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CASE NO.: Appeal (civil)  4759 of 2006

PETITIONER: Chief Engineer of B.P.D.P./R.E.O., Ranchi        

RESPONDENT: M/s Scoot Wilson Kirpatrick India Pvt.Ltd.       

DATE OF JUDGMENT: 10/11/2006

BENCH: ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T Arising out of S.L.P. (C) No. 15033 of 2005

ARIJIT PASAYAT, J.

Leave granted.

Challenge in this appeal is to the order passed by a  learned Single Judge of the Jharkhand High Court holding  that the appeal filed by it was not maintainable as the same  does not fall within the ambit of Section 37 of the Arbitration  and Conciliation Act, 1996 (in short the ’Act’).   

Learned counsel for the appellant submitted that the  appeal is clearly maintainable under Section 37(1)(b) of the  Act.

Per contra, learned counsel for the respondent submitted  that the case is covered by the decision of this Court in Union  of India v. Popular Construction Co. (2001 (8) SCC 470) and  State of Goa v. Western Builders (2006 (6) SCC 239), and the  High Court was justified in holding that the appeal was not  maintainable. Therefore, it is submitted that certain aspects  which have not been raised specifically in the grounds raised  before this Court but submitted during the course of  arguments cannot be taken note of.   

Section 37(1)(b) of the Act is in pari materia to Section  39(1)(vi) of the Arbitration Act, 1940 (in short ’Old Act’). The  provisions in the Acts read as follows:                          "1996 Act:             Section 37(1)(b) "An appeal shall lie from  the following orders of the Court authorized  by law to hear appeals from original decrees  of the Court passing the order, namely :-

b.      Setting aside or refusing to set aside an  arbitral award under Section 34 of the  Act".

1940 Act:             Section 39.  Appealable orders: "(1) An  appeal shall lie from the following orders  passed under this Act (and from no others)    to the Court authorized by law to hear appeal  from original decrees of the Court passing the

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order  :-

An order: xxx             xxx             xxx                     xxx (vi)    Setting aside or refusing to set aside an   award".  

In Dharma Prathishthanam v. Madhok Construction (P)  Ltd. (2005 (9) SCC 686) it has been held by this Court as  follows: "27. In the event of the appointment of an  arbitrator and reference of disputes to him  being void ab initio as totally incompetent or  invalid the award shall be void and liable to  be set aside de hors the provisions of Section  30 of the Act, in any appropriate proceedings  when sought to be enforced or acted upon.  This conclusion flows not only from the  decided cases referred to hereinabove but also  from several other cases which we proceed to  notice. 28. In Chhabba Lal v. Kallu Lal and Ors., (AIR  1946 P.C. 72 )their Lordships have held that  an award on a reference presupposes a valid  reference. If there is no valid reference, the  purported award is a nullity. 29. On this point, there is near unanimity of  opinion as amongst the High Courts of the  country as well. Illustratively, we may refer to  a few cases. In Union of India v. Ajit Mehta  and Associates, Pune and Ors. (AIR 1990 Bom  45), the Division Bench held that the Court  has suo motu power to set aside an award on  ground other than those covered by Section  30 such as an award made by arbitrators who  can never have been appointed under Section  8, as such an award would undoubtedly be ab  initio void and no nest. In Union of India v.  South Eastern Railway (AIR 1992 M.P. 47)  and Rajendra Dayal v. Govind (1970 MPLJ  322), both Division Bench decisions, the High  Court of Madhya Pradesh has held that in  certain situations the Court may set aside an  Award even without there being an  application under Section 30 or even if the  petition under Section 30 has not been filed  within the period of limitation if the Court  finds that the award is void or directs a party  to do an act which is prohibited by law or is  without jurisdiction or patently illegal. We  need not multiply the number of authorities  on this point as an exhaustive and  illuminating conspectus of judicial opinion is  found to be contained in Law of Arbitration  and Conciliation - Practice and Procedure by  S.K. Chawla (Second Edition, 2004 at pp.  181-184) under the caption - "Whether the  Court has suo motu power to set aside an  Arbitral Award - " and the answer given in the  discussion thereunder is in the affirmative. 30. Though it has been held in The Union of  India v. Shri Om Prakash (1976 (4) SCC 32),  that an objection on the ground of invalidity  of a reference is not specifically covered by  Clauses (a), (b) and (c) of Section 30, yet it is

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included in the residuary expression "or as  otherwise invalid" and could have been set  aside on such an application being made.  However, the above decision cannot be treated  as an authority to hold that an award which  is void ab initio and hence a nullity  consequent upon an invalid appointment and  an invalid reference in clear breach of the  provisions contained in Sections 8, 9 and 20  of the Act, can still be held to be valid if not  objected to through an objection preferred  under Section 30 of the Act within the  prescribed period of limitation. 31. Three types of situations may emerge  between the parties and then before the  Court. Firstly, an arbitration agreement,  under examination from the point of view of  its enforceability, may be one which expresses  the parties’ intention to have their disputes  settled by arbitration by using clear and  unambiguous language then the parties and  the Court have no other choice but to treat  the contract as binding and enforce it. Or,  there may be an agreement suffering from  such vagueness or uncertainty as is not  capable of being construed at all by culling  out the intention of the parties with certainty,  even by reference to the provisions of the  Arbitration Act, then it shall have to be held  that there was no agreement between the  parties in the eye of law and the question of  appointing an arbitrator or making a  reference or disputes by reference to Sections  8, 9 and 20 shall not arise. Secondly, there  may be an arbitrator or arbitrators named, or  the authority may be named who shall  appoint an arbitrator, then the parties have  already been ad idem on the real identity of  the arbitrator as appointed by them before  hand; the consent is already spelled out and  binds the parties and the Court. All that may  remain to be done in the event of an occasion  arising for the purpose, is to have the  agreement filed in the Court and seek an  order of reference to the arbitrator appointed  by the parties. Thirdly, if the arbitrator is not  named and the authority who would appoint  the arbitrator is also not specified, the  appointment and reference shall be to a sole  arbitrator unless a different intention is  expressly spelt out. The appointment and  reference - both shall be by the consent of the  parties. Where the parties do not agree, the  Court steps in and assumes jurisdiction to  make an appointment, also to make a  reference, subject to the jurisdiction of the  Court being invoked in that regard. We hasten  to add that mere inaction by a party called  upon by the other one to act does not lead to  an inference as to implied consent or  acquiescence being drawn. The appellant not  responding to respondent’s proposal for  joining in the appointment of a sole arbitrator  named by him could not be construed as  consent and the only option open to the

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respondent was to have invoked the  jurisdiction of Court for appointment of an  arbitrator and an order of reference of  disputes to him. It is the Court which only  could have compelled the appellant to join in  the proceedings."                  Reference may be made to some observations in Essar  Constructions v. N.P. Rama Krishna Reddy (2000 (6) SCC 94),  where it was held that appeal is maintainable against the  dismissal of objections on the ground of limitation.  Similar  views were expressed in Union of India and Ors. v. Manager,  M/s Jain and Associates (2001 (3) SCC 277).  Para 11, 12 and  19 read as follows: "11.    In view of the aforequoted Sections, it  can be stated that-- (a) after receipt of an award, the Court can  suo motu refuse to make award rule of the  Court on the ground that (i) part of the award  is upon a matter not referred to arbitration;  and (ii) the award is imperfect in form or  contains any obvious error. The Court can  also remit the award to arbitrator in case (i)  where the award has left undetermined any  matter referred to arbitration; or (ii) where it  has determined any matter not referred to  arbitration; or (iii) the award is so indefinite  as to be incapable of execution; or (iv) is on  the face of it illegal. This is also provided  under parenthesis clause of section 17 which  provides "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 .. proceed to  pronounce judgment.." Therefore, it cannot be  stated that in case where objections under  Section 30 or 33 are not filed the Court is  bound to pass decree in terms of the award. (b) Section 5 of Limitation Act gives discretion  to the Court to extend the time for filing  application under Section 30 or 33 raising  objections to the award. (c) The Civil Procedure Code including Order  IX Rule 13 is applicable to the proceedings  initiated by producing award before the Court  for passing a decree. (d) The power of the Court to modify the  award under Section 15 or to remit the award  to the arbitrator for reconsideration under  Section 16 varies from the jurisdiction of the  Court to set aside the award under Section 30  or to determine the validity of the arbitration  agreement or an award under Section 33. 12.     The result is--before pronouncing  judgment, the Court has to apply its mind to  arrive at the conclusion whether there is any  cause to modify or remit the award. Further  the phrase ’pronounce judgment’ would itself  indicate judicial determination by reasoned  order for arriving at the conclusion that  decree in terms of award be passed. One of  the meaning given to the word "Judgment" in  Webster’s Comprehensive Dictionary  [International Edition, Vol. 1 (1984)] reads  thus: "the result of judging; the decision or

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conclusion reached, as after consideration or  deliberation". Further, Order XX Rule 4(2)  C.P.C. in terms provides that ’Judgment’ shall  contain a concise statement of case, the  points for determination, the decision  thereon, and the reasons for such decision.  This is antithesis to pronouncement of non- speaking order.

19.     Further, large part of the controversy  involved in this appeal is covered by the  decision rendered by this Court in Essar  Constructions v. N.P. Rama Krishna Reddy  (2000 (6) SCC 94). The Court observed that  because of the applicability of Section 5 of the  Limitation Act, 1963, if the court has not  pronounced judgment for whatever reason,  although the time prescribed for making the  application has expired and an application for  setting aside the award is made with a prayer  for condonation of delay, the court cannot  pronounce judgment until the application is  rejected. The Court also observed that even  after a decree is passed under Section 17, an  application under Section 30 can be  entertained provided sufficient cause is  established. In either case, the rejection of the  application would be a refusal to set aside the  award. In case where such application is  rejected on the ground that it is delayed and  no sufficient cause has been made out under  Section 5 of the Limitation Act, it would be an  appealable order under Section 39(1)(vi) of the  Act".

       The decision in Popular Construction’s case (supra) did  not deal with specific issues in this case.  In that decision it  was held that in respect of "sufficient cause cases" the  provisions of Section 34(3) of the Act which are special  provisions relating to condonation of delay override the  general provisions of the Section 5 of the Limitation Act, 1963  (in short ’Limitation Act’). The position was reiterated in the  Western Builders case (supra) and also in Fairgrowth  Investment Ltd. v. Custodian (2004 (11) SCC 472).  There can  be no quarrel with the proposition that Section 5 of the  Limitation Act providing for condonation of delay is excluded  by Section 34(3) of the Act.   

But the question in the instant case is not about the  applicability of Section 5 of the Limitation Act, and question  really is whether the appeal was maintainable.  The High  Court did not consider this aspect. The appeal is clearly  maintainable.  Therefore, the order of the High Court is set  aside.  The High Court shall deal with the matter and examine  the respective stand on merits treating the appeal to be  maintainable.

       The appeal is accordingly disposed of with no order as to  costs.