Full Judgment Text
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CASE NO.:
Appeal (civil) 1062 of 2003
PETITIONER:
Municipal Corporation of Delhi & Ors.
RESPONDENT:
Intnl. Security & Intelligence Agency Ltd.
DATE OF JUDGMENT: 06/02/2003
BENCH:
R.C. LAHOTI, BRIJESH KUMAR & ARIJIT PASAYAT.
JUDGMENT:
JUDGMENT
[Arising out of SLP(C) No.20508/2002]
WITH
CIVIL APPEAL NO. 1063/2003
[Arising out of SLP(C) No.20511/2002]
R.C. Lahoti, J.
Leave granted in both the SLPs.
The respondent-International Security and Intelligence Agency
Ltd. entered into a contract with the Municipal Corporation of Delhi
whereby the former undertook to provide security services etc. to the
latter. The agreement contained an arbitration clause obligating the
parties to have the disputes arising between them and referable to the
contract determined by reference to arbitration under the provisions of
the Arbitration Act, 1940, hereinafter ’the Act’, for short.
It appears that originally when the agreement was entered into
between the parties the respondents were a sole proprietory concern
and the appellant no.1 was an institution known as Delhi
Development Authority (Slum Wing). Subsequently, the respondents,
the sole proprietory concern, was taken over by a private limited
company as the respondents presently are while the DDA (Slum
Wing) was taken over by the Municipal Corporation of Delhi.
Whether or not the arbitration clause incorporated in the contract
entered into between the parties as they were then, would be binding
on and available to be invoked by the present parties, was the subject
matter of controversy raised by the appellants but we need not enter
into the details thereof inasmuch as that is irrelevant for adjudicating
upon the neat questions of law arising for decision in these appeals.
Disputes arose between the parties and on a petition under
Section 8 of the Act filed by the respondents, the Court directed the
same to be determined through arbitration by a retired Judge of the
High Court. The order of the Court appointing the arbitrator and
referring the disputes for determination by him achieved a finality as
the appellants did not file any appeal thereagainst and both the parties
submitted to the jurisdiction of the arbitrator. On 14.3.1997, the
arbitrator gave an award. The award is a non speaking one. The
arbitration agreement between the parties does not require the
arbitrator to make a reasoned award. The respondents filed an
application under Section 14 of the Act for making the award a rule of
the Court. On 26.5.1997, objections were filed by the appellants
seeking setting aside of the award. Though the objection petition is
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styled as one under Sections 30 and 33 (both) of the Act, a perusal of
the contents of the objection petition shows that all the objections
raised therein fall within the scope of Section 30 of the Act. During
the pendency of the hearing on the said objection petition, on
20.1.2000 the appellants filed another objection petition styled as one
under Section 33 of the Act wherein for the first time a plea was
raised that so far as the respondents company is concerned it was not a
party to the contract and therefore appointment of arbitrator at its
instance and all the subsequent proceedings upto the date of making
of the award were without jurisdiction and nullity and were liable to
be adjudged so. By judgment dated 17.1.2001, the Court directed the
objection raised on behalf of the appellants to be dismissed and the
award to be made a rule of the Court. A decree in terms of the award
as upheld by the judgment was later drawn up and dated as 17.1.2001.
On 20.2.2001, the respondents moved an application seeking
review of the judgment. The judgment and the decree drawn up did
not award future interest on the decretal amount to the respondents
and the only relief sought for in the review petition was to suitably
modify the operative part of the judgment and the decree so as to
include therein a direction for payment of interest from the date of
decree till realization of the decretal amount. On 25.9.2001, the
learned single Judge directed the review petition to be dismissed.
On 8.10.2001, the respondents filed an appeal before the
Division Bench of the High Court feeling aggrieved by the judgment
and decree dated 17.1.2001. Condonation of delay in filing the appeal
by excluding the time lost in prosecuting the review petition was
sought for. A perusal of the memo of appeal shows that the only
relief sought for in the appeal was for a suitable modification in the
decree so as to include therein direction to pay future interest from the
date of decree till realization. On 27.10.2001, the appellants too filed
an appeal against the judgment and decree dated 17.1.2001 laying
challenge to the order of the original court rejecting the objection
petition filed by it and directing the award to be made a rule of the
Court. The appeal was filed with a delay of 230 days. The appellants
sought for condonation of delay in filing the appeal on the ground that
it was awaiting the result of review petition and was persuaded to file
an appeal because of the respondents having filed an appeal. The
cause assigned by the appellants for seeking condonation of delay did
not apparently amount to sufficient cause within the meaning of
Section 5 of the Limitation Act. When the matter came up for
hearing, the appellants submitted that the memo of appeal filed on
27.10.2001, if barred by time and hence not maintainable as an
appeal, could still be treated as a cross objection under Order 41 Rule
22 of the CPC which having been filed within the prescribed period of
limitation for filing cross objection the same deserved to be heard and
decided on merits along with the first appeal filed by the respondents
herein.
On 12th July, 2002, the first appeal filed by the appellants has
been directed to be dismissed by the Division Bench as barred by time
consequent upon the dismissal of its application under Section 5 of the
Limitation Act. Feeling aggrieved by the judgment dated 12.7.2002,
SLP(C) 20508/2002 has been filed by Municipal Corporation of
Delhi.
Subsequently by an order dated 20th September, 2002, the first
appeal filed by the respondents has been directed to be dismissed by
the Division Bench as not maintainable on the Division Bench
forming an opinion that the order put in issue by the respondents
(herein and appellant in the High Court) and the relief sought for in
appeal did not fall within the purview of clauses (i) to (vi) of sub-
Section(1) of Section 39 of the Act and, therefore, the appeal was not
maintainable and was incompetent.
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On the respondents taking out execution of the decree based on
award, the appellants preferred an objection petition under Section 47
of the Code of Civil Procedure before the Executing Court submitting
that in the absence of any arbitration agreement between the parties,
the reference to arbitration, the award and the decree incorporating the
award were all invalid and hence the decree was not executable. By
order dated 5.3.2002 the Executing Court over ruled the objection.
Feeling aggrieved thereby, the appellants preferred an appeal before
the High Court which has been dismissed by the High Court as devoid
of any merit vide its decision dated 12th July, 2002. SLP(C)
No.20511/2002 impugns the decision dated 12.7.2002 of the High
Court.
It is not disputed by the learned senior counsel for the parties
that so far as appeal filed by the respondents before the Division
Bench is concerned, the same was not maintainable under Section 39
of the Act and has, therefore, been rightly dismissed as not
maintainable. Two questions arise for decision in these appeals:
firstly, whether in an appeal under Section 39 of the Arbitration Act,
1940, a respondent has a right to file cross objection and, if so,
whether the cross objection must be heard and decided on merits
though the appeal by reference to which cross objection has been filed
is itself dismissed as not maintainable?
When the matter came up for hearing before a two-Judge Bench
of this Court, reliance was placed on behalf of the respondents on
Superintending Engineer & Ors. Vs. B. Subba Reddy, (1999) 4 SCC
423, wherein a two-Judge Bench of this Court has held that cross
objection in an appeal under Section 39 of the Arbitration Act are not
maintainable. On 09.12.2002, the two-Judge Bench entertaining some
doubt about the correctness of the view taken in B. Subba Reddy’s
case deemed it proper for this appeal to be placed for hearing before a
three-Judge Bench.
We have heard Dr. K.S. Sidhu, Senior Advocate for the
appellants and Mr. R.F. Nariman, Senior Advocate for the
respondents. We answer the questions posed before us as under.
Competence and maintainability of cross objections in an appeal
preferred under Section 39 of the Arbitration Act, 1940?
Sections 39 and 41 of the Act and Rule 22 of Order 41 of the
Code of Civil Procedure provide as under:
"Arbitration Act, 1940
Sec.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 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;
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(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.
Sec. 41. Procedure and powers of court. __
Subject to the provisions of this Act
and of rules made thereunder
(a) the provisions of the Code of
Civil Procedure, 1908 (5 of
1908), shall apply to all
proceedings before the Court,
and to all appeals, under this
Act; and
(b) the Court shall have, for the
purpose of, and in relation to,
arbitration proceedings, the
same power of making orders
in respect of any of the matters
set out in the Second Schedule
as it has for the purpose of, and
in relation to, any proceedings
before the Court :
Provided that nothing in clause (b) shall be
taken to prejudice any power which may be
vested in an arbitrator or umpire for making
orders with respect of any of such matters.
Order XLI Rule 22 of CPC :
22. Upon hearing respondent may object to
decree as if he had preferred separate
appeal. __ (1) Any respondent, though he
may not have appealed from any part of the
decree, may not only support the decree but
may also state that the finding against him in
the Court below in respect of any issue
ought to have been in his favour; and may
also take any cross-objection to the decree
which he could have taken by way of
appeal, provided he has filed such objection
in the Appellate Court within one month
from the date of service on him or his
pleader of notice of the day fixed for hearing
the appeal, or within such further time as the
Appellate Court may see fit to allow.
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(2) Form of objection and provisions
applicable thereto. __ Such cross-objection
shall be in the form of a memorandum, and
the provisions of rule 1, so far as they relate
to the form and contents of the
memorandum of appeal, shall apply thereto.
(3) Unless the respondent files with the
objection a written acknowledgement from
the party who may be affected by such
objection or his pleader of having received a
copy thereof, the Appellate Court shall
cause a copy to be served, as soon as may be
after the filing of the objection, on such
party or his pleader at the expense of the
respondent.
(4) Where, in any case in which any
respondent has under this rule filed a
memorandum of objection, the original
appeal is withdrawn or is dismissed for
default, the objection so filed may
nevertheless be heard and determined after
such notice to the other parties as the Court
thinks fit.
(5) The provisions relating to pauper
appeals shall, so far as they can be made
applicable, apply to an objection under this
rule."
Right of appeal is creature of statute. There is no inherent right
of appeal. No appeal can be filed, heard or determined on merits
unless the statute confers right on the appellant and power on the
Court to do so. Section 39 of the Act confers right to file appeal, in so
far as the orders passed under this Act are concerned, only against
such of the orders as fall within one or other of the descriptions given
in clauses (i) to (vi) of sub-Section (1) of Section 39. The Parliament
has taken care to specifically exclude any other appeal being filed,
against any order passed under the Act but not covered by clauses (i)
to (vi) abovesaid, by inserting the expression "and from no others" in
the text of sub-Section (1). Clause (a) of Section 41 extends
applicability of all the provisions contained in the Code of Civil
Procedure, 1908 to (i) all proceedings before the Court under the Act,
and (ii) to all the appeals, under the Act. However, the applicability
of such of the provisions of the Code of Civil Procedure shall be
excluded as may be inconsistent with the provisions of the Act and/or
of rules made thereunder. A bare reading of these provisions show
that in all the appeals filed under Section 39, the provisions of the
Code of Civil Procedure, 1908 would be applicable. This would
include the applicability of Order 41 including the right to take any
cross objection under Rule 22 thereof to appeals under Section 39 of
the Act.
Right to prefer cross objection partakes of the right to prefer an
appeal. When the impugned decree or order is partly in favour of one
party and partly in favour of the other, one party may rest contended
by his partial success with a view to giving a quietus to the litigation.
However, he may like to exercise his right of appeal if he finds that
the other party was not interested in burying the hatchet and proposed
to keep the lis alive by pursuing the same before the appellate forum.
He too may in such circumstances exercise his right to file appeal by
taking cross objection. Thus taking any cross objection to the decree
or order impugned is the exercise of right of appeal though such right
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is exercised in the form of taking cross objection. The substantive
right is the right of appeal; the form of cross objection is a matter of
procedure.
Though the statement of law made hereinabove flows simply by
the reading of the relevant statutory provisions yet some available
decisions may also be noticed. In Bhadurmal Vs. Bizaatunnisa
Begum & Ors., AIR 1964 AP 365, a Division Bench presided over by
Jaganmohan Reddy, J. (as His Lordship then was) held cross objection
to be maintainable in an appeal preferred under Sections 47 to 49 of
Hyderabad Jagirdars Debt Settlement Act, 1952 because the
provisions of Civil Procedure Code were generally applicable by
virtue of Section 51 thereof. The applicability of Order 41 Rule 22 of
the appeals under that Act was held not excluded merely because
provisions governing grounds of appeal and court fees were
specifically enacted in the Hyderabad Act. In Inayatullah Khan Vs.
Diwanchand Mahajan & Ors., AIR 1959 M.P. 58, Chief Justice M.
Hidayatullah (as His Lordship then was) upheld maintainability of
cross objection in an election appeal under Section 116A of the
Representation of the People Act, 1951 because the High Court as an
Appellate Court hearing an appeal under Section 116A was enjoined
to exercise the same powers, jurisdiction and authority and to follow
the same procedure as it would have exercised or followed in respect
of a civil appeal under the Code of Civil Procedure. In Ramasray
Singh & Ors. Vs. Bibhisan Sinha & Ors., AIR 1950 Calcutta 372,
the Division bench consisting of Harries, CJ and Bachawat, J. (as His
Lordship then was) held that conferment of right of appeal by Section
38 of Bengal Money-Lenders Act, 1940 which spoke of the order
being appealable in the same manner as if it were a decree of the court
implied a right in the respondent to file cross objection inasmuch as
the jurisdiction to hear appeal was conferred on a pre-established Civil
Court namely the Court of the District Judge and nothing was
expressly stated as to the procedure regulating such appeal. In A.L.A.
Alagappa Chettiar Vs. Chockalingam Chetty & Ors., AIR 1919
Madras 784, a Full Bench of the High Court of Madras presided over
by Wallis, C.J. held that right of respondent to proceed by way of
memorandum of cross objections was strictly incidental to the filing
of appeal by opposite party and therefore in an appeal under Sections
46 and 47 of the Provincial Insolvency Act, 1907 cross objections
were maintainable as the procedure prescribed in the Civil Procedure
Code is the standard procedure and applicable to courts exercising
powers in insolvency cases.
With advantage, we may also refer to observations of this Court
made in Shri Baru Ram Vs. Smt. Prasanni & Ors., 1959 SCR 1403.
Section 116A of the Representation of the People Act, 1951
contemplates an appeal being laid before the Supreme Court from
every order made by High Court under Section 98 or Section 99 of
that Act. Section 116C provides for every such appeal being heard
and determined by the Supreme Court as nearly as may be in
accordance with the procedure applicable to the hearing and
determination of any appeal from any final order passed by the High
Court in exercise of its original civil jurisdiction subject to the
provisions of that Act and the Rules, if any. All the provisions of the
Code of Civil Procedure, 1908 and rules of the Court shall, so far as
may be, apply in relation to such appeal. P.B. Gajendragadkar, J. (as
His Lordship then was) speaking for the Court observed __ "There is
no doubt that, in an ordinary civil appeal, the respondent would be
entitled to support the decree under appeal on grounds other than
those found by the trial court in his favour. Order 41, Rule 22 of the
Code of Civil Procedure which permits the respondent to file cross-
objections recognizes the respondent’s right to support the decree on
any of the grounds decided against him by the court below. In the
present case no appeal could have been preferred by respondent 1
because she had succeeded in obtaining the declaration that the
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appellant’s election was void and it should therefore be open to her to
support the final conclusion of the High Court by contending that the
other finding recorded by the High Court which would go to the root
of the matter is erroneous. Prima facie there appears to be some force
in this contention." However, the Court did not express any final
opinion thereon as it was considered not necessary to decide the point
in that appeal.
We have, therefore, no doubt in our mind that right to take a
cross objection is the exercise of substantive right of appeal conferred
by a statute. Available grounds of challenge against the judgment,
decree or order impugned remain the same whether it is an appeal or a
cross-objection. The difference lies in the form and manner of
exercising the right; the terminus a quo (the starting point) of
limitation also differs.
In Superintending Engineer & Ors. Vs. B. Subba Reddy
(supra) a two-Judges Bench of this Court observed (vide para 24) "if
there is no right of cross-objection given under Section 39 of the Act,
it cannot be read into Section 41 of the Act. Filing of cross objection
is not procedural in nature. Section 41 of the Act merely prescribes
that the procedure of the Code would be applicable to the appeal
under Section 39 of the Act. We are, therefore, of the opinion that
cross objection by the respondent was not maintainable.".
Such observation is not correct and proceeds on certain wrong
premises. Firstly, form of cross objection is procedural and is only a
manner of exercising right of appeal which is substantive, as we have
already stated. Secondly, it is not merely the procedure prescribed by
the Code of Civil Procedure which has been made applicable to
proceedings under the Arbitration Act by Section 41 (a) of the Act;
the entire body of the Code of Civil Procedure, 1908 has been made
applicable to all proceedings before the Court and to all appeals under
the Arbitration Act, 1940. The provision is general and wide in its
applicability which cannot be curtailed; the only exception being
where the provisions of the Arbitration Act and/or of rules made
thereunder may be inconsistent with the provisions of the Code of
Civil Procedure, 1909 in which case the applicability of the latter shall
stand excluded but only to the extent of inconsistency. We may
hasten to add that to the extent of our disagreement with the law laid
down in B. Subba Reddy’s case, the proposition appears to have been
rather widely stated in that case. In fact the question before the Court
in B. Subba Reddy’s case was whether cross objection seeking the
relief of award of interest at a higher rate was maintainable though
such an order did not fall within the purview of Section 39(1) of the
Act.
Once we hold that by taking cross objection what is being
exercised is the right of appeal itself, it follows that the subject-matter
of cross objection and the relief sought therein must conform to the
requirement of Section 39(1). In other words, a cross objection can be
preferred if the applicant could have sought for the same relief by
filing an appeal in conformity with the provisions of Section 39(1) of
the Act. If the subject-matter of the cross objection is to impugn such
an order which does not fall within the purview of any of the
categories contemplated by clauses (i) to (vi) of sub-Section (1) of
Section 39 of the Act, the cross objection shall not be maintainable.
Effect on cross objection if the appeal itself is held not competent
or not maintainable?
What happens to cross objections if the appeal itself is found to
be incompetent or not maintainable? Sub-Rule (4) of Order 22 of the
CPC provides for only two situations in which the cross objection
may be heard in spite of the original appeal having not been heard on
merits. These situations are two: (i) the original appeal being
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dismissed as withdrawn, (ii) the original appeal being dismissed for
default (default in appearance or any other default). Just as the
enabling provisions of cross objection contained in sub-Rule (1) of
Order 22 of the CPC are applicable to appeals under Section 39 of the
Act the disabling provision contained in sub-Rule (4) too would apply
to appeals under Section 39 of the Act in view of the generality of the
provisions contained in Section 41 of the Act. To put it briefly, if the
Appellate Court forms an opinion that the original appeal itself was
incompetent or not maintainable as it was filed against an order not
falling within one of the clauses (i) to (vi) of sub-Section (1) of
Section 39 then the cross objection shall also fall to the ground and
cannot be adjudicated upon on merits. It has to be remembered that
law of limitation operates with all its rigour and equitable
considerations are out of place in applying the law of limitation. The
cross-objector ought to have filed appeal within the prescribed period
of limitation calculated from the date of the order if he wished to do
so. Having allowed that opportunity to lapse he gets another extended
period of limitation commencing from the date of service of the notice
of the appeal enabling him putting in issue for consideration of the
Appellate Court the same grounds which he could have otherwise
done by way of filing an appeal. This extended period of limitation
commences from the date of service of the notice of appeal and such
notice ought to be in a valid or competent appeal.
If the appeal cannot be heard on merits for the reason that it was
no appeal in the eye of law, service of notice in such appeal would not
furnish cause for commencement of a new period of limitation for
filing appeal in the form of cross objection. The only exception in
which the cross objection can still be heard is one where the memo of
cross objection can be said to have been filed within the period
prescribed for filing an original appeal against the impugned order and
the memo also independently satisfies all the requirements of a memo
of appeal. Just as a belated or time-barred memo of cross-appeal can
be treated __ and taken up for consideration __ as cross objection
subject to its satisfying the requirements of cross-objection memo so
also a cross-objection can be treated as cross-appeal and heard as
such subject to its satisfying the requirements as to maintainability of
an appeal with regard to limitation and otherwise.
Illustratively, we may refer to some judicial opinion as to non-
maintainability of cross objections consequent upon the non-
maintainability of the original appeal. In M/s. Malhati Tea Syndicate
Limited Vs. Revenue Officer, Jalpaiguri & Ors., AIR 1973 Calcutta
78, a Division Bench of Calcutta High Court presided over by P.B.
Mukherji, CJ (as His Lordship then was) held the cross objection
liable to fail in view of the original appeal itself failing in view of its
having been filed in the name of a company which was no longer in
existence. In Dhani Ram Vs. Smt. Sushila Devi, AIR 1977 HP 83,
R.S. Pathak, CJ (as His Lordship then was) held that though Order 41
Rule 22 speaks of an appeal, it contemplates a valid appeal which
ordinarily calls for consideration on its merits. It is such an appeal the
pendency of which would entitle the respondent to file a cross
objection. An appeal which is barred by time is not a valid appeal and
the cross objections too shall have to be rejected. In Chanchalgauri
Ramanlal & Ors. Vs. Narendrakumar Chandulal & Ors., AIR 1986
Gujarat 55, a Division Bench presided over by Hon’ble the Chief
Justice held that a cross objection filed in a validly instituted appeal
against a decree is as good as an appeal and shall have to be disposed
of on merits but if an appeal does not lie any cross objection in such
an appeal would not call for adjudication on merits. In Charity
Commissioner Vs. Padmavati & Ors., AIR 1956 Bombay 86, Chagla,
CJ speaking for the Division Bench held that in a time-barred appeal
where the delay was refused to be condoned the appeal itself was
rendered not maintainable and the cross objection would not survive
for consideration. In A.L.A. Alagappa Chettiar Vs. Chockalingam
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Chetty & Ors. (supra), Wallis, C.J. opined that the right of respondent
to proceed by way of memorandum of objections is strictly incidental
to the filing of the original appeal in time and it is open to a party
against whom a memorandum of objections has been filed to set up
the bar that the original appeal was filed out of time. We are in
respectful agreement with the view of the law taken by several High
Courts and noticed hereinabove. The cross objection is available to be
heard if the original appeal is available for hearing on merits. A view
to the contrary has been taken by a Division Bench of Allahabad High
Court in Shankar Lal & Anr.Vs. Sarup Lal & Anr., (1912) 34 ILR
Allahabad 140, and Nanak Bakhsh & Ors. Vs. Wazir Singh & Ors.,
(1909) 4 IC 625 (Punjab Chief Court). Both the decisions are not
supported by any convincing reasoning or logic and to say the least do
not lay down the correct law, in our opinion.
The original appeal filed by the respondents herein was found
to be not maintainable as not covered by any of the clauses (i) to (vi)
of sub-Section (1) of Section 39 of the Act. It was dismissed as
incompetent. The question of the memo of appeal filed in the High
Court by the appellants herein being treated as cross objection and
being taken up for hearing on merits does not arise. Independently
treated as an original appeal the same was held to be hopelessly barred
by time as the delay was not explained satisfactorily. On this aspect
we are not persuaded to take a view different from the one taken by
the High Court. The appeal filed in the High court by the appellants
herein has been rightly held liable to be dismissed as time-barred and
is not available to be heard and decided as cross objection in view of
the original appeal filed in the High Court by the respondents herein
having failed as incompetent.
The appeals are dismissed. Costs easy.
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