Arbitration Application No. 24 of 2014 · The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK ARBA No.13 OF 2018 In the matter of an Appeal under Section 37(1) of the Arbitration & Conciliation Act, 1996 and from an order dated 02.12.2017 passed by the learned District Judge, Sundergarh in Arbitration Application No.24 of 2014. ---- Steel Authority of India Limited (SAIL) …. Appellant -versus- 1. M/s. Simplex Engineering & Foundry Works Limited; and 2. Sri A.K. Shah, Arbitrator …. Respondents Appeared in this case by Hybrid Arrangement (Virtual/Physical Mode): For Appellant - For Respondents- M/s.N. K. Sahu, B. Swain, M.Das & P. Swain Advocates Mr. Budhadev Routray, Senior Advocate M/s.C.R.Das, J. Biswal, L.V. Srivastav. S.K. Mishra, P.C. Nayak & A.C. Panda Advocates for Respondent No.1 CORAM: MR. JUSTICE D.DASH Date of Judgment: 20.06.2024 Dash,J. The Appellant has filed this Appeal under section 37 (1) of the Arbitration and Conciliation Act, 1996 (for short, the A & C ARBA No.13 of 2018 Page 1 of 14 Act) in assailing the judgment passed by the learned District Judge, Sundargarh on 02.12.2017 in Arbitration Application No.24 of 2014 in the matter of an application under section 34 of the said Act. 2. Facts necessary for the purpose are as under:- The Appellant is a Government of India owned company having its registered office at ISPAT Bhawan Lodhi Road, New Delhi. The Respondent is a company registered under the Indian Companies Act, 1956. The Appellant (hereinafter referred to as SAIL) on 30.06.1992 entered into a contract with M/s.Tyazhpromexport (Principal Contractor) Before that the Appellant had issued a Letter of Intent (LOI) to M/s.Tyazhpromexport, being the principal contractor for “Sinter Plant”. In total three contracts were awarded to the Principal Contractor. In course of execution of the contracts, and, therefore, certain developments have been taken place and finally despite one Memorandum of Understanding and the minutes coming into place after the meeting held on 15th December, 2001, the disputes/differences having remained unresolved, the matter was referred by the parties to the conciliator in terms of the amendment of clause 10.34 of the contract-2. The conciliation, however, failed on 6th September, 2011, therefore, in terms of the amendment, the Respondent- Company by issuing letter dated 20th September, 2011 invoked ARBA No.13 of 2018 Page 2 of 14 the arbitration clause contained under contract two and called upon the Appellant to nominate an Arbitrator. The parties agreed upon the sole Arbitrator and Arbitral Tribunal was
Legal Reasoning
constituted on 16th November, 2011. The sole Arbitrator Mr. A. K. Shahi after hearing the parties, passed an award on 8th August, 2014. The Appellant then filed an application under section 34 of the A & C Act before the learned District Judge, Sundargarh praying therein to set aside the said award. 3. Learned District Judge by the judgment, which is impugned in this Appeal has come to conclude that the application under section 34 of the A & C Act is not maintainable and that Court has no jurisdiction to sit upon to adjudicate the application under section 34 of the A & C Act for setting aside the said award. That being the ground of rejection of the application under section 34 of the A & C Act, at the outset, when the hearing of this Appeal commenced, Mr.Routray, learned Senior Counsel for the Respondent No.1-Company raised the objection as to the maintainability of the Appeal. So this Court, instead of proceeding to hear and decide the Appeal on merit, felt it proper to answer the following point as its answer in one way may dispose of the Appeal. The point reads:- “Whether an appeal under section 37 of lies Arbitration and Conciliation Act, 1996 the in ARBA No.13 of 2018 Page 3 of 14 challenging the order passed by the Court in seisin of an application under section 34 of the Act, ruling that it has no jurisdiction to entertain the application.” 4. The above point being framed by order dated 23.02.2024, I have heard Mr. B. Routray, learned Senior Counsel for the Respondent No.1-Company, who raised the objection and Mr. N. K. Sahu, learned counsel for the Appellant at length. 5. Mr. B. Routray, learned Senior Counsel training his gun upon the questioning the entertainability of this Appeal as against the judgment passed by the learned District Judge in seisin of an application under section 34 of the A & C Act, contended that the learned District Judge having not gone to decide in that Appeal in either way, whether the award is liable to be set aside or not, has dismissed the said application on the ground of lack of jurisdiction, and, therefore, as against such an order, no Appeal lies under section 37 of the A & C Act. In support of the same, he has relied upon the decision of the Hon’ble Apex Court in case of BGS SGS SOMA JV –Versus- NHPC (2020) 4 SCC 234. It was submitted that the judgment under challenge is not the one as specified in clause a, b or C on sub section 1 of section 37 of the A & C Act; since it is not an order questioning the refusal to refer the parties to the arbitration under section 8 of the A & C Act nor an order granting or refusing to grant an order under section 9 of the A & C Act nor it is one where the Court has either set aside the ARBA No.13 of 2018 Page 4 of 14 arbitral or refused to set aside within the purview, ambit and scope of section 34 of the A & C Act. He, therefore, submitted that the learned District Judge when has not gone to rule upon the question as to whether the award is liable to be set aside coming within the ambit and scope of section 34 of the A & C and it having said that the Court has no jurisdiction that said court has no jurisdiction to entertain the application section 34 of the A & C Act, no Appeal under section 37 of the A & C Act lies. 6. Mr. N. K. Sahu, learned counsel for the Appellant resisting the said objection as to the entertainability of the Appeal under section 37 of the A & C Act, first of all placing the operative part of the impugned judgment submitted that when finally the learned District Judge has rejected the application under section 34 of the A & C Act, it indirectly has refused to set aside the award, and, therefore, Appeal very well lies under clause C of the sub section 1 of section 37 of the A & C Act. He also placing reliance upon the said decision in case of BGS SGS SOMA JV (supra) contended that when it has been held in the impugned judgment that the Court of District Judge, Sundargarh cannot proceed with the matter, the impugned judgment therein is final and therefore is appealable under section 37 of the A & C Act. 7. Keeping in view the submissions made, I have carefully read the judgment under challenge in the said Appeal. It appears from the said judgment that the learned District Judge ARBA No.13 of 2018 Page 5 of 14 had noticed the following admitted factual setting into consideration. “i. The contract was executed between the parties at Delhi; ii. The contract that was executed between the parties at Delhi contained the Arbitration clause; iii. As per the said Arbitration clause, the Arbitration was to be held in accordance with the Arbitration Act, 1940 and under International Chambers of Commerce Room, Arbitration; iv. The venue of Arbitration was agreed to be at New Delhi or any other place decided by the Arbitrator; v. The entire Arbitral Proceedings were held at New Delhi after the Arbitrator, who is the executive Director of the Appellant was appointed by the Appellant; and vi. As per Article 19 of the Contract, the disputes between the parties with regard to the Contract were all subject to the exclusive jurisdiction of the Court of New Delhi” 8. Taking note of all these above, the learned District Judge has concluded as under:- “The parties have entered into the contract and jurisdiction of a Court. Hence, the accepted the Petitioner cannot contradict the terms of the contract and as such is debarred from such application. Hence, the present application is not maintainable as filed in this Court which does not have the jurisdiction to decide the issue. Hence, the same is hereby rejected.” ARBA No.13 of 2018 Page 6 of 14 It is thus seen that the learned District Judge before proceeding to examine the award which was impugned before it within the scope of section 34 of the A & C Act, has simply rejected the application filed by the Appellant in that regard in holding that the said Court at Sundargarh lacks the jurisdiction to decide the application under section 34 of the A & C Act on merit. 9. At the first instance, therefore, the provision of section 37(1) of the A & C Act has to be gone through. It reveals as under:- “Section 37(1) of the Arbitration Act, 1996 reads as follows: (1) An appeal shall lie from the following orders (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order, namely: (a) Refusing to refer the parties to arbitration Under Section 8; (b) Granting or refusing to grant any measure Under Section 9; Setting aside or refusing to set aside an arbitral (c) award Under Section 34.” At this juncture, it would be pertinent to state that in case of BGS SGS SOMA JV (supra), the question was that given the Arbitration Clause in the proceedings, whether the seat of Arbitration Proceeding is New Delhi or ARBA No.13 of 2018 Page 7 of 14 Faridabad, consequent upon which a petition under section 34 of the A & C Act may be filed dependent on where the seat of arbitration was located. The project site of the works which were the subject matter of the contract in that case, were in the State of Asam and Arunachal Pradesh. It was there in the Contract that the Arbitration Proceeding shall be held in New Delhi and Faridabad, India. The notice of Arbitration being issued by one of the parties in regard to payment of compensation for the losses suffered due to abnormal delay and additional costs and as a result hindrances caused by the other parties the three members Arbitral Tribunal was constituted as per the relevant clause of the said agreement. The sittings of the Arbitral Tribunal took place at New Delhi. The Tribunal delivered the award at New Delhi. The Party aggrieved by the award filed an application under section 34 of the A & C Act in the Court of District Judge, Faridabad, Haryana. The party in whose favour, the award stood then filed an application under Order 7 Rule 10 of the Code of Civil Procedure and section 2(1) (e) (i) of the A & C Act seeking return of the petition under section 34 of the A & C Act for its presentation before the appropriate Court at New Delhi and/or the District Judge at Dhemaji, Asam. In November, 2017 after constitution of a Special Commercial Court at Gurugram, section 34 petition field ARBA No.13 of 2018 Page 8 of 14 at Faridabad was transferred to the said Commercial Court at Gurugram. The Special Commercial Court, Gurugram allowed the Application filed by the party for return of the application under section 34 of the A & C Act for its presentation before the proper Court having the jurisdiction in New Delhi, Then party in whose favour the award had been passed, filed an Appeal under section 37 of the A & C Act read with section 13 (1) of the Commercial Court’s Act, 2015 before the High Court of Punjab and Haryana at Chandigarh. The High Court held that the Appeal under section 37 of the A & C Act was maintainable and then having said that Delhi being the only convenient venue where Arbitral Proceedings were held and not the seat of the Arbitration Proceeding, Faridabad would have jurisdiction on the basis of the cause of action having arisen in part in Faridabad. Said Appeal was allowed and the judgment of the Special Commercial Court, Gurugram for return of the Application under section 34 of the A & C Act for presentation before the proper Court having the jurisdiction in New Delhi, was set aside. With these backgrounds, the Company (Party), who had filed the Application under section 34 of the A & C Act approached the Hon’ble Apex Court. ARBA No.13 of 2018 Page 9 of 14 10. The Hon’ble Apex Court referred to the decision of Delhi High in the case of South Delhi Municipal Corporation –V- Tech. Mahindra EFA (OS) (COMM) 3 of 2019 which had said that the right of Appeal inheres in no one, and, therefore, an appeal for its maintainability must have the clear authority of law and that explains why the right of Appeal is described as a creature of statute of statute and then referring to the Division Bench decision of Delhi High Court in case of Harmanprit Singh Sidhu v. Arcadia Shares & Stock Brokers Private Limited 2016 (234) DLT 30 (DB) holding that an Appeal against an order allowing an application in condonation of delay in filing an Application under section 34 of the A & C Act is not maintainable has said as under:- “the reasoning in this judgment commends itself to us, as a distinction is made between judgments which either set aside, or refuse to set aside, an arbitral award after the court applies its mind to Section 34 of the Arbitration Act, 1996, as against preliminary orders of condonation of delay, which do not in any way impact the arbitral award that has been assailed.” The Court said as under:- “98. We have extracted the arbitration agreement in the present case (as contained in Clause 67.3 of the agreement between the parties) in paragraph judgment. As per the arbitration 3 of this agreement, in case a dispute was to arise with a foreign contractor, clause 67.3(ii) would apply. Under this sub-clause, a dispute which would ARBA No.13 of 2018 Page 10 of 14 to an 2(7) of finally ‘international award under Section in 1996 read with commercial amount arbitration’ within the meaning of Section 2(1)(f) of the Arbitration Act, 1996, would have to accordance with be settled the Arbitration Act, the UNCITRAL Arbitration Rules, and in case of any conflict, the Arbitration Act, 1996 is to prevail (as an award made under Part I is considered a the domestic Arbitration Act, 1996 notwithstanding the fact that it is an award made in an international commercial arbitration). Applying the Shashoua principle delineated above, it is clear that if the dispute was with a foreign contractor under Clause 67.3 of the agreement, the fact that arbitration proceedings shall be held at New in sub-clause (vi) of Delhi/Faridabad, India Clause 67.3, would amount to the designation of either of these places as the “seat” of arbitration, as a supranational body of law is to be applied, namely, the UNCITRAL Arbitration Rules, in conjunction with the Arbitration Act, 1996. As international such arbitration would be an commercial arbitration which would be decided in India, the Arbitration Act, 1996 is to apply as well. There being no other contra indication in such a situation, either New Delhi or Faridabad, the India agreement, and it is thereafter for the parties to choose as to in which of the two places the arbitration is finally to be held.” the designated “seat” under is “99. Given the fact that if there were a dispute between NHPC Ltd. and a foreign contractor, clause 67.3(vi) would have to be read as a clause designating the “seat” of arbitration, the same must follow even when sub-clause (vi) is to be ARBA No.13 of 2018 Page 11 of 14 read with sub-clause (i) of Clause 67.3, where the dispute between NHPC Ltd. would be with an Indian Contractor. The arbitration clause in the present case states that “Arbitration Proceedings shall be held at New Delhi/Faridabad, India…”, thereby signifying that all the hearings, including the making of the award, are to take place at one of the stated places. Negatively speaking, the clause does not state that the venue is so that some, or all, of the hearings take place at the venue; neither does it use language such as “the Tribunal may meet”, or “may hear witnesses, experts or parties”. The expression “shall be held” also indicates that the so-called “venue” is really the “seat” of the arbitral proceedings. The dispute is to be settled in accordance with the Arbitration Act, 1996 which, therefore, applies a national body of rules to the arbitration that is to be held either at New Delhi or Faridabad, given the fact that the present arbitration would be Indian and not international. It is clear, therefore, that even in such a scenario, New Delhi/Faridabad, India has been designated as the “seat” of the arbitration proceedings.” “100. However, the fact that in all the three appeals before us the proceedings were finally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the “seat” of arbitration under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the Courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings. There- fore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant ARBA No.13 of 2018 Page 12 of 14 once the “seat” has been chosen, which would then amount to an exclusive jurisdiction clause so far as Courts of the “seat” are concerned.” “101. Consequently, the impugned judgment is set aside, and the Section 34 petition is ordered to be presented in the Courts in New Delhi, as was held by the learned Single Judge of the Special Commercial Court at Gurugram.” 11. Adverting to the facts of the case at hand, when it has been there in the Arbitration Clause that the venue of Arbitration would be at New Delhi or any other place decided by the Arbitrator and the Arbitrator having held all the sittings of the Arbitral Proceedings at New Delhi and then as it is there in Article 19 of the Contract that the disputes between the parties with regard to the contract was subject to the exclusive jurisdiction of the courts of New Delhi, in my considered view, the District Judge, Sundargarh, while holding that the Court lacks the jurisdiction to sit over the Application under section 34 of the A & C Act should not have stopped there itself and proceeded to dismiss the Application leaving the Appellant without remedy of filing the Application for such bona fide mistake, if any, in filing the Application in that very Court. The learned District Judge since has simply dismissed the Application, that amounts to refusal to set aside the award put under challenge as the impugned judgment has in that way put a seal of approval to the award under challenge before the said ARBA No.13 of 2018 Page 13 of 14 Court and has in that way impact upon award. Therefore, the Appeal under section 37 of the A & C Act is maintainable 12. In that view of the matter, the Appeal is allowed and the matter is remitted to the Court of learned District Judge, Sundergarh to pass appropriate order as per law consequent upon conclusion arrived at regarding the jurisdiction. There shall, however, be no order as to cost. (D. Dash), Judge. Gitanjali Signature Not Verified Digitally Signed Signed by: GITANJALI NAYAK Designation: Junior Stenographer Reason: Authentication Location: HIGH COURT OF ORISSA : CUTTACK Date: 27-Jun-2024 12:28:33 ARBA No.13 of 2018 Page 14 of 14