Madras High Court
M/S. Landmark Housing Projects ... vs Savithri Naidu on 17 February, 2021
O.S.A. No.SR 90890 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 17.02.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
O.S.A. No.SR 90890 of 2020
M/s. Landmark Housing Projects Pvt. Ltd.
rep. by its Managing Director
T.Udayakumar
Office at No.27, Saravana Street
T.Nagar, Chennai 600 017. ... Appellant
Vs.
1. Savithri Naidu
2. Rajiv Naidu
3. Vikram Naidu
4. M/s. Matchpoint Tennis Academy Pvt. Ltd.
rep. by its Managing Director
Rajiv Naidu
No.7, 1st Avenue, Sasthri Nagar
Adyar, Chennai 600 020.
5. R.Venkatraman ... Respondents
Prayer: Appeal filed under Clause XV of the Letters Patent read with
Section 37 of the Arbitration and Conciliation Act, against the order
dated 02.12.2020 made in O.P.No.546 of 2020.
__________
Page 1 of 15
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
For Appellant : Mr.C.Aryama Sundaram, S.C.
For Mr.C.K.Chandrasekar
For Respondents : Mr.Nithyesh Natraj
JUDGMENT
(Delivered by the Hon'ble Chief Justice)
A limited question is involved in this matter pertaining to the
maintainability of the appeal.
2. By the order impugned, certain grounds taken to challenge a
arbitral award under Section 34 of the Arbitration and Conciliation
Act, 1996 have been disregarded and notice has been issued on
limited grounds rather than the full gamut of the challenge to the
award as designed by the appellant herein. The undisputed position
is that the order impugned did not have the effect of rejecting the
challenge to the award, either wholly or in part.
3. Section 37 of the Act provides for the orders under the Act
from which appeals may be carried. Section 37(1)(c) reads thus:
"setting aside or refusing to set aside an arbitral
award under Section 34".
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
4. Thus, it is the setting aside or refusing to set aside an
arbitral award on which hinges the right to prefer an appeal from the
relevant order.
5. An arbitral award may be made under different heads. It is
possible that the grounds furnished in the award in support of certain
heads find favour with the Arbitration Court while receiving a petition
under Section 34 of the Act and, even at such initial stage, the Court
does not permit other heads to be challenged in view of the
completeness of the award in such regard or the absence of any
ground to detract therefrom. It is akin to a situation where the
Arbitration Court may stay the operation of a part of the award,
conditionally or unconditionally, and not stay the operation of another
part of the order. In such a scenario, where the arbitral award
comprises several heads and the challenge to certain heads are not
entertained or irreversibly repelled, there would be a refusal to set
aside such heads in the award and, as such, a right of appeal will
immediately accrue to the award-debtor. However, the matter is
completely different when divers grounds are carried to challenge an
award and some of such grounds are not entertained and the scope of
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
the challenge is restricted to certain grounds. In such a scenario,
there is no refusal to set aside the award, so as to say, in terms of
Section 37 of the Act; but only a refusal to entertain certain grounds.
The two scenarios are completely different. In one case, a part of the
award attains finality upon the challenge thereto being rejected which
immediately triggers off the right to appeal under Section 37 of the
Act. In the second case, no decision is made as to the validity of the
award, but only certain grounds urged to question the correctness of
the award are negated. In the second case, it will be open to the
award-debtor to resurrect the grounds negated at the initial stage in
course of an appeal in the event the award-debtor is aggrieved by the
final order passed in the proceedings under Section 34 of the award.
6. The test appears to be whether any part of the arbitral award
becomes enforceable. If, as a result of the Court repelling a
challenge to a part of the award even at the initial stage, such part of
the award becomes enforceable, the award-debtor is entitled to
prefer an appeal therefrom as the order of the Arbitration Court
amounts to refusing to set aside such part of the award and
immediately gives rise to a right of appeal in such regard.
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
7. The matter may be seen from another perspective. It is
equally possible that immediately upon receipt of a challenge to an
award, the Arbitral Court discovers a part of the award to be
demurrable and sets it aside. Such act and the resultant order in
such regard permits an appeal to be carried therefrom by the award-
holder on the ground that such part of the award has been set aside.
Indeed, in either case, when a part of the award is set aside or a part
of the award is conclusively refused to be set aside, the right to
prefer an appeal will accrue immediately and the clock of limitation
would start to run in respect of such part of the award. As a
consequence, the party aggrieved may not be permitted to await the
final outcome of the proceedings under Section 34 of the Act to
challenge the entirety of the order. It is quite akin to a situation
where a decree for a particular amount may be passed at an early
stage of the suit and the balance claim deferred for assessment at
the trial; or even when a partial award is made. It is the conclusivity
of the order that is the key.
8. Ideally, the grounds challenging an arbitral award should not
be confined to certain aspects and other counts of challenge excluded
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
at the initial stage, unless the grounds excluded are scandalous or ex
facie impermissible and are directed to be struck out, just as
completely unnecessary and scandalous pleadings may be in a civil
suit. Such a course of action should ordinarily not be followed since
the Court allows limited time at such initial stage and the object of
the exercise is to discover whether an utterly frivolous challenge has
been carried to stall the implementation of the award. It is quite
possible that when a protracted hearing takes place at a later stage,
some of the grounds earlier negated may appear to be reasonable,
but would have already been excluded.
9. The appellant has relied on a Full Bench judgment of the
Delhi High Court reported at 193 (2012) DLT 15 (National Highway
Authority of India v. Oriental Structure Engineers Ltd) to justify the
institution of the present appeal. In that case, the reference before
the Full Bench was whether a limited notice could be issued on a
petition under Section 34 of the Arbitration Act, in the sense that the
challenge would be confined to certain grounds and other grounds
canvassed stand disallowed. The Bench held, at paragraph 11 of the
report, that there is no limitation in Section 34 of the Act which
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
"disempowers" the Court while entertaining a petition under Section
34 of the Act to issue a notice limited to some of the grounds made
out to challenge the award. However, as to whether an appeal could
be preferred upon such limited notice being issued, the Court held as
follows:
"14. This brings us to the third question,
which is, whether there is any bar to more than one
appeal being maintained by an aggrieved party.
Here again we find that there is no bar. An
expression "an appeal" would only mean that at a
given point of time, when 'a' cause of action arises,
the court would entertain an appeal, therefore,
logically where the court refuses to issue notice qua
certain grounds, an aggrieved party would be well
within its right to prefer an appeal under the
provisions of Section 37. The fact that an aggrieved
party would have to, perhaps, prefer a second
appeal in the event that the court may come to a
conclusion, upon hearing an opposing party, that
there is no merit even in respect of the grounds vis-
a-vis which notice was issued, cannot come in the
way of our holding that the court is not empowered
to issue a limited notice. There is in the 1996 Act no
such limitation. There is as a matter of fact
complete autonomy given to the party to prefer an
appeal as soon as the provision of Section 37 of the
1996 Act get triggered under sub-section (1)(b) of
Section 37 of the Act. It is another matter that if a
party prefers an appeal against a court order issuing
limited notice and while the appeal is pending, the
award get successfully set aside on the grounds on
which limited notice was issued, would result in the
appeal becoming infructuous. The appellate court
could in such a situation either pass such an order
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
or, call upon the opposing party to disclose whether
it wishes to prefer an appeal against a decision of
the original court, whereby the award gets set
aside, albeit on limited grounds. There are thus
several possibilities that may arise in a given case.
The party filing a petition under Section 34 of the
1996 Act could as well wait till the entire
proceedings come to an end and then make a
decision as to whether it needs to file an appeal.
Quite logically if the award is set aside, on one or
more grounds, the petitioner would have no cause
to carry the matter in appeal. Before the appellate
court, however, it may have to, in a given situation,
as articulated above, argue those grounds, which
did not pass muster with the original court when
notice in the first instance was issued by that
court."
10. The opinion expressed that notice may be issued on limited
grounds upon certain other grounds being rejected, is
unexceptionable. Indeed, sometimes scandalous grounds are raised
which ought to be directed to be struck out so that the real issues
may be gone into. However, the second part of the decision in the
reported judgment, insofar as it holds that an appeal may be carried
under Section 37 of the Act against an order directing limited notice,
in the sense that some of the grounds are disregarded and only
limited grounds are identified to be considered at a later stage, does
not appeal. A distinction has to be made between several heads of
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
claim on which an award is passed and the grounds for challenging
an award. Just as it is possible to pass a partial award which also
attains finality upon it being pronounced, since such aspect of the
matter is conclusively decided on, it is possible to reject challenges to
parts of the award and continue with the challenges to the other parts
of the award. When the challenge to certain parts of the award is
rejected, such parts of the award become enforceable, unless
appealed against and stayed. That is the scheme of the Act of 1996
and the effect of Section 36(1) thereof. However, when certain
grounds are not accepted and completely rejected, but the award or
parts thereof are permitted to be challenged on other grounds, there
is no finality to such order since the challenge still remains, but the
challenge is abridged in the sense that certain grounds are reserved
for consideration and the other grounds are rejected.
11. Qualitatively, reliefs granted or heads of claim awarded or
parts of award, on the one hand, and the grounds of challenge
thereof, on the other, are completely distinct. The “cause of action”
that the Full Bench refers to has, necessarily, to be a cause of action
to institute the appeal. While there is no doubt that several appeals
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
may arise out of a solitary petition filed to set aside an award under
Section 34 of the Act, such causes of action would accrue to a party
aggrieved if a part of the award were to be conclusively set aside or
conclusively refused to be set aside, in the sense that such aspect of
the matter is incapable of being revisited at a later stage at such
level. That is the cause which would give rise to a right of appeal, as
the challenge to such part of the award is extinguished by the order
sought to be appealed against or the award to such extent stands set
aside. As aforesaid, it is only the setting aside or the refusal to set
aside the award or any part thereof that makes the order appellable.
12. When some of the grounds to challenge an award or a part
thereof are disallowed from being urged at the later stage of the
proceedings under Section 34 of the Act, it does not affect the award
or any part thereof, whether finally or otherwise. All that an order
discarding certain grounds challenging the arbitral award does is to
restrict the scope of the challenge without altogether annulling the
challenge. When a part of an award is conclusively refused to be set
aside, the challenge to such part is irretrievably annulled at that
level. Likewise, when a part of an award is set aside at the outset,
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
such part cannot be restored at the later stage of the proceedings. It
is the finality and the completion of the act of setting aside or
endorsing a part of the award without further recourse to it at that
level that gives the right to appeal therefrom under Section 37 of the
Act. Even if ten grounds of challenge are initially urged and nine
grounds are repelled at the receiving stage and only one allowed to
be canvassed later, the challenge is not conclusively decided on. As
a consequence, no appeal may be carried from such order restricting
the grounds of challenge as long as the challenge is not completely
negated.
13. There is another good reason for making the distinction. If
the challenge on the one ground which is permitted to be retained
succeeds, the award-debtor would still have succeeded and it will not
be open to the award-debtor to prefer an appeal. However, if the
only ground permitted to be taken to challenge the award is repelled,
all the grounds that had been disallowed at the initial stage may be
urged in course of the resultant appeal. Further, even if the solitary
ground allowed to be retained to challenge an arbitral award
succeeds, it will still be open to the award-debtor to urge the other
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
grounds in course of the award-holder's appeal without the award-
debtor being entitled to carry an independent appeal.
14. There is a similar situation that the Act of 1996 throws up
elsewhere; though in such case the provision expressly suspends the
right to an immediate challenge. Section 16 of the Act permits an
objection as to the jurisdiction of the arbitral tribunal to be raised
before such tribunal. However, upon the objection being repelled,
the objector has to await the final outcome of the arbitral reference
and, if the award goes against the objector, the grounds of objection
may be urged in addition to challenging the award on merits in
proceedings under Section 34 of the Act.
15. In the light of the above discussion, we respectfully
disagree with the second part of the Full Bench judgment rendered by
the Delhi High Court insofar as it recognises a right of appeal against
an order rejecting some of the grounds of challenge to an arbitral
award and confining the challenge to some limited grounds. Section
37 of the Act stands on its own. It does not permit any appeal from
an order passed under Section 34 of the Act unless such order sets
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
aside or refuses to set aside an award. Just as an award can be
passed at various stages and partial awards are also deemed to be
awards within the meaning of the definition of an award under the
Act, parts of orders under Section 34 which confer finality pertaining
to heads of claim or parts of award, whether set aside or refused to
be set aside, are appellable, as the challenge has been conclusively
decided to such extent. It is a completely different kettle of fish when
it comes to grounds being limited, since the challenge remains alive
but certain legs on which the challenge was fashioned may have been
truncated without any conclusive pronouncement on the challenge.
16. The appeal is, therefore, found to be premature. In the
event the would-be appellant herein is aggrieved by the final order
passed upon the challenge being assessed, it will be open to the
appellant to urge the grounds that have been disregarded by the
order impugned. Equally, it will be open to the would-be appellant to
urge such grounds in support of the order setting aside the award in
the respondents' resultant appeal.
17. A minor matter is pointed out on behalf of the respondents
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
that the appeal herein has been filed under Clause 15 of the Letters
Patent. It is elementary that when an Act like the Act of 1996 is a
complete Code unto itself, since it is both a consolidating and
amending Act, the authority to prefer an appeal must be found in the
Code itself and cannot be discovered elsewhere. Accordingly, in view
of Section 37 of the Act of 1996, particularly the words in parenthesis
used therein, no appeal would be maintainable in respect of
arbitration matters under Clause 15 of the Letters Patent.
OSA No.SR90890 of 2020 is dismissed on the ground of
maintainability. There will be no order as to costs.
(S.B., CJ.) (S.K.R., J.)
17.02.2021
Index : Yes
kpl/sasi
__________
https://www.mhc.tn.gov.in/judis/
O.S.A. No.SR 90890 of 2020
THE HON'BLE CHIEF JUSTICE
AND
SENTHILKUMAR RAMAMOORTHY, J.
(kpl)
O.S.A. No.SR 90890 of 2020
17.02.2021
__________
https://www.mhc.tn.gov.in/judis/
