Legal Blog: July 2011

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Sunday, July 31, 2011

Contractual Fetters on Award of Interest by Arbitrator : The Law

Justice Altamas Kabir
Supreme Court of India
The Supreme Court in Union of India v. M/s Krafters Engineers & Leasing Pvt. Ltd., had the occasion to examine the provisions of the old and new Arbitration Acts and the powers of the arbitrator to grant interest, and whether these powers can be fettered by the agreement of the parties. We have already covered this topic in our post titled 'Power of Arbitrator to Award Interest : The Law', where Justice Deepak Varma opined that the Arbitrator has the power to award interest for the period from the award to the date of payment, as also for pre-reference, pendente lite and post award. The present post is concerned with the powers of the arbitrator to grant interest where the parties have expressly agreed against the same. The relevant extracts from the judgment are reproduced hereinbelow;

7) It is not in dispute that the provisions of the Arbitration Act, 1940 alone are applicable to the case on hand. Now, let us consider various decisions of this Court dealing with similar prohibition in the agreement for grant of interest. In Secretary, Irrigation Department, Government of Orissa and Others vs. G.C. Roy, (1992) 1 SCC 508, the Constitution Bench had considered Section 29 of the Arbitration Act, 1940 which deals with interest pendente lite. After analyzing the scheme of the Act and various earlier decisions, the Constitution Bench considered the very same issue, namely, whether an arbitrator has power to award interest pendente lite and, if so, on what principle. The relevant paragraphs are extracted hereunder:-

43. The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law. (v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre- reference period). For doing complete justice between the parties, such power has always been inferred.
44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes -- or refer the dispute as to interest as such -- to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view.
8) In Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa and Others vs. N.C Budharaj (deceased) by LRs and Others, (2001) 2 SCC 721, another Constitution Bench considered payment of interest for pre-reference period in respect of cases arising when Interest Act, 1839 was in force. The following conclusion in para 26 is relevant which reads thus:
26. For all the reasons stated above, we answer the reference by holding that the arbitrator appointed with or without the intervention of the court, has jurisdiction to award interest, on the sums found due and payable, for the pre-reference period, in the absence of any specific stipulation or prohibition in the contract to claim or grant any such interest. The decision in Jena case taking a contra view does not lay down the correct position and stands overruled, prospectively, which means that this decision shall not entitle any party nor shall it empower any court to reopen proceedings which have already become final, and apply only to any pending proceedings. No costs. (Emphasis supplied).
9) In the earlier paras, we have referred to the stand taken by the learned counsel for the respondent and reliance based on the decision reported in Board of Trustees for the Port of Calcutta (supra). It is true that in that decision, this Court has held that arbitrator has jurisdiction to interpret the clauses of the contract and to decide whether interest pendente lite could be awarded by him. The short question that arose in that case was that the arbitrator had awarded interest pendente lite notwithstanding the prohibition contained in the contract against the payment of interest on delayed payments. Ultimately, the two-Judge Bench of this Court has concluded that irrespective of the terms of the contract, the arbitrator was well within his jurisdiction in awarding interest pendente lite. It is useful to point out that the ratio in that decision was considered by this Court in Sayeed Ahmed and Company vs. State of Uttar Pradesh and Others, (2009) 12 SCC 26. While considering the very same issue, particularly, specific clause in the agreement prohibiting interest pendente lite, this Court considered the very same decision i.e. Board of Trustees for the Port of Calcutta (supra). After adverting to the clause in the Board of Trustees for the Port of Calcutta (supra) and the Constitution Bench in G.C. Roy's case (supra), this Court concluded as under:
23. The observation in Engineers-De-Space-Age that the term of the contract merely prohibits the department/employer from paying interest to the contractor for delayed payment but once the matter goes to the arbitrator, the discretion of the arbitrator is not in any manner stifled by the terms of the contract and the arbitrator will be entitled to consider and grant the interest pendente lite, cannot be used to support an outlandish argument that bar on the Government or department paying interest is not a bar on the arbitrator awarding interest. Whether the provision in the contract bars the employer from entertaining any claim for interest or bars the contractor from making any claim for interest, it amounts to a clear prohibition regarding interest. The provision need not contain another bar prohibiting the arbitrator from awarding interest. The observations made in the context of interest pendente lite cannot be used out of contract.
24. The learned counsel for the appellant next contended on the basis of the above observations in Engineers-De-Space- Age, that even if Clause G1.09 is held to bar interest in the pre-reference period, it should be held not to apply to the pendente lite period, that is, from 14-3-1997 to 31-7-2001. He contended that the award of interest during the pendency of the reference was within the discretion of the arbitrator and therefore, the award of interest for that period could not have been interfered with by the High Court. In view of the Constitution Bench decisions in G.C. Roy and N.C. Budharaj rendered before and after the decision in Engineers-De- Space-Age, it is doubtful whether the observation in Engineers-De-Space-Age in a case arising under the Arbitration Act, 1940 that the arbitrator could award interest pendente lite, ignoring the express bar in the contract, is good law. But that need not be considered further as this is a case under the new Act where there is a specific provision regarding award of interest by the arbitrator.
10) Considering the specific prohibition in the agreement as discussed and interpreted by the Constitution Bench, we are in respectful agreement with the view expressed in Sayeed Ahmed and Company (supra) and we cannot possibly agree with the observation in Board of Trustees for the Port of Calcutta (supra) in a case arising under the Arbitration Act, 1940 that the arbitrator could award interest pendente lite ignoring the express bar in the contract.

11) In Union of India vs. Saraswat Trading Agency and Others, (2009) 16 SCC 504, though it was under the Arbitration and Conciliation Act, 1996, this Court has considered elaborately about the legal position in regard to interest after adverting to all the earlier decisions and basing reliance on clause 31 of the agreement held: 
33. In the case in hand Clause 31 of the agreement is materially different. It bars payment of any interest or damage to the contractor for any reason whatsoever. We are, therefore, clearly of the view that no pre-reference or pendente lite interest was payable to the respondent on the amount under Item 3 and the arbitrator's award allowing pre-reference and pendente lite interest on that amount was plainly in breach of the express terms of the agreement. The order of the High Court insofar as pre-reference and pendente lite interest on the amount under Item 3 is concerned is, therefore, unsustainable.
12) At the end of the argument, learned counsel for the respondent heavily relied on the recent decision of this Court in Madnani Construction Corporation Private Limited (supra) which arose under the Arbitration Act, 1940. There also, Clause 30 of SCC and Clause 52 of GCC prohibits payment of interest. Though the Bench relied on all the earlier decisions and considered the very same clause as to which we are now discussing, upheld the order awarding interest by the arbitrator de hors to specific bar in the agreement. It is relevant to point out that the decision of Madnani Construction Corporation Private Limited (supra) was cited before another Bench of this Court in Sree Kamatchi Amman Constructions vs. Divisional Railway Manager (Works), Palghat and Others, (2010) 8 SCC 767, wherein the decision in Madnani Construction Corporation Private Limited (supra) was very much discussed and considered. After adverting to all the earlier decisions including the Constitution Bench judgments, this Court has analyzed the effect of Madnani Construction Corporation Private Limited (supra). The following discussion and ultimate conclusion are relevant:

17. In Madnani the arbitrator had awarded interest pendente lite, that is, from the date of appointment of arbitrator to the date of award. The High Court had interfered with the same on the ground that there was a specific prohibition in the contract regarding awarding of interest. This Court following the decision in Engineers-De- Space-Age reversed the said rejection and held as follows: (Madnani case, SCC pp. 560-61, para 39)

39. In the instant case also the relevant clauses, which have been quoted above, namely, Clause 16(2) of GCC and Clause 30 of SCC do not contain any prohibition on the arbitrator to grant interest. Therefore, the High Court was not right in interfering with the arbitrator's award on the matter of interest on the basis of the aforesaid clauses. We therefore, on a strict construction of those clauses and relying on the ratio in Engineers find that the said clauses do not impose any bar on the arbitrator in granting interest.

18. At the outset it should be noticed that Engineers-De- Space-Age and Madnani arose under the old Arbitration Act, 1940 which did not contain a provision similar to Section 31(7) of the new Act. This Court, in Sayeed Ahmed held that the decisions rendered under the old Act may not be of assistance to decide the validity of grant of interest under the new Act. The logic in Engineers-De-Space-Age was that while the contract governed the interest from the date of cause of action to date of reference, the arbitrator had the discretion to decide the rate of interest from the date of reference to date of award and he was not bound by any prohibition regarding interest contained in the contract, insofar as pendente lite period is concerned. This Court in Sayeed Ahmed held that the decision in Engineers-De-Space- Age would not apply to cases arising under the new Act. We extract below, the relevant portion from Sayeed Ahmed: (SCC p. 36, paras 23-24)

23. The observation in Engineers-De-Space-Age that the term of the contract merely prohibits the department/employer from paying interest to the contractor for delayed payment but once the matter goes to the arbitrator, the discretion of the arbitrator is not in any manner stifled by the terms of the contract and the arbitrator will be entitled to consider and grant the interest pendente lite, cannot be used to support an outlandish argument that bar on the Government or department paying interest is not a bar on the arbitrator awarding interest. Whether the provision in the contract bars the employer from entertaining any claim for interest or bars the contractor from making any claim for interest, it amounts to a clear prohibition regarding interest. The provision need not contain another bar prohibiting the arbitrator from awarding interest. The observations made in the context of interest pendente lite cannot be used out of contract.

24. The learned counsel for the appellant next contended on the basis of the above observations in Engineers-De-Space-Age, that even if Clause G 1.09 is held to bar interest in the pre-reference period, it should be held not to apply to the pendente lite period, that is, from 14-3-1997 to 31-7-2001. He contended that the award of interest during the pendency of the reference was within the discretion of the arbitrator and therefore, the award of interest for that period could not have been interfered with by the High Court. In view of the Constitution Bench decisions in G.C. Roy and N.C. Budharaj rendered before and after the decision in Engineers-De-Space-Age, it is doubtful whether the observation in Engineers-De-Space-Age in a case arising under the Arbitration Act, 1940 that the arbitrator could award interest pendente lite, ignoring the express bar in the contract, is good law. But that need not be considered further as this is a case under the new Act where there is a specific provision regarding award of interest by the arbitrator.

The same reasoning applies to the decision in Madnani also as that also relates to a case under the old Act and did not independently consider the issue but merely relied upon the decision in Engineers-De-Space-Age.

19. Section 37(1) of the new Act by using the words & unless otherwise agreed by the parties categorically clarifies that the arbitrator is bound by the terms of the contract insofar as the award of interest from the date of cause of action to the date of award. Therefore, where the parties had agreed that no interest shall be payable, the Arbitral Tribunal cannot award interest between the date when the cause of action arose to the date of award.

20. We are of the view that the decisions in Engineers-De- Space-Age and Madnani are inapplicable for yet another reason. In Engineers-De-Space-Age and Madnani the arbitrator had awarded interest for the pendente lite period. This Court upheld the award of such interest under the old Act on the ground that the arbitrator had the discretion to decide whether interest should be awarded or not during the pendente lite period and he was not bound by the contractual terms insofar as the interest for the pendente lite period. But in the instant case the Arbitral Tribunal has refused to award interest for the pendente lite period. Where the Arbitral Tribunal has exercised its discretion and refused award of interest for the period pendente lite, even if the principles in those two cases were applicable, the award of the arbitrator could not be interfered with. On this ground also the decisions in Engineers-De-Space-Age and Madnani are inapplicable.

Thursday, July 28, 2011

Scope of Examination of Parties by Court under Order X of Code of Civil Procedure

Justice R.V. Raveendran
Supreme Court of India
The Supreme Court in M/s Kapil Corepacks Pvt. Ltd. v. Harbans Lal, has examined the scope and ambit of the Courts powers under Order 10 of the Code of Civil Procedure, 1908. The Supreme Court has held that the scope of the power of the Court is limited to identifying 'matters in controversy' and not to prove / disprove facts. The relevant extracts from the judgment are reproduced hereinbelow;

On the contentions urged by the learned counsel, the following questions arise for our consideration:

(i) What is the scope and ambit of Order 10 Rule 2 of the Code? (ii) Whether the court could, in an examination under Order 10 Rule 2 of the Code, confront a defendant with only the signature portion of a disputed unexhibited document filed by the plaintiff (by covering the remaining portions of the document) and require him to identify the seal/stamp and signature?

(iii) Whether on the basis of the answer given by a party, in response to a question under Order 10 Rule 2 of the Code, the court could prosecute him under Section 340 of Code of Criminal Procedure read with Section 195 of the Indian Penal Code?

Re : Question (i)

9. We may first advert to the relevant provisions. Rule 2 of Order 10 of the Code as also Rules 1 and 3 are relevant and they are extracted below : 

ORDER 10 - EXAMINATION OF PARTIES BY THE COURT

1. Ascertainment whether allegations in pleadings are admitted or denied-

At the first hearing of the suit the Court shall ascertain from each party or his pleader whether he admits or denies such allegations of fact as are made in the plaint or written statement (if any) of the opposite party, and as are not expressly or by necessary implication admitted or denied by the party against whom they are made. The Court shall record such admissions and denials.

2. Oral examination of party, or companion of party -- (1) At the first hearing of the suit, the Court-

(a) shall, with a view to elucidating matters in controversy in the suit examine orally such of the parties to the suit appearing in person or present in Court, as it deems fit; and

(b) may orally examine any person, able to answer any material question relating to the suit, by whom any party appearing in person or present in Court or his pleader is accompanied. (2) At any subsequent hearing, the Court may orally examine any party appearing in person or present in Court, or any person, able to answer any material question relating to the suit, by whom such party or his pleader is accompanied.

(3) The Court may, if it thinks fit, put in the course of an examination under this rule questions suggested by either party.

3. Substance of examination to be written --

The substance of the examination shall be reduced to writing by the Judge, and shall form part of the record.

10. Rule 1 enables the court to ascertain from each of the parties (or his pleader), at the first hearing whether he admits or denies such of those allegations of fact made in the pleadings of the other party, which were not expressly or by necessary implication admitted or denied by him. In other words, if the defendant in his written statement fails to expressly or by necessary implication admit or deny any of the plaint allegations, the court can ascertain from the defendant, whether he admits or denies the said plaint allegations. Similarly, if the defendant has made some allegations against the plaintiff in his written statement, and no reply is filed thereto by the plaintiff, the court can ascertain whether plaintiff admits or denies those allegations. Resort to Rule 1 of Order 10 is necessary only in cases where the court finds that the plaintiff or the defendant has failed to expressly or impliedly admit or deny any of the allegations made against him, by the other party. Examination under Order 10 Rule 1 of the Code will not be necessary where the pleadings of each party have been fully and clearly traversed by the other party.

11. On the other hand, the examination under Rule 2 of Order 10 of the Code, need not be restricted to allegations in the pleadings of the other party, but can relate to elucidating any matter in controversy in the suit. Further, under Rule 1 of Order 10, the court can examine only the parties and their advocates, that too at the `first hearing'. On the other hand, Rule 2 enables the court to examine not only any party, but also any person accompanying either party or his pleader, to obtain answer to any material question relating to the suit, either at the first hearing or subsequent hearings. The object of oral examination under Rule 2 of Order 10 is to ascertain the matters in controversy in suit, and not to record evidence or to secure admissions. The statement made by a party in an examination under Rule 2 is not under oath, and is not intended to be a substitute for a regular examination under oath under Order 18 of the Code. It is intended to elucidate what is obscure and vague in the pleadings. In other words, while the purpose of an examination under Rule 1 is to clarify the stand of a party in regard to the allegations made against him in the pleadings of the other party, the purpose of the oral examination under Rule 2 is mainly to elucidate the allegations even in his own pleadings, or any documents filed with the pleadings. The power under Order 10 Rule 2 of the Code, cannot be converted into a process of selective cross-examination by the court, before the party has an opportunity to put forth his case at the trial.

12. The above position of law is well settled. We need refer only to two decisions in this behalf. In Manmohan Das v. Mt. Ramdei & Anr. [AIR 1931 PC 175], the Privy Council observed:

No doubt under Order 10, Rule 2, any party present in Court may be examined orally by the Court at any stage of the hearing, and the Court may if it thinks fit put in the course of such examination questions suggested by either party. But this power is intended to be used by the Judge only when he finds it necessary to obtain from such party information on any material questions relating to the suit and ought not to be employed so as to supersede the ordinary procedure at trial as prescribed in Order 18.

(emphasis supplied)

A Division Bench of the Madras High Court in Arunagiri Goundan v. Vasantharoya Koundan & Ors (AIR 1949 Madras 707), held as follows referring to Order 10 Rule 2 of the Code :

At the outset it must be pointed out that this (Order 10 Rule 2) does not provide for an examination on oath. This provision was intended to be used to elucidate the matters in controversy in suit before the trial began. This is not a provision intended to be used to supersede the usual procedure to be followed at the trial.

(emphasis supplied)

13. The object of Order 10 Rule 2 is not to elicit admissions. Nor does it provide for or contemplate admissions. The admissions are usually contemplated (i) in the pleadings (express or constructive under Order 8 Rule 5 of the Code); (ii) during examination of a party by the court under Order 10 Rule 1 of the Code; (iii) in answers to interrogatories under Order 11 Rule 8 of the Code; (iv) in response to notice to admit facts under Order 12 Rule 4 of the Code; (v) in any evidence or in an affidavit, on oath; and (vi) when any party voluntarily comes forward during the pendency of a suit or proceedings to make an admission.

14. The power of court to call upon a party to admit any document and record whether the party admits or refuses or neglects to admit such document is traceable to Order 12 Rule 3A rather than Order 10 Rule 2 of the Code. Nothing however comes in the way of the court combining the power under Order 12 Rule 3A with its power under Order 10 Rule 2 of the Code and calling upon a party to admit any document when a Party is being examined under Order 10 Rule 2. But the court can only call upon a party to admit any document and cannot cross-examine a party with reference to a document.

Re : Question No.(ii)

15. Learned counsel for the appellants contended that confronting the signature portion of a disputed document by covering up the remaining portions, is a tool in the arsenal of the cross examining counsel. He submitted that the court examining a party under Order 10 Rule 2 of the Code while purporting to elucidate the matters in controversy, cannot confront the signature portion of a disputed unexhibited document by adopting the procedure of covering up the other portions of the agreement.

16. The learned counsel for the respondents on the other hand submitted that the power of the court under Order 10 Rule 2 of the Code, to examine any party with reference to any document is wide and unrestricted and therefore, any procedure adopted to arrive at the truth, could not be said to be a deviation from the normal examination under Order 10 Rule 2 of the Code. He relied upon the decisions of several High Courts in support of his contention that the court could confront a party with a document and seek his admission in respect of its execution. The decisions relied upon are : Bhanwarlal Kavad v. Shyamsunder [AIR 1984 Raj. 113], Amrita Devi v. Sripat Rai [AIR 1962 All. 111], Rajiv Srivastava v. Sanjiv Tuli [AIR 2005 Del. 319] and Gautam Adani v. Container Corporation of India [150 (2008) DLT 281]. On a careful consideration of these decisions, we find that they are not of any assistance in this case.

16.1) In Bhanwar Lal Kavad (supra), a learned Single Judge of Rajasthan High Court held:

In my opinion the court should resort to the examination of the parties under Rule 2, particularly on the documents, which are said to be signed by the parties. .... it is better that the original documents are put to the party and admission or denial is obtained after visual observations by the party himself of the original documents. After looking into the documents, the party would be in a position to admit or deny the same, which would not be possible, if the same is got done by his pleader. 16.2) Learned Single Judge of the Allahabad High Court in Amrita Devi (supra) and the Division Bench of Delhi High Court in Rajiv Srivastava (supra) held that an admission made by a party under Order 10 Rule 2 of the Code is conclusive against him, and the court can proceed to pass judgment on the basis of such admission.

16.3) In Gautam Adani (supra), a Division Bench of the Delhi High Court referred to the scope of Order 10 Rule 2 thus:

.....we are of the view that examination of the parties is a matter that is per se intended not so much for determining any right or obligation in the suit or resolving or adjudicating upon a controversy as it is for identifying the precise area of controversy so that the same can be effectively adjudicated upon. The distinction between any order which adjudicates upon a controversy or a part thereof and another which simply attempts to identify the real area in controversy cannot be lost sight of. Inasmuch as the impugned order directed the defendants to remain present for recording their statements under Order 10 Rule 2, it was an attempt to identify the real issues in controversy and to elucidate matters which, in the opinion of the learned Single Judge, required to be elucidated." 16.4) None of these decisions assists the respondents. Bhanwar Lal Kavad recognizes the power of the court to call upon a party to admit a document. Amrita Devi and Rajiv Srivastava reiterate the position that if a party makes an admission of fact, it will be binding on him. Gautam Adani supports the contention of the appellants that the scope of Order 10 Rule 2 of the Code is limited to identifying the matters in controversy and not to adjudicate upon the matters in controversy.

17. The object of the examination under Order 10 Rule 2 of the Code is to identify the matters in controversy and not to prove or disprove the matters in controversy, nor to seek admissions, nor to decide the rights or obligations of parties. If the court had merely asked the second appellant whether he had executed the agreement/receipt or not, by showing him the document (by marking the document for purposes of identification only and not as an exhibit), it might have been possible to justify it as examination under Order 10 Rule 2 read with Order 12 Rule 3A of the Code. But any attempt by the Court, to either to prove or disprove a document or to cross-examine a party by adopting the stratagem of covering portions of a document used by cross-examining counsel, are clearly outside the scope of an examination under Order 10 Rule 2 of the Code and the power to call upon a party to admit any document under Order 12 Rule 3A of the Code. What the High Court has done in this case is to `cross-examine' the second appellant and not examine him as contemplated under Order 10 Rule 2 of the Code. We therefore hold that the purported examination under Order 10 Rule 2 of the Code, by confronting a party only with a signature on a disputed and unexhibited document by adopting the process of covering the remaining portions thereof is impermissible, being beyond the scope of an examination under Order 10 Rule 2 of the Code.

Letters Patent Appeal and the Arbitration & Conciliation Act, 1996 : Scope Examined

Justice Aftab Alam
Supreme Court of India
The Supreme Court, in a recent decision in Fuerst Day Lawson Ltd. v Jindal Exports Ltd, has examined the maintainability of a Letters Patent Appeal in cases where appeals are not maintainable under the Arbitration & Conciliation Act, 1996. This judgment examines in great detail, the provisions of the Arbitration & Conciliation Act, 1996 and a long line of judicial precedents. The relevant extracts of the judgment are reproduced hereinbelow;


12. The question regarding the availability of an appeal under the relevant clause of the Letters Patent has engaged the attention of this Court from time to time under different circumstances and in cases arising under different Acts. We take note of some of the cases here that were brought to our notice by the two sides. 


13. In National Sewing Thread Co. Ltd., this Court held that the judgment of a learned single judge of the Bombay High Court, on an appeal preferred under section 76 of the Trade Marks Act was subject to appeal under clause 15 of the Letters Patent of that High Court. The Court noted the material part of clause 15 of the Letters Patent of the High Court and section 76 (1) of the Trade Marks Act and observed:

The Trade Marks Act does not provide or lay down any procedure for the future conduct or career of that appeal in the High Court, indeed S.77 of the Act provides that the High Court can if it likes make rules in the matter. Obviously after the appeal had reached the High Court it has to be determined according to the rules of practice and procedure of that Court and in accordance with the provisions of the charter under which that Court is constituted and which confers on it power in respect to the method and manner of exercising that jurisdiction. The rule is well settled that when a statute directs that an appeal shall lie to a Court already established, then that appeal must be regulated by the practice and procedure of that Court; 
(emphasis supplied)

14. Taking support for its view from the decisions in (i) National Telephone Co. Ltd. v. Postmaster-General, (1913) AC 546, (ii) Adaikappa Chettiar v. Chandresekhara Thevar, AIR 1948 PC 12 and (iii) Secy. of State for India v. Chellikani Rama Rao, AIR 1916 PC 21, the decision in National Sewing Thread Co. Ltd. further observed: 

Section 76, Trade Marks Act confers a right of appeal to the High Court and says nothing more about it. That being so, the High Court being seized as much of the appellate jurisdiction conferred by S.76 it has to exercise that jurisdiction in the same manner as it exercises its other appellate jurisdiction and when such jurisdiction is exercised by a single Judge, his judgment becomes subject to appeal under Cl.15 of the Letters Patent there being nothing to the contrary in the Trade Marks Act.; 

15. The Court held that there was nothing in the provisions of section 77 of the Trade Marks Act that would debar the High Court from hearing appeals under section 76, according to the Rules under which all other appeals are heard or from framing Rules for the exercise of that jurisdiction under section 108, Government of India Act, 1915, for hearing those appeals by single judges or by division benches. It also negated the submission that the judgment of the learned single judge would not be subject to an appeal under clause 15 of the Letters Patent because it was not delivered pursuant to section 108, Government of India Act. 

16. In Vinita M. Khanolkar, a bench of two judges of this Court held that notwithstanding the bar of sub-section (3), an order passed by a learned single judge of the High Court under section 6 of the Specific Relief Act would nevertheless be subject to appeal under clause 15 of the Letters Patent of the Bombay High Court. In Vinita M. Khanolkar, this Court put the power of the High Court under the Letters Patent at the level of constitutional power of the High Court and went on to observe as follows: 

3. Now it is well settled that any statutory provision barring an appeal or revision cannot cut across the constitutional power of a High Court. Even the power flowing from the paramount charter under which the High Court functions would not get excluded unless the statutory enactment concerned expressly excludes appeals under letters patent. No such bar is discernible from Section 6(3) of the Act. It could not be seriously contended by learned counsel for the respondents that if clause 15 of the Letters Patent is invoked then the order would be appealable. Consequently, in our view, on the clear language of clause 15 of the Letters Patent which is applicable to Bombay High Court, the said appeal was maintainable as the order under appeal was passed by learned Single Judge of the High Court exercising original jurisdiction of the court. Only on that short ground the appeal is required to be allowed. 

17. As noted above, Vinita M. Khanolkar, was considered in a later three judge bench decision in Aradhana Trading Co. One may not go so far as to say that Aradhana Trading Co. disapproved Vinita M. Khanolkar wholly but it surely took the opposite view on the question in the context of section 39 of the Arbitration Act, 1940. 

18. In Sharda Devi v. State of Bihar, (2002) 3 SCC 705, a bench of three judges of this Court examined the question whether a Letters Patent Appeal is maintainable against the judgment and decree of a single judge of the High Court passed in an appeal preferred under section 54 of the Land Acquisition Act, 1894. A bench of two judges before which the case was earlier put up noticed a conflict of decision on the question. In Baljit Singh v. State of Haryana, bench of two judges of the Court had held that no Letters Patent Appeal is maintainable against the judgment of a single judge of the High Court on an appeal under section 54 of the Land Acquisition Act, whereas in Basant Kumar v. Union of India, (1996) 11 SCC 542, a bench of three judges, without adverting to the decision in Baljit Singh, held that such an appeal is maintainable. The two judge bench, accordingly, referred the case for hearing before a bench of three judges. The three judge bench affirmed the decision in Basant Kumar. It noted that the decision in Baljit Singh was based on concession made in light of an earlier decision of this Court in South Asia Industries (P) Ltd. v. S.B. Sarup Singh, (1965) 2 SCR 756. The decision in South Asia Industries was in a case under the Delhi Rent Control Act, 1958. In Sharda Devi, the Court pointed out that in South Asia Industries, the Court had examined sections 39 and 43 of the Delhi Rent Control Act and held that a combined reading of the two sections showed that an order passed by the High Court in an appeal under section 39 was to be final. It was held that the provision of finality was intended to exclude any further appeal. This decision was, thus, based on interpretation of sections 39 and 43 of the Delhi Rent Control Act. Section 54 of the Land Acquisition Act, has no similarity with sections 39 and 43 of the Delhi Rent Control Act. Hence, the decision in South Asia Industries had no relevance to decide the question whether a letters patent appeal is maintainable against the judgment passed by a single judge under section 54 of the Land Acquisition Act. In regard to the Letters Patent jurisdiction of the High Court, this Court in Sharda Devi made the following observation in paragraph 9: 

9. A Letters Patent is the charter under which the High Court is established. The powers given to a High Court under the Letters Patent are akin to the constitutional powers of a High Court. Thus when a Letters Patent grants to the High Court a power of appeal, against a judgment of a Single Judge, the right to entertain the appeal would not get excluded unless the statutory enactment concerned excludes an appeal under the Letters Patent. 

19. Referring to section 54 of the Land Acquisition Act, the Court concluded as follows: 

14. ... Section 26 of the said Act provides that every award shall be a decree and the statement of grounds of every award shall be a judgment. By virtue of the Letters Patent an appeal against the judgment of a Single Judge of the High Court would lie to a Division Bench. Section 54 of the said Act does not exclude an appeal under the Letters Patent. The word occurring immediately after the non obstante clause in Section 54 refers to the forum of appeal. In other words, it provides that the appeal will be to the High Court and not to any other court e.g. the District Court. The term an appeal does not restrict it to only one appeal in the High Court. The term an appeal would take within its sweep even a letters patent appeal. The decision of the Division Bench rendered in a letters patent appeal will then be subject to appeal to the Supreme Court. Read in any other manner there would be a conflict between Section 54 and the provision of a Letters Patent. It is settled law that if there is a conflict, attempt should be made to harmoniously construe the provisions. 

20. In Subal Paul v. Malina Paul & Anr., (2003) 10 SCC 361, a bench of three judges of this Court examined the question whether a letters patent appeal would lie against the judgment of a single judge of a High Court on an appeal filed under section 299 of the Indian Succession Act, 1925. Arguing against the maintainability of a letters patent appeal against the judgment of the single judge it was contended that the rejection of the application for probate by the district judge did not give rise to any decree. Hence, an appeal against such an order would be one under section 104 of the Civil Procedure Code and a further appeal would, therefore, be barred under sub-section (2) of section 104. This Court did not accept the submission. It held that the appeal against an order of the district judge would be under section 299 of the Indian Succession Act. Section 104 of the Code simply recognizes appeals provided under special statutes; it does not create a right of appeal as such. Consequently, it does not bar any further appeal also. As regards the nature of an appeal under the Letters Patent, the decision in Subal Paul in paragraphs 21 and 22, observed as follows: 

21. If a right of appeal is provided for under the Act, the limitation thereof must also be provided therein. A right of appeal which is provided under the Letters Patent cannot be said to be restricted. Limitation of a right of appeal, in the absence of any provision in a statute cannot be readily inferred. It is now well-settled that the appellate jurisdiction of a superior court is not taken as excluded simply because the subordinate court exercises its special jurisdiction. In G.P. Singh's Principles of Statutory Interpretation, it is stated: The appellate and revisional jurisdiction of superior courts is not taken as excluded simply because the subordinate court exercises a special jurisdiction. The reason is that when a special Act on matters governed by that Act confers a jurisdiction to an established court, as distinguished from a persona designata, without any words of limitation, then, the ordinary incident of procedure of that court including any general right of appeal or revision against its decision is attracted. 

22. But an exception to the aforementioned rule is on matters where the special Act sets out a self-contained code, the applicability of the general law procedure would be impliedly excluded. [See Upadhyaya Hargovind Devshanker v. Dhirendrasinh Virbhadrasinhji Solanki (1988) 2 SCC 1] (emphasis supplied) 

21. In paragraph 32 of the judgment, this Court further observed as follows: 

32. While determining the question as regards clause 15 of the Letters Patent, the court is required to see as to whether the order sought to be appealed against is a judgment within the meaning thereof or not. Once it is held that irrespective of the nature of the order, meaning thereby whether interlocutory or final, a judgment has been rendered, clause 15 of the Letters Patent would be attracted. 

22. In P.S. Sathappan v. Andhra Bank Ltd. & Ors., (2004) 11 SCC 672, a constitution bench of this Court once again extensively considered the nature of the Letters Patent jurisdiction of the High Court, and the circumstances in which it would be available and those under which it would be ousted. The question that was referred to the Constitution Bench was: what would be the effect of the provisions of section 104(2) of the Code of Civil Procedure, 1908 (hereinafter CPC) vis-`-vis clause 15 of the Letters Patent (of the Madras High Court)? An application for setting aside the court auction-sale was dismissed by the execution court. An appeal against the order came to the High Court and it was dismissed by a single judge. Against the order of the single judge, a letters patent appeal was filed. The question of maintainability of the appeal was examined by a full bench of the High Court and the intra-court appeal to the division bench was held to be not maintainable in view of the provisions of section 104(2) of CPC. A Constitution Bench of this Court, however, reversed the decision of the full bench of the High Court and by a majority of 3:2 held that the letters patent appeal was perfectly maintainable. 

23. P.S. Sathappan is actually an authority on the interplay of section 104 of the Code of Civil Procedure and the Letters Patent jurisdiction of the High Court. The majority judgment went into the history of the matter and pointed out that under the Civil Procedure Codes of 1877 and 1882 there was a divergence of opinion among the different High Courts on the point whether the finality attached to orders passed under section 588 (corresponding to section 104 of the present Code) precluded any further appeals, including a letters patent appeal. The question, then, came up before the Privy Council in the case of Hurrish Chunder Chowdry v. Kali Sundari Debia, ILR (1882) 9 Cal. 482 ( PC). But the decision of the Privy Council, rather than settling the issue gave rise to further conflicting decisions by different High Courts in the country. The Bombay, Calcutta and Madras High Courts held that section 588 did not take away the right of appeal given under the Letters Patent. On the other hand, the Allahabad High Court took a different view and held that a letters patent appeal was barred under section 588 of the Code. In view of this conflict of views, the legislature stepped in and amended the law. It introduced section 4 and section 104 in the Code. 

Having, thus, put the controversy in the historical perspective, the Court referred to sections 4 and 104 of the Code and made the following observation in paragraph 6 of the judgment: 

To be immediately noted that now the legislature provides that the provision of this Code will not affect or limit special law unless specifically excluded. The legislature also simultaneously saves, in section 104(1), appeals under any law for the time being in force. These would include letters patent appeals.; 

(emphasis supplied ) 

24. The above is really the kernel of the decision in P.S. Sathappan and the rest of the judgment is only an elucidation of this point. 

25. In P. S. Sathappan the constitution bench considered in some detail the 1962 decision by a bench of four judges of the Court in Mohindra Supply Co. (supra) in which the legislative history of section 104 of the Code was traced out in detail and it was shown that by virtue of the saving clause in section 4 and the express language of section 104 that saved an appeal as provided by any other law for the time being in force, a letters patent appeal was not hit by the bar of sub-section (2) of section 104 of the Code. [Mohindra Supply Co., however, was a case under section 39 of the 1940 Act, which did not contain any provision similar to section 4 of the Code and hence, in that case the Court held that the finality attached by sub- 20 section (2) to an order passed under sub-section (1) of section 39 barred any further appeal, including a letters patent appeal.] 

26. In P.S. Sathappan, on a consideration of a number of earlier decisions, the Constitution Bench concluded that till 1996, the unanimous view of all courts was that section 104(1) CPC specifically saved letters patent appeals and the bar under section 104(2) did not apply to letters patent appeals. Thereafter, there were two decisions in deviation from the accepted judicial view, one by a bench of two judges of this Court in Resham Singh Pyara Singh v. Abdul Sattar, (1996) 1 SCC 49 and the other by a bench of three judges of this Court in New Kenilworth Hotel (P) Ltd. v. Orissa State Finance Corpn., (1997) 3 SCC 462. P.S. Sathappan, overruled both these decisions and declared that Resham Singh Pyara Singh and New Kenilworth Hotel (P) Ltd. laid down wrong law. It further pointed out that even after the aforementioned two decisions this Court had continued to hold that a Letters Patent Appeal is not affected by the bar of section 104(2) CPC. In this connection, it referred to Vinita M. Khanolkar (supra), under section 6 of the Specific Relief Act, Chandra Kanta Sinha v. Oriental Insurance Co. Ltd. & Ors., (2001) 6 SCC 158, under section 140 of the Motor Vehicles Act, 1988, Sharda Devi (supra), under section 54 of the Land Acquisition Act and Subal Paul (supra), under section 299 of the Indian Succession Act, 1925 and came to the conclusion that the consensus of judicial opinion has been that section 104(1) CPC expressly saves the letters patent appeal and the bar under section 104(2) CPC does not apply to letters patent appeals. In paragraph 22 of the judgment, the Court observed as follows: 

22.... The view has been that a letters patent appeal cannot be ousted by implication but the right of an appeal under the Letters Patent can be taken away by an express provision in an appropriate legislation. The express provision need not refer to or use the word letters patent but if on a reading of the provision it is clear that all further appeals are barred then even a letters patent appeal would be barred.; 

27. Further, analysing the two sub-sections of section 104(2) along with section 4 CPC, this Court in paragraph 30 of the judgment observed as follows: 

30.... Section 104 must be read as a whole and harmoniously. If the intention was to exclude what is specifically saved in sub- section (1), then there had to be a specific exclusion. A general exclusion of this nature would not be sufficient. We are not saying that a general exclusion would never oust a letters patent appeal. However, when section 104(1) specifically saves a letters patent appeal then the only way such an appeal could be excluded is by express mention in section 104(2) that a letters patent appeal is also prohibited. . .... 

28. Mr. Sundaram heavily relied upon this decision. 

29. The decisions noticed so far lay down certain broad principles that may be stated as follows: 

1. Normally, once an appeal reaches the High Court it has to be determined according to the rules of practice and procedure of the High Court and in accordance with the provisions of the charter under which the High Court is constituted and which confers on it power in respect to the method and manner of exercising that power. 

2. When a statute merely directs that an appeal shall lie to a court already established then that appeal must be regulated by the practice and procedure of that court. 

3. The High Court derives its intra-court appeal jurisdiction under the charter by which it was established and its powers under the Letters Patent were recognized and saved by section 108 of the Government of India Act, 1915, section 223 of the Government of India Act, 1935 and finally, by Article 225 of the Constitution of India. The High Court, therefore, cannot be divested of its Letters Patent jurisdiction unless provided for expressly or by necessary intendment by some special statute. 

4. If the pronouncement of the single judge qualifies as a judgment, in the absence of any bar created by a statute either expressly or by necessary implication, it would be subject to appeal under the relevant clause of the Letters Patent of the High Court. 

5. Since section 104(1) CPC specifically saves the letters patent appeal it could only be excluded by an express mention in section 104(2). In the absence of any express mention in section 104(2), the maintainability of a letters patent appeal is saved by virtue of section 104(1). 

6. Limitation of a right of appeal in absence of any provision in a statute cannot be readily inferred. The appellate jurisdiction of a superior court cannot be taken as excluded simply because a subordinate court exercises its special jurisdiction. 

7. The exception to the aforementioned rule is where the special Act sets out a self-contained code and in that event the applicability of the general law procedure would be impliedly excluded. The express provision need not refer to or use the word letters patent but if on a reading of the provision it is clear that all further appeals are barred then even a letters patent appeal would be barred. 

30. These general principles are culled out from the decisions of this Court rendered under section 104 of the CPC and various other Acts, as noted above. But there is another set of decisions of this Court on the question under consideration rendered in the context of section 39 of the 1940 Act. Section 39 of the erstwhile Act contained the provision of appeal and provided as follows: 

39. Appealable orders.--(1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order: 

An order - 

(i) superseding an arbitration; 

(ii) on an award stated in the form of a special case; 

(iii) modifying or correcting an award; 

(iv) filing or refusing to file an arbitration agreement; 

(v) staying or refusing to stay legal proceedings where there is an arbitration agreement; 

(vi) setting aside or refusing to set aside an award: 

PROVIDED THAT the provisions of this section shall not apply to any order passed by a Small Cause Court. 

(2) 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. 

[Insofar as relevant for the present, section 37 of the 1996 Act, is very similar to section 39 of the previous Act as ed above.] 

31. In Mohindra Supply Co., a bench of four judges of this Court held that a letters patent appeal against an order passed by a single judge of the High Court on an appeal under section 39(1) of the 1940 Act was barred in terms of sub-section (2) of section 39. This decision is based on the bar against further appeals as contained in sub-section (2) of section 39 of the 1940 Act and, therefore, it may not have a direct bearing on the question presently under consideration. 

32. More to the point are two later decisions. In M/s Gourangalal Chatterjee, a bench of two judges of this Court held that an order, against which no appeal would lie under section 39(1) of the 1940 Act, could not be taken in appeal before the division bench of the High Court under its Letters Patent. The same view was reaffirmed by a bench of three judges of this Court in Aradhana Trading Co. 

33. In regard to these two decisions, Mr. Sundaram took the position that both M/s Gourangalal Chatterjee and Aradhana Trading Co. were rendered on section 39 of the 1940 Act, the equivalent of which is section 37 of the 1996 Act. In view of the two decisions, he conceded that in the event an order was not appealable under section 37(1) of the 1996 Act, it would not be subject to appeal under the Letters Patent of the High Court. He, however, referred to section 50 of the 1996 Act, which is as follows: 50. Appealable orders.--(1) An appeal shall lie from the order refusing to-- 

(a) refer the parties to arbitration under section 45; (b) enforce a foreign award under section 48, to the court authorised by law to hear appeals from such order. (2) 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. 

34. Mr. Sundaram submitted that section 50, unlike section 39 of the previous Act and section 37 of the current Act does not have the words (and from no others) and that, according to him, made all the difference. He contended that the omission of the words in parenthesis was significant and it clearly pointed out that unlike section 37, even though an order was not appealable under section 50, it would be subject to appeal under the Letters Patent of the High Court. At any event the decisions rendered under section 39 of the 1940 would have no application in a case relating to section 50 of the 1996 Act. 

35. Mr. Dave, in reply submitted that the words (and from no other) occurring in section 39 of the 1940 Act and section 37 of the 1996 Act were actually superfluous and seen, thus, there would be no material difference between the provisions of section 39 of the 1940 Act or section 37 of the 1996 Act and section 50 of the 1996 Act and all the decisions rendered on section 39 of the 1940 Act will apply with full force to cases arising under section 50 of the 1996 Act. 

36. The use of round brackets for putting words in parenthesis is not very common in legislation and this reminds us of the painful lament by Meredith, J. of the Patna High Court, who in 1948 dealing with a case said that the 1940 Act contains examples of bad drafting which it would be hard to beat.

37. According to the New Oxford Dictionary of English, 1998 edition, brackets are used to enclose words or figures so as to separate them from the context. The Oxford Advanced Learner's Dictionary, Seventh edition defines bracket to mean either of a pair of marks, ( ) placed around extra information in a piece of writing or part of a problem in mathematics. The New Oxford Dictionary of English, 1998 edition gives the meaning and use of parenthesis as: 

Parenthesis--noun (pl. parentheses) a word, clause, or sentence inserted as an explanation or afterthought into a passage which is grammatically complete without it, in writing usually marked off by brackets, dashes, or commas. - (usu. Parentheses) a pair of round brackets ( ) used to include such a word, clause, or sentence. 

38. The Oxford Advanced Learner's Dictionary, Seventh edition, defines the meaning of parenthesis as: 

a word, sentence, etc. that is added to a speech or piece of writing, especially in order to give extra information. In writing, it is separated from rest of the text using brackets, commas or DASHES. 

39. The Complete Plain Words by Sir Ernest Gowers, 1986 revised edition by Sidney Greenbaum and Janet Whitcut, gives the purpose of parenthesis as follows: 

Parenthesis 

The purpose of a parenthesis is ordinarily to insert an illustration, explanation, definition, or additional piece of information of any sort into a sentence that is logically and grammatically complete without it. A parenthesis may be marked off by commas, dashes or brackets. The degree of interruption of the main sentence may vary from the almost imperceptible one of explanatory words in apposition, to the violent one of a separate sentence complete in itself. 

40. The Merriam Webster Online Dictionary defines parenthesis as follows: 

1 a : an amplifying or explanatory word, phrase, or sentence inserted in a passage from which it is usually set off by punctuation b : a remark or passage that departs from the theme of a discourse : digression 

2: interlude, interval 

3: one or both of the curved marks ( ) used in writing and printing to enclose a parenthetical expression or to group a symbolic unit in a logical or mathematical expression 29 

41. The Law Lexicon, The Encyclopaedic Law Dictionary by P. Ramanatha Aiyar, 2000 edition, defines parenthesis as under: Parenthesis. a parenthesis is defined to be an explanatory or qualifying clause, sentence, or paragraph, inserted in another sentence, or in course of a longer passage, without being grammatically connected with it. (Cent. Dist.) 

PARENTHESIS is used to limit, qualify or restrict the meaning of the sentence with which it is connected, and it may be designated by the use of commas, or by a dash, or by curved lines or brackets [53 Fed.81 (83); 3C, CA 440]. 

42. Having regard to the grammatical use of brackets or parentheses, if the words, (and from no others) occurring in section 39 of the 1940 Act or section 37 of the 1996 Act are viewed as `an explanation or afterthought' or extra information separate from the main context, then, there may be some substance in Mr. Dave's submission that the words in parentheses are surplusage and in essence the provisions of section 39 of the 1940 Act or section 37 of the 1996 Act are the same as section 50 of the 1996 Act. Section 39 of the 1940 Act says no more and no less than what is stipulated in section 50 of the 1996 Act. 

43. But there may be a different reason to contend that section 39 of the 1940 Act or its equivalent section 37 of the 1996 Act are fundamentally different from section 50 of the 1996 Act and hence, the decisions rendered under section 39 of the 1940 Act may not have any application to the facts arising under section 50 of the 1996 Act. 

44. But for that we need to take a look at the basic scheme of the 1996 Act and its relevant provisions. Before the coming into force of the Arbitration and Conciliation Act, 1996 with effect from August 16, 1996, the law relating to domestic arbitration was contained in the Arbitration Act, 1940, which in turn was brought in place of the Arbitration Act, 1899. Apart from the Arbitration Act 1940, there were two other enactments of the same genre. One called the Arbitration (Protocol and Convention) Act, 1937 (for execution of the Geneva Convention Awards) and the other called the Foreign Awards (Recognition and Enforcement) Act, 1961 (for enforcement of the New York Convention awards). 

45. The aforesaid three Acts were replaced by the Arbitration and Conciliation Act, 1996, which is based on the United Nations Commission on International Trade Law (UNCITRAL) Model and is broadly compatible with the Rules of Arbitration of the International Chamber of Commerce. The Arbitration and Conciliation Act, 1996 that has repealed the Arbitration Act, 1940 and also the Acts of 1937 and 1961, consolidates and amends the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and defines the law relating to conciliation and provides for matters connected therewith and incidental thereto taking into account the UNCITRAL MODEL law and Rules. 

46. The Statement of Objects and Reasons of the Arbitration and Conciliation Act, 1996 reads as under: 

Statement of Objects and Reasons 

The law of arbitration in India is at present substantially contained in three enactments, namely, The Arbitration Act, 1940, The Arbitration (Protocol and Convention) Act, 1937 and The Foreign Awards (Recognition and Enforcement) Act, 1961. It is widely felt that the 1940 Act, which contains the general law of arbitration, has become outdated. The Law Commission of India, several representative bodies of trade and industry and experts in the field of arbitration have proposed amendments to this Act to make it more responsive to contemporary requirements. It is also recognised that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms. Like arbitration, conciliation is also getting increasing worldwide recognition as an instrument for settlement of disputes. There is, however, no general law on the subject in India. 

2. The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. The UNCITRAL also adopted in 1980 a set of Conciliation Rules. The General Assembly of the United Nations has recommended the use of these Rules in cases where the disputes arise in the context of international commercial relations and the parties seek amicable settlement of their disputes by recourse to conciliation. An important feature of the said UNCITRAL Model Law and Rules is that they have harmonised concepts on arbitration and conciliation of different legal systems of the world and thus contain provisions which are designed for universal application. 

3. Though the UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules. 

4. The main objectives of the Bill are as under:- 

(i) to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation;

(ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; 

(iii) to provide that the arbitral tribunal gives reasons for its arbitral award; 

(iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction; 

(v) to minimise the supervisory role of courts in the arbitral process; 

(vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes; 

(vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court; (viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and 

(ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award. 

5. The Bill seeks to achieve the above objects. (emphasis supplied) 

47. The Preamble of the Arbitration and Conciliation Act, 1996 is as follows: 

PREAMBLE 

WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985; 

AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980; 

AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation; AND WHEREAS the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations; 

AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules; 

48. The new Act is a loosely integrated version of the Arbitration Act, 1940, Arbitration (Protocol and Convention) Act, 1937 and Foreign Awards (Recognition and Enforcement) Act, 1961. It actually consolidates amends and puts together three different enactments. But having regard to the difference in the object and purpose and the nature of these three enactments, the provisions relating thereto are kept separately. A mere glance at the 1996 Act is sufficient to show that under its scheme the provisions relating to the three enactments are kept separately from each other. The 1996 Act is divided into four parts and it has three schedules at its end. Part I has ten chapters that contain provisions governing domestic arbitration and international commercial arbitration. Part II has two chapters; Chapter I contains provisions relating to the New York Convention Awards and Chapter II contains provisions relating to the Geneva Convention Awards. Part III of the Act has provisions concerning conciliation. Part IV has the supplementary provisions such as the power of the High Court to make rules (section 82), provision for removal of difficulties (section 83), and the power to make rules (section 84). At the end there are two repeal and saving sections. Section 85 repeals the three enactments referred to above, subject to the appropriate saving clause and section 86 repeals Ordinance 27 of 1996, the precursor of the Act, subject to the appropriate saving clause. Of the three schedules, the first is related to Part II, Chapter I, i.e., the New York Convention Awards and the second and the third to Chapter II, i.e., the Geneva Convention Awards. 

49. There is a certain similarity between the provisions of Chapters I and II of Part II but Part I of the Act is vastly different from Chapters I and II of Part II of the Act. This is quite understandable too since Part II deals only with enforcement of foreign awards (Chapter I, of New York Convention Awards and Chapter II, of Geneva Convention Awards) while Part I of the Act deals with the whole gamut of law concerning domestic arbitration and international commercial arbitration. It has, therefore, a very different and much larger framework than the two chapters in Part II of the Act. 

50. Part I has ten chapters. Chapter I begins with definition clauses in section 2 that defines, amongst other terms and expressions, arbitration, arbitration agreement, arbitral award, etc. Chapter I also contains some General Provisions (sections 3-6). Chapter II contains provisions relating to Arbitration Agreement (sections 7-9). Chapter III contains provisions relating to Composition of Arbitral Tribunal (sections 10-15). Chapter IV deals with the Jurisdiction of Arbitral Tribunals (sections 16-17). Chapter V lays down provisions concerning Conduct of Arbitral Proceedings (sections 18-27). Chapter VI deals with Making of Arbitral Award and Termination of Proceedings (sections 28-33). Chapter VII has only one section, i.e., section 34 that provides Recourse against Arbitral Award. Chapter VIII deals with Finality and Enforcement of Arbitral Awards (sections 35-36). Chapter IX provides for Appeals (section 37 which is akin to section 39 of the 1940 Act). Chapter X contains the Miscellaneous provisions (sections 38-43). 

51. It is also evident that Part I and Part II of the Act are quite separate and contain provisions that act independently in their respective fields. The opening words of section 2, i.e. the definition clause in Part I, make it clear that meanings assigned to the terms and expressions defined in that section are for the purpose of that part alone. Section 4 which deals with waiver of right to object is also specific to Part I of the Act. Section 5 dealing with extent of judicial intervention is also specific to Part I of the Act. Section 7 that defines arbitration agreement in considerable detail also confines the meaning of the term to Part I of the Act alone. Section 8 deals with the power of a judicial authority to refer parties to arbitration where there is an arbitration agreement and this provision too is relatable to Part I alone (corresponding provisions are independently made in sections 45 and 54 of Chapter I and II, respectively of Part II). The other provisions in Part I by their very nature shall have no application insofar as the two chapters of Part II are concerned. 

52. Once it is seen that Part I and Part II of the Act are quite different in their object and purpose and the respective schemes, it naturally follows that section 37 in Part I (analogous to section 39 of the 1940 Act) is not comparable to section 50 in Part II of the Act. This is not because, as Mr. Sundaram contends section 37 has the words in parentheses and from no others which are not to be found in section 50 of the Act. Section 37 and section 50 are not comparable because they belong to two different statutory schemes. Section 37 containing the provision of appeal is part of a much larger framework that, as seen above, has provisions for the complete range of law concerning domestic arbitration and international commercial arbitration. Section 50 on the other hand contains the provision of appeal in a much limited framework, concerned only with the enforcement of New York Convention awards. In one sense, the two sections, though each containing the appellate provision belong to different statutes. 

53. Having come to this conclusion, it would appear that the decisions rendered by the Court on the interplay between section 39 of the 1940 Act and the Letters Patent jurisdiction of the High Court shall have no application for deciding the question in hand. But that would be only a superficial view and the decisions rendered under section 39 of the 1940 Act may still give the answer to the question under consideration for a very basic and fundamental reason. 

54. However, before going into that it will be useful to take another look at the provisions of Chapter I of Part II of the Act. We have so far seen the provisions of Chapter I of Part II of the Act in comparison with those of Part I of the 1996 Act. It would also be relevant to examine it in comparison with the provisions of its precursor, the Foreign Awards, Recognition and Enforcement Act, 1961 and to see how far the earlier Act is consolidated, amended and harmonised and designed for universal application. 

55. The provisions of Chapter I of Part II of the 1996 Act along with the provisions of the Foreign Awards, Recognition and Enforcement Act, 1961, insofar as relevant for the present are placed below in a tabular form:

PART II 


ENFORCEMENT OF CERTAIN THE FOREIGN AWARDS FOREIGN AWARDS (RECOGNITION AND ENFORCEMENT) ACT, 1961 CHAPTER I NEW YORK CONVENTION AWARDS 

2. Definition.--In this Act, unless the 44. Definition.--In this Chapter, unless context otherwise requires, foreign the context otherwise requires, foreign award means an award on differences award means an arbitral award on between persons arising out of legal differences between persons arising out relationships, whether contractual or not, of legal relationships, whether considered as commercial under the law contractual or not, considered as in force in India, made on or after the commercial under the law in force in 11th day of October, 1960 - India, made on or after the 11th day of (a) in pursuance of an agreement in October, 1960 - writing for arbitration to which the Convention set forth in the (a) in pursuance of an agreement in Schedule applies, and writing for arbitration to which the (b) in one of such territories as the Convention set forth in the First Central Government being Schedule applies, and satisfied that reciprocal (b) in one of such territories as the provisions have been made, may, Central Government, being by notification in the Official satisfied that reciprocal provisions Gazette, declare to be territories have been made may, by to which the said Convention notification in the Official Gazette, applies. declare to be territories to which the said Convention applies. 

3. Stay of proceedings in respect of matters to be referred to arbitration.-- 

Notwithstanding anything contained in the Arbitration Act, 1940 (10 of 1940), or in the Code of Civil Procedure, 1908 (5 of 1908), if any party to an agreement to which Article II of the Convention set 45. Power of judicial authority to refer forth in the Schedule applies, or any parties to arbitration.-- person claiming through or under him Notwithstanding anything contained in commences any legal proceedings in any Part I or in the Code of Civil Procedure, court against any other party to the 1908 (5 of 1908), a judicial authority, agreement or any person claiming when seized of an action in a matter in through or under him in respect of any respect of which the parties have made matter agreed to be referred to arbitration an agreement referred to in section 44, in such agreement, any party to such shall, at the request of one of the parties legal proceedings may, at any time after or any person claiming through or under appearance and before filing a written him, refer the parties to arbitration, statement or taking any other step in the unless it finds that the said agreement is proceedings, apply to the court to stay null and void, inoperative or incapable of the proceedings and the court, unless bring performed. satisfied that the agreement is null and void, inoperative or incapable of being When foreign award binding.--Any performed or that there is not, in fact, foreign award which would be any dispute between the parties with enforceable under this Chapter shall be regard to the matter agreed to be treated as binding for all purposes on the referred, shall make an order staying the persons as between whom it was made, proceedings. and may accordingly be relied on by any of those persons by way of defence, set 

4. Effect of foreign awards.--(1) A off or otherwise in any legal proceedings foreign award shall, subject to the in India and any references in this provisions of this Act, be enforceable in Chapter to enforcing a foreign award India as if it were an award made on a shall be construed as including matter referred to arbitration in India. references to relying on an award. (2) Any foreign award which would be enforceable under this Act shall be Evidence.--(1) The party applying treated as binding for all purposes on the for the enforcement of a foreign award persons as between whom it was made, shall, at the time of the application, and may accordingly be relied on by any produce before the court - of those persons by way of defence, set off or otherwise in any legal proceedings (a) the original award or a copy in India and any references in this Act to thereof, duly authenticated in the enforcing a foreign award shall be manner required by the law of the construed as including references to country in which it was made; relying on an award. (b) the original agreement for arbitration or a duly certified copy 

5. Filing of foreign award in court.--(1) thereof; and Any person interested in a foreign award (c) such evidence as may be necessary may apply to any court having to prove that the award is a foreign jurisdiction over the subject-matter of the award. award that the award be filed in court. 

(2) The application shall be in writing (2) If the award or agreement to be and shall be numbered and registered as produced under sub-section (1) is in a a suit between the applicant as plaintiff foreign language, the party seeking to and the other parties as defendants. enforce the award shall produce a (3) The court shall direct notice to be translation into English certified as given to the parties to the arbitration, correct by a diplomatic or consular agent other than the applicant, requiring them of the country to which that party to show cause, within a time specified belongs or certified as correct in such why the award should not be filed. other manner as may be sufficient according to the law in force in India. 

6. Enforcement of foreign award.--(1) Explanation.--In this section and all Where the court is satisfied that the the following sections of this Chapter, foreign award is enforceable under this Court means the principal Civil Court Act, the court shall order the award to be of original jurisdiction in a district, and filed and shall proceed to pronounce includes the High Court in exercise of its judgment according to the award. ordinary original civil jurisdiction, (2) Upon the judgment so pronounced a having jurisdiction over the subject- decree shall follow, and no appeal shall matter of the award if the same had been lie from such decree except in so far as the subject-matter of a suit, but does not the decree is in excess of or not in include any civil court of a grade inferior accordance with the award. to such principal Civil Court, or any Court of Small Causes. 

7. Conditions for enforcement of foreign awards.-- (1) A foreign award may not 48. Conditions for enforcement of be enforced under this Act- foreign awards.--(1) Enforcement of a (a) if the party against whom it is foreign award may be refused, at the sought to enforce the award request of the party against whom it is proves to the court dealing with invoked, only if that party furnishes to the case that- the court proof that - (i) the parties to the agreement were under the law applicable (a) the parties to the agreement to them, under some referred to in section 44 were, incapacity, or the said under the law applicable to them, agreement is not valid under under some incapacity or the said the law to which the parties agreement is not valid under the have subjected it, or failing law to which the parties have any indication thereon, under subjected it or, failing any the law of the country where indication thereon, under the law the award was made; or of the country where the award (ii) the party was not given was made; or proper notice of the (b) the party against whom the award appointment of the arbitrator is invoked was not given proper or of the arbitration notice of the appointment of the proceedings or was otherwise arbitrator or of the arbitral unable to present his case; or proceedings or was otherwise (iii) the award deals with unable to present his case; or questions not referred or (c) the award deals with a difference contains decisions on matters not contemplated by or not falling beyond the scope of the within the terms of the submission agreement: Provided that if to arbitration, or it contains the decisions on matters decisions on matters beyond the submitted to arbitration can scope of the submission to be separated from those not arbitration: submitted, that part of the Provided that, if the decisions award which contains on matter submitted to arbitration decisions on matters can be separated from those not so submitted to arbitration may submitted, that part of the award be enforced; or which contains decisions on (iv) the composition of the matters submitted to arbitration arbitral authority or the may be enforced; or arbitral procedure was not in (d) the composition of the arbitral accordance with the authority or the arbitral procedure agreement of the parties or was not in accordance with the failing such agreement, was agreement of the parties, or, failing not in accordance with the such agreement, was not in law of the country where the accordance with the law of the arbitration took place; or country where the arbitration took (v) the award has not yet become place; or binding on the parties or has (e) the award has not yet become been set aside or suspended binding on the parties, or has been by a competent authority of set aside or suspended by a the country in which, or competent authority of the country under the law of which, that in which, or under the law of award was made; or which, that award was made. (b) if the court dealing with the case (2) Enforcement of an arbitral award is satisfied that- may also be refused if the Court finds (i) the subject-matter of the that - 

difference is not capable of (a) the subject-matter of the settlement by arbitration difference is not capable of under the law of India; or settlement by arbitration under the (ii) the enforcement of the award law of India; or will be contrary to public (b) the enforcement of the award policy. would be contrary to the public policy of India. 

(2) If the court before which a foreign award is sought to be relied upon is Explanation.--Without prejudice to satisfied that an application for the the generality of clause (b) of this setting aside or suspension of the award section, it is hereby declared, for the has been made to a competent authority avoidance of any doubt, that an award is referred to in sub-clause (v) of clause (a) in conflict with the public policy of India of sub-section (1), the court may, if it if the making of the award was induced deems proper, adjourn the decision on or affected by fraud or corruption. the enforcement of the award and may also, on the application of the party (3) If an application for the setting aside claiming enforcement of the award, or suspension of the award has been order the other party to furnish suitable made to a competent authority referred to security. in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the 8. Evidence.--(1) The party applying for decision on the enforcement of the award the enforcement of a foreign award shall, and may also, on the application of the at the time of the application, produce- party claiming enforcement of the award, (a) the original award or a copy order the other party to give suitable thereof, duly authenticated in the security. manner required by the law of the country in which it was made; 49. Enforcement of foreign awards.-- (b) the original agreement for Where the Court is satisfied that the arbitration or a duly certified copy foreign award is enforceable under this thereof; and Chapter, the award shall be deemed to be (c) such evidence as may be a decree of that Court. necessary to prove that the award is a foreign award. 50. Appealable orders.--(1) An appeal (2) If the award or agreement requiring shall lie from the order refusing to - to be produced under sub-section (1) is in a foreign language, the party seeking (a) refer the parties to arbitration under to enforce the award shall produce a section 45; translation into English certified as (b) enforce a foreign award under correct by a diplomatic or consular agent section 48, of the country to which that party to the court authorised by law to hear belongs or certified as correct in such appeals from such order. other manner as may be sufficient according to the law in force in India. (2) No second appeal shall lie from an order passed in appeal under this section, 

9. Saving.--Nothing in this Act shall- but nothing in this section shall affect or (a) prejudice any rights which any take away any right to appeal to the person would have had of Supreme Court. enforcing in India of any award or of availing himself in India of any 51. Saving.--Nothing in this Chapter award if this Act had not been shall prejudice any rights which any passed; or person would have had of enforcing in (b) apply to any award made on an India of any award or of availing himself 44 arbitration agreement governed in India of any award if this Chapter had by the law of India. not been enacted. 

10. Repeal.--The Arbitration (Protocol 52. Chapter II not to apply.--Chapter II and Convention) Act, 1937 (6 of 1937), of this Part shall not apply in relation to shall cease to have effect in relation to foreign awards to which this Chapter foreign awards to which this Act applies. applies. 

11. Rule making power of the High Court.--The High Court may make rules consistent with this Act as to- 

(a) the filing of foreign awards and all proceedings consequent thereon or incidental thereto; 

(b) the evidence which must be furnished by a party seeking to enforce a foreign award under this Act; and 

(c) generally, all proceedings in court under this Act. 

56. A comparison of the two sets of provisions would show that section 44, the definition clause in the 1996 Act is a verbatim reproduction of section 2 of the previous Act (but for the words chapter in place of Act, first schedule in place of schedule and the addition of the word arbitral before the word award in section 44). Section 45 corresponds to section 3 of the previous Act. Section 46 is a verbatim reproduction of section 4(2) except for the substitution of the word chapter for Act. Section 47 is almost a reproduction of section 8 except for the addition of the words before the court in sub-section (1) and an explanation as to what is meant by court in that section. Section 48 corresponds to section 7; section 49 to section 6(1) and section 50 to section 6(2). Apart from the fact that the provisions are arranged in a far more orderly manner, it is to be noticed that the provisions of the 1996 Act are clearly aimed at facilitating and expediting the enforcement of the New York Convention Awards. Section 3 of the 1961 Act dealing with a stay of proceedings in respect of matters to be referred to arbitration was confined in its application to legal proceedings in any court and the court had a wider discretion not to stay the proceedings before it. The corresponding provision in section 45 of the present Act has a wider application and it covers an action before any judicial authority. Further, under section 45 the judicial authority has a narrower discretion to refuse to refer the parties to arbitration. Under section 4(1) of the 1961 Act, a foreign award for its enforcement was first deemed to be an award made on a matter referred to arbitration in India. Section 46 of the present Act dispenses with the provision of sub-section (1) of section 4 and resultantly a foreign award is enforceable in its own right. Section 47 is almost a reproduction of section 8 except for the addition of the words before the court in sub-section (1) and an explanation as to what is meant by court at the end of the section. Section 49 corresponds to section 6(1) and section 50 to section 6(2). It is however, a comparison of section 6 of the 1961 Act with section 49 of the present Act that would be of interest to us and that provides a direct answer to the question under consideration. As the comparison of the two sections is of some importance, the two sections are once again reproduced here: 

The Foreign Awards (Recognition and Enforcement) Act, 1961 6. Enforcement of foreign award.--(1) Where the court is satisfied that the foreign award is enforceable under this Act, the court shall order the award to be filed and shall proceed to pronounce judgment according to the award. 

(2) Upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except in so far as the decree is in excess of or not in accordance with the award. The Arbitration and Conciliation Act, 1996 

49. Enforcement of foreign awards.--Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court. 

57. Under section 6 of the 1961 Act, the Court on being satisfied that the foreign award was enforceable under the Act, would first order the award to be filed and then proceed to pronounce judgment according to the award. The judgment would lead to a decree against which no appeal would lie except insofar as the decree was in excess of or not in accordance with the award. 

58. Section 49 of the present Act makes a radical change in that where the court is satisfied that the foreign award is enforceable, the award itself would be deemed to be a decree of the Court. It, thus, not only omits the procedural formality for the court to pronounce judgment and a decree to follow on that basis but also completely removes the possibility of the decree being in excess of, or not in accordance with the award. Thus, even the limited basis on which an appeal would lie under sub-section (2) of section 6 of the 1961 Act, is taken away. There is, thus, no scope left for an appeal against an order of the court for the enforcement of a foreign award. It is for this reason that section 50(1)(b) provides for an appeal only against an order refusing to enforce a foreign award under section 48. 

59. There can be no doubt that under section 6, except on the very limited ground, no appeal including a Letters Patent Appeal was maintainable against the judgment and decree passed by the Court under section 6(1). It would be futile, therefore, to contend that though the present Act even removes the limited basis on which the appeal was earlier maintainable, yet a Letters Patent Appeal would lie notwithstanding the limitations imposed by section 50 of the Act. The scheme of sections 49 and 50 of the 1996 Act is devised specially to exclude even the limited ground on which an appeal was earlier provided for under section 6 of the 1961 Act. The exclusion of appeal by section 50 is, thus, to be understood in light of the amendment introduced in the previous law by section 49 of the Act. 

60. There is another way to look at the matter. It will be illuminating to see how the courts viewed the Arbitration Act, 1940 shortly after it was enacted and even while the previous law, the Arbitration Act, 1899 coupled with the Schedule 2 of the Code of Civil Procedure was still fresh in the courts' mind. In Gauri Singh v. Ramlochan Singh, AIR (35) 1948 Patna 430, the plaintiff had filed a suit for an order for filing an arbitration award and preparing a decree of the court on that basis. The award was in writing and it was also registered on the admission of the arbitrators but the award was made not on the basis of any arbitration agreement in writing but on an oral reference. Before the division bench of the Patna High Court, the question arose regarding the maintainability of the suit. Agarwala, C.J. in a brief order held that Chapter II of the Act would only apply when the agreement was in writing. In other words, the existence of an arbitration agreement i.e. an agreement in writing, was the foundation of the court's jurisdiction to direct the arbitrators, under section 14(2), to cause the award to be filed in court. But Meredith, J. examined the matter in greater detail. He considered the question, whether the Act of 1940 was exhaustive or whether it related only to awards following arbitration agreements within the meaning of the Act. The case of the plaintiff was that there was an oral reference to arbitration. Such an oral reference was perfectly valid and so was the award upon it. But it did not come within the scope of the Act. The award could, therefore, be enforced by an ordinary suit under the Code of Civil Procedure. Rejecting the submission, in paragraphs 20, 21 and 22 of the judgment, Meredith, J. observed as follows: 

20. ..... It may be regarded as settled that, so far as Sch.2, Civil P.C., and the Arbitration Act of 1899 were concerned, an award based upon an oral submission or reference to arbitration was not touched, but was perfectly legal and valid, and the award could be enforced by suit, though not by the special procedure under the provisions of the Civil P.C., or the 1899 Act. That Act was regarded as not exhaustive even in the limited areas where it was applicable. ..... 

21. This view was also taken by the Madras High Court in Ponnamma v. Marappudi Kotamma [19 A.I.R. 1932 Mad. 745], and also in our own High Court in Ramautar Sah v. Langat Singh, A.I.R. 1931 Pat. 92. The view there taken was that there is nothing in law which requires a submission of the dispute between the parties to arbitration to be in writing. A parole submission is a legal submission to arbitration. 

22. Has the position been altered by the Act of 1940? In my opinion it has. The Act of 1899 was described as An Act to amend the law relating to arbitration, but the Act of 1940 is headed as An Act to consolidate and amend the law relating to arbitration, and the preamble says whereas it is expedient to consolidate and amend the law relating to arbitration in British India. It is an Act to consolidate the arbitration law. This suggests that it is intended to be comprehensive and exhaustive. ...... 

61. Making reference to sections 47, 26 and 30 of the 1940 Act, in paragraph 26 of the judgment, His Lordship concluded as follows: 26. I think I am justified in holding, in view of these provisions, that the Act was intended to be exhaustive of the law and procedure relating to arbitration. I cannot imagine that the words arbitrations and awards could have been used in such specific provisions without more, specially having regard to the definition of award, if it was intended to leave it open to the parties to an award based upon an oral submission to proceed to enforce it or set it aside by proceedings by way of suit altogether outside the Act. Let us take it then that the Act intended that there should be no such proceedings. 

62. In paragraph 33, he further said: 

If then, as I have held, the Act is intended to be exhaustive, and contains no provisions for the enforcement of an award based upon an oral submission, the only possible conclusion is that the Legislature intended that such an award should not be enforceable at all, and that no such suit should lie. 

63. In Belli Gowder v. Joghi Gowder, AIR (38) 1951 Madras 683, Viswanatha Sastri, J. took the same view on a case very similar in facts to the case in the Patna decision. In paragraph 2 of the judgment, Sastri, J. observed as follows: 

2. The first point argued by the applt's learned advocate is that the suit is one to enforce an award given on oral reference or submission to arbitration and is not maintainable by reason of the provisions of the Arbitration Act, 1940. It is common ground that there was no written submission to the panchayatdars. Prior to the enactment of the Arbitration Act of 1940 it had been held by this and other H. Cts that there was nothing in the Arbitration Act of 1899 or in Sec. 89 and schedule 2 of the C. P. C. of 1908 rendering an oral agreement to refer to arbitration invalid. A parole submission was held to be a legal submission to arbitration and an award passed on an oral reference was held to be valid and enforceable by a suit though not by the special procedure prescribed by Sch 2, C. P. C. or the Arbitration Act of 1899.... .... The question whether it was intended merely to make awards on oral submissions unenforceable under the procedure of the Arbitration Act or to make them invalid and unenforceable altogether, would depend to a large extent on whether the Act is exhaustive of the law of arbitration. I am inclined to think that it is. I therefore hold that an award passed on oral submission can neither be filed and made a rule of Ct under the Act, nor enforced apart from the Act. The same opinion has been expressed in 'Gauri Singh v. Ramlochan Singh', AIR (35) 1948 Pat 430: (29 PLT 105). 

64. In Narbadabai and Ors. v. Natverlal Chunilal Bhalakia & Anr., AIR 1953 Bombay 386, a division bench of the Bombay High Court went a step further and held that an arbitration award could only be enforced in terms of section 17 of the Arbitration Act and a suit filed for enforcement of an award was not maintainable. Chagla, C.J. speaking for the court, in paragraph 5 of the judgment, held and observed as follows: 

5. Whatever the law on the subject may have been prior to the Indian Arbitration Act 10 of 1940, it is clear that when this Act was passed, it provided a self-contained law with regard to arbitration. The Act was both a consolidating and amending law. The main object of the Act was to expedite and simplify arbitration proceedings and to obtain finality; and in our opinion when we look at the various provisions of the Arbitration Act, it is clear that no suit can be maintained to enforce an award made by arbitrators and an award can be enforced only by the manner and according to the procedure laid down in the Arbitration Act itself. Section 14 deals with signing and filing of the award. Section 15 deals with the power of the Court to modify the award in cases set out in that section and Section 16 deals with the power of the Court to remit the award. Then we come to S.17 and that provides that 

Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award. 

Therefore, Section 17 lays down the procedure by which a decree can be obtained on an award. The Act gives the right to the parties to challenge the award by applying for setting aside the award after the award is filed under Section 14, but if that right is not availed of or if the application is dismissed and the Court has not remitted the award, then the Court has to pronounce judgment according to the award, and upon the judgment so pronounced a decree has to follow. Mr. Desai does not dispute, as indeed he cannot, that when the award was published by the arbitrators, he could have followed the procedure laid down in the Arbitration Act and could have applied for judgment under Section 17. But Mr. Desai contends that Section 17 does not preclude a party from filing a suit to enforce the award. Mr. Desai says that Section 17 gives a party a summary remedy to obtain judgment upon the award but that summary remedy does not bar a suit. ... 

65. He, then, considered sections 31 and 32 of the Act and came to hold as follows: 

6.... Mr. Desai is undoubtedly right that before the Act of 1940 the view was taken that an award did not lose its efficacy merely because it was not filed and no action was taken on it by proceedings under the arbitration law. But the question is whether that view is possible after the Arbitration Act came into force and the Legislature enacted S.32. Therefore, with respect, we agree with the view taken by the Madras High Court in -'Moolchand v. Rashid Jamshed Sons & Co.', [('46) AIR 1946 Mad. 346] and the view taken by the Patna High Court in-- 'Ramchander Singh v. Munshi Mian [('42) AIR 1942 Bom 101]., & the view taken by the Punjab High Court in - 'Radha Kishen v. Ganga Ram [('51) AIR 1951 Punj 121]. 

7. The result, therefore, is that the plaintiff cannot maintain this action to enforce the award. ..... Therefore, if we are right in the view we take as to the interpretation of Section 32, then it is clear that Shah J. with respect, had no jurisdiction to try a suit which in substance and in effect was a suit to enforce an award. The result, therefore, is that the suit must fail on the preliminary ground that the suit is not maintainable, the suit being one to enforce an award duly given by arbitrators appointed by the parties and also because the award deals with the very disputes which are the subject-matter of the suit. .... 

66. In S.N. Srikantia & Co. v. Union of India and Anr., AIR 1967 Bombay 347, the question that arose for consideration was whether a court has the power to grant interest on the principal sum adjudged by an award from the date of the award till payment. The plaintiff in the case claimed that the court should award interest in the principal sum adjudged by the award at a certain rate from the date of the award till the date of the decree, and further interest on the said principal sum at another rate from the date of the decree till payment. The plaintiff's claim was resisted on the plea that under section 29 of the 1940 Act, interest on the principal sum adjudged by an award could not be granted from the date of the award till the passing of the decree. It was contended on behalf of the plaintiff that section 29 was merely an enabling provision but that cannot stand in the way of the court in awarding interest for the prior period, namely, from the date of the award onwards till the passing of the decree. Tulzapurkar, J., (as his Lordship then was) referred to the earlier decisions of the Bombay High Court in Narbadabai and relying upon the decisions of Patna High Court in Gauri Singh and Madras High Court in Belli Gowder held an observed as follows: I may mention that a contention was raised in that case that though Section 17 of the Act laid down the procedure by which a decree could be obtained on an award that Section gave a summary remedy to a party to an award for a judgment upon an award, but that such summary remedy did not bar a suit to enforce an award. This contention was negatived by this Court and it was held that for enforcing an award the procedure laid down in the Act itself could alone be availed of by a party to the award. It is no doubt true that Section 32 of the Act was referred to, which expressly barred suits for a decision upon the existence, effect or validity of an award and it was held that the expression effect of the award was wide enough, to cover a suit to enforce an award. At the same time this Court did take the view that since the Act was a self-contained Code with regard to arbitration and was exhaustive, an award could be enforced only by the manner and according to the procedure laid down in section 17 of the Act. In my view, these decisions and particularly, the decisions of the Patna High Court and the Madras High Court clearly indicate the corollary which follows upon an Act being regarded as exhaustive viz.. that it carries with it a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done. In my view, Section 29 of the Act also is exhaustive of the whole law upon the subject of interest on awards and since the said section enables the court to award interest on the principal sum adjudged by an award from the date of the decree onwards, it must be held that it carries with it the negative import that it shall not be permissible to the Court to award interest on the principal sum adjudged by an award for any period prior to the date of the passing of the decree. 

67. We have so far seen the decisions of the High Courts holding that a suit for enforcement of an arbitration award made on an oral reference was not maintainable, an arbitral award could only be enforced in terms section 17 of the Arbitration Act and a suit for the enforcement of an arbitral award was not maintainable, and third, that no interest could be awarded on the amount adjudged in the award beyond the provisions of section 29 of the Arbitration Act. 

68. We now come back to the decision of this Court in Mohindra Supply Co. in which the issue was about the maintainability of an appeal, particularly, a letters patent appeal. It is seen above that, in Mohindra Supply Co. the court held that a letters patent appeal was not maintainable in view of section (2) of section 39 of the 1940 Act. To that extent, the decision may not have any bearing on the present controversy. But, in that decision observations of great significance were made in regard to the nature of the 1940 Act. It was observed (SCR page 500): 

The proceedings relating to arbitration are, since the enactment of the Indian Arbitration Act X of 1940, governed by the provisions of that Act. The Act is a consolidating and amending statute. It repealed the Arbitration Act of 1899, Schedule 2 of the Code of Civil Procedure and also cls. (a) to (f) of s. 104(1) of the Code of Civil Procedure which provided for appeals from orders in arbitration proceedings. The Act set up machinery for all contractual arbitrations and its provisions, subject to certain exceptions, apply also to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that, other enactment were an arbitration agreement, except in so far as the Arbitration Act is inconsistent with that other enactment or with any rules made thereunder. .... ... 

69. It was further observed and held (SCR page 506): But it was urged that the interpretation of s.39 should not be divorced from the setting of legislative history, and if regard be had to the legislative history and the dictum of the Privy Council in Hurrish Chunder Chowdry v. Kali Sundari Debia [(1882) L.R.10 I.A. 4, 17] which has been universally followed, in considering the extent of the right of appeal under the Letters Patent, the Court would not be justified in restricting the right of appeal which was exercisable till 1940 by litigants against decisions of single Judges of High Courts in arbitration matters from orders passed in appeals. In considering the argument whether the right of appeal which was previously exercisable by litigants against decisions of single Judges of the High Courts in appeals from orders passed in arbitration proceedings was intended to be taken away by s. 39(2) of the Indian Arbitration Act, the Court must proceed to interpret the words of the statute without any predisposition towards the state of the law before the Arbitration Act was enacted. The Arbitration Act of 1940 is a consolidating and amending statute and is for all purposes a code relating to arbitration..... 

70. And (SCR pages 512-513): 

Prior to 1940 the law relating to contractual arbitration (except in so far as it was dealt with by the Arbitration Act of 1899) was contained in the Code of Civil Procedure and certain orders passed by courts in the course of arbitration proceedings were made appealable under the Code of 1877 by s. 588 and in the Code of 1908 by s.104. In 1940, the legislature enacted Act X of 1940, repealing schedule 2 and s. 104(1) clauses (a) to (f) of the Code of Civil Procedure 1908 and the Arbitration Act of 1899. By s. 39 of the Act, a right of appeal was conferred upon litigants in arbitration proceedings only from certain orders and from no others and the right to file appeals from appellate orders was expressly taken away by sub-s.2 and the clause in s.104 of the Code of 1908 which preserved the special jurisdiction under any other law was incorporated in s. 39. The section was enacted in a form which was absolute and not subject to any exceptions. It is true that under the Code of 1908, an appeal did lie under the Letters Patent from an order passed by a single Judge of a Chartered High Court in arbitration proceedings even if the order was passed in exercise of appellate jurisdiction, but that was so, because, the power of the Court to hear appeals under a special law for the time being in operation was expressly preserved. 

There is in the Arbitration Act no provision similar to s. 4 of the Code of Civil Procedure which preserves powers reserved to courts under special statutes. There is also nothing in the expression authorised by law to hear appeals from original decrees of the Court contained in s. 39(1) of the Arbitration Act which by implication reserves the jurisdiction under the Letters Patent to entertain an appeal against the order passed in arbitration proceedings. Therefore, in so far as Letters Patent deal with appeals against orders passed in arbitration proceedings, they must be read subject to the provisions of s. 39(1) and (2) of the Arbitration Act. 

Under the Code of 1908, the right to appeal under the Letters Patent was saved both by s. 4 and the clause contained in s. 104(1), but by the Arbitration Act of 1940, the jurisdiction of the Court under any other law for the time being in force is not saved; the right of appeal can therefore be exercised against orders in arbitration proceedings only under s. 39, and no appeal (except an appeal to this Court) will lie from an appellate order. 

71. Mohindra Supply Co. was last referred in a constitution bench decision of this Court in P.S. Sathappan, and the way the constitution bench understood and interpreted Mohindra Supply Co. would be clear from the following paragraph 10 of the judgment: 

10.....The provisions in the Letters Patent providing for appeal, in so far as they related to orders passed in Arbitration proceedings, were held to be subject to the provisions of Section 39(1) and (2) of the Arbitration Act, as the same is a self-contained code relating to arbitration. 

72. It is, thus, to be seen that Arbitration Act 1940, from its inception and right through 2004 (in P.S. Sathappan) was held to be a self-contained code. Now, if Arbitration Act, 1940 was held to be a self-contained code, on matters pertaining to arbitration the Arbitration and Conciliation Act, 1996, which consolidates, amends and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a self- contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done. In other words, a Letters Patent Appeal would be excluded by application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded. 

73. We, thus, arrive at the conclusion regarding the exclusion of a letters patent appeal in two different ways; one, so to say, on a micro basis by examining the scheme devised by sections 49 and 50 of the 1996 Act and the radical change that it brings about in the earlier provision of appeal under section 6 of the 1961 Act and the other on a macro basis by taking into account the nature and character of the 1996 Act as a self-contained and exhaustive code in itself. 

74. In light of the discussions made above, it must be held that no letters patent appeal will lie against an order which is not appealable under section 50 of the Arbitration and Conciliation Act, 1996.
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