Delhi High Court
The East India Hotels Ltd. vs Jyoti (P) Ltd. on 1 July, 1996
Equivalent citations: 1996IIIAD(DELHI)242, 1996(38)DRJ73
Author: R.C. Lahoti
Bench: R.C. Lahoti, S.N. Kapoor
JUDGMENT R.C. Lahoti, J.
(1) This order shall govern the disposal of FAO(OS) 115/96 and 116/96 Filed by the same appellant against the same respondents.
(2) Suit 1808-A/95 was Filed by the appellant for appointment of an arbitrator relying upon a loan agreement dated 8.8.1980, wherein the respondent had agreed to pay certain amount to the appellant. Suit No. 622- A/95 was filed by the respondent seeking appointment of an arbitrator relying upon a hotel operation agreement where under the appellant had agreed to carry on hotel business in the premises of the respondent. The learned Single Judge has allowed both the prayers and appointed Mr Justice G.C. Jain, retired Judge of this Court as an arbitrator. All the disputes between the parties under the loan agreement as well as the hotel operation agreement and all the claims and counter-claims of the parties have been referred to him. By the same order, the learned Single Judge has rejected I.A. 7955/95 whereon an ex-parte interim injunction was granted in favour of the appellant and I.A. 9753/95 filed by the respondent for vacating the injunction has been allowed. The two appeals have been filed by the appellant feeling aggrieved by both the parts of the order.
(3) FAO(OS) 116/96 is directed against that part of the order by which the arbitrator has been appointed. The grievance of the appellant is that the two references arising out of two suits should not have been made to a single arbitrator and certainly not to be treated together. It is submitted that such an order would irreparably prejudice the appellant. The stand taken by the appellant before the learned single Judge was that the two references should have been to two different arbitrators. However, this appeal need not detain us any longer inasmuch as during the course of hearing both the learned counsel for the two parties have agreed on the proposal that though the two references for adjudication may be dealt with by the same arbitrator, however, they will be treated as two separate references; both will be tried separately and decided separately, though the two awards shall be made by the arbitrator on one day. The order under appeal shall stand modified and clarified accordingly.
(4) In FAO(OS) 115/96, the subject matter is vacating of injunction granted by the learned single Judge at an earlier stage of the suit. It is submitted by the learned counsel for the appellant that the learned single Judge was not justified in vacating the injunction and should have confirmed the ex parte injunction granted earlier.
(5) At the very threshold, the learned counsel for the respondent has raised an objection to the maintainability of the appeal submitting that the impugned order has been passed by the learned single Judge exercising jurisdiction under the Arbitration Act, 1940 and the impugned order is not of a nature contemplated by sub section (1) of Section 39 of the Act which provides for only six types of orders being appealable and the impugned order being none out of the said six categories, no appeal lies there against. It is submitted by him that in view of the restrictions spelled out by Section 39 of the Arbitration Act, 1940, no appeal lies against an order granting or refusing to grant an injunction passed by a court exercising jurisdiction under the Arbitration Act.
(6) Section 39 of the Arbitration Act provides as under :- "39.Appealable orders-(1) An appeal shall lie from the following orders passed under this Act ( and from no others) to the Court authorised by law to hear appeals from original decrees of the court passing the order : An order - (i) superseding an arbitration; (ii) on an award stated in the form of a special case (iii) modifying or correcting an award; (iv) filing or refusing to file an arbitration agreement; (v) staying or refusing to stay legal proceedings where there is an arbitration agreement; (vi) setting aside or refusing to set aside an award; Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court. ' (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."
(7) Section 10 of the Delhi High Court Act provided as under: "10.Powers of Judges- (1) Where a single Judge of the High Court of Delhi exercises ordinary original civil jurisdiction conferred by sub-section (2) of section 5 on that Court, an appeal shall lie from the judgment of the single Judge to a Division Court of that High Court. (2) Subject to the provisions of sub-section (1), the law in force immediately before the appointed day relating to the powers of the Chief Justice single Judges and Division Courts of the High Court of Punjab and with respect to all matters ancillary to the exercise of those powers shall, with the necessary modifications, apply in relation to the High Court of Delhi."
(8) At the very outset lei it be noted that five judges Full Bench of Delhi High Court has held in Union of India vsA.S. Dhupia and am, that Section 10 of Delhi High Court Act, 1966 provides only for a forum of appeal. It is, therefore, clear that the question of right of appeal has to be decided by reference to Section 39 of the Arbitration Act and not by reference to Section 10 of Delhi High Court Act. It is well settled that an appeal is a creature of statute. There is no inherent right of appeal. The right to file an appeal and available has to be conferred by legislation. In view of the Full Bench decision above said it will have to be decided on the touchstone of Section 39 of the Arbitration Act if an order of the nature appealed against is appealable or not; if held to be appealable the question of forum may be decided by reference to Section 10 of the Delhi Act.
(9) The opening words of sub-section (1) of S. 39 not only proceed to catalogue the orders wherefrom an appeal shall lie but also exclude right of appeal against orders other than those catalogued therein.
(10) It was submitted by the learned senior counsel for the appellant that by virtue of Clause (a) of Section 41 of the Arbitration Act, the provisions of Code of Civil Procedure have been made applicable to all the proceedings before the court and to all appeals under this Act and so an order granting or refusing to grant an injunction under Order 39 Rules 1-2 Civil Procedure Code would be appealable under Order 43 Rule l(r) of the CPC. This submission would require an indepth scrutiny of Section 41 of the Arbitration Act.
(11) Section 41 of the Arbitration Act provides as under : "PROCEDURE and powers of court- Subject to the provisions of this Act and of rules made there under (a) the provisions of the Code of Civil Procedure, 1908 (5 of 1908) shall apply to all proceedings before the Court and to all appeals, under this Act; and (b) the court shall have, for the purpose of, and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose, and in relation to, any proceedings before the Court." Provided that nothing in clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders which respect to any of such matters."
(12) Entry No. 4 in The Second Schedule confers power on the arbitration court in the matter of "interim injunctions or the appointment of a receiver". The power to grant an injunction vests in the court under the Arbitration Act whether under clause (a) or (b)- is a question that need not detain us any longer in view of the availability of law laid down by the Supreme Court in M/S H.K. Kamaluddin Ansari & Co vs Uoi . The following principles emerges therefrom:- "(I)An arbitration court has got the power to pass an injunction only "for the purpose and in relation to arbitration proceedings" before the court, (para 15) (ii) Clause (a) of Section 41 makes only the procedural rule of Cpc applicable to the proceedings in the court under the Arbitration Act. This does not authorise the court to pass an order for injunction. The power is conferred by clause (b) of Section 41. The source of power cannot be traced to clause (a) (para 18)"
(13) It is, therefore, clear that in so far as an arbitration court is concerned, power to grant an injunction is conferred by Section 41(b) read with the Second Schedule Entry No.4. That power has to be exercised only for the purpose of and in relation to arbitration proceedings. An arbitration court cannot exercise power to grant an injunction de hors clause (b) of Section 41. Inasmuch as power to grant an injunction by the arbitration court is not exercised by reference to Order 39 of Cpc, the question of considering maintainability of appeal by reference to provisions of Civil Procedure Code does not arise.
(14) The arbitration court grants or refuses an injunction under Section 41(b) read with The Second Schedule - Entry No.4. Such an order being not one of the six orders listed as appealable orders under Section 39(1) of the Act no appeal lies therefrom. If the order be one passed by a court subordinate to the High Court it would be revisable. If the order be passed by a learned single Judge of the High Court sitting on the original side, the order would not be appealable; the revision being out of question.
(15) Several High Courts have taken the view that an order of interim injunction passed under Section 41(b) would not be appealable under Section 39(1) of the Act and hence it would not be appealable even under Letters Patent ( see the State of Himachal Pradesh vs Mis H.S.Sobti& Co. Air 1973 Hpi Db, Sharma Ice Factory vs Mis Jewel Ice Factory , Air 1975 J&K 25 Db and Hindustan Steel Works Construction Ltd vs Tampore & Co.Madras, .
(16) On the same principle an order in the matter of appointment of receiver has been held to be not appealable ( see Rebati Ranjan v Suranjan, and Krishnawati Devi vs HMMisra, .) (17) The prohibition incorporated in Section 39 would apply to Letters Patent also. Where an appeal is excluded by the provisions of Section 39 of the Arbitration Act, even an appeal in Letters Patent would not the ( See Uoi vs Mahindera Supply Co and the State of Himachal Pradesh vs Mis H.S.Sobli&co.
(18) We may refer to the view taken by our own High Court in such matters.
18.1.A Division Bench has held in Mis B.Lal R. Mohan v. Punjab State Coop S&M Fedn.Ltd. :- "Appeals from the judgment/order of a trial Judge to a larger Bench of the High Court would be maintainable unless otherwise so provided either expressly or by implication by any law. Section 4 of the Civil P.C. in terms lays down that when anything in the Civil P.C. is in conflict with anything in the special or local law or with any special jurisdiction or power conferred or any special forum or procedure prescribed by or under any other law, the Code will not, in the absence of specific provision to the contrary, prevail so as to override such inconsistent provision. Section 39 of the Arbitration Act in terms says that no other orders would be appealable except those specified in the section. Maintainability of an appeal from an order amounting to a judgment from which appeal is not permissible on a reading of Section 39 of the Arbitration Act was specifically ruled out." "The Delhi High Court Act would be the general law and the Arbitration Act would be a special law. Therefore, which is earlier or which is later is not relevant, lndecd,one will have to keep in view the principle whether the right created by a law, for example Section 10 of the Delhi High Court Act, being later in point of time, can confer a right of appeal without repealing S.39 of the Arbitration Act which was earlier in point of time. The doctrine of repeal by implication is also not available. Both Section 39 of the Arbitration Act and S. 10 of the Delhi High Court Act have to be construed harmoniously. Where the trial Judge while exercising power under S. 5 of the Act makes an order which may be termed as a judgment within the meaning of S. 10 of the High Court Act, an appeal would be competent unless specifically barred. In the present case it is specifically barred being impermissible on a mere reading of S.39 of the Arbitration Act."
18.2.In Union of India vs. N.K. Pvl Ltd, , it has been held by the Division Bench : "The order varying temporary injunction is prima facie a "judgment" within the meaning of Section 10 of the Delhi High Court Act, 1966 and an appeal would ordinarily have been competent thereunder. However, this right of appeal under the general law is subject to the special law, namely, Section 39 of the Arbitration Act, which bars an appeal from such an order altogether. While the proceeding under S.20 of the Act is a proceeding in a court of civil jurisdiction within the meaning of S.141 Cpc, it is nevertheless a proceeding under the Arbitration Act within the meaning of S.41(a) of the Act. Though by virtue of S. 141 Civil Procedure Code provision of Civil Procedure Code would apply to a proceeding before the court under the Arbitration Act, an order passed in such a proceeding would be an order passed in a proceeding which is before the Court under the Arbitration Act and therefore the order itself would be under that Act. Thus order under appeal would be under S. 41 of the Arbitration Act and would thus be governed by Section 39 of that Act. It cannot be said to have been passed outside the Act and under the Code of Civil Procedure alone. Section 141 Civil Procedure Code applies only to the procedure under the Code to other proceedings in a court of civil jurisdiction. The right of appeal and other substantive rights and powers dealt with by the Civil Procedure Code are not regarded as mere procedure and are not therefore made applicable by Section 141."
18.3.The Five Judges Bench in Union of India vs A.S.Dhupia, has laid down the law in the following terms : "Section 10(1) of the Delhi Act does not confer unfettered right of appeal without any limitation. The provision cannot be held to confer a right of appeal even against those orders which are not covered by Section 39(1) of the Arbitration Act.
(19) The Arbitration Act is a specific Code dealing with the arbitration matters and Section 39(1) is a special provision indicating the orders which alone are appealable. It is wrong therefore, to say that Section 10 of the Delhi Act which only provides for a forum of appeal is a special provision and will override Section 39(1) of the Act."
(20) Ordinarily in view of at least three judgments of Delhi High Court, one of them being by a Full Bench and the other two by Division Benches- all binding on us, there was no occasion to examine the question afresh and once again. However, all the above said decisions of the Delhi High Court were rendered before the decision of Supreme Court in M/S Hmk ANSARI's case ( supra). This decision of the Supreme Court has overruled certain observations to the contrary made in Uoi vs Roman Iron Foundry, and laid down law clearly distinguishing between the two powers conferred on an arbitration court by clause (a) and by clause (b) of S. 41 of the Arbitration Act. We have, therefore, thought it fit to make a review of the law and make the position clear on the question of maintainability of appeal arising before us.
(21) A question arises: what would happen if an arbitration court may exercise power to grant an injunction de hors the provisions contained in Section 41(b) of the Arbitration Act ? Would the parly aggrieved be left without any remedy ?
(22) It has already been stated hereinabove that an arbitration court does not have power to issue an injunction away from the provisions contained in Section 41(b) of the Act; still if it exercises such power it would be in purported exercise of power conferred by Order Xxxix and S. 94 of the CPC. The arbitration court would be deemed to have exercised a power not vested in it and hence an appeal would lie against such an order under Order 43 Rule l(r) CPC. The expression "and from no others" as used in Section 39(1) of the Arbitration Act refers to orders under the Arbitration Act only ( see- Rebati Ranjan v. Suranjan and Jhamaklal v. Mishrilal Air 1957 Mb 22 and Sri Krishen v. Radha Kishan ). In Trideshwar Dayal vs. Maheshwar Dayal, their Lordships have reiterated the following view of the law which was taken earlier in Janardhan Reddy vs. State of Hyderabad, which was taken after referring to a number of decisions :
"IT is well settled that if a court acts without jurisdiction, its decision can be challenged in the same way as it would have been challenged if it had acted with jurisdiction i.e. an appeal would lie to the court to which it would lie if its order was with jurisdiction"
"TO sum up: (i) the only power to grant an injunction conferred on arbitration court is for the purpose of and in relation to arbitration proceedings; (ii) the power to grant an injunction cannot be exercised by an arbitration court by reference to clause (a) of S 41 of the Arbitration Act, for the scope of clause (a) is confined to procedural matters merely as laid down by the Supreme Court in Hk Ansari's case. (supra) (iii) An order of the arbitration court disposing of a prayer for an interim injunction is not appealable; rather an appeal therefrom is specifically prohibited by Section 39(1) of the Arbitration Act. (iv) If an arbitration court may grant an injunction de hors the provisions contained in Section 41(b) of the Arbitration Act, the same would be liable to be set aside in appeal under Section 43(l)(r) of CPC. The order would be appealable inasmuch as the order being not an order under the Arbitration Act, neither the prohibition on right of appeal contained under Section 39(1 ) of the Arbitration Act would apply nor the question of c shall be required to be determined by reference to the said Section 39(1),"
(23) The contents of Ia 7955/95 filed by the appellant seeking the injunction and contents of Ia 9753/95 filed by the respondent seeking vacating of the injunction go to show that the order of injunction forming subject matter of this appeal was for the purpose of and in relation to the arbitration proceedings. To be so the order of injunction must be relatable to the subject matter of arbitration proceedings, as is deductible from para 19 of the Supreme Court decision in M/s Hkk Ansari & Go's case (supra). The power to grant such an injunction was wielded by the learned single Judge by exercising jurisdiction under the Arbitration Act only by reference to Section 41(b) read with the Second Schedule Entry No.4. The order of injunction, was an order under the Arbitration Act and so would be the order vacating the same and impugned herein. An appeal there against is clearly prohibited and certainly not permitted by Section 39 of the Arbitration Act. The appeal is, therefore, incompetent and deserves to be dismissed as not maintainable.
(24) Faced with this situation Mr P.N. Lekhi, the learned senior counsel for the appellant advanced an ingenious argument. He submitted that if an appeal against the impugned order vacating the interim injunction be not maintainable even then this Court may while dealing with FAO(OS) 116/96 independently exercise the power to grant an injunction; such a power in the appellate court being vested by Section 107 of CPC. The argument must fail. Firstly, there is no application for the grant of ad interim injunction moved in Fao (OS) 116/96. Secondly, what cannot be done directly, cannot be done indirectly. Thirdly, the order vacating the "injunction has achieved a finality in view of the order of the learned single Judge being not appealable; the appellant would not have a prima facie case for the grant of injunction.
(25) For the foregoing reasons, Fao (OS) 115/96 is dismissed. Fao (OS) 116/96 Is partly allowed and be treated as disposed of in accordance with the observations made in para 3 above. Cost shall be borne as incurred in both the appeals.