Full Judgment Text
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5172 OF 2017
(Arising out of SLP (Civil) No. 2370 of 2015)
Kinnari Mullick and Another …. Appellants
Versus
Ghanshyam Das Damani .... Respondent
J U D G M E N T
A.M.KHANWILKAR, J.
1. This appeal raises a short question as to whether Section
34 (4) of the Arbitration and Conciliation Act, 1996 (for short “the
Act”) empowers the Court to relegate the parties before the Arbitral
Tribunal after having set aside the arbitral award in question and
Signature Not Verified
Digitally signed by
GULSHAN KUMAR
ARORA
Date: 2017.04.22
11:30:52 IST
Reason:
moreso suo moto in absence of any application made in that behalf
by the parties to the arbitration proceedings?
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2. The Appellants, being joint owners of premises No.4 Wood
Street, Kolkata, known as 4C, Dr. Martin Luther King Sarani,
Kolkata, entered into two development agreements with the
Respondent for a construction of a multi storied building. On
completion of construction of the building sometime in 2003, the
Appellants entered into a further agreement with the Respondent in
terms of which the Respondent, for better enjoyment of the
property, distributed the owner’s allocation. In terms of the said
agreement, the Respondent fully sold and transferred his share of
the premises to various prospective buyers with proportionate area
of the land to them as well as in common areas. According to the
Appellants, the Respondent is not in possession of any portion of
the suit premises. The Appellants have also executed and registered
the conveyance along with the proportionate right in common areas
and land of the said premises to various transferees, save and
except two flats. The said agreement contained an Arbitration
clause which reads thus:
“21. That all disputes and/or differences between the parties
herein shall be referred to arbitration in terms of the provisions
of the Arbitration & Conciliation Act, 1996.”
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3. The Respondent asserted that he was entitled to execution and
registration of conveyance in respect of 50% built up area on the
ground floor of such premises. That claim was rejected by the
Appellants. The Respondent, through his advocate’s letter dated
21.11.2009 addressed to the Appellants, inter alia informed them
about the appointment of one Siddhartha Sankar Mandal, Advocate
as arbitrator and further, that the said arbitrator would send
intimation to the Appellants about the date, time and venue in
respect of the arbitration proceedings to be held by him. The said
letter, however, did not specify that Siddhartha Sankar Mandal was
appointed as Sole Arbitrator nor did it call upon the Appellants to
appoint their nominee arbitrator. The Appellants then received
communication through Siddhartha Sankar Mandal dated
01.11.2009 stating that he has been appointed as arbitrator to
arbitrate the dispute between the Appellants and the Respondent
and that he would enter upon the reference on 10.11.2009. By this
letter, the Appellants were called upon to remain present so as to
hold a meeting as scheduled. According to the Appellants, the letter
did not even provide for 30 days’ time between the date of meeting
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and the receipt of the communication by the Appellants.
Nevertheless, the arbitrator proceeded with the arbitration
proceedings and held meetings. The Appellants did not file their
statement of defence. Instead, they filed an application on
10.05.2010 before the arbitrator under Section 16 of the Act, inter
alia challenging the composition of the Arbitral Tribunal and also
raising the issue of jurisdiction to proceed with the arbitration as a
Sole Arbitrator. The arbitrator, however, rejected the said
application on 27.08.2010 by an interim award.
4. The Appellants then filed their counter statement in November
2010 to the statement of claim in the said arbitral proceedings
without prejudice to their contention that, the Arbitral Tribunal has
not been properly constituted and that the arbitrator had no
jurisdiction to adjudicate the alleged dispute referred to him. The
Appellants were also advised to file an application under Section 14
before the High Court, alleging bias on the part of the arbitrator and
for a declaration that the arbitrator had become incompetent to
perform his functions. The learned Single Judge of the High Court
at Calcutta vide judgment dated 17.09.2012 disposed of the said
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application by reserving the right of the Appellants to raise all
grounds mentioned in the application regarding the competence of
the Arbitral Tribunal at the time of challenging the award under
Section 34 of the Act, if such occasion arose.
5. The Appellants then received a copy of the purported award
dated 18.06.2013 passed by the Arbitral Tribunal. The arbitrator
allowed the claim of the Respondent and directed the Appellants to
execute and register appropriate deed and/or deeds as proposed by
the Respondent vide its Advocate’s letter dated 29.06.2009; and
further directed that conveyance and/or conveyances was/were to
be executed and registered by the Appellants, costs and expenses
thereof were to be borne by the Respondent within a period of 30
days from the date of the award irrespective of any intervening
holiday and/or holidays. The said award, however, did not contain
any reason for allowing the claim of the Respondent.
6. Being dissatisfied with the interim award dated 27.08.2010
and final award dated 18.06.2013 passed by the Arbitral Tribunal,
the Appellants filed an application under Section 34 of the Act, for
setting aside of the said awards. The learned Single Judge was
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pleased to allow the said application on the finding that the
impugned award did not disclose any reason in support thereof.
The impugned award was accordingly set aside and the parties were
left to pursue their remedies in accordance with law. The relevant
portion of the decision of the learned Single Judge reads thus:
“Since the present award is completely lacking in reasons and
is littered with the unacceptable expressions like “I feel that the
claim is justified”, “I find no basis” and the like which cannot be
supplement for reasons that the statute demands, A.P. No.1074
of 2013 is allowed by setting aside the award dated June 18,
2013. The parties are left free to pursue their remedies in
accordance with law.”
7. Against the aforementioned decision the Respondent preferred
an appeal before the Division Bench of the High Court at Calcutta.
The Appellants also filed a cross objection in respect of the adverse
findings recorded by the learned Single Judge against them. The
cross objection bearing APO No.223 of 2014 and APOT No.318 of
2014, were heard and decided together by the Division Bench vide
impugned judgment dated 13.08.2014. The Division Bench affirmed
the findings and conclusion recorded by the learned Single Judge
that the award did not contain any reason whatsoever and thus
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rejected the appeal preferred by the Respondent, in the following
words:
“We have considered the rival contentions. Section 31 is clear
that would require the Tribunal to assign reason. The award
would suffer from such lacunae. We would not be in a position
to agree with Mr. Sharma when he would contend, it was
reasoned, but reasons might have been insufficient.
The learned Judge observed, “The award does not
indicate a line or sentence of reasons and notwithstanding the
petitioners herein, having pulled out of the reference and not
urging their counter-statement or any defence to the claim, it
was still incumbent on the arbitrator to indicate the grounds on
which the respondents were entitled to succeed”.
We fully endorse what his Lordship would say as quoted
(supra). Hence, the appeal fails on such count.”
While considering the cross objection filed by the Appellants,
the Division Bench negatived the ground urged before it about the
inappropriate and illegal constitution of the Arbitral Tribunal. As a
result, the cross objection filed by the Appellants was also rejected.
Having decided as above, the Division Bench suo moto decided to
relegate the parties before the Arbitral Tribunal by sending the
award back with a direction to assign reasons in support of its
award. It will be useful to reproduce the observations of the Division
Bench in this regard. The same reads thus:
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“On the cross-objection we would, however, agree with Mr.
Sharma when he would draw our attention to Section 13. The
learned Judge, in our view, rightly rejected the contention of the
respondents. The challenge procedure as spelt out in Section 13
would refer to constitution of the Tribunal as well. Section 4
would clearly provide, if a party knowing his right does not
take any step that would debar him to object at a later stage as
if he shall be deemed to have waived his right to object.
Section 34 would empower the Court to remit the award
to the Arbitrator, at a stage when the award was under
challenge, to eliminate the ground for setting aside of the
arbitral award. Applying such provision we send the award
back to the Arbitrator with a direction, he must assign reason to
support his award. However, we wish to give the Arbitrator a
free hand. If he feels, further hearing to be given to the parties,
he may do so and upon hearing, he may publish his award in
accordance with law adhering to the norms and procedures
laid-down under the said Act 1996 without being influenced by
the award that the learned Judge already set aside.
The appeal is dismissed without any order as to costs.”
(emphasis supplied)
8. Aggrieved by the highlighted operative part of the direction
issued by the Division Bench to send back the award to the Arbitral
Tribunal for assigning reasons in support of the award, the
Appellants have approached this Court by way of present appeal.
9. Indeed, the Appellants have also challenged the approach of
the Division Bench and of the learned Single Judge in rejecting the
contention of the Appellants about the jurisdiction of the Arbitral
Tribunal. According to the Appellants, that objection could be
raised by the Appellants and ought to be answered in their favour,
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keeping in mind, the decision of this Court in BSNL Vs. Motorola
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India Pvt. Ltd. . It is contended that the Appellants could raise the
plea, that the Arbitral Tribunal did not have jurisdiction. Further,
the Appellants had submitted the submission of defence without
prejudice and thus the participation of the Appellants in the
proceedings before the Arbitral Tribunal would not come in the way
of the Appellants to raise that contention. The Appellants have also
relied on the decisions of this Court in the case of Konkan
Railway Corporation Limited Vs. Rani Construction Private
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Limited and GAIL Vs. Keti Construction (I) Ltd. . However, it
may not be necessary for us to examine this argument if we were to
accept the challenge set up by the Appellants to the concluding part
of the impugned judgment of the Division Bench of having relegated
the parties before the Arbitral Tribunal with a direction to assign
reasons in support of the impugned award. As regards this
1
(2009) 2 SCC 337
2
(2002) 2 SCC 388
3
(2007) 5 SCC 38
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contention, the Appellants have relied on the dictum in the case of
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MMTC Vs. Vicnivass Agency of the High Court of Madras,
Raitani Engineering Works Pvt. Ltd. Vs. The Union of India
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and Others decided by the Gauhati High Court dated 28.05.2015,
Bhaskar Industrial Development Limited Vs. South Western
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Railway decided by the High Court of Karnataka, Dharwad Bench
and lastly in McDermott International Inc. Vs. Burn Standard
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Ltd.
10. The Respondent, on the other hand, submits that ample power
is bestowed upon the Court to relegate the parties to the award
under challenge back to the Arbitral Tribunal to eliminate the
ground for setting aside of the arbitral award, in terms of Section 34
of the Act. It is submitted that no jurisdictional error has been
committed by the Division Bench in exercising that power for
4
(2009) 1 MLJ 199
5
Arbitration Petition No.13 of 2015 [2015 (2) GLD 615 (Gau)]
6
MFA No.103528 of 2015
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(2006) 11 SCC 181
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sending the award back to the Arbitral Tribunal with a direction to
assign reasons in support of the award. It is submitted that the
dismissal of the appeal preferred by the Respondent against the
judgment of the learned Single Judge will not come in the way of
the Respondent muchless to participate in the proceedings before
the Arbitral Tribunal as has been remitted by the Division Bench for
the limited purpose of assigning reasons in support of the award. It
is submitted that no interference is warranted with the concluding
part of the judgment of the Division Bench which intends to
facilitate rectification of the deficiencies in the award already
pronounced by the Arbitral Tribunal.
11. We have heard the learned counsel for the parties. At the
outset, we may note that, if the plea taken by the Appellants in
relation to the concluding part of the impugned judgment - of
sending the award back to the Arbitral Tribunal for recording
reasons - was to be accepted, we may not be required to dilate on
any other argument. Inasmuch as the learned Single Judge allowed
the application under Section 34 of the Act for setting aside of the
award preferred by the Appellants; and the Division Bench has
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already affirmed the conclusion recorded by the learned Single
Judge while dismissing the appeal preferred by the Respondent.
Thus, the award has been set aside on that count. The Respondent
has not challenged that part of the impugned judgment and has
allowed it to become final.
12. In this backdrop, the question which arises is: whether the
highlighted portion in the operative part of the impugned judgment
of the Division Bench can be sustained in law? For that, we may
advert to Section 34(4) of the Act which is the repository of power
invested in the Court. The same reads thus:
“Section 34………….
(4). On receipt of an application under sub-section (1), the court
may, where it is appropriate and it is so requested by a party,
adjourn the proceedings for a period of time determined by it in
order to give the arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as in the
opinion of arbitral tribunal will eliminate the grounds for setting
aside the arbitral award.”
13. On a bare reading of this provision, it is amply clear that the
Court can defer the hearing of the application filed under Section
34 for setting aside the award on a written request made by a party
to the arbitration proceedings to facilitate the Arbitral Tribunal by
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resuming the arbitral proceedings or to take such other action as in
the opinion of Arbitral Tribunal will eliminate the grounds for
setting aside the arbitral award. The quintessence for exercising
power under this provision is that the arbitral award has not been
set aside. Further, the challenge to the said award has been set up
under Section 34 about the deficiencies in the arbitral award which
may be curable by allowing the Arbitral Tribunal to take such
measures which can eliminate the grounds for setting aside the
arbitral award. No power has been invested by the Parliament in the
Court to remand the matter to the Arbitral Tribunal except to
adjourn the proceedings for the limited purpose mentioned in
sub-section 4 of Section 34. This legal position has been expounded
in the case of McDermott International Inc. (supra). In paragraph
8 of the said decision, the Court observed thus:
“8…..parliament has not conferred any power of remand to the
Court to remit the matter to the arbitral tribunal except to
adjourn the proceedings as provided under sub-section (4) of
Section 34 of the Act. The object of sub-section (4) of Section 34
of the Act is to give an opportunity to the arbitral tribunal to
resume the arbitral proceedings or to enable it to take such
other action which will eliminate the grounds for setting aside
the arbitral award.”
(emphasis supplied)
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14. In any case, the limited discretion available to the Court under
Section 34(4) can be exercised only upon a written application made
in that behalf by a party to the arbitration proceedings. It is crystal
clear that the Court cannot exercise this limited power of deferring
the proceedings before it suo moto . Moreover, before formally setting
aside the award, if the party to the arbitration proceedings fails to
request the Court to defer the proceedings pending before it, then it
is not open to the party to move an application under Section 34(4)
of the Act. For, consequent to disposal of the main proceedings
under Section 34 of the Act by the Court, it would become functus
officio . In other words, the limited remedy available under Section
34(4) is required to be invoked by the party to the arbitral
proceedings before the award is set aside by the Court.
15. In the present case, the learned Single Judge had set aside the
award vide judgment dated 07.03.2014. Indeed, the Respondent
carried the matter in appeal before the Division Bench. Even if we
were to assume for the sake of argument, without expressing any
opinion either way on the correctness of this assumption, that the
appeal was in continuum of the application under Section 34 for
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setting aside of the award and therefore, the Division Bench could
be requested by the party to the arbitral proceedings to exercise its
discretion under Section 34(4) of the Act, the fact remains that no
formal written application was filed by the Respondent before the
Division Bench for that purpose. In other words, the Respondent
did not make such a request before the learned Single Judge in the
first instance and also failed to do so before the Division Bench
rejected the appeal of the Respondent.
16. In the case of MMTC (supra), the Madras High Court, while
dealing with the purport of Section 34(4) of the Act in paragraph 22
(C) of the reported judgment, observed thus:
“(C)……On the other hand, Section 34(4) of the new Act, does
not prescribe any condition precedent on the substance of the
matter but prescribes three procedural conditions namely that
there should be an application under Section 34(1) of the new
Act and that a request should emanate from a party and the
Court considers it appropriate to invoke the power under
Section 34(4) of the new Act.”
Again, in paragraph 22 (e) (IV) of the reported judgment, it
observed thus:
“But under the 1996 Act, the Court has only two sets of powers
after the award is pronounced viz.,
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(i) to set aside the award under Section 34(2); or
(ii) to adjourn the proceedings to enable the arbitral
tribunal to resume the proceedings or take such other
action as in the opinion of the tribunal will eliminate
the grounds for setting aside the arbitral award.”
In the case of Raitani Engineering Works Pvt. Ltd. (supra),
the Gauhati High Court, placing reliance on the decision in MMTC
(supra) in paragraph 8 of its decision, observed thus:
“But unfortunately in the present case, the award given by the
arbitration panel on 13.07.2012 was quashed in its entirety
and the appeal under Section 34 is no more pending before the
Court. Therefore, invoking the powers conferred under
sub-section (4) of Section 34 of the Arbitration Act to facilitate
the arbitration panel to take rectificatory steps is not an option
in this matter. Moreover neither of the contesting party in this
dispute have applied for an additional award and therefore it
may not be appropriate to direct the arbitration panel to
re-decide on the six un-decided claims of the contractor.”
The Division Bench of the High Court of Karnataka in the case
of Bhaskar Industrial Development Limited (Supra) has
expounded that the power of the Court under Section 34 of the Act
is not to remand the matter to the Arbitral Tribunal after setting
aside the arbitral award.
17. A priori, it must follow that the Division Bench committed
manifest error in issuing direction in the concluding part of the
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impugned judgment, as reproduced hereinbefore in paragraph No.7.
Such direction could not have been issued in the fact situation of
the present case. The impugned direction suffers from the vice of
jurisdictional error and thus cannot be sustained. We have no
option but to quash and set aside the same.
18. As the Respondent has not challenged the decision of the
Division Bench, we are left with the situation where the award has
been set aside, and as observed by the learned Single Judge, with
liberty to the parties to pursue their remedies in accordance with
law.
19. Accordingly, we allow this appeal to the extent indicated above
with no order as to costs.
…..……………………………..J.
(Dipak Misra)
.…..…………………………..J.
(A.M.Khanwilkar)
.…..…………………………..J.
(Mohan M. Shantanagoudar)
New Delhi,
Dated: April 20, 2017
ITEM NO.1B COURT NO.2 SECTION XVI
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 5172 of 2017
KINNARI MULLICK AND ANR. Appellant(s)
VERSUS
GHANSHYAM DAS DAMANI Respondent(s)
Date : 20/04/2017 This appeal was called on for judgment today.
For Appellant(s) Mr. Shekhar Kumar, AOR
For Respondent(s) Mr. M.C. Dhingra, AOR
Hon'ble Mr. Justice A.M. Khanwilkar pronounced the judgment of
the Bench consisting of Hon'ble Mr. Justice Dipak Misra, His
Lordship and Hon'ble Mr. Justice Mohan M. Shantanagoudar.
The appeal is allowed to the extent indicated in the signed
reportable judgment with no order as to costs.
(Gulshan Kumar Arora) (H.S. Parasher)
Court Master Court Master
(Signed reportable judgment is placed on the file)