Babasaheb Ambedkar Open University vs Abhinav Knowledge Services Private ... on 8 July, 2019

[Cites 23, Cited by 1]

Gujarat High Court

Babasaheb Ambedkar Open University vs Abhinav Knowledge Services Private ... on 8 July, 2019

Bench: R.M.Chhaya, B.N. Karia

       C/FA/1632/2019                                        IA ORDER



        IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

           CIVIL APPLICATION (FOR STAY) NO. 1 of 2019
                               In
                 R/FIRST APPEAL NO. 1632 of 2019
                              With
 CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 2 of 2019
                               In
                 R/FIRST APPEAL NO. 1632 of 2019
==========================================================

BABASAHEB AMBEDKAR OPEN UNIVERSITY Versus ABHINAV KNOWLEDGE SERVICES PRIVATE LIMITED ========================================================== Appearance:

MR KAMAL B TRIVEDI, SENIOR ADVOCATE assisted by MR MITUL SHELAT and MS DISHA N NANAVATY for the APPELLANT(s) No. MR NIRAV C THAKKAR for the RESPONDENT(s) No. ========================================================== CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA and HONOURABLE MR.JUSTICE B.N. KARIA Date : 08/07/2019 COMMON IA ORDER (PER : HONOURABLE MR.JUSTICE R.M.CHHAYA)

1. Both these Civil Applications relate to the same issue involved in the First Appeal and both the Civil Applications were therefore heard together and are disposed of by this common order. The parties as mentioned in the order are as per their position in the First Appeal.

2. Civil Application no.1 of 2019 is filed by the appellant, wherein it is, interalia, prayed as under: Page 1 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER "A) Pending admission, disposal and final hearing of the present First Appeal, this Hon'ble Court may be pleased to stay the further proceedings between the Applicant and the Opponent pending before the Learned Sole Arbitrator (Hon'ble Justice (Rtd) Ms. R.M. Doshit (A Former Chief Justice of Patna High Court);"

3. Civil Application no.2 of 2019 is filed by the respondent, interalia, praying for vacating the interim relief granted to the original applicant vide order dated 16.4.2019 passed in Civil Application no.1 of 2019.

4. The following noteworthy facts arising in these Civil Applications are as under: 4.1 That, the appellant is a University established by Act 14 of 1994 passed by the State Legislature and it has come into existence on 27.7.1994 with a purpose to create the infrastructure to promote digital literacy in all parts of Gujarat, more particularly, remote areas. The respondent herein entered into Public Private Partnership Agreement dated 24.10.2011 (hereinafter referred to as "the agreement") signed between the University and the respondent and its partners for a globally competitive ICT enabled educational course. As per the said Page 2 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER agreement, the respondent was to print and supply the study material to the University and to distribute amongst the students. As per Clause 8 of the said agreement, the parties were to share the fees. Record indicates that somewhere in January, 2014, the appellant- University through its faculties were reported that the study material supplied by the respondent was plagiarized. As per the said agreement, respondent no.1 to supply such material in association with ICTU and ICITD. Record further indicates that by a communication dated 27.1.2014, the respondent intimated the University that they have terminated the association with ICTU and ICITD with effect from February, 2014. The appellant - University, by a further communication dated 3.2.2014, intimated the respondent informing about plagiarism. By a further communication dated 7.6.2014, the appellant addressed a letter regarding verbatim usage of material from the site www.gcflearnfree.org without obtaining no objection from the owner of the said site. The University thereafter constituted a Committee and the respondent was also allowed to make its submissions before the said Committee. After considering the material before it, the said Committee recommended that reputation of the University has been jeopardized by the Page 3 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER respondent by not developing original material for CCC programme as per the said agreement but instead copiedpasted the material available on the website. From the record, the said agreement was terminated with effect from 18.6.2014, which was accepted by the respondent vide communication dated 19.6.2014. As disputes and differences arose after termination of the said agreement, the parties agreed to refer the dispute to learned sole arbitrator - Mr. R.A. Patel. The parties appeared before the said arbitrator and the said proceedings culminated into the award dated 2.7.2014. Record shows that the appellant as well as the respondent accepted the same and acted as per the award and the award was implemented.

4.2 As the record indicates, the respondent again invoked arbitration clause for the second time and as the appellant did not agree, the respondent approached this Court by way of filing IAAP no.89 of 2016 and this Court (Coram: Hon'ble Mr. Justice Akil Kureshi, as he then was) allowed the said petition. The Court was pleased to appoint Hon'ble Ms. Justice R.M. Doshit, Former Hon'ble the Chief Justice of Patna High Court as sole arbitrator. In the said order, the Court permitted the appellant to raise issue of res Page 4 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER judi cata before the learned arbitrator. The appellant filed an application below Exh.7 before the learned arbitrator under Section 16 of the Act (hereinafter referred to as "the Act") and contended that the present arbitration proceedings are barred by principle of resjudi cata. The said application Exh.7 came to be rejected by the learned sole arbitrator vide order dated 3.8.2018 and as per the appellant, it being an interim award, the appellant approached the Commercial Court, Ahmedabad by filing proceedings under Section 34 of the Act and the Commercial Court, by the impugned order dated 1.4.2019, was pleased to dismiss the said application permitting the appellant to take plea of resjudi cata and applicability of Order II Rule 2 of the Code of Civil Procedure, 1908 at the time of challenging the final award. Being aggrieved by the said order, present appeal is filed by the appellant under Section 37 of the Act. The appeal came to be admitted by this Court vide order dated 16.4.2019 and by an order dated 16.4.2019 passed in Civil Application no.1 of 2019, this Court was pleased to grant ad interim relief, whereby further proceedings before the learned Arbitral Tribunal came to be stayed. Civil Application no.1 of 2019 is therefore for confirmation of the adinterim Page 5 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER relief, whereas Civil Application no.2 of 2019 is for vacation of the adinterim relief.

5. Heard Mr. Kamal B. Trivedi, learned Senior Advocate assisted by Mr. Mitul Shelat and Ms. Disha Nanavaty, learned advocates for the appellant and Mr. Nirav C. Thakkar, learned advocate for the respondent.

6. Mr. Kamal B. Trivedi, learned Senior Advocate for the appellant has taken this Court through the factual matrix arising out of these applications and submitted that the respondent in fact accepted the termination of the agreement dated 18.6.2014 with effect from 18.6.2014 which is quite evident from the letter of the respondent dated 19.6.2014. It was submitted that the award passed by the learned arbitrator - Mr. R.A. Patel was accepted by both the parties and both the parties have acted upon the same. It was further submitted that pursuant to the award passed, the appellant has paid an amount of Rs.1,18,95,350/ to the respondent. Referring to the correspondence between the parties which is on record of the appeal, Mr. Trivedi submitted that both the parties in fact agreed before the learned arbitrator - Mr. R.A. Patel and accordingly, the award was passed. It was further submitted that having acted upon as Page 6 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER per the award and having accepted the award, the respondent cannot invoke arbitration clause for the second time. Referring to the judgment passed by this Court in petition under Arbitration Act no.89 of 2016 dated 7.7.2017, it was contended that even while appointing the learned arbitrator - Hon'ble Ms. Justice R.M. Doshit, this Court has specifically provided that the plea of res judi cata was kept open and accordingly, the appellant filed an application under Section 16 of the Act before the learned arbitrator in second arbitral proceedings. It was further contended that in fact, in the first arbitral proceedings, the very claims were filed by the respondent and the same have been adjudicated which relates to discontinuation of the agreement and therefore, the second arbitral proceedings are barred by resjudi cata/constructive resjudi cata. It was further contended that the aspect of preliminary objection as regards resjudi cata/constructive resjudi cata has been finally and conclusively held not barred by resjudi cata by the impugned order and hence, the aspect of resjudi cata/constructive res judi cata stands finally concluded and therefore, the impugned award is an interim award and hence, the present proceedings are maintainable under Section 37 of the Act. It Page 7 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER was further contended that during the first arbitral proceedings, even though the appellant was not supposed to file any statement of claim, it filed the statement of claim and the respondent also filed their counter claim and all the claims made by both the parties were adjudicated and the first arbitral award 2.7.2014 was passed, which has been acted by the parties. It was further contended that the respondent, having received amount of Rs.1,18,95,350/ in acceptance of the first arbitral award, cannot now be permitted to invoke the arbitral clause again for the second time.

6.1 Mr. Trivedi further submitted that even the issues now raised by the respondent in the application for vacation of interim relief are squarely covered by the judgments of the Hon'ble Supreme Court in the cases of Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, (2018) 2 SCC 534 and State of Bihar & Ors. v. Bihar Rajya Bhumi Vikas Bank Samiti, (2018) 9 SCC 472. Mr. Trivedi, relying upon the judgment of State of Bihar & Ors. (supra) contended that the Hon'ble Supreme Court has held that the requirement of Section 34(5) of the Act is directory and not mandatory. It was further contended that in Page 8 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER fact, point of resjudi cata has been finally concluded by the learned arbitrator and its order on the aspect of resjudi cata has become final and therefore, the order passed by the learned arbitrator is an interim award as defined under Section 2(c) of the Act.

6.2 Mr. Trivedi, relying upon the proceedings of the first arbitral proceedings which culminated into first arbitral award dated 2.7.2014, contended that both the parties agreed to appoint Mr. R.A. Patel as the learned arbitrator. All the points were submitted before the learned arbitrator and even points which were raised as regards discontinuation of the agreement and the points now sought to be raised by the respondent in the second arbitration proceedings have been considered by the learned arbitrator in the first arbitral proceedings and having accepted the award and having acted upon it, the respondent cannot now be permitted to reagitate the whole issue. Mr. Trivedi also relied upon the judgment of the Delhi High Court in the case of M/s. Cinevistaas Ltd. v. M/s. Prasar Bharti, rendered in O.M.P. (COMM) no.31/2017 and I.A. no.13479/2018 dated 12.2.2019 and contended that the proceedings by way of present First Appeal under Section 37 of the Page 9 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER Act is maintainable and this Court has rightly granted adinterim relief in Civil Application no.1 of 2019 which deserves to be confirmed. It was further contended that the contentions raised in Civil Application no.2 of 2019 filed by the respondent for vacation of the interim relief deserves to be dismissed.

7. Per contra, Mr. Nirav Thakkar, learned advocate for the respondent has submitted that the order dated 16.4.2019 passed by this Court in Civil Application no.1 of 2019 deserves to be vacated. It was contended that the impugned order passed by the learned arbitrator under Section 16 of the Act cannot be termed as interim award as the proceedings under Section 37 of the Act by way of this appeal are not maintainable. It was contended that the interim order granted, whereby the proceedings before the arbitrator have been stayed, is contrary to the provisions of the Act and such an interlocutory order cannot be made subject matter of successive challenges. It was further contended that no notice was given to other side as provided under Sections 34(5) and 34(6) of the Act and there is a breach of Sections 34(5) and 34(6) of the Act and therefore, the present appeal itself is not maintainable and hence, the adinterim relief granted deserves to be vacated immediately. It Page 10 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER was further contended that mandatory procedure as prescribed under the Act is not adhered to by the appellant and therefore, the present appeal itself deserves to be dismissed and hence, the adinterim relief granted earlier deserves to be vacated forthwith. It was further contended that the proceedings before the Arbitral Tribunal deserves to be continued and cannot be stayed as the same is against the very purpose of the provisions of the Act. It was contended that the plea of resjudi cata has been examined by the learned arbitrator and it has come to the conclusion that the same is not barred by principle of resjudi cata which can be challenged only when the final award is passed. It was also contended that it is not an interim award as defined under the Act and even the Commercial Court has provided that such challenge can be made along with the challenge to the final award and therefore, the adinterim relief granted by this Court deserves to be vacated. It was also contended that the respondent has got a very good case on merits and as the appeal itself is not maintainable, the arbitral proceedings are not barred by principle of resjudi cata. It was also contended that first arbitral proceedings did not decide the issues which are now raised by the respondent and therefore also, the second Page 11 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER arbitral proceedings are not barred by principle of resjudi cata or constructive resjudi cata. It was reiterated by Mr. Thakkar that if the adinterim relief is continued, the same would be against the provisions of the Act and the same deserves to be vacated forthwith by dismissing Civil Application no.1 of 2019 and allowing Civil Application no.2 of 2019 filed by the respondent.

8. This Court (Coram: Ms. Harsha Devani, J. and Mr. Bhargav D. Karia, J.) vide order dated 16.4.2019 passed in Civil Application no.1 of 2019 was pleased to observe thus: "1. Mr. Kamal Trivedi, Senior Advocate, learned counsel with Ms. Disha Nanavaty, learned advocate for the applicant, invited the attention of the court to the impugned order passed by the Commercial Court to submit that the decision of the Supreme Court in case of Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, (2018) 2 Supreme Court Cases 534, was duly cited before the court, however, the court has held that the factual position in that decision was different and that in that case, the order was passed by the arbitrator after framing of issue of limitation. Thus, the order passed on the issue of limitation falls within the ambit and scope of Page 12 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER interim award. But in the present case, the sole arbitrator has passed the order on the application filed by the applicant under section 16 of the Arbitration and Conciliation Act and therefore, the ratio of that decision would not be applicable. It was submitted that the plea taken by the applicant before the learned arbitrator as well as before the Commercial Court is as regards the principle of res judicata. The attention of the court was invited to the award dated 2.7.2014 made by the learned arbitrator during the course of the first arbitration proceeding, wherein it has been recorded thus:

"31. It appears that ultimately, even the Committee also found that as submitted by the members of the faculty the study material is plagiarized. It appears that therefore, finally the Committee decided to put an end to the PPP and to have the arbitration about the payment or nonpayment of share of AKS, from the fees received from the students, for the course of February, 2014 and accordingly BAOU decided to discontinue the PPP agreement further and informed accordingly to AKS, the AKS did not dispute the same and accepted the discontinuation of the agreement further. This appears from the correspondence between BAOU and AKS on record."

2. It was further pointed out that the learned arbitrator has recorded that when Incharge Registrar Mr. Shah informed AKS about Page 13 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER discontinuation of PPP agreement with immediate effect vide his letter dated 18.06.2014, AKS agreed for the same vide its letter dated 19.6.2014. It was submitted that ultimately the learned arbitrator had held that withholding of 100% share of fees (35%) to be paid to AKS by BAOU is not justified and at the same time the payment of 100% share by BAOU to AKS would also not be justified in the facts and circumstances of the case, and therefore, let BAOU pay fees share (35%) to AKS by deducting Rs.200/per student from the payment to be made immediately on giving undertaking/indemnity bond to be given by AKS. It was submitted that in compliance with the said direction, undertaking/indemnity bond was also issued. It was submitted that in the previous arbitral proceeding, the respondent had filed its counter claim raising identical issues which have been raised in the present proceedings and the learned arbitrator by the award dated 2.7.2014 has directed the appellant to pay the amount referred to hereinabove to the respondent. It was submitted that if the respondent was aggrieved by the said award, it was open for it to challenge the same by an application under section 34 of the Act.

However, the respondent having given up the challenge to the decision of the appellant to put an end to the PPP in the previous arbitral proceedings, it is no longer open for the petitioner to file a fresh application challenging the same in view of the bar of res judicata. It Page 14 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER was submitted that the Arbitral Tribunal was not justified in holding that the subsequent proceedings are not barred by res judicata. It was contended that the Commercial Court has misread the decision of the Supreme Court in Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products (supra) while arriving at the conclusion that it is only when a question of limitation is to be considered that the award can be said to be an interim award.

3. Having regard to the submissions advanced by the learned counsel for the applicant and more particularly, in view of the decision of the Supreme Court in Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products (supra) wherein reference has been made to an earlier decision of the Supreme Court in Pandurang Dhondi Chougale v. Maruti Hari Jadhav, AIR 1966 SC 153, for the proposition that it is well settled that a plea of res judicata is a plea of law which concerns the jurisdiction of the court which tries proceedings, this court is of the view that a prima facie case has been made out for grant of ad interim relief.

4. Issue Notice returnable on 7.5.2019.

5. By way of ad interim relief, further proceedings before the Arbitral Tribunal in the matter of Abhinav Knowledge Services Pvt. Ltd. v. Dr. Babasaheb Ambedkar Open University are hereby stayed."

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C/FA/1632/2019 IA ORDER

9. Section 2(c) of the Act provides thus: ""arbitral award" includes an interim award;"

10. It would also be appropriate to refer to the judgment dated 7.7.2017 passed by this Court in IAAP no.89/2016, wherein the respondent has filed an application under Section 11 of the Act for appointment of arbitrator, wherein it is observed thus: "20. In the present case, the petitioner raised multiple disputes. In view of the earlier agreement between the parties to refer the question of fee share of the petitioner to the arbitrator, a fundamental question would arise whether the petitioner could and therefore, ought to have raised all these claims before the same arbitrator? The case of the petitioner is that certain materials and information were not available with the petitioner to give full idea of the extent to which the petitioner's software was utilised by the University without reimbursing the petitioner at the agreed rates. This is not to suggest that I am accepting prima facie any of the assertions of the petitioner in this respect. This is only to record that these assertions would require leading of evidence and decision on merits before they can be accepted or rejected. This is therefore, only to Page 16 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER suggest that arbitral disputes have arisen between the parties which needs to be referred for arbitration. The question whether such disputes can be held to be barred by principle of resjudicata or constructive resjudicata, must be kept open for the arbitrator to decide."

11. By an order dated 24.6.2018 passed by the learned arbitrator below Exh.7, the preliminary objection raised by the appellant herein came to be rejected. Prima facie therefore, the issue on resjudi cata/ constructive resjudi cata stands concluded finally. Therefore, in opinion of this Court, as far as the aspect of resjudi cata/constructive resjudi cata is concerned, the order passed below Exh.7 gets concluded. The Hon'ble Apex Court in the case of Indian Farmers Fertilizer Cooperative Limited (supra) has observed thus: "6. The point at issue is a narrow one: whether an award on the issue of limitation can first be said to be an interim award and, second, as to whether a decision on a point of limitation would go to jurisdiction and, therefore, be covered by Section 16 of the Act.

11. By reading this section, it becomes clear that more than one award finally determining any particular issue before the arbitral tribunal can be made on different Page 17 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER aspects of the matters to be determined. A preliminary issue affecting the whole claim would expressly be the subject matter of an interim award under the English Act. The English Act advisedly does not use the expression "interim" or "partial", so as to make it clear that the award covered by Section 47 of the English Act would be a final determination of the particular issue that the arbitral tribunal has decided.

15. Tested in the light of the statutory provisions and the case law cited above, it is clear that as the learned Arbitrator has disposed of one matter between the parties i.e. the issue of limitation finally, the award dated 23 rd July, 2015 is an "interim award" within the meaning of Section 2(1)(c) of the Act and being subsumed within the expression "arbitral award" could, therefore, have been challenged under Section 34 of the Act.

24. Interestingly, in a separate concurring judgment, P.K. Balasubramanyan, J., held:

"17. In the larger sense, any refusal to go into the merits of a claim may be in the realm of jurisdiction. Even the dismissal of the claim as barred by limitation may in a sense touch on the jurisdiction of the court or tribunal. When a claim is dismissed on the ground of it being barred by limitation, it will be, in a sense, a case of the court or tribunal refusing to exercise jurisdiction to go into the merits of the claim. In Page 18 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER Pandurang Dhoni Chougule v. Maruti Hari Jadhav [AIR 1996 SC 153 : (1996) 1 SCR 102] this Court observed that:

(AIR p. 155, para 10) "10. ... It is well settled that a plea of limitation or a plea of res judicata is a plea of law which concerns the jurisdiction of the court which tries the proceedings. A finding on these pleas in favour of the party raising them would oust the jurisdiction of the court, and so, an erroneous decision on these pleas can be said to be concerned with questions of jurisdiction which fall within the purview of Section 115 of the Code."

In a particular sense, therefore, any declining to go into the merits of a claim could be said to be a case of refusal to exercise jurisdiction.

18. The expression "jurisdiction" is a word of many hues. Its colour is to be discerned from the setting in which it is used. When we look at Section 16 of the Act, we find that the said provision is one, which deals with the competence of the Arbitral Tribunal to rule on its own jurisdiction. SBP & Co. v. Patel Engg. Ltd. [(2005) 8 SCC 618] in a sense confined the operation of Section 16 to cases where the Arbitral Tribunal was constituted at the instance of the parties to the contract without reference to the Chief Justice under Section 11(6) of the Act. In a case where the parties had thus constituted the Arbitral Tribunal without recourse to Section 11(6) of the Act, they still have the Page 19 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER right to question the jurisdiction of the Arbitral Tribunal including the right to invite a ruling on any objection with respect to the existence or validity of the arbitration agreement. It could therefore rule that there existed no arbitration agreement, that the arbitration agreement was not valid, or that the arbitration agreement did not confer jurisdiction on the Tribunal to adjudicate upon the particular claim that is put forward before it. Under subsection (5), it has the obligation to decide the plea and where it rejects the plea, it could continue with the arbitral proceedings and make the award. Under subsection (6), a party aggrieved by such an arbitral award may make an application for setting aside such arbitral award in accordance with Section 34. In other words, in the challenge to the award, the party aggrieved could raise the contention that the Tribunal had no jurisdiction to pass it or that it had exceeded its authority, in passing it. This happens when the Tribunal proceeds to pass an award. It is in the context of the various subsections of Section 16 that one has to understand the content of the expression "jurisdiction" and the scope of the appeal provision. In a case where the Arbitral Tribunal proceeds to pass an award after overruling the objection relating to jurisdiction, it is clear from subsection (6) of Section 16 that the parties have to resort to Section 34 of the Act to get rid of that award, if possible. But, if the Tribunal declines jurisdiction or declines to pass an award and Page 20 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER dismisses the arbitral proceedings, the party aggrieved is not without a remedy. Section 37(2) deals with such a situation. Where the plea of absence of jurisdiction or a claim being in excess of jurisdiction is accepted by the Arbitral Tribunal and it refuses to go into the merits of the claim by declining jurisdiction, a direct appeal is provided. In the context of Section 16 and the specific wording of Section 37(2)(a) of the Act, it would be appropriate to hold that what is made directly appealable by Section 37(2)(a) of the Act is only an acceptance of a plea of absence of jurisdiction, or of excessive exercise of jurisdiction and the refusal to proceed further either wholly or partly.

19. In a case where a counterclaim is referred to and dealt with and a plea that the counterclaim does not survive in view of the settlement of disputes between the parties earlier arrived at is accepted, it could not be held to be a case of refusal to exercise jurisdiction by the Arbitral Tribunal. Same is the position when an Arbitral Tribunal finds that a claim was dead and was not available to be made at the relevant time or that the claim was not maintainable for other valid reasons or that the claim was barred by limitation. They are all adjudications by the Tribunal on the merits of the claim and in such a case the aggrieved party can have recourse only to Section 34 of the Act and will have to succeed on establishing any of the grounds available under that provision. It would not be open to that party to Page 21 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER take up the position that by refusing to go into the merits of his claim, the Arbitral Tribunal had upheld a plea that it does not have jurisdiction to entertain the claim and hence the award or order made by it, comes within the purview of Section 16(2) of the Act and consequently is appealable under Section 37(2)(a) of the Act."

25. This judgment is determinative of the issue at hand and has our respectful concurrence. However, various judgments were referred to by learned senior advocate appearing on behalf of the respondent, in which "jurisdiction" in the wide sense was used. Thus, a jurisdictional error under Section 115 of the Code of Civil Procedure, 1908, dealing with revision petitions, was held to include questions which relate to res judicata and limitation. [See Pandurang Dhoni Chougule v. Maruti Hari Jadhav (1966) 1 SCR 102 at

107)].

30. In our view, therefore, it is clear that the award dated 23 rd July, 2015 is an interim award, which being an arbitral award, can be challenged separately and independently under Section 34 of the Act. We are of the view that such an award, which does not relate to the arbitral tribunal's own jurisdiction under Section 16, does not have to follow the drill of Section 16(5) and (6) of the Act. Having said this, we are of the view that Parliament may consider amending Section 34 of the Act so as to consolidate all interim awards together with the final Page 22 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER arbitral award, so that one challenge under Section 34 can be made after delivery of the final arbitral award. Piecemeal challenges like piecemeal awards lead to unnecessary delay and additional expense."

12. Considering the ratio laid down by the Hon'ble Apex Court in the case of Indian Farmers Fertilizer Cooperative Limited (supra), the order passed below Exh.7 is an interim award and the same is amenable to challenge under Section 34 of the Act. As far as the objections raised by Mr. Thakkar are concerned, in the case of State of Bihar (supra), the Hon'ble Apex Court has held that the requirement of Sections 34(5) and 34(6) of the Act are directory in nature and not mandatory. The Hon'ble Apex Court has observed thus: "6. Section 34(5) and (6) are set out hereunder as follows:

"34. Application for setting aside arbitral award.--

xxx xxx xxx (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

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C/FA/1632/2019 IA ORDER (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in subsection (5) is served upon the other party."

7. There is no doubt whatsoever that the language of Section 34 does lend itself in support of the argument of Shri Tripathi, as the expressions used are "shall", "only after" and "prior notice" coupled with such application which again "shall" be accompanied by an affidavit endorsing compliance.

8. The 246th Law Commission Report, which introduced the aforesaid provision, also makes interesting reading, which is set out hereinbelow:

"3. The Arbitration and Conciliation Act, 1996 (hereinafter "the Act") is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980. The Act has now been in force for almost two decades, and in this period of time, although arbitration has fast emerged as a frequently chosen alternative to litigation, it has come to be afflicted with various problems including those of high costs and delays, making it no better than either the earlier regime which it was intended to replace; or to litigation, to which it intends to provide an alternative. Delays are inherent in the arbitration process, and costs of arbitration can be tremendous. Even though courts play a Page 24 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER pivotal role in giving finality to certain issues which arise before, after and even during an arbitration, there exists a serious threat of arbitration related litigation getting caught up in the huge list of pending cases before the courts. After the award, a challenge under section 34 makes the award inexecutable and such petitions remain pending for several years. The object of quick alternative disputes resolution frequently stands frustrated.

4. There is, therefore, an urgent need to revise certain provisions of the Act to deal with these problems that frequently arise in the arbitral process. The purpose of this Chapter is to lay down the foundation for the changes suggested in the report of the Commission. The suggested amendments address a variety of issues that plague the present regime of arbitration in India and, therefore, before setting out the amendments, it would be useful to identify the problems that the suggested amendments are intended to remedy and the context in which the said problems arise and hence the context in which their solutions must be seen.

xxx xxx xxx

25. Similarly, the Commission has found that challenges to arbitration awards under sections 34 and 48 are similarly kept pending for many years. In this context, the Commission proposes the addition of sections 34(5) and 48(4) which would Page 25 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER require that an application under those sections shall be disposed of expeditiously and in any event within a period of one year from the date of service of notice. In the case of applications under section 48 of the Act, the Commission has further provided a time limit under section 48(3), which mirrors the time limits set out in section 34(3), and is aimed at ensuring that parties take their remedies under this section seriously and approach a judicial forum expeditiously, and not by way of an afterthought ............"

21. Section 80, though a procedural provision, has been held to be mandatory as it is conceived in public interest, the public purpose underlying it being the advancement of justice by giving the Government the opportunity to scrutinize and take immediate action to settle a just claim without driving the person who has issued a notice having to institute a suit involving considerable expenditure and delay. This is to be contrasted with Section 34(5), also a procedural provision, the infraction of which leads to no consequence. To construe such a provision as being mandatory would defeat the advancement of justice as it would provide the consequence of dismissing an application filed without adhering to the requirements of Section 34(5), thereby scuttling the process of justice by burying the element of fairness.

22. However, according to Shri Tripathi, an application filed under Page 26 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER Section 34 is a condition precedent, and if no prior notice is issued to the other party, without being accompanied by an affidavit by the applicant endorsing compliance with the said requirement, such application, being a nonstarter, would have to be dismissed at the end of the 120 days' period mentioned in Section 34(3). Apart from what has been stated by us hereinabove, even otherwise, on a plain reading of Section 34, this does not follow. Section 34(1) reads as under:

"34. Application for setting aside arbitral award.--(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and subsection (3)."

What is conspicuous by its absence is any reference to subsection (5). The only requirement in Section 34(1) is that an application for setting aside an award be in accordance with sub sections (2) and (3). This, again, is an important pointer to the fact that even legislatively, sub section (5) is not a condition precedent, but a procedural provision which seeks to reduce the delay in deciding applications under Section 34. One other interesting thing needs to the noted - the same Amendment Act brought in a new Section 29A. This provision states as follows:

"29A. Time limit for arbitral award.--

(1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the Page 27 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER reference. Explanation.-- For the purpose of this subsection, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.

(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

(3) The parties may, by consent, extend the period specified in sub section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in subsection (1) or the extended period specified under subsection (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

Provided that while extending the period under this sub section, if the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay."

23. It will be seen from this provision that, unlike Section 34(5) Page 28 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER and (6), if an Award is made beyond the stipulated or extended period contained in the Section, the consequence of the mandate of the Arbitrator being terminated is expressly provided. This provision is in stark contrast to Section 34(5) and (6) where, as has been stated hereinabove, if the period for deciding the application under Section 34 has elapsed, no consequence is provided. This is one more indicator that the same Amendment Act, when it provided time periods in different situations, did so intending different consequences.

27. We may also add that in cases covered by Section 10 read with Section 14 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, the Commercial Appellate Division shall endeavour to dispose of appeals filed before it within six months, as stipulated. Appeals which are not so covered will also be disposed of as expeditiously as possible, preferably within one year from the date on which the appeal is filed. As the present appeal has succeeded on Section 34(5) being held to be directory, we have not found it necessary to decide Shri Rai's alternative plea of maintainability of the Letters Patent Appeal before the Division Bench."

13. The Delhi High Court in the case of M/s.

    Cinevistaas            Ltd.     (supra),            relying       upon         the
    decision          in    the        case        of     Indian          Farmers
    Fertilizer         Cooperative                Limited      (supra)            has


                                  Page 29 of 32

                                                            Downloaded on : Wed Jul 10 23:27:30 IST 2019
       C/FA/1632/2019                                              IA ORDER

taken a similar view and has held that the proceedings are maintainable.

14. In view of the aforesaid therefore, the present proceedings are maintainable keeping the merits of the First Appeal open for its consideration of the final hearing of the appeal. Considering the provisions of the Act and more particularly, Sections 16 and 34 of the Act, it cannot be said that stay of arbitral proceedings before the learned arbitrator is in any manner violative of any provisions of the Act. Having come to the conclusion that the order passed below Exh.7 is an interim order, the appellant has legitimate right to challenge the same before appropriate forum as the said question is finally decided by the learned arbitrator and till then, the order dated 16.4.2019 passed in Civil Application no.1 of 2019 deserves to be continued.

15. At this stage, it may be noted that this Court suggested to the learned advocates of both the parties that instead of examining the issues which are raised in Civil Application no.2 of 2019, as the interim order has continued since 16.4.2019, the First Appeal may be set down for final hearing. However, the learned advocate for the respondent, on instructions, Page 30 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER stated before the Court that the respondent intends to pursue Civil Application no.2 of 2019 first. However, it was also submitted that this Court may fix the final hearing.

16. It is also made clear that as the applications relate only to the interim relief pending the First Appeal, this Court has not devolved the aspects, on the merits, involved in the appeal and thus, the order is passed keeping in mind the observations made by this Court in its order dated 16.4.2019 only. The observations made in this order only relate to the contentions raised by both the learned advocates on the interim relief aspect only and more particularly, the requirements of Sections 34(5) and 34(6) which are held to be directory and not mandatory as well as this Court has considered the aspect that the proceedings under Section 34 of the Act are maintainable in view of the fact that the order passed below Exh.7 is an interim award as defined under the Act as it has concluded the aspect of resjudi cata/constructive res judi cata finally.

17. The appellant has been able to make out all the 3 aspects for grant of adinterim relief and hence, the interim relief granted vide order dated 16.4.2019 deserves to be continued Page 31 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019 C/FA/1632/2019 IA ORDER till final hearing of the First Appeal. Considering the totality of facts, this Court deems it fit to fix the main appeal for final hearing in the week beginning from 22.7.2019. The appellant has filed the paperbook. It is open for the respondent also to file the paperbook latest by 15.7.2019.

18. Consequently, the adinterim relief granted vide order dated 16.4.2019 passed in Civil Application no.1 of 2019 is continued till final disposal of the appeal and Civil Application no.2 of 2019 stands rejected. The parties are at liberty to take all available contentions on merits in the First Appeal. No costs.

(R.M.CHHAYA, J) (B.N. KARIA, J) MRP Page 32 of 32 Downloaded on : Wed Jul 10 23:27:30 IST 2019

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