This civil revision is directed against the order dated 26.3.2010 passed by the District Judge, Ghaziabad in Execution Case no. 43 of 2004 for enforcement of arbitral award dated 11.12.2003 passed by Arbitral Tribunal under Arbitration and Conciliation Act, 1996.
Heard Sri Ravi Kant, learned Senior Advocate, assisted by Sri Tarun Agrawal, Advocate for the applicant and Sri Navin Sinha, learned Senior Advocate, assisted by Sri Anurag Khanna, Advocate for the respondent.
The question which arises for consideration is whether the validity of arbitral award can be challenged in proceeding for its enforcement under Section 36 of the Arbitration and Conciliation Act, 1996 (herein after referred to as the ''Act') taking recourse to section 47 C.P.C.
Shorn of unnecessary details, the facts relevant for the purpose of the case are as under :
An agreement dated 1.7.1998 was entered into between the applicant and respondent for construction of three Blocks of medical college. Clause 33 of the agreement provided for arbitration clause. It further provided that in case of dispute between the parties, the same shall be referred by the appointing authority (to be appointed by the employer-trust) for adjudication by a sole arbitrator. A dispute arose between the parties. The appointing authority in terms of Clause 33 of the agreement proposed a panel of three persons, out of which one Mr. Justice Rama Moorthy (Retd.) was appointed as sole arbitrator with the consent of both the parties. He entered upon the reference and vide order dated 27.9.2001 fixed time schedule for completion of pleadings by the parties. During the pendency of the proceedings, the respondent made a representation under Sections 12 and 13 of the Act raising a challenge to the continuance of the Arbitrator. The appointing authority issued a letter dated 28.8.2003 again asking the applicant to agree for appointment of substitute arbitrator and suggested three names. The applicant vide his letter dated 3.9.2003 refused to select any of the names suggested by the appointing authority. Thereafter, the appointing authority in terms of the arbitration clause vide letter dated 19.9.2003 appointed Sri K. S. Baidwan as sole arbitrator. The applicant raised objection before the substitute arbitrator but he proceeded with the proceedings and gave the award on 11.12.2003. The applicant filed a petition under Section 34 of the Act for setting the arbitral award before the Delhi High Court. Vide order dated 5.7.2005, Delhi High Court finding that it had no territorial jurisdiction to hear the petition on the ground that parties in their agreement agreed that Courts at Ghaziabad will only have jurisdiction directed return of the same. The petition was returned to the applicant on 30.7.2005. The applicant again moved an application under Section 34 of the Act before the District Court at Ghaziabad along with an application for condonation of delay under Section 14 of the Limitation Act. The District Judge, Ghaziabad vide judgment and order dated 14.12.2007 rejected the application for condonation of delay and as a result, the application under section 34 of the Act also stood dismissed. The order was challenged before this Court by filing First Appeal From Order no. 295 of 2009, which was dismissed on 31.3.2009. The order passed by this Court was affirmed by Hon'ble Apex Court as the SLP filed by the applicant was dismissed vide judgment dated 22.7.2009. The award was put into execution. The applicant again raised objection under Section 47 read with section 151 C.P.C.. The District Judge vide impugned judgment and order dated 26.3.2010 dismissed the objection on the ground that earlier order rejecting the application under Section 34 of the Act will operate as res-judicata and hence objection filed under Section 47 C.P.C. was not maintainable.
It has been urged by the learned counsel for the applicant that since objection under section 34 of the Act was dismissed on the question of limitation and not on merits hence the said order would not operate as res-judicata and the District Judge has wrongly and illegally dismissed the objection filed by the applicant as barred by principle of res-judicata. It has further been urged that appointment of substitute arbitrator and reference of dispute to him being null and ab initio void and invalid, the award shall be void and liable to be set aside in any appropriate proceedings when sought to be enforced or acted upon.
Reliance in support of above contentions has been placed upon the following pronouncement of the Hon'ble Apex Court :
1.Dadu Dayalu Mahasabha Vs. Mahant Ram Niwas (2008) 11 SCC 753;
2.Dharma Pratishthanam Vs. Madhok Constructions (2005) 9 SCC 686;
3.Sundar Das Vs. Ram Prakash (1977) 2 SCC 62;
4.Isabella Johnson (Smt. Vs. M. A. Susai (1991) 1 SCC 494;
5.Sushil Kumar Mehta Vs. Gobind Ram Bohra (1990) 1 SCC 193;
6.State of U. P. and others Vs. Jagdish Saran Agrawal and others (2009) 1 SCC 689 ; and
7.Sarwan Kumar and another Vs. Madan Lal Aggrawal (2003) 4 SCC 147.
In reply, it has been submitted on behalf of respondent that scheme of Act makes it clear that whatever be dispute or lis between the conflicting claimants in arbitral proceedings it comes to an end with adjudication under Section 34 of the Act subject to an appeal against that order provided under the Act and once the award becomes final under Section 35 of the Act, it is no more open to challenge the validity of the same in any proceedings on any ground whatsoever. It has further been urged that section 36 of the Act only provides a mode for enforcement of the award and for that very limited purpose, the Court can invoke the provisions of the C.P.C., otherwise, the provisions of the C.P.C. are expressly excluded from their applicability to arbitration proceedings in view of Section 19 of the Act.
To support the contention, learned counsel for the respondent has placed reliance upon the judgment of Delhi High Court in the case of Anil Mehra Vs. East India Weaving Ltd. and others 91 (2001) Delhi Law Times - 535.
I have considered the arguments advanced by the learned counsel for the parties and perused the record.
It is no doubt correct that District Judge has rejected the objections filed by the applicant under Section 47 C. P. C. in the proceedings for execution of the award on the ground that they are barred by res-judicata in as much as same objections filed under Section 34 of the Act has already been dismissed as barred by limitation. However, the question whether the principles of res-judicata would be applicable and whether the award is nullity and the said question can be raised in execution proceedings would merit consideration only if the applicant is held to be entitled to file objection under Section 47 C. P. C. in the proceedings for execution of arbitral award.
It may be relevant to examine the provisions of the Act. Section 12 contained in Chapter III of the Act provides for challenge to the appointment of arbitrator. Section 13 provides for challenge procedure which reads as under :
"13. Challenge procedure.- (1) subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.
(2)Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3)Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(4)If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
(5)Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34.
(6)Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees."
In view of the provisions of Section 13, quoted above, no doubt, challenge is to be made before the arbitrator himself and the same is to be decided by him and in case the challenge fails, the arbitral proceedings shall continue but in view of sub-section (5), the same becomes a ground for challenging the arbitral award in proceedings under Section 34 of the Act. Reference may also be made to Section 35 which provides that arbitral award shall be final and binding on the parties and the persons claiming under them respectively. Section 36 speaks for enforcement of the award. The said section reads as under :
"36. 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."
The aforesaid scheme of the Act go to show that Section 34 of the Act prescribes the ground under which arbitral award can be challenged. If no application is made under Section 34 within the prescribed period of limitation or the application is refused the award becomes final under Section 35 of the Act and enforceable in terms of Section 36. Section 34 of the Act enumerates specific grounds on which an application for setting aside an award can be made.
Intention of legislature is a guiding factor for interpreting the provision of a Statute and the same is to be gathered from the words used in various provisions and the scheme of the Statute. Under 1996 Act, the grounds of challenge having been specified by the legislature by enacting Section 34 of the Act and finality having been attached under Section 35, the legislature obviously did not intend to either enlarge the scope of grounds of challenge or to provide another opportunity of challenge after the stage of Section 34 is over. Thus, the objection to the award on the grounds enumerated in Section 34 of the Act once adjudicated cannot be allowed to be raised or re-agitated by permitting to raise objection during the execution proceedings under Section 36 by pressing Section 47 CPC in service as the same would render the provisions of Section 34 and 35 of the Act virtually redundant.
The use of words "the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court" in section 36 of the Act would not mean that the provisions of the Code of Civil procedure with regard to execution of decree would become applicable in the execution of the award. Section 36 only creates a fiction that an award would be enforceable as if it were a decree of the Court within the scope of Order XXI C. P. C. This enforcement of the award under Order XXI CPC would not attract the application of Section 47 CPC simply by use of the expression "shall be enforceable as a decree" in Section 36 nor Section 36 can be read independent of other provisions contained in the Act itself. The provisions of the Act are to be reconciled with each other. Section 36 cannot be read out of context and independent of the scheme of the Act. Reference to another statute does not attract application of such other statute to the referring statute unless expressly provided. A reference in a statute to another statute cannot be read in a manner to invite inconsistency in the referring statute. Any such reference, if made, has to be interpreted in the context in which the reference is made so as not to make inconsistent the provisions of the referring statute itself. If it brings inconsistency, then the same is to be avoided. If Section 47 CPC is to be attracted, then the restrictions provided in Section 34 of the Act and finality to arbitral award by virtue of Section 35 of the Act would be redundant. Section 36 cannot be interpreted in the manner inconsistent with the provisions contained in the other part of the Act. That apart the finality of the decree under the Code is reached after the decision under Section 47 C. P. C., if raised. But the legislature in its wisdom thought it fit to incorporate the scope similar to Section 47 C. P. C. in Section 34 of the Act in order to bring finality before the award becomes executable. Same procedure cannot be expected to be incorporated in a statute twice. Legislature can never be interpreted to intend repetition. At the same time, the object of the Act is directed towards speedy and hazard-free finality with a view to avoid long drawn proceeding based on technicalities. Therefore, having regard to the provisions of Sections 13, 16, 34 and 35, Section 36 cannot be interpreted in a manner inconsistent with any of the provisions of the Act to attract the provisions contained in the Code in its entirety. Therefore, while considering the application filed under Section 36 of the Act for the execution of an award, the Court cannot overlook the scope and ambit within which the Court is to execute the award taking aid of the provisions for execution contained in the CPC not inconsistent with the provisions contained in the 1996 Act. Therefore, in my view, Section 47 CPC cannot be attracted despite the words "in the same manner as if it were a decree of the Court" used in Section 36 when the award is sought to be executed thereunder.
The matter can be viewed from another angle. Section 47 CPC provides for questions to be determined by the Court executing the decree. The said section reads as under :
"47. Questions to be determined by the Court executing decree.- (1) All questions arising between the parties to the suit in which the decree was passed, or their representatives, and relating to the execution, discharge or satisfaction of the decree, shall be determined by the Court executing the decree and not by a separate suit.
(2)Omitted by the Code of Civil Procedure (Amendment Act, 1976, S. 20 (w.e.f. 1.2.1977) (3)Where a question arises as to whether any person is or is not the representative of a party, such question shall, for the purposes of this section, be determined by the Court.
Explanation I.- For the purposes of this section, a plaintiff whose suit has been dismissed and a defendant against whom a suit has been dismissed are parties to the suit.
Explanation II.- (a) for the purposes of this section, a purchaser of property at a sale in execution of a decree shall be deemed to be a party to the suit in which the decree is passed; and
(b) all questions relating to the delivery of possession of such property to such purchaser or his representative shall be deemed to be questions relating to the execution, discharge or satisfaction of the decree within the meaning of this section."
It is, thus, clear that in order to invoke section 47 CPC, there must be a decree. Section 2 (2) CPC defines the decree. For a decision or determination to be a decree, it must necessarily fall within the fore-corners of the language used in the definition. Section 2 (2) CPC defines decree to mean "formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. It shall be deemed to include the rejection of a plaint and the determination of any question within Section 144, but shall not include - (a) any adjudication from which an appeal lies as an appeal from an order, or (b) any order of dismissal for default."
Explanation. _ A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed of. It is final when such adjudication completely disposes of the suit. It may be partly preliminary and partly final.
The use of words ''adjudication' and ''suit' used by Legislature clearly goes to show that it is only a court which can pass a decree in a suit commenced by plaint adjudicating the dispute between the parties by means of a judgment pronounced by the Court. The Hon'ble Apex Court in the case of Paramjeet Singh Patheja Vs. ICDS Ltd., AIR 2007 SC - 168 after considering the definition of decree as contained in CPC in paragraph 29 has held that "it is obvious that an arbitrator is not a Court, an arbitration is not an adjudication and, therefore, an award is not a decree". Again in paragraph 31, it has been held that words ''decision', and ''Civil Court' unambiguously rule out an award by arbitrators to be a decree. In the said case, the Hon'ble Apex Court while considering the question as to whether an insolvency notice under Section 9 of the Presidency Town Insolvency Act, 1909 can be issued on the basis of an arbitration award, held that such notice cannot be issued for the reason the arbitration award is neither a decree nor an order for payment within the meaning of Section 9(2) of the Insolvency Act and it is not rendered in a suit. Thus, the award not being covered under the definition of a decree, objection with respect to its validity can only be raised as provided under Section 34 of the Act and not by taking resort to section 47 C. P. C..
In the case of Pramjeet Singh Patheja (supra), the Hon'ble Apex Court has interpreted the words ''as if' used in Section 36 of the Act as under:
"The words ''as if' demonstrate that award and decree or order are two different things. Legal fiction is created for limited purpose of enforcement as a decree. The fiction is not intended to make a decree for all purposes under all statutes, whether State or Central."
While comparing the provisions of Section 15 of the Arbitration Act, 1899 which also provided for enforcing the award as a decree with Section 36 of the Arbitration and Conciliation Act, 1996, the Hon'ble Apex Court has observed in paragraphs 56 and 57 as under :
"56. Section 15 of the Arbitration Act, 1899 provides for ''enforcing' the award as if it were a decree. Thus a final award, without actually being followed by the decree (as was later provided by Section 17 of the Arbitration Act of 1940), could be enforced, i.e., executed in the same manner as a decree. For this limited purpose of enforcement, the provisions of CPC were made available for realizing the money awarded. However, the award remained an award and did not become a decree either as defined in the CPC and much less so far purposes of an entirely different statute such as the Insolvency Act."
"57. Section 36 of the Arbitration and Conciliation Act of 1996 brings back the same situation as it existed from 1899 to 1940. Only under the Arbitration Act, 1940, the award was required to be made a rule of Court i.e. required a judgment followed by a decree of court.
The issue that an award made in arbitral proceedings is not a decree within the meaning of CPC having been settled by the aforesaid pronouncement by the Hon'ble Apex Court, the provisions of Section 47 C. P. C. cannot be available to obstruct the execution of the award.
Much emphasis has been laid by the learned counsel for the applicant on the decision of the Hon'ble Apex Court in the case of Dharma Pratishthanam Vs. Madhok Constructions (2005) 9 SCC 686 wherein it has been held that in the event of 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 in any appropriate proceedings when sought to be enforced or acted upon. However, the said case relied upon by the learned counsel for the applicant is distinguishable and will have no application in the facts of the present case. In the said case when the award was filed in the court for making rule of the Court under 1940 Act, objections were filed by the judgment-debtor under Section 30 of the said Act which were dismissed on the ground that they were filed beyond the prescribed period of limitation. The intra-court appeal preferred against the said order was also dismissed by the Division Bench against which appeal by special leave was filed. The dispute being under 1940 Act, the question of interpretation of Sections 35 and 36 of the Act and applicability of section 47 C. P. C. to the execution of an award was not under consideration before the Hon'ble Apex Court. The Hon'ble Apex Court was considering the validity of the objection filed under Section 30 of 1940 Act and having found that since the appointment of Arbitrator and reference of dispute was void and as such the award was also void and the fact that application was filed beyond the period of limitation was not of much significance and delay was liable to be condoned. The same can be inferred from the following observations made in paragraph 32 of the judgment :
"In the present case, we find that far from submitting to the jurisdiction of the arbitrator and conceding to the appointment of and reference to the arbitrator Shri Swami Dayal, the appellant did raise an objection to the invalidity of the entire proceedings beginning from the appointment till the giving of the award though the objection was belated. In ordinary course, we would have after setting aside the impugned judgements of the High Court remanded the matter back for hearing and decision afresh by the learned single Judge of the High Court so as to record a finding if the award is a nullity and if so then set aside the same without regard to the fact that the objection petition under Section 30 of the Act filed by the appellant was beyond the period of limitation prescribed by Article 119 (b) of the Limitation Act, 1963. However, in the facts and circumstances of the case, we consider such a course to follow as a futile exercise resulting in needless waste of public time. On the admitted and undisputed facts, we are satisfied, as already indicated hereinabove, that the impugned award is a nullity and hence liable to be set aside and that is what we declare and also do hereby, obviating the need for remand."
In the present case, the situation is quite different. The applicant invoking section 34 of the Act filed their objection challenging the validity of the award which were dismissed as barred by limitation. The judgment came to be affirmed by the Hon'ble Apex Court on dismissal of the special leave petition. The grounds of challenge to the arbitral award which were dismissed as barred by limitation, were much before the Hon'ble Apex Court but it did not find it fit to condone the delay and to consider grounds of challenge on merit, itself or remand back the proceedings for the said purpose. Hon'ble Apex Court rather chose to affirm the orders passed by the District Judge and this Court dismissing the objection as barred by limitation. Thus, the reliance placed by the learned counsel for the applicant on the aforesaid pronouncement of the Hon'ble Apex Court is totally misfounded.
Apart from above, the extent of judicial intervention has been circumscribed by Section 5 of the Act. In other words, judicial interpretation is prohibited except as provided under the Act. Section 5 of the Act reads as under :
"Section 5. Extent of judicial intervention._ Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.
Section 5 of the Act falls under Part-I which includes within its ambit Section 2 to Section 43 of the Act. Thus, Sections 34 and 36 are also included in Part-I of the Act. The judicial intervention having been limited by the legislature, the Court cannot interfere at any and every stage on a ground other than those available in the Act itself. Thus, once stage of Section 34 is over and the award becomes final under Section 35, judicial intervention in the execution of the award under Section 36 cannot be held to be permissible on any ground, whatsoever, in view of the limitation imposed by Section 5 of the Act.
Thus, having regard to the provisions of Sections 5, 12, 13, 16, 34, 35 and 36 of the Act, the irresistible conclusion is only grounds which can be pressed into service for challenge to an award is within the ambit and scope of Section 34 of the Act. Once the stage of section 34 is over and the questions that were raised or could have been raised at that stage cannot be allowed to be raised again and again by pressing into service section 47 of the Code of Civil Procedure at the time of execution of award under Section 36 of the Act.
In view of the aforesaid facts and discussions, the applicant did not have any right to challenge the enforceability of the award by taking recourse to Section 47 C. P. C. and the same were liable to be dismissed. It is altogether different question that the objections have been dismissed by the court below on different grounds and reasons but since they are liable to be dismissed, the impugned order does not require any interference. The revision accordingly stands dismissed.
However, in the facts and circumstances, there shall be no order as to costs.
Date : September 24, 2010 Dcs.