Gujarat High Court
Man Industries (India) Limited vs Gujarat Water Supply And Sewerage Board on 5 May, 2023
Author: Ashutosh Shastri
Bench: Ashutosh Shastri
C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4305 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 4180 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 4361 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI
and
HONOURABLE MR. JUSTICE J. C. DOSHI
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
MAN INDUSTRIES (INDIA) LIMITED
Versus
GUJARAT WATER SUPPLY AND SEWERAGE BOARD
==========================================================
Appearance:
MS SAKSHI RAHEJA FOR MR. AH MOHAPATRA(6807) for the Petitioner(s)
No. 1
MR KUNAL VYAS WITH DEVARSH TRIVEDI FOR GANDHI LAW
ASSOCIATES(12275) for the Respondent(s) No. 1,2
==========================================================
CORAM:HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI
and
HONOURABLE MR. JUSTICE J. C. DOSHI
Page 1 of 14
Downloaded on : Tue May 09 20:37:22 IST 2023
C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023
Date : 05/05/2023
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE J. C. DOSHI)
1. By way of present Special Civil Applications under Article 227 of the Constitution of India read with Order 21 Rule 43 of CPC, the petitioner Challenges the orders below Exh. 9 in Commercial Execution Petition No.86 of 2022, Commercial Execution Petition No.85 of 2022 and Commercial Execution Petition No.87 of 2022 passed by the learned Principal Senior Civil Judge, Gandhinagar, whereupon the prayer made by the petitioner for issuance of warrant under Order 21 Rule 30 is denied.
2. Since all these petitions involve similar issues based on similar facts between the similar parties, with the consent of learned advocates for the respective parties, they are decided by this common order. It is further agreed by both the learned advocates for the parties to take up the facts from Special Civil Application No.4305 of 2023.
3. Case Background.
3.1 Pursuant to earthquake in the State of Gujarat, Page 2 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 Government of India received loan from Asian Development Bank to meet with the cost of "Gujarat Earthquake Reconstruction and Rehabilitation Project" and with a intent to accomplish said object, Gujarat Water Supply and Sewerage Board (for short 'GWSSB'), designated for implementation of Rural Water Supply Project invited bid for the said project. The petitioner - Man Industries was successful bidder. In a contract having arbitration clause in the general condition of contract and special condition, on arising dispute between the parties and as no consensus was reached between the parties, the petitioner approached this Court for appointment of Arbitrator under section 11 of the Arbitration and Conciliation Act to adjudicate the dispute. Arbitrator was appointed by this Court and thereafter, learned Arbitral Tribunal was constituted to resolve the dispute between the parties. After filing necessary evidence, etc. and considering the arguments, learned Arbitrator passed award on 28.11.2009 and modified the same on 07.05.2010. Being aggrieved by the award passed by the learned Arbitrator and duly modified later on, Gujarat Water Supply and Sewerage Board challenged the same by way of recourse under section 34 of the Arbitration and Page 3 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 Conciliation Act before the District Court, Gandhinagar. This recourse is pending for hearing and final adjudication. 3.2 Meanwhile as Commercial Court Act, 2015 came into force, recourse was referred to Commercial Court, Gandhinagar for adjudication. Since there was no stay operating on execution of award, the petitioner - Man Industries filed application for execution of award by way of Commercial Execution Petition before the Court of learned Principal Senior Civil Judge, Gandhinagar and subsequently filed application under Order 21 Rule 30 seeking issuance of Jangam Warrant against Gujarat Water Supply and Sewerage Board.
3.3 Learned Principal Senior Civil Judge, Gandhinagar on the finding that since challenge to the validity of the award passed by the Arbitrator is pending before the higher forum i.e. Commercial Court, he cannot decide the validity of the said award and consequently cannot issue warrant under Order 21 Rule 30 of CPC, therefore rejected the applications and hence, this petitions.
Page 4 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023
4. Heard learned advocate Ms. Shaksi Raheja for the petitioner and learned advocate Mr. Krunal Vyas for Gandhi Law Associates for the respondent - GWSSB.
5. Learned advocate for the petitioner having taken us through entire facts stated herein above mainly argued that challenge to the arbitral award by way of recourse under section 34 of the Arbitration and Conciliation Act is pending for adjudication since 12 years before the District Court, Gandhinagar whereby GSWSSB who is applicant has not prayed for stay nor has obtained stay on the execution and implementation of the award and therefore, present petitioner has filed execution petition before the learned Principal Senior Civil Judge, Gandhinagar, more particularly, after amendment in section 36 of the Arbitration and Conciliation Act which permits the petitioner who is judgment holder to file execution. But the learned Trial Court without examining this aspect denied to issue warrant under Order 21 Rule 30 of CPC inter-alia on the ground that challenge is pending before the higher forum to the award for which execution is sought. She further submitted that it is erroneous approach on the part of Page 5 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 the learned Trial Court not to issue warrant on touchstone that proceeding is pending before the higher forum. She further submitted that no stay is granted by the Commercial Court, Gandhinagar. It is submitted that recourse under section 34 was not proceeded further by GWSSB due to which entire proceeding is stalled. In that event, it was incumbent upon the learned Principal Senior Civil Judge to execute award as it exists to give meaning to the decree. However, by not doing so, learned Principal Senior Civil Judge, Gandhinagar has committed error, much less error of understanding law.
5.1. Learned advocate for the petitioner has taken us through amended and unamended provision of section 36 of the Arbitration and Conciliation Act and would submit that prior to amendment in 2015, there was automatic stay or suspension of execution of award by filing recourse section 34 of the Arbitration and Conciliation Act. But after amendment in the year 2015, the situation has altogether changed and if award is not stayed by the Court, hearing challenge to arbitral award under section 34, it is always executable award. She Page 6 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 has further submitted that after the amendment in section 36 of the Act, no automatic stay or suspension of execution is permitted. She further submitted that amendment envisaged in section 36 of the Act also applies to the recourse made prior to the amendment. In other words, she would submit that amendment in section 36 has retrospective effect and can operate retrospectively and even if recourse is filed under section 34 of the Act prior to amendment came into force in the year 2015 in Arbitration and Conciliation Act, amendment in section 36 would apply to those proceedings as well. Therefore, she would submit that learned Trial Court has erred in not passing order of issuance of warrant. To strengthen her submission, learned advocate for the petitioner referred to judgment of Hon'ble Supreme Court in the case of Board of Control for Cricket in India v/s. Kochi Cricket Private Limited and Ors. reported in (2018) 6 SCC 287. She further relied upon later judgment of Full Bench of Hon'ble Supreme Court in the case of Hindustan Construction Company Limited and Anr. v/s. Union of India and Ors. Reported in (2020) 17 SCC 324, whereby, Full Bench of Hon'ble Supreme Court reiterated law laid down in BCCI (supra). Upon such Page 7 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 submissions, she would submit to allow the petitions and quash and set aside impugned order passed by the learned Principal Senior Civil Judge, Gandhinagar and further to allow applications for issuance of warrant under Order 21 Rule 30 of CPC.
6. On the other hand learned advocate Mr. Krunal Vyas appearing for Gandhi Law Associates for the respondent - GWSSB has taken us through the history of pre and post amendment in the Arbitration and Conciliation Act and would submit that in the case of National Aluminum Company Ltd. v/s. Presteel and Fabrications Pvt. Ltd. Reported in (2004) 1 SCC 540, the Hon'ble Supreme Court has observed that in view of mandatory language of section 34 of the Act, when challenge is made to the arbitral award within time stipulation, award therein automatically becomes unexecutable and there is no discretion left with the Court to pass any interlocutory order with regard to said award except to adjudicate on the correctness of the claim made by the applicant therein. He further submitted that by way of amendment in Arbitration and Conciliation Act, section 36 Page 8 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 was amended, whereupon mandatory language of section 34 has been diluted and now it is not position of law that on filing of recourse under section 34 of the Arbitration and Conciliation Act, award under challenge would automatically become unexecutable. He fairly submitted that in absence of stay, operation of the award while hearing of application under section 34, award is executable. Learned advocate for the respondent has fairly accepted the proposition of law laid down in the case of BCCI (supra), wherein, the Hon'ble Supreme Court in no uncertain terms held that amendment in section 36 would operate retrospectively and it applies to the arbitration proceedings which are pending prior to amendment of the Act. He submits that Arbitration and Conciliation Act was again amended in the year 2019, whereby, section 87 was inserted to the Act nullifying the observations made by the Hon'ble Supreme Court in the case of BCCI (supra). He further submitted that however, in the decision of Full Bench of Hon'ble Supreme Court in the case of Hindustan Construction Company Ltd. (supra), the Hon'ble Supreme Court has struck down section 87 of the Arbitration and Conciliation Act which was inserted by amendment Act, Page 9 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 2019. Mr. Vyas learned advocate for the respondent fairly submitted that he cannot come out from operation of section 36 which is amended subsequently but he would submit that recourse made to arbitral award under section 34 of the Act is at final stage of pronouncing order. Man Industries and GWSSB both have advanced their arguments in the proceedings under section 34 and now District Court, Gandhinagar has kept the proceedings for passing judgment. In that event and circumstances, issuance of warrant at this juncture under Order 21 Rule 30 would have some adverse effect. He would submit that GWSSB is Government sponsored Board and therefore, awarded amount is secured and in that event, Man Industries is not required to execute the award. He further submitted that since Man Industries has waited for more than 12 years, it can wait for some more time. Upon such submission, learned advocate Mr.Vyas would submit to pass necessary order in the interest of justice.
7. Having heard learned advocates for both the sides, at the outset, it is to be noted that after amendment in section 36 of the Arbitration and Conciliation Act, arbitral award made by Page 10 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 the learned Arbitrator is executable under section 36, unless it has been stayed by the Court hearing recourse under section
34. In other words, no automatic stay is operating on the execution of award and therefore, pending recourse under section 34 of the Arbitration and Conciliation Act, award impugned therein is executable award upon execution filed by the concerned holder. There is no cavil that the amendment in section 36 is operating retrospectively. The Hon'ble Supreme Court in the case of BCCI (supra) has clarified the position of law in para 67, which reads as under :-
"67. In 2004, this Court's Judgment in National Aluminium Company (supra) had recommended that Section 36 be substituted, as it defeats the very objective of the alternative dispute resolution system, and that the Section should be amended at the earliest to bring about the required change in law. It would be clear that looking at the practical aspect and the nature of rights presently involved, and the sheer unfairness of the unamended provision, which granted an automatic stay to execution of an award before the enforcement process of Section 34 was over (and which stay could last for a number of years) without having to look at the facts of each case, it is clear that Section 36 as amended Page 11 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 should apply to Section 34 applications filed before the commencement of the Amendment Act also for the aforesaid reasons."
8. It is also to be noted that by amendment in the Arbitration and Conciliation Act in the year 2019, legislature has introduced section 87 which reads as under :-
"87. Effect of arbitral and related court proceedings commenced prior to 23.10.2015 --
Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) shall --
(a) not apply to--
(i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (23rd October, 2015);
(ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016);
(b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings."
9. Inserting above provision of section 87, Legislature has applied amendment made for the Arbitration and Conciliation Act prospectively. Insertion of section 87 of the Arbitration Act has been challenged before the Hon'ble Supreme Court in Page 12 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 the case of Hindustan Construction Company Limited (supra), whereby, the Hon'ble Supreme Court while reiterating the judgment of BCCI (supra) held that section 87 is invalid as it is ultra vires the object of the Act, 1996 and constitution held being manifestly arbitrary. Thus, there is no doubt that execution of the award which is under challenge by way of section 34 pre or post amendment is always maintainable until it has been stayed by the concerned Court hearing the challenge.
10. What perceives from the record that challenge under section 34 of the Arbitration and Conciliation Act made to arbitral award is pending for final decision before the District Court, Gandhinagar. It is submitted that the matter is posted for order on 14.06.2023. Considering this aspect we refrain from passing any order with regard to impugned order for which challenge is made by way of Special Civil Applications. We permit the petitioner herein to request the concerned District Court to decide the challenge made under section 34 of the Arbitration and Conciliation Act against arbitral award in expeditious manner more particularly since it is pending for Page 13 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023 C/SCA/4305/2023 CAV JUDGMENT DATED: 05/05/2023 more than 10 years and in the event of any such request being made by either of the party, we hope and trust that the concerned District Court would consider the request in letter and spirit and would dispose of recourse under section 34 as soon as possible.
11. With these observations, we dispose of these petitions. Civil Applications, if any, would not survive in view of disposal of main Special Civil Applications. Copy of this order be placed in each matter.
12. Since we have passed this order in peculiar background of facts, this order shall not be treated as precedent in routine manner. It is made clear that this Court has not expressed any opinion on merits of the case.
(ASHUTOSH SHASTRI, J) (J. C. DOSHI,J) SATISH Page 14 of 14 Downloaded on : Tue May 09 20:37:22 IST 2023