supreme Court the respondent contended that since it was the only party which had laid challenge to that part of the award which was in favour of the appellant, it was open to the respondent to execute the award, as no application under Section 34 was pending

qua that part of the award. The Supreme Court allowed the appeal and set aside the impugned order of the Division Bench. The rationale supplied by the Supreme Court in coming to that conclusion is set out in paragraph 6 of the said judgment. For the sake of convenience the same is extracted hereinbelow:

"...we are of the view that the award clearly states that "after an adjustment of accounts", the only amount payable by the appellant to the respondent was Rs.4,11,756/-. How the arbitrator arrived at this figure is not for us to see. For the purpose of Section 36 of the Act, the court cannot be called upon to go behind the awarded amount and deal with the processes by which the amount was arrived at. There is on record only one award for the amount of Rs.4,11,756/-. Even though the respondent claims that the applicant under Section 34 was filed in respect of part of the award, it is in fact only a process by which the arbitrator has arrived at the awarded amount. This would mean that the award as a whole cannot be enforced under Section 36 of the Act. As held by this Court in National Aluminum Co. Ltd. (SCC p. 546 para10)...."

17.1 A close scrutiny of the observations would show that the court was conscious of the fact that the net figure payable under the award had been arrived at "after an adjustment of accounts" and, therefore, the court enforcing the award under Section 36 could not have gone behind the "processes" by which the amount was arrived at. The fact situation obtaining in this case, cannot be extended to a situation where the claims are severable and not interconnected. The executing court would have to examine such an application filed under section 36 before proceeding to enforce the award where challenge vis-a-vis some claims stands rejected in a petition under Section 34, while the others are still

at large as to ascertain whether they are severable or inextricably interconnected. Where claims can be sustained on a stand-alone basis, there is no reason as to why a court cannot execute the award vis-a-vis those claims in respect of which a challenge laid in Section 34 proceedings is fully and completely adjudicated upon. In coming to this conclusion, we may remind ourselves dicta of the judgment of the Supreme Court in the case of Ambika Quarry Works vs State of Gujarat & Ors. (1987) 1 SCC 213 para 18 & 19 at page 221 (AIR 1987 SC 1073 paras 18 & 19 at pages 1077-1078) and Uttaranchal Road Transport Corpn. & Ors. vs Mansaram Nainwal: (2006) 6 SCC 366 at page 370 (AIR 2006 SC 2840 at pages 2843- 2844) that judgments of the Supreme Court have to be read and understood in the context of what they decide, and not what logically follows from a decision. Each fact may lend a different weave to the final texture. [Also see Quinn vs Leathem (1901) A.C. 495]

18. Having regard to our discussion above, our conclusion are as follows:

(i) There is no limitation in the court issuing a limited notice at the stage of admission of a petition under Section 34 of the 1996 Act provided the grounds which are raised and argued are rejected by a reasoned order.

(ii) There is complete autonomy conferred under the 1996 Act on the party aggrieved, to prefer an appeal under Section 37 against grounds which the court rejects either at that stage or at the stage when the petition under Section 34 is finally disposed of.

(iii) In view of our conclusion arrived at, as indicated in sub-clause (ii) above, what would necessarily follow is that the aggrieved party can maintain more than one appeal.

(iv) A fresh cause of action would arise at both stages, i.e., at the initial stage and at the final stage when the petition under Section34 of the 1996 Act is finally disposed of as at each stage the award would get impacted.

(v) If an application is filed in the executing court, pursuant to rejection of some grounds, in Section 34 proceeding, the executing court would have to discern as to whether that part of the order of the court pertains to those claims which can be sustained on a stand-alone basis. If the executing court comes to such an conclusion, undoubtedly, the execution proceedings can proceed against that part of the order subject, however, to intercession by an appellate court."

6. Therefore, the mere filing of petition under Section 34 of the Act does

not make the whole of the decree non-executable. If few of the claims

awarded are separable and not under challenge under Section 34 of the Act,

this part of the award can still be enforced by way of execution petition. In

this case out of several claims of the petitioner, the arbitrator has awarded

the claim of release of BGB in favour of petitioner. All other claims of the

petitioner were rejected. Then, there was counter claim of the respondents

of Rs. 50,000, but after adjudication, arbitrator has awarded only

Rs.12,83,819.22/- to the respondent. It is thus clear that both the claims

were independent to each other. It is the petitioner who has challenged the

part of the award whereby the arbitrator had granted sum of

Rs.12,83,819.22/- towards counter-claim to the respondent and the