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CASE NO.: Appeal (civil)  2522 of 1999

PETITIONER: National Aluminium Co.Ltd.                       

RESPONDENT: M/s.Pressteel & Fabrications Pvt. Ltd. & Anr.

DATE OF JUDGMENT: 18/12/2003

BENCH: N. Santosh Hegde & B.P. Singh.

JUDGMENT: J U D G M E N T

SANTOSH HEGDE,J.

       The original appeal from which this application arises for our  consideration namely, C.A. No.2522/99 was preferred by the  respondent herein questioning the unilateral appointment of an  arbitrator made by the present applicant under the Arbitration Act,  1940. This Court in the said appeal after hearing the parties and with  the agreement of the parties appointed Hon. Mr. Justice A.M.  Ahmadi, former Chief Justice of India as the sole arbitrator. Before  the said arbitrator both the parties by consent agreed that the  proceedings should be governed by the provisions of the Arbitration  & Conciliation Act, 1996. It is on that basis the learned arbitrator  proceeded and gave a final award.            In this application, namely, I.A. No.2 in C.A. No.2522/99 made  under sections 15, 17 and 29 of the Indian Arbitration Act, 1940  praying for modification of the said award made by the arbitrator, the  applicant contends that since the dispute between the parties and the  agreement of the parties to refer such dispute to an arbitrator was prior  to the coming into force of the 1996 Act, all further proceedings  subsequent to the award should be governed by the 1940 Act and  under the said Act an aggrieved party which wants to seek  modification has to move the court which appointed the arbitrator,  hence, the applicant contends that this is the only Court before which  such an application is maintainable.           It is to be noted at this stage that the respondent in this  application was appellant in C.A. No.2522/99. The said respondent  being aggrieved by this award, itself has filed objections to the said  award before the appropriate Civil Court under section 34 read with  section 2(e) of the 1996 Act.

         On the facts of this case, 2 primary questions arise for our  consideration. They are : (i) whether  the proceedings in which an  impugned award has come to be made, are governed by the 1940 Act  or the 1996 Act ? and (ii) whether the appropriate court for the  purpose of challenging the said award or seeking modification of the  said award is this Court, being the court which appointed the arbitrator  or an appropriate court as contemplated under Section 34 of the 1996  Act read with section 2(e) of the said Act which contemplates said  court to be the principal civil court of original jurisdiction ?            As stated above, the argument of learned counsel appearing for  the applicant is that since this Court has appointed the sole arbitrator  in the abovesaid civil appeal under the provisions of the 1940 Act, this  Court alone has the jurisdiction to modify the impugned award. While  the respondent in this application contends that the proceedings before  the arbitrator admittedly having proceeded under the provisions of the  1996 Act by consent of parties, for the purpose of seeking  modification of the award in such proceedings, it will only be a court

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contemplated under the 1996 Act.            It is an admitted fact that after the arbitrator was appointed by  this Court, the parties by consent agreed before the arbitrator that the  proceedings should go on under the provisions of the 1996 Act though  the dispute arose prior to coming into force of this Act. Such a  procedure is permissible under section 85(2)(a) of the 1996 Act. In the  normal course having agreed to this procedure, the applicant should  not be permitted to raise a plea at this stage that the provisions of the  1940 Act would apply for challenging or seeking modification of the  award made under the 1996 Act. But the learned counsel placed  reliance on two judgments of this Court in State of M.P. etc. v. M/s.  Saith & Skeleton (P) Ltd. (1972 1 SCC 702) and M/s. Guru Nanak  Foundation v. M/s. Rattan Singh and Sons (1981 4 SCC 634) wherein  according to the applicant, this Court entertained an award for the  purpose of making it a rule of the Court because it had appointed the  arbitrator hence for the purpose of making an award a rule of the  Court it can only be the court which appointed the arbitrator in view  of the provisions of sections 2(e) and 14(2) of the 1940 Act.            Before considering the said argument of the applicant and the  two decisions referred to hereinabove, it is necessary for us to note the  contents of the Order whereby this Court had appointed Hon. Mr.  Justice A.M. Ahmadi as the sole arbitrator. That order was made by  this Court on 23.4.1999 in the abovesaid civil appeal and the relevant  portion of the order reads thus :

       "Parties agree that Mr.Justice A.M. Ahmadi,  former Chief Justice of this Court, be appointed as  an Arbitrator. In view of this agreement between  the parties we allow this appeal, set aside the  judgment of the High Court and appoint Mr.Justice  A.M. Ahmadi as sole Arbitrator. The fees and  expenses of the Arbitrator shall be fixed by the  Arbitrator in consultation with the parties. The  learned Arbitrator is requested to conclude the  proceedings within four months from the day he  enters upon the Arbitration. No order as to costs."

       It is to be noted that as per the above order, this Court has not  retained any power or control over the arbitration proceedings while  appointing the arbitrator by consent of parties, on the contrary, it  seems this Court has merely recorded a submission of the parties as to  their agreement in appointing a particular arbitrator. Even the time  limit fixed therein is only a request to the learned arbitrator to  conclude the proceedings within 3 months from the day he enters  upon the arbitration and it is not a mandate in the sense that the failure  to do so would have entitled the parties to approach this Court for  suitable remedy. On facts, it is admitted that the learned arbitrator has  extended the time suo motu a few times before making the award,  without reference to this Court, therefore, it is clear on facts of this  case that it is the arbitrator who had the control over the proceedings    and not this Court. Therefore, in our opinion, the two judgments relied  on by the applicant do not help the applicant because in those  judgments this Court had held that while appointing an arbitrator this  Court had retained control over the arbitral proceedings, therefore,  under the provisions of the 1940 Act, it was this Court which could  entertain an application for making the award a rule of the Court and  not any other court.            The next question to be considered by us in this application is  whether the dispute having arisen prior to the coming into force of the  1996 Act and the proceedings having continued under the provisions  of the 1996 Act, would the provisions of the 1940 Act still be  applicable for making an application for the modification of the  award, and if so, before which court. First part of this issue need not  detain us because of the admitted fact that by consent of the parties  provisions of 1996 Act have been made applicable to the proceedings

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which is in conformity with Section 85(2)(a) of 1996 Act, hence, it is  futile to contend that for the purpose of challenge to the Award 1940  Act will apply. Hence, we reject this contention. In regard to the  forum before which the application for modification or setting aside  the award is concerned, we find no difficulty in coming to the  conclusion that in view of the provisions of section 34 read with  section 2(e) of the 1996 Act that it is not this Court which has the  jurisdiction to entertain an application for modification of the award  and it could only be the principal civil court of original jurisdiction as  contemplated under section 2(e) of the Act, therefore, in our opinion,  this application is not maintainable before this Court.            Learned counsel for the applicant then contended that nearly 16  years have gone-by since the dispute between the parties arose and  since the said dispute was first referred to an arbitrator. After the  passage of such a long time, the applicant has been able to get only a  partial award in his favour, but still he is unable to enjoy the fruits of  that award also because of the proceedings initiated under section 34  of the 1996 Act. In this factual background, he prays that to do  complete justice, we should consider the objections of both the parties  to the said award and decide the same in these proceedings. Since we  have come to the conclusion that the parties having agreed to the  procedure under the 1996 Act to be followed by the arbitrator for the  post-award proceedings also, the provisions of the said Act would  prevail and the said statute having specifically provided for a remedy   under section 34 of the 1996 Act, it may not be proper for us to  exercise our jurisdiction under Article 142 of the Constitution to  adjudicate upon the objections filed by both the parties to the award.  Learned counsel then prayed that at least the amount representing that  part of the award which is in their favour should be directed to be  deposited in the competent civil court by the respondents herein so  that the applicant could enjoy the fruits of the said award during  further proceedings. At one point of time, considering the award as a  money decree, we were inclined to direct the party to deposit the  awarded amount in the court below so that the applicant can withdraw  it on such terms and conditions as the said court might permit them to  do as an interim measure. But then we noticed from the mandatory  language of section 34 of the 1996 Act, that an award, when  challenged under section 34 within the time stipulated therein,  becomes unexecutable. There is no discretion left with the court to  pass any interlocutory order in regard to the said award except to  adjudicate on the correctness of the claim made by the applicant  therein. Therefore, that being the legislative intent, any direction from  us contrary to that, also becomes impermissible. On facts of this case,  there being no exceptional situation which would compel us to ignore  such statutory provision, and to use our jurisdiction under Article 142,  we restrain ourselves from passing any such order, as prayed for by  the applicant.  

         However, we do notice that this automatic suspension of the  execution of the award, the moment an application challenging the  said award is filed under section 34 of the Act leaving no discretion in  the court to put the parties on terms, in our opinion, defeats the very  objective of the alternate dispute resolution system to which  arbitration belongs. We do find that there is a recommendation made  by the concerned Ministry to the Parliament to amend section 34 with  a proposal to empower the civil court to pass suitable interim orders in  such cases. In view of the urgency of such amendment, we sincerely  hope that necessary steps would be taken by the authorities concerned  at the earliest to bring about the required change in law.  

       For the reasons stated above, this application fails and the same  is dismissed with a direction to the applicant to file its objections to  the award before the court concerned and if the same are filed within  30 days from today, the delay in regard to the filing of the objections  as contemplated under section 34 of the 1996 Act shall be condoned

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by the said court since the time consumed was in bona fide  prosecution of the application in a wrong forum.  

         With the above observations, this application fails and the same  is dismissed.