Jammu & Kashmir High Court
Union Of India And Others. vs M/S Roman Tarmat Ltd. And Another. on 10 April, 2018
Equivalent citations: AIR 2019 (NOC) 214 (J.&K.)
Author: Sanjeev Kumar
Bench: Sanjeev Kumar
HIGH COURT OF JAMMU AND KASHMIR
AT JAMMU
OW104 No.39/2018
MP No.1/2018
Date of Judgment:10.04.2018.
Union of India and others. v. M/S Roman Tarmat Ltd. and another.
Coram:
Hon'ble Mr. Justice Sanjeev Kumar, Judge
Appearing counsel:
For the Petitioner(s) : Mrs. Sindhu Sharma, ASGI.
For the Respondent(s) : Mr. R.K.Gupta, Sr. Advocate with
Mr.Javed Iqbal, Advocate.
i/ Whether to be reported in : Yes/No
Press/Media
ii/ Whether to be reported in : Yes
Digest/Journal
1. The power of superintendence of this Court vested in terms of Section 104 of the Constitution of Jammu & Kashmir is invoked by the petitioners to assail the order dated 12.03.2018 passed by the Additional District Judge, Jammu (hereinafter to be referred as ―the trial Court‖) whereby two applications, one seeking dismissal of the execution petition and another seeking modification of order dated 11.12.2017, have been rejected.
2. The background facts necessary for disposal of this petition are that in view of the disputes having arisen between the petitioners and respondent No.1 with respect to contract awarded to respondent No.1 vide CA No.CEAFU- 09/2012-13, with the intervention of this Court under Section 11 of the Jammu & Kashmir Arbitration and Conciliation Act, 1997 (hereinafter referred to as ―the Act‖), Shri A.S.Wazir, Retired Chief Engineer respondent No.2 herein, was appointed as sole arbitrator. Respondent No.2 delivered his award on 20.02.2016.
OW 104 No.39/2018 Page 1 of 133. Aggrieved, the petitioners challenged the award of the sole arbitrator aforesaid under Section 34 of the Act in the Court of Principal District Judge, Srinagar. An application in this regard was filed on 19.05.2016 which was well within the period of three months prescribed under Sub Section 3 of Section 34 of the Act. The Principal District Judge, Srinagar returned the application in terms of Order VII Rule 10-A for its presentation before the appropriate Forum having jurisdiction. Accordingly, the petitioners filed the returned application before the Principal District Judge, Pulwama on 06.02.2017 along with the copy of the order passed by the Principal District Judge, Srinagar dated 30.01.2017. It appears that the Principal District Judge, Pulwama also returned the application for its presentation before the Additional District Judge, Jammu. As is apparent from the order passed by the Principal District Judge, Pulwama dated 12.08.2017, the application was returned to be presented in the Court of Additional District Judge, Jammu on the ground that the award in question had already been called in question by respondent No.1 before the said Court and, therefore, in view of the settled position of law and the language of Section 42 of the Act, it is the Court of Additional District Judge, Jammu which alone has the jurisdiction to entertain any subsequent proceeding under the Act. It is stated that the order of Principal District Judge, Pulwama dated 12.08.2017 is under challenge in an appeal filed by the petitioners under Section 37 of the Act which is pending disposal before the Srinagar Wing of this Court.
4. It is the case of the petitioners that while appeal under Section 37 of the Act against the order of Principal District Judge, Pulwama is pending adjudication and, therefore, till the appeal is decided by the High Court, the award in terms of Section 36 of the Act cannot be executed. It may be pertinent to mention that the same award which was subject matter of challenge in an application filed by the petitioner under Section 34 of the Act before the Principal District Judge, Pulwama is partially assailed by respondent No.1 before the trial Court. To put it succinctly the award dated 20.02.2016 passed OW 104 No.39/2018 Page 2 of 13 by the sole arbitrator was wholly under challenge under the application which was filed by the petitioners first before the Principal District Judge, Srinagar and thereafter on return before the Principal District Judge, Pulwama. It is the same award which has been partially assailed by respondent No.1 also in terms of Section 34 of the Act before the trial Court. The respondent No.1 has also filed the execution proceedings before the trial Court for execution of the portion of the award which it has accepted. It is in these proceedings, the order impugned, in the circumstances narrated above, has been passed by the trial Court.
5. Having heard learned counsel for the parties and after scrutiny of the record, I find that the only question to be determined in this petition is as to whether an appeal under Section 37 of the Act against the order passed by the Court in an appeal under Section 34 of the Act is continuation of the proceedings under Section 34 of the Act and, therefore, would operate as automatic stay of the execution of the award. Allied with this, is the question as to whether the execution proceedings before the trial Court are maintainable at the instance of respondent No.1 who himself has challenged the part of the award under Section 34 of the Act before the trial Court.
6. The answer to the aforesaid questions would determine the fate of this petition. If we take appeal under Section 37 of the Act as continuation of the proceedings determined under Section 34 of the Act, then by necessary implication, the award would become inexecutable till the appeal is finally decided.
7. With a view to appreciate the controversy involved in this petition and to determine the aforesaid question, it is necessary to first set out the relevant provisions of the Act.
Section 2(1)(e) OW 104 No.39/2018 Page 3 of 13 ―2. Definition:---(1) In this part unless the context otherwise requires,---
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(e) ―Court‖ means the Principal Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court or any Court of Small Causes;‖ Section 34 ―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 sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity;or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration or it contains decisions on matters beyond the scope of the submission to arbitration Provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement was not in accordance with this Part;or
(b) the Court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force;or
(ii) the arbitral award is in conflict with the public policy of the State.
Explanation :-Without prejudice to the generality of sub-clause (ii) of clause (b) , it is hereby declared for the avoidance of any doubt, that an award is in conflict with the public policy of the State if the OW 104 No.39/2018 Page 4 of 13 making of the award was induced or affected by fraud or corruption or was in violation of section 58 or section 64.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months, it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.‖ Section 35 "35. Finality of arbitral awards--Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively.‖ Section 36 "36. 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, Samvat 1977 in the same manner as if it were a decree of the Court.‖ Section 37 "37. Appealable orders--(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order namely:-
(a) granting or refusing to grant any measure under section 9;
(b) setting aside or refusing to set aside an arbitral award under section 34.
(2) An appeal shall also lie from an order granting or refusing to grant an interim measure under section 17 to a Court.
(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.‖ OW 104 No.39/2018 Page 5 of 13
8. From a reading of Section 2(1)(e) of the Act, it is clear that the Court means Principal Court of original jurisdiction of a district and includes High Court also in its original jurisdiction which has the jurisdiction to decide the question forming ―subject matter of arbitration‖ if the same had been ―subject matter of suit‖. The ―subject matter of arbitration‖ is not the same as the ―subject matter of suit and the two expressions are distinct having different connotations.
9. While interpreting the term ―Court‖ as defined in Section 2(e) of the Act, the Supreme Court in paragraph No.96 of the judgment rendered in the case of Bharat Aluminium company v. Kaiser Aluminium Technical Services INC.; (2012) 9 SCC 552 observed thus:-
―96. Section 2(1)(e) of the Arbitration Act, 1996 read as under:-
―2. Definitions (1) In this Part, unless the context otherwise requires -
(e) ―Court‖ means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes.‖ We are of the opinion, the term ―subject matter of the arbitration‖ cannot be confused with ―subject matter of the suit‖. The term ―subject matter‖ in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is OW 104 No.39/2018 Page 6 of 13 held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the Courts of Delhi being the Courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the Courts would have jurisdiction, i.e., the Court within whose jurisdiction the subject matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution, i.e., arbitration is located.
10. When the case in hand is examined in the light of aforesaid dictum of law laid down by the Supreme Court, it can safely be said that apart from other Court, the Principal Court of original jurisdiction in Jammu district shall also have the jurisdiction to entertain the execution proceedings for enforcement of the award. This is so because the arbitration proceedings have been conducted by the arbitrator in Jammu and the award too has been delivered in Jammu. Since the situs of the arbitration was in Jammu and, therefore, the Principal Court of civil jurisdiction in the district of Jammu shall have the jurisdiction to entertain any proceeding under Part-I of the Act. That apart, in terms of the order passed by the Principal District Judge, Pulwama holding that the Additional District Judge, Jammu alone has the jurisdiction to entertain all subsequent applications, the application of the respondent No.1 for execution was rightly entertained by the trial Court.
11. The argument of the learned counsel for the petitioners that the petitioners had filed an application before the Principal District Judge, Srinagar which was prior in time to the application which was moved by respondent No.1 before the trial Court challenging the award to the extent of claim No.6 only in terms of Section 34 of the Act, also cannot be accepted for the reason that the Principal District Judge, Srinagar before whom the first application under Section 34 of the Act was filed by the petitioners has clearly held that it OW 104 No.39/2018 Page 7 of 13 had no jurisdiction and, therefore, returned the application for its presentation before the appropriate forum. The order of the Principal District Judge, Srinagar has not been challenged by the petitioner and has, thus, attained finality.
12. That being so, it cannot be contended by the petitioners that the application filed before the Principal District Judge, Srinagar under Section 34 of the Act which was returned by the said Court can be taken to be an application under Part-I of the Act, thus, conferring exclusive jurisdiction on the said Court over the arbitral proceedings and all subsequent applications arising out of the agreement and such arbitral proceedings. In that view of the matter, I do not find any infirmity in the view taken by the trial Court that the application filed by respondent No.1 for setting aside a part of the award under Section 34 of the Act was the first application with regard to the arbitration proceedings in question. The aforesaid view was the only possible view that could have been taken by the trial Court in the facts and circumstances of the case.
13. From the aforesaid discussion, it, thus, emerges that the trial Court which is seized of the execution proceedings has the jurisdiction and the contrary plea urged by the learned counsel for the petitioners has to be rejected.
14. This brings us to the principal question involved in this petition with respect to the effect of pendency of appeal under Section 37 of the Act on the executability of the award. A similar question came up for determination before the High Court of Delhi in the case of Decor India P Ltd. v. National Building Const. Corpn. Ltd; (2007) 3 ArbLR 348. The Division Bench of the High Court of Delhi clearly held that mere pendency of an appeal under Section 37 of the Act would not automatically operate as stay on the execution of the award. Referring to the provisions of Order XLI Rule 5 of the Code of Civil Procedure and taking note of the Introduction, Statement of objects and OW 104 No.39/2018 Page 8 of 13 Reasons and Preamble to the Arbitration and Conciliation Act, 1996, the Division Bench of the Delhi High Court concluded that the provisions of Section 37 of the Act do not provide unconditional automatic stay under the principle of merger or otherwise. Since the issue raised herein is squarely covered by the aforesaid Division Bench judgment of the High Court of Delhi, as such, it would be appropriate to reproduce what was said by the High Court of Delhi in paragraph Nos. 4, 8 to 15 is as follows:-
―4. In the Execution Petition filed by the Appellant herein, the question before the learned Single Judge was as to whether the execution Petition was maintainable in view of the pendency of the appeals. After discussing the facts and the law the learned Single Judge held that during pendency of the appeals Execution Petition could not be entertained and dismissed the same. Hence the Execution First Appeal by the claimant.
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8. In the above cited case the learned Single Judge has minutely examined the provisions of law for distinguishing a decree passed in a civil suit and an Award passed in arbitration proceedings and has extensively referred to the provisions of the Code of Civil Procedure for execution of the decrees and has then interpreted Section 35 & 36 of the Act to hold that there is no automatic stay due to pendency of the appeal.
9. At this stage we may reproduce Sections 35 & 36 of the Arbitration & Conciliation Act, 1996 which are as under: 35. Finality of arbitral awards. - Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively. 36. 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.
10. The learned Counsel for the Respondent has given prominence to the words "this part" mentioned in Section 35 of the Act and wants it to be read as part-I of the entire Act, which also contains Section 37 of Chapter IX (Appeals) of the Act under which the Appeal was filed and is pending. In all there are 4 parts in the Act. We may mention here that the part-I of the Act has 10 Chapters. Chapter No. VIII deals with Finality and Enforcement of Arbitral Award, while Chapter IX of Part-I deals with appeals; part-II of the Act deals with Enforcement of Certain Foreign Award; part -III relates to Conciliation and Part IV has Supplementary Provisions.
OW 104 No.39/2018 Page 9 of 1311. Needless to say that as per established principles of interpretation an Act is to be interpreted keeping in view the harmonious construction so as to advance the object of the legislation. The object of the Act is to provide speedy remedy for the commercial and other related transactions and to avoid the procedural delays in the routine suits in the courts of law. When viewed in this background we are of the opinion that the term "this Part"
used in Section 35 of the Act refers to the Chapter No. VIII only and neither to the Chapter IX (Appeals) nor to the entire Part-I of the Act. This interpretation, in our view, is in consonance with the language of Section 36 of the Act, because inbuilt limitations qua enforcement/execution are legislated in Section 36 (supra) of the Act, regarding enforcement of the Decree.
12. In the case before us the application under Section 34 of the Act for setting aside the Award has been refused (dismissed) and therefore the award becomes executable under Section 36 of the Act as a decree under the Code of Civil Procedure. The provisions of Order XLI Rule 5 of the Code of Civil Procedure are as under:
5. Stay by Appellate Court. - (1) An appeal shall not operate as a stay of proceedings under a decree or order appealed from except so far as the Appellate Court may order, nor shall execution of a decree be stayed by reason only of an appeal having been preferred from the decree; but the Appellate Court may for sufficient cause order stay of execution of such decree.
(2) Stay by Court which passed the decree. - Where an application is made for execution of an appealable decree before the expiration of the time allowed for appealing there from, the Court which passed the decree may on sufficient cause being shown order execution to be stayed.
(3) No order for stay of execution shall be made under Sub-rule (1) or Sub- rule (2) unless the Court making it is satisfied-
(a) that substantial loss may result to the party applying for stay of execution unless the order is made;
(b) that the application has been made without unreasonable delay; and
(c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.
(4) [Subject to the provisions of Sub-rule (3)], the Court may make an ex parte order for stay of execution pending the hearing of the application.
[(5) Notwithstanding anything contained in the foregoing sub-rules, where the appellant fails to make the deposit or furnish the security specified in sub-rule (3) of Rule 1, the Court shall not make an order staying the execution of the decree.
OW 104 No.39/2018 Page 10 of 1313. At this stage we may refer to the Introduction, Statement of Objects and Reasons and Preamble to the Arbitration & Conciliation Act, 1996. The sum and substance of these sub-headings in the Arbitration & Conciliation Act, 1996 is that the outdated Arbitration Act, 1940 was replaced by the Arbitration & Conciliation Act, 1996 to make it more responsive to contemporary requirement; to make provisions for an Arbitral procedure which is fair, efficient and capable of meeting the needs of specific arbitration; to minimize the supervisory role of the courts in the arbitral process and to provide that every final Arbitral Award is enforced in the same manner as if it were a decree of the Court.
14. If we read the provisions of Section 35, 36 & 37 of the Act and Order XLI Rule 5 of the Code of Civil Procedure in the light of the laudable objects of the Arbitration & Conciliation Act, 1996, we find that there is no manner of doubt that the very purpose of Arbitration & Conciliation Act, 1996 is to curb the procedural delays as are inherent in the routine civil disputes in the courts. In fact a summary procedure has been envisaged in the Act in contradistinction to the Arbitration Act of 1940.
15. Now if the execution of the Decree followed by Award is to be delayed as suggested by learned Counsel for the Respondent by treating the pendency of Appeal as automatic stay then the new legislation i.e., the Arbitration & Conciliation Act, 1996 instead of being an efficient and speedy remedy would be reduced to a remedy worst than what we already had, that is the civil suits and the deep routed procedural delays till passing of the decree and even thereafter but we may hasten to add that even in civil suits' decrees there is no automatic stay on pendency of the Appeal and stay even if granted in execution of civil suits' decrees is more often than not a conditional stay and preferably subject to deposit of the decretal amount. Had the legislature intended to give the provision of stay of execution on filing of an Appeal under Section 37 of the Act, it would have given the provision in the Act itself, in pari materia with Order XLI Rule 5 of the Code of Civil Procedure. Since it has not been done by the legislature, in our view, it will not be possible to provide unconditional automatic stay under the principle of merger. So from whatever angle we examine this proposition, the interpretation, in our view, falls in favor of non-automatic stay.‖ I don't see any reason to take a view different from the one taken by the Delhi High Court in the aforesaid judgment. Furthermore, the learned counsel for parties have also stated at Bar that the appellate Court has not granted any stay with regard to execution of the award in the appeal filed by the petitioners.
15. Lastly the argument of learned counsel for the petitioners that since respondent No.1 itself has challenged the award by invoking Section 34 of the Act and, therefore, cannot seek execution of the same award so long as its OW 104 No.39/2018 Page 11 of 13 application under Section 34 of the Act is pending. As already indicated, the respondent No.1 has challenged the award insofar as it pertains to item/claim No.6 only. As demonstrated before this Court, the award, insofar as item No.6 is concerned, is clearly severable from the rest of the award and therefore, respondent No.1 is well within its authority to challenge only the offending portion of the award. Simply because the offending portion of the award which is clearly severable is under challenge under Section 34 of the Act, it cannot be said that rest of the award which the respondent No.1 accepts and has otherwise attained finality, cannot be executed.
16. The term ―arbitral award‖ as used in Section 36 of the Act would also encompass within its sweep a partial severable award. Reference in this regard can be invited to the observations of the Supreme Court in paragraph No.3 to 5 of the judgment rendered in the case of National Buildings Construction Corporation Ltd. v. Lloyds Insulation India Ltd.; (2005) 2 SCC 367. Paragraph No.3 to 5 read thus:-
―3. An application was made by the respondent challenging that part of the award which related to the finding of the arbitrator in favour of the appellant. While the challenge was pending, an application for execution was moved by the respondent for recovery of the entire amount of Rs.13,97,072.24 from the appellant. The application for execution was allowed. Being aggrieved, the appellant preferred an appeal before the Division Bench. Pending the appeal before the Division Bench, the Division Bench had granted stay of the order of the executing court subject to the appellant depositing a sum of Rs.5,00,000/-. The said amount of Rs.5,00,000/- was deposited and has been withdrawn by the respondent against a bank guarantee. The Division Bench was of the view that since there was no challenged by the appellant to the finding of the arbitrator that an amount of Rs.13,97,072.24 was payable, the respondent was entitled to execute the award for that amount. The Division Bench in disposing of the appeal directed the appellant to deposit a further sum of balance awarded amount and gave liberty to the respondent to withdraw the same upon furnishing appropriate security.
4. The matter has been brought before this Court by the appellant inter alia on the ground that this Court had in National Aluminum Co. Ltd. v.
Pressteel & Fabrications (P) Ltd. held on a construction of Section 36 of OW 104 No.39/2018 Page 12 of 13 the Arbitration and Conciliation Act, 1996, that there was no power in a Court to direct the execution of an award when an application under Section 34 of the Act challenging the award was pending. Being prima facie satisfied with the submission of the appellant, we had stayed the operation of the impugned order of the Division Bench.
5. The learned counsel appearing on behalf of the respondent has submitted that in fact there were two separate awards: one which allowed the respondent's claim up to Rs.13,97,072.24 and the second which allowed the appellant's counterclaim for Rs.9,85,316. It is contended that since the respondent alone had challenged the award in favour of the appellant, it was open to the respondent to execute that portion of the award which was in the respondent's favour and against which no application under Section 34 was pending.‖
17. The observations of the Supreme Court in the aforesaid judgment take care of the argument raised by the learned counsel for the petitioners and negates the contention that once a part of the award is under challenge under Section 34 of the Act, rest of the award could not be put to execution.
18. In view of the aforesaid analysis and the reasons, I do not find any infirmity in the order of the trial Court necessitating exercise of power of superintendence in terms of Section 104 of the Constitution of Jammu & Kashmir. Resultantly, the petition is dismissed.
(Sanjeev Kumar) Judge Jammu 10.04.2018 Vinod.
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