Madhya Pradesh High Court
M/S. Ssangyong Engineering And ... vs M/S. Engineering Associates on 17 May, 2017
AA-20-2017
(M/S. SSANGYONG ENGINEERING AND CONSTRUCTION COMPANY LTD. Vs M/S.
ENGINEERING ASSOCIATES)
17-05-2017
JUDGMENT
(17.05.2017) Per : Sujoy Paul J.
This appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) takes exception to the order dated 22.3.2017 passed by the learned Additional District Judge, Jabalpur in MJC (AV) No.280/2016. By the impugned order, the court below allowed the application of respondent no.1 filed under Section 9 of the Arbitration Act.
2. Draped in brevity, the admitted facts between the parties are that the appellant and respondent no.1 entered into an agreement. The agreement contained a clause relating to the dispute resolution through arbitration. Since there was a dispute, the matter was referred to the sole arbitrator, a former Judge of this Court. The learned arbitrator passed an award on 31.1.2016. Certain typographical errors etc. were rectified by the learned arbitrator on 28.4.2016.
3. This is also admitted between the parties that the learned arbitrator partially accepted the claim of both the parties and both the parties feeling aggrieved by the award of the arbitrator preferred appeals under Section 34 of the Arbitration Act before the competent appellate court. Both the appeals are still pending before the appellate court.
4. The respondent no.1 preferred an application under Section 9 of the Arbitration Act with a prayer that the respondent no.1 therein be directed to deposit the amount of Rs.7.5 Crores with interest in a schedule bank as a fixed deposit. The present appellant filed its reply Annexure A-5. After hearing both the parties, the Court below by impugned order directed the present appellant to deposit Rs.7 crores, 50 Lacs in a fixed deposit.
5. Shri V.R. Rao, learned Sr. Counsel criticized this order by contending that Section 21 of the Arbitration Act provides that the arbitration proceedings will commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. It is submitted that the said date is much prior to the date of introduction of Arbitration and Conciliation (Amendment) Act, 2016 (in short, 'the Amendment Act'). It is further submitted by learned Sr. Counsel that even the appeals under Section 34 were filed by the appellant prior to commencement of Amendment Act, 2015. It is argued that in view of Section 26 of the Amendment Act, the provisions which were brought into force by way of amendment act shall not apply in relation to arbitral proceedings which had commenced in accordance with Section 21 of the principal act (Arbitration Act). On the strength of Section 26 of the Amendment Act, it is contended that Section 36 of principal act makes it clear 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 and it has been refused, the award shall be enforced under the Code of Civil Procedure in the same manner, as if it were a decree of the Court. The contention of appellant is that in the present case since the appeal under Section 34 was filed before the amendment Act came into being, the unamended Section 36 which deals with enforcement would apply. Since it is nobody's case that either time to file application under Section 34 had expired or such application filed under Section 34 is refused, the protection under Section 36 will be automatically available to the appellant.
6. Putting it differently, it is urged that as per unamended Section 36, it is clear that there would be an automatic stay of the award, if the application under Section 34 is filed within the time prescribed for its filing. The award can be enforced only when such application filed under Section 34 is refused by the Court below. In that event, the court below had no jurisdiction to entertain an application under Section 9 of the Arbitration Act and direct to deposit the amount in the bank.
7. The second limb of argument of learned Sr. Counsel is about the decision making process and findings given by the court below in the impugned order. It is urged by the appellant that the stand of respondent no.1 before the court below was that the appellant, company is not running any project or business and in that event, if it flees from the country being company of Singapore, it will be difficult for respondent no1. to realise the awarded amount. In support of said contention, the respondent no.1 herein filed the balance sheet and contended that the present appellant has no running business at present in India. In that event, it will be impossible to realise the fruits of the award, if appellant company leaves India suddenly.
8. Criticizing these findings, learned counsel for the appellant submits that the said contentions are without any basis. The court below has not considered the balance sheets filed by the appellant. The court below has failed to see that even for exercising powers under Section 9 of the Arbitration Act, the necessary ingredients for grant of injunction must be available. The reliance is placed in the cases of Adhunik Steels Ltd. vs. Orissa Manganese and Minerals Pvt. Ltd., AIR 2007 SC 2563 and Arvind Construction Co. Ltd. Vs. M/s. Kalinga Mining Corporation, AIR 2007 SC 2144. It is submitted that necessary ingredients for grant of interim relief were not available in the present case and; therefore, court below has committed an error of law in issuing the directions for depositing the money in a fixed deposit. It is further submitted that the defence taken by the appellant before the court below has not been considered. No reasons are assigned as to why defence of present appellant did not suit the court below in comparison to the stand taken by the appellant.
9. Per contra, Shri R.N,. Singh, learned senior counsel opposed the said contention. He submits that the application under Section 9 was maintainable and prayer of respondent No.1 before the court below was in terms of unamended Section 9(b) of the Arbitration Act. He submits that there is no jurisdictional error in passing the impugned order because the order is passed in consonance with the enabling provision i.e. Section 9 of the Principal Act. Shri Singh, learned senior counsel submits that the court below was right in passing appropriate orders to ensure that the amount in dispute is secured. It is further urged that a plain reading of impugned order shows that rival contentions were considered and adequate reasons are assigned. In support of his contention, Shri Singh relied upon 2011 SCC Online Delhi 3689 (SAIL vs. AMCI Pvt. Ltd.).
10. No other point is pressed by the learned counsel for the parties.
11. I have heard the parties at length and perused the record in the light of submissions made herein above.
12. Before dealing with the rival contentions, it is apposite to refer certain relevant statutory provisions. Section 9 of the Principal Act reads as under:
â9. Interim measures, etc. by Court.- A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court-
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:-
(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the court to be just and convenient, and the court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.â (Emphasis supplied) Section 36 of the Principal Act reads as under :
â36. Enforcement.-Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.â
13. Indisputably, the Amendment Act, 2015 came into being on 23.10.2015 and before that date, in the present case arbitration proceedings had commenced. Admittedly, appeals under Section 34 were filed by the parties before the competent court before Amending Act came into being. Section 26 of the Amendment Act reads as under:
â26. Act not apply to pending arbitral proceedings.- Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.â (Emphasis supplied) Section 26 aforesaid begins with negative words. The language employed in Section 26 makes it clear that the Amendment Act shall not apply to the arbitral proceedings commenced as per Section 21 of the Principal Act unless the parties otherwise agree. In the present case, no such agreement which has been otherwise arrived at is shown to this court nor it is the case of the parties that they otherwise agreed that the Amendment Act shall apply in relation to present arbitral proceedings. A plain reading of Section 26 makes it crystal clear that provisions contained in the Amendment Act will not apply to the proceedings which were commenced before the amendment was introduced. However, the provisions of Amendment Act shall apply in relation to arbitral proceedings commenced on or after the date, the Amendment Act became part of the Statute Book.
14. I find support in my view from the judgment of Supreme Court reported in 1999 (9) SCC 334 (Thyssen Stahlunion Gambh vs. Steel Authority of India Ltd.). The Apex Court assigned following reasons while interpreting Section 85 of the Arbitration Act:
â22. For the reasons to follow, we hold:
1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before the coming into force of the new Act (the Arbitration and Conciliation Act, 1996).
2. The phrase âin relation to arbitral proceedingsâ cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising thereunder.
3. In cases where arbitral proceedings have commenced before the coming into force of the new Act and are pending before the arbitrator, it is open to the parties to agree that the new Act be applicable to such arbitral proceedings and they can so agree even before the coming into force of the new Act.
4. The new Act would be applicable in relation to arbitral proceedings which commenced on or after the new Act comes into force.
5. Once the arbitral proceedings have commenced, it cannot be stated that the right to be governed by the old Act for enforcement of the award was an inchoate right. It was certainly a right accrued. It is not imperative that for right to accrue to have the award enforced under the old Act some legal proceedings for its enforcement must be pending under that Act at the time the new Act came into force.
6. If a narrow meaning of the phrase âin relation to arbitral proceedingsâ is to be accepted, it is likely to create a great deal of confusion with regard to the matters where award is made under the old Act.
Provisions for the conduct of arbitral proceedings are vastly different in both the old and the new Act. Challenge of award can be with reference to the conduct of arbitral proceedings. An interpretation which leads to unjust and inconvenient results cannot be accepted.
7. A foreign award given after the commencement of the new Act can be enforced only under the new Act. There is no vested right to have the foreign award enforced under the Foreign Awards Act [Foreign Awards (Recognition and Enforcement) Act, 1961].â
15. In the case of Thyssen Stahlunion Gmbh(Supra), it was further held that the phrase âin relation to arbitral proceedingsâ cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising thereunder. The contention that if it is accepted that the expression âin relation to arbitral proceedingsâ would include proceedings for the enforcement of the award as well, the second limb of Section 85(2)(a) would become superfluous and cannot be accepted. It is further laid down that Section 82(2)(a) is the saving clause. It exempts the old Act from complete obliteration so far as pending arbitration proceedings are concerned. That would include saving of whole of the old Act up till the time of the enforcement of the award. Thus Section 82(2)(a) prevents the accrued right under the old Act from being affected. Saving provision preserves the existing right accrued under the old Act. Once the arbitral proceedings have commenced, it cannot be stated that the right to be governed by the old Act for enforcement of the award was an inchoate right. It was certainly a right accrued. It is not imperative that for right to accrue to have the award enforced under the old Act some legal proceedings for its enforcement must be pending under that Act at the time the new Act came into force.
16. In the light of Section 26 of the Act of 1996 and the principles laid down by the Supreme Court, I have no scintilla of doubt that the Amendment Act and provisions contained therein will not apply to the present arbitral proceedings which were admittedly commenced before 23 rd October, 2015, the date when Amendment Act became part of the Statute Book.
17. No doubt, the contention of Shri V.R. Rao, learned senior counsel is justifiable wherein he has contended that as per Section 36 of the Principal Act, if an application under Section 34 has already been filed, unless such application is refused, the award cannot be enforced. In other words, since in the present case an application under Section 34 has already been filed by the present appellant before the expiry of time and such application is pending, the award cannot be enforced as per Section 36 of the Principal Act. However, it is equally important to note the language employed in Section 9 of the Principal Act. It provides that a party may apply for grant of interim measure (i) during arbitral proceedings or (ii) at any time after the making of arbitral award but before its enforcement in accordance with Section 36. The second part (ii) is squarely attracted in the present case. In my view, legislative intent is to equip the courts to pass appropriate orders as envisaged in various sub clauses of Section 9 during arbitral proceedings or after making of the award and till its enforcement. In the present case, the award was passed on 30.1.2016 and it was rectified on 24.8.2016. The award is yet to be enforced in accordance with Section 36. Between this period, an application under Section 9 is very much maintainable. There is no legal impediment for the court for exercising powers under Section 9 if application under Section 34 is pending before the appellate court. Section 9(b) gives power to the court to pass appropriate order for securing the amount in dispute in the arbitration.
18. The argument of learned senior counsel Shri Rao is that since application under Section 34 is pending, the award gets is automatically stayed. Even if this argument is accepted, the only effect would be that award would be in existence but its execution will remain suspended for the time being. The award will not vanish in thin air. The distinction between setting aside an order and quashing of an order is well settled. In 1992 (3) SCC 1 (Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association CSI Cinod Secretariat, Madras), the Apex Court held as under :
âWhile considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence.â This principle is followed by the Division Bench of this court in 2008 (1) MPLJ 577 (Kunal Kanti Majee vs. Chancellor, Rani Durgawati Vishwavidyalaya, Jabalpur and others). Thus, in my view, the award is very much in existence and only its enforcement will remain suspended by operation of Section 34 of the Principal Act till decision of application under Section 34 of the Act. Thus awarded amount cannot be given to respondent No.1 but this will not preclude the court to pass appropriate orders to secure the amount.
19. A conjoint reading of Section 9 and 34 of the Act makes it clear that there was no impediment for the court below for exercising the power under Section 9 of the Principal Act when application under Section 34 is pending before the appellate court. A plain reading of Section 9 makes it clear that interim relief can be granted after making of arbitral award and before its actual enforcement. This is trite that if language of Statute is clear, plain and unambiguous i.e. it is reasonably susceptible to only one meaning, the courts can give effect to that meaning irrespective of consequences (AIR 1992 SC 1281, Nelson Motis vs. Union of India and another). I also find support from the judgment of Delhi High Court 2011 SCC Online DEL 3689 (Steel Authority of India Ltd. vs. AMCI PTY. Ltd. and another) wherein the court opined that Section 9 of the Act in terms states that âa party may, before or during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to the court.....â. Therefore the power of the court under Section 9 is not limited only in respect of such cases, where the arbitral proceedings have either not commenced or are in progress. It extends to even such cases where an arbitral award has come into existence, but is still not in the process of being enforced under Section 36 of the Act. By virtue of Section 36 of the Act, an arbitral award cannot be enforced where an application to assail the arbitral award under Section 34 of the Act is pending disposal. Thus, I am unable to hold that court below has committed any jurisdictional error in exercising power under Section 9 of the Principal Act.
20. The second question raised by Shri Rao, learned senior counsel is relating to procedural impropriety and perversity. The case of appellant is that there was no clinching evidence before the court below which establishes that the appellant may flee the country and in absence of any such strong evidence, the interim relief could not have been granted. The principles laid down by Supreme Court in this regard in Adhunik Steels Ltd. and Arvind Construction Company Ltd.(Supra) cannot be doubted. For getting an interim relief, the party must make out a case in consonance with principles laid down in the said judgments. However, so far the question of submitting the proof of appellant leaving country is concerned, in my view, no such clinching proof was required. The court has to gather it on the basis of facts and circumstances of each case. The decision to leave the country is normally a unilateral decision which takes shape in the back of somebody's mind. The other party cannot get clinching proof of such intention of other party. It was not in dispute that at present the appellant is not running any project. Shri Rao contended that certain bills with respondent No.2 are pending. In absence of finalizing those bills which are of few crores, the question of leaving country by the appellant does not arise. In my view, at present, appellant has failed to show that it is running any on-going project. The defence of the appellant is that he had certain pending bills with respondent No.2 which are to be realized.
21. The question is whether the court below has committed any error in directing the appellant to deposit the amount of Rs.7,50,00,000/-. At the cost of repetition, in my view, the court below passed its order in the peculiar facts and circumstances of the case. Since no project is there in the hands of the appellant, the court below did not rule out the possibility of appellant's leaving the country and in order to secure the awarded amount passed the interim order. In my view necessary ingredients for passing the interim order were available before the court below. This was not in dispute that arbitrator has awarded Rupees Seven Crore fifty lacs in favour of Respondent No.1. The respondent No.1 prima facie established before the court below that there exists an awarded amount which needs to be protected. In order to prevent irreparable loss to respondent No.1, court exercised its power flowing from Section 9 of the principle Act. The element of balance of convenience was also there because in the event of success of appellant in his application under section 34 of the Act, the amount so deposited shall be returned back to him.
22. As noticed, the court below is competent to pass such orders under Section 9 of the principal Act. In the peculiar facts and circumstances of this case, the court was justified in passing such order. If a minor defence or a document is not discussed in the impugned order by the court below, it will not make much difference. The court below has passed the order as per the Arbitration Act and; more particularly, as per the requirement of Section 9(b) of the principal Act. I do not find any jurisdictional error, procedural impropriety or palpable perversity which warrants interference by this court. The court below has taken a plausible view which is based on material on record. On the basis of foregoing analysis, I find no reason to disturb the impugned order dated 22.3.2017 Annexure A/1.
23. Consequently, the appeal fails and is hereby dismissed. No cost.
(SUJOY PAUL) JUDGE MKL