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2008 DIGILAW 273 (CAL)

Banerjee Construction v. UNION OF INDIA

2008-03-06

SANJIB BANERJEE

body2008
Judgment :- (1). THE present execution proceedings were launched following an award made on October 16, 2006. The matter cannot be proceeded with without the concluding part of the award being noticed : the Award could not be finalised as the Award has to be changed accordingly. This letter is kept on record. Hence another two sittings will be required for finalising the Award and handing over the same to the parties. Therefore total sittings would be 66. Hence the costs upto 66th sittings will be Rs. 3,86,600/-which includes the miscellaneous expenses of Rs. 500/-to be paid by the claimant for finalising the Award. The respondent has paid Rs. 1,52,100/ -. Hence the balance amount would be Rs. 2,34,500/ -. The costs incurred by the claimant for contesting this Arbitration Proceeding is Rs. 2,81,000/-as will be clear from the claimants letter dated 2.5.2006 which is kept on record. Hence the claimant will be entitled to recover costs from the respondent amounting to Rs. 5,15,500/ -. The time to file the Award is extended upto 30.11.2006. " (2). IT, therefore, is evident that the award was not final as it required to be corrected and the time to file the award was kept extended by the arbitrator till November 30, 2006. It is undisputed that by a letter of November 7, 2006, the arbitrator corrected certain typographical mistakes in the award of October 16, 2006. The figure at page 14 of the award was also corrected. The award debtor claims to have received the letter of November 7, 2006 on November 13,2006. (3). THE execution proceedings were launched by the Tabular statement taken out on January 18,2007. Upon the award-debtor getting notice, the award-debtor pointed out to this Court that an application under Section 34 of the Arbitration and Conciliation Act, 1996 had been filed before the District Judge at Barasat challenging the award. On such submission, an order was made by this Court on June 7, 2007, the material part whereof is as follows : "the Court : The proceeding relating to this execution case pending before the District Judge North 24 Parganas is stayed. . . . In my opinion, the stay of the proceeding pending before the learned district Judge North 24 Parganas is a serious abuse of the power and process of Court. . . . In my opinion, the stay of the proceeding pending before the learned district Judge North 24 Parganas is a serious abuse of the power and process of Court. The respondent taking the fullest advantage of its mighty position has most wrongfully invoked the jurisdiction of the District judge, when the execution proceeding is pending in this Court. The illegality of action of the respondent should be stopped in order to prevent multiplicity of judicial proceedings as well. " (4). THE alleged decree-holder has used an affidavit in reply to the affidavit filed on behalf of the award-debtor. At paragraph 8 of the affidavit of smt. Anuja Banerjee affirmed on behalf of the award-holder on March 5, 2008 it has been stated that the award-debtor had admitted that it had filed the application under Section 34 of the 1996 Act on February 3, 2007 and had contended that the execution proceedings would not be maintainable. Implicit in such assertion is the acceptance of the fact that the application under Section 34 of the 1996 Act had been filed by the award-debtor on February 3, 2007. (5). SECTION 34 (3) of the 1996 Act requires an application for challenging the award to be made within three months from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the Arbitral Tribunal. There is a further period of thirty days that the proviso to sub Section 3 of Section 34 permits a challenger to launch the challenge. Under Section 36 of the 1996 Act, unlike under its predecessor statute of 1940, an award made by an arbitrator is not required to be made a judgment of Court before it can be enforced. But the enforceability of an award under Section 36 of the 1996 Act is subject to the time recognised by Section 34 (3) of the 1996 Act elapsing. But the enforceability of an award under Section 36 of the 1996 Act is subject to the time recognised by Section 34 (3) of the 1996 Act elapsing. The opening words of Section 36 cannot admit of any other construction: "enforcement.-Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court. " (6). IN the present case the arbitrator recorded in the award of October 16, 2006 that the award required to be corrected. In pursuance of such recording, the arbitrator forwarded a letter of November 7, 2006, actually correcting material parts of the award. Thus, the time that the award debtor had to challenge the award began running, at the earliest, from November 7, 2006 though Section 34 (3) begins the clock from the date of receipt of the award or the correction relating thereto by the award-debtor (or the party who could have challenged the award ). (7). SINCE it is the admitted position that the Section 34 proceedings were instituted on February 3, 2007, it is needless to enter into the dispute as to the date when the award debtor received the letter of November 7, 2006 from the arbitrator. The filing of an application under Section 34 by an award debtor operates as a stay of the award. The opening words of Section 36 of the 1996 Act recognise this, as the enforcement of an award is subject to a challenge thereto and the enforceability arises only upon the challenge failing or upon the time for making the challenge under Section 34, expiring. (8). THE award-holder, the pretending decree-holder herein, submits that since the reference commenced upon an order passed under Section 11 of the 1996 Act by the Chief Justice or His designate, the challenge to the award rendered consequent upon the reference so commenced could only be received in this Court and none other. Such contention is completely baseless and is against what Section 42 of the Act provides : "section 42. Such contention is completely baseless and is against what Section 42 of the Act provides : "section 42. Jurisdiction.-Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that court and in no other Court. " (9). IF an application under Part-l of the 1996 Act is made to a Court which had authority to receive it, it is only such Court which has jurisdiction to entertain further applications arising out of the reference required to be made to Court under Part-l of the Act. Section 11 is a complete exception to the general rule under Section 42. Under Section 11, whether it is the Chief Justice of a High Court or the Chief Justice of India, or the designate of either, who entertains the request for constituting the arbitral tribunal the only function that is discharged is of sending the parties to a reference upon naming an arbitrator (or arbitral tribunal), consequent upon a finding that either there was no agreed procedure or that the agreed procedure had failed, whether by conduct of a party to the arbitration agreement or by reason of default on the part of the appointing authority. (10). THERE is a reason why an order made under Section 11 of the 1996 Act stands outside the ordinary orders under the remaining part of Part-I of the 1996 Act. It was originally held by the Supreme Court in the case of konkan Railway Corporation Limited v. Rani Construction Private Limited reported at (2002)2 SCC 388 that the power exercised under Section 11 was purely administrative and not judicial. Despite the original view having been upset in the case of SBP and Co. v. Patel Engineering Ltd. , reported at (2005)8 SCC 618 , paragraph 47 of the Patel Engineering judgment recognises the distinction between an application made under Section 11 of the 1996 Act and an application made under any other provision in Part-l of the 1996 Act. Despite the original view having been upset in the case of SBP and Co. v. Patel Engineering Ltd. , reported at (2005)8 SCC 618 , paragraph 47 of the Patel Engineering judgment recognises the distinction between an application made under Section 11 of the 1996 Act and an application made under any other provision in Part-l of the 1996 Act. It is only a preliminary adjudication that is made under Section 11 of the 1996 Act and only to consider whether a reference is called for or not. The adjudication is limited and only the Chief Justice is authorised to deal with the matter to ensure finality as to the beginning of the process of arbitration. (11). A party to an arbitration agreement where the agreed procedure has failed in a reference commencing or where there is no agreed procedure for the appointment of an arbitrator, has per force to apply before the appropriate Chief Justice under Section 11 for an order to be made for commencement of the reference. The 1996 Act does not permit such a party to approach any court or other forum other than the appropriate Chief Justice as defined in section 11. The definition of Court in Section 2 (1 ) (e) of the Act and the principle recognised in Section 42 which is similar to the principle in Section 31 (4) of the 1940 Act, would imply that the Chief Justices designate in making an order under Section 11 would not be a Court receiving an application under part-l of the 1996 Act. (12). THE matter can be better understood with the help of an example. If two parties entered into a contract in Alipurduar, where the execution and everything relating to the contract were to be performed in Alipurduar, and if such a contract contained an arbitration agreement without there being an agreed procedure for appointment, the party seeking a reference would have no choice but to apply under Section 11 to the Chief Justice of this High Court for the appointment of an arbitrator. It cannot be said that by virtue of the Chi,ef justices designate receiving an application under Section 11 in respect of such reference, all further proceedings that are required to be filed in Court arising out of the reference have only to be received by this Court for, in such event, the situs of the cause of action, the situs of the parties and other factors which are relevant for identifying the Court having jurisdiction to receive the application (as if in a suit) would be meaningless. (13). IN time, the Barasat Court has to be satisfied that it had jurisdiction to receive the petition under Section 34 of the 1996 Act. That a Section 11 petition was disposed of by the Chief Justice of this Court or his designate would be immaterial in the assessment of the Barasat Courts authority to receive the setting-aside proceedings, just as this Court, now in execution, cannot assess whether the Barasat Court has jurisdiction in the pending matter once it is not shown that there is any legal bar under Section 42 of the 1996 act. (14). THE fact that the award debtor here applied before the Barasat court and applied within time operates as a bar to the launching of any execution proceedings. The award-holder here instituted the execution proceedings before the period under Section 36 read with Section 34 (3) of the 1996 Act had elapsed. For a second, immediately upon the Section 34 proceedings being instituted, the execution proceedings could not have been continued even if it had otherwise been valjdly instituted. What is obvious from the dates referred to above is that the award holder sought to implement the award at a time that it was not entitled in law so to do and insisted on continuing with the execution proceedings despite the award debtor bringing it to the award holders notice that Section 34 proceedings had been instituted on February 3, 2007. (15). THE clear bar under Section 36 of the 1996 Act as to the enforceability of the award being the subject matter of the execution proceedings, stares at the award-debtor and pretending decree-holder. (16). THE execution application is found to be not been maintainable and is dismissed. All interim orders stand vacated. The award holder will pay costs assessed at 2000 GMs to the judgment debtor.