Jharkhand High Court
The Union Of India Through The Secretary ... vs Senbo Engineering Limited Through One ... on 8 August, 2017
Equivalent citations: AIR 2018 JHARKHAND 51, 2018 (1) AJR 507 (2018) 1 JCR 271 (JHA), (2018) 1 JCR 271 (JHA)
Author: D.N. Patel
Bench: D.N. Patel
IN THE HIGH COURT OF JHARKHAND AT RANCHI
L.P.A. No. 506 of 2016
With
I.A. No. 428 of 2017
With
I.A. No. 5747 of 2017
1. The Union of India, through the Secretary, Ministry of Railways, Government
of India, Rail Bhawan, P.O. & P.S. Parliament Street, District New
Delhi110001
2. The Deputy Chief Engineer (Con)III, East Central Railway, Canary Hill
Road, Dipugarh Colony, Near Old DAV School, P.O. & P.S. Hazaribagh,
District Hazaribagh, Jharkhand
3. The General Manager, East Central Railway, having office at Zonal Office
Road, P.O. & P.S. Hajipur, District Hajipur, Bihar844102
4. The Deputy Chief Engineer/C/South, East Central Railway, Mahendrughat,
P.O. & P.S. Mahendrughat, District Patna834004, Bihar
5. The Chief Administrative Officer/C/South, East Central Railway, P.O. & P.S.
Mahendrughat, District Patna834004, Bihar ... Appellants
Versus
1. Senbo Engineering Limited, Lenin Sarani, P.O. & P.S. Lenin Sarani, District
Kolkata700013, West Bengal (now Bengal), through one of its directors
namely Sri Saktimay Chakarborty, son of Hiranmay Chakarborty, resident of
43/3/2/Baisnabghata Road, P.O. Naktala, P.S. Netaji Nagar, District Kolkata, West Bengal
2. Saktimay Chakarborty, son of Hiranmay Chakarborty, resident of 43/3/2/Baisnabghata Road, P.O. Naktala, P.S. Netaji Nagar, District Kolkata, West Bengal
3. Bank of Maharastra, N.S. Road, District Kolkata700001, West Bengal through its Branch Manager ... Respondents CORAM: HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE RATNAKER BHENGRA For the Appellants : Mr. Gautam Rakesh, Advocate For the Respondents : Mr. Indrajit Sinha, Advocate 05/ Dated: 8 th August, 2017 Oral Order Per D.N. Patel, A.C.J.:
1. This Letters Patent Appeal has been preferred by respondent no.1 in W.P.(C) No. 3987 of 2016. The learned Single Judge has disposed of the writ petition with the observation in paragraph no.11 of the order dated 7th September, 2016 granting stay against the encashment of bank guarantee till the Arbitral Tribunal/Arbitrator commences its proceeding under Arbitration and Conciliation Act, 1996.
2
2. Having heard learned counsels for both the sides and looking to the facts and circumstances of the case, it appears that respondent no.1 was given work rd order on 3 June, 2014 and the agreement was entered into between the parties on 3rd October, 2014 for construction of 7 bridges.
3. nd The work was to be completed on or before 2 June, 2016 and upto 11th July, 2016, as submitted by the learned counsel for the appellants, only 4% of the work was done.
4. It further appears from the facts of the case that two bank guarantees were given by the respondents, one for security and another for performance.
5. th The contract was terminated by the appellants on 11 July, 2016 .
6. The writ petition was preferred by the respondents being W.P.(C) No. 3987 of 2016 for quashing the termination order passed by the appellants (original respondents) dated 11th July, 2016 and second prayer was for extension of time for completion of work during pendency and final hearing of the writ petition. There was also a prayer for restraining the appellants from encashing the bank guarantees. Prayer nos. 1 and 2 were not granted by the learned Single Judge and the prayer of interim protection for encashment of bank guarantees, as sought for by the respondents (original petitioners), was granted by the learned Single Judge.
7. It has been held by the Hon'ble Supreme Court in the case of Everest Co owners, A.B.C. v. M.P. State Ware Housing Corpn., reported in (1993) 1 SCC 281 in paragraph 11, which reads as under:
"11. Counsel for the respondent also relied upon the fact that an application had been made under Section 33 challenging the existence of the arbitration agreement. This application was filed on July 6, 1991, that is, one day after the appointment of the arbitrator by the District Judge. Another application also appears to have been presented by the respondent on September 23, 1991 under Section 31(3) praying for the stay of the proceedings before the arbitrator. The application under Section 31(3) has been dismissed because 3 the respondent had not raised the objection during the pendency of the Section 20 application and because the court interpreted its own record dated April 8, 1991 as showing that both counsel had agreed to the appointment of an arbitrator by the court. The arbitrator had been directed to file the award by November 11, 1991 and already, two months had elapsed. In the circumstances, the court saw no reason to grant stay of the arbitration proceedings. The application under Section 33 itself has been kept pending as the parties asked the District Judge to decide only the question of stay. We are of opinion that the order dated September 27, 1991 refusing to stay the proceedings cannot be interfered with under Article 136. The High Court did not interfere with the order because the question of stay became academic in view of its decision setting aside the appointment of the arbitrator. But even though we have disagreed with that order and held that the appointment of the arbitrator was valid, we see no reason to interfere with the order dated September 27, 1991 refusing to grant stay of the arbitration proceedings in the circumstances set out above."
(emphasis supplied)
8. It has been held by the Hon'ble Supreme Court in the case of Pradeep Anand v. ITC Ltd., reported in (2002) 6 SCC 437 in paragraphs 11, 12, 13 and 14, which read as under:
"11. From the discussions made in the foregoing paragraphs, it is manifest that the dispute raised in the proceeding arises from and relates to the Cooperation Agreement dated 1191990 entered into between the parties. In the said Agreement it was agreed by the parties under Article 12 that "any unresolved dispute" arising in connection with this Agreement shall be settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with those rules and the arbitration shall be held at Bombay, India. The arbitration proceeding was initiated in pursuance of the express provision made in the Agreement and the arbitrator was appointed by ICC under the stipulation in the Agreement. On the materials on record the position has to be accepted, prima facie, that the Indian law is applicable to the proceeding. The proceeding is to be conducted and decided in accordance with the provisions of the Arbitration Act, 1940. We make it clear that our observation in this regard will not prevent any of the parties to raise the question, at the appropriate stage of the proceedings before the Court and if such contention is 4 raised the Court will decide the same in accordance with law. The Arbitration Act, 1940 is fairly comprehensive and contains provisions from the stage of appointment of arbitrator till the award being made rule of the court whereafter it becomes a decree of the court and executable as such. In Section 34 of the Act power is vested in the court to order stay of legal proceedings, where there is an arbitration agreement therein. It is laid down therein that:
"34. Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings."
From the provision in the section it is clear that in case there is an arbitration agreement entered between the parties, they should ordinarily be held by their agreement and should not be permitted to initiate any legal proceeding other than arbitration proceeding relating to any dispute coming within the arbitration clause. This principle was taken note of by this Court in U.P. Coop. Federation Ltd. v. Sunder Bros. in which it was observed inter alia that:
It is, of course, the normal duty of the court to hold the parties to the contract and to make them present their disputes to the forum of their choice, but the strict principle of sanctity of contract is subject to the discretion of the court under Section 34 of the Indian Arbitration Act. A party may be released from the bargain if he can show that the selected arbitrator is likely to show bias or there is sufficient reason to suspect that he will act unfairly or that he has been guilty of unreasonable conduct.
This position is also clear from the provision in Section 18 of the Act in which it is laid down inter alia that:
"18. Power of court to pass interim orders.--(1) Notwithstanding anything contained in Section 17, at any time after the filing of the award, whether notice of the filing has been served or not, upon being 5 satisfied by affidavit or otherwise that a party has taken or is about to take steps to defeat, delay or obstruct the execution of any decree that may be passed upon the award, or that speedy execution of the award is just and necessary, the court may pass such interim orders as it deems necessary.
(2) Any person against whom such interim orders have been passed may show cause against such orders, and the court, after hearing the parties, may pass such further orders as it deems necessary, and just."
These provisions, in our view show that the legislative policy is to ensure proper enforcement of an arbitration award and to assist a party who apprehends that he may face serious difficulties in execution of the award passed in his favour on account of the conduct of the other party. Be it noted here that different provisions of the Arbitration Act leave little scope for doubt that an arbitration proceeding is to be conducted by the arbitrator with reasonable dispatch and after the award is passed the court should also dispose of the proceedings and decide the question whether the award should be made a rule of court expeditiously so that the party in whose favour the award has been passed gets the benefit of the arbitration clause. In the present case the order passed by the learned Single Judge gives rise to a converse situation. The Court has intervened to stay further proceedings in a proceeding which is continuing before the arbitrator giving the reason inter alia that the petitioner applying for stay may be put to unnecessary expense in defending the proceeding before the arbitrator. As noted earlier, Respondent 1 herein, has initiated proceedings before the Court to direct the arbitrator to file the partial award and has also filed an application under Sections 30 and 33 of the Act challenging the validity of the award and has also raised the question of validity of the agreement itself in the petition. The said proceedings are pending in the Court. The questions raised therein will be decided by the Court on merit after hearing the parties. In such circumstances, the view taken by the High Court that the arbitrator should not proceed further in the arbitration proceeding is unnecessary, uncalled for and erroneous. The observation of the learned Single Judge that "since the arbitrator did not file the partial award in court immediately on being directed by the Court, Respondent 1 was made remediless and was gagged", is equally uncalled for and erroneous. It may be noted here that no party will be entitled to get any benefit in any final award passed by the arbitrator until the same is made rule of the court and before this is done the court is duty bound to give notice to the parties and consider objections, if any, raised by 6 any of the parties against the award.
12. On perusal of the judgment/order passed by the learned Single Judge, we are constrained to observe that the learned Judge travelled beyond the limited jurisdiction vested in him in deciding the question of stay and has discussed the merits of the case and made observations which may prejudice the parties of any of them in a proceeding before the arbitrator and at subsequent stages in the proceeding before the Court.
13. The judgment of the Division Bench, we are constrained to observe, suffers from similar error of approach as that of the learned Single Judge. Being aware of the position that Respondent 1 has challenged the partial award by filing objections under Sections 30, 31 and 33 of the Act and the proceeding is pending before the trial court, the Division Bench thought it appropriate to make observations regarding the alleged misconduct of the arbitrator in sending the draft award to the ICC International Court of Arbitration for advice and also in declining to send up the depositions and the documents to the Court on certain grounds. The Division Bench appears to have lost sight of the fact that all these questions may come up for decision before the trial court in the proceeding under Sections 30 and 33 of the Act and parties will have opportunity to have their say in the matter. The Division Bench failed to appreciate that in the context of facts of the case it is in the interest of the parties that the arbitration proceeding should be concluded and the challenge against the draft award/final award should be decided as expeditiously as possible. The observations made by the Division Bench in the judgment are not only unnecessary but also uncalled for keeping in view the limited question that came up for consideration before it i.e. whether the further proceeding before the arbitrator should be stayed or it should continue. Any observation touching upon the merits of the case particularly, the allegations relating to alleged misconduct of the arbitrator at the stage of consideration of the application for interim order of stay does not commend to us. It appears from the record that Respondent 1 has also filed an application before the Court for removal of the arbitrator and the same is also pending. We are conscious of the position that grant of stay is a matter of discretion of the court and if the trial court on consideration passes the order of stay the appellate court should be slow to interfere with the same. But that does not mean that if the order of stay passed by the trial court is based on non judicial consideration such order is not liable to be interfered with by the appellate court. However, since the Division Bench held that the appeal was maintainable we need say no further on merits of the observations/findings in 7 the judgment.
14. On consideration of the entire matter, we are not persuaded to maintain the order granting stay of further proceedings before the arbitrator passed by the learned Single Judge, which was confirmed in appeal by the Division Bench. The judgment/order dated 2241999 passed by the learned Single Judge which was confirmed by the Division Bench in the judgment/order dated 1332000 in FAO (OS) No. 134 of 1999 is set aside and accordingly, the appeals are allowed with costs. Hearing fee is assessed at Rs 25,000."
(emphasis supplied) In view of the aforesaid decisions, when the parties are relegated to the learned Arbitrator, stay ought not to have been granted by the learned Single Judge for encashment of the bank guarantees more particularly when the appellant is Union of India. The respondents (original petitioners) are not remedyless. Ubi jus ibi remidum (where there is wrong, there is remedy). The respondents have all remedies before the learned Arbitrator and if the respondents succeed in arbitration proceeding, the amount can be returned by the Union of India. Even otherwise also, prima facie, looking to the facts and nd circumstances of the case, the work was to be completed on or before 2 June, 2016 and only 4% of the work was done and, hence, contract was terminated th on 11 July, 2016. Hence, both the bank guarantees ought to have been encashed. These aspects of the matter have not been properly appreciated by the learned Single Judge.
9. In view of the aforesaid facts, reasons and judicial pronouncements, we hereby modify the order passed by the learned Single Judge dated 7th September, 2016 in W.P.(C) No. 3987 of 2016 to the extent that the stay granted by the learned Single Judge against the encashment of the bank guarantees is, hereby, vacated. The appellants are permitted to encash the bank guarantees, given by the respondents for tender no. 99. Rest of the observations made by the learned Single Judge have been maintained as they are.
8
10. Learned Arbitrator will decide the dispute between the parties in accordance with law, independently, on their own merits and without being influenced by the orders passed by this Court.
11. This Letters Patent Appeal is, hereby, allowed and disposed of.
12. In view of final order passed in the Letters Patent Appeal, I.A. No. 428 of 2017 and I.A. No. 5747 of 2017 are also disposed of.
(D.N. Patel, A.C.J.)
(Ratnaker Bhengra, J.)
Ajay/ A.F.R.