Case Law Details
Union of India and others Vs Yashpal Choptra & Co. (Orissa High Court)
Arbitration Appeal Maintainable Because Section 34 Challenge Was Thrown Out Without Merits Adjudication; Section 42 Cannot Confer Appellate Jurisdiction on High Court Without Original Civil Jurisdiction; Orissa HC Restores Arbitration Challenge Because District Judge Wrongly Declined Jurisdiction; Appeal Under Section 37 Maintainable When Court Refuses to Examine Arbitration Challenge; Orissa HC Distinguishes Section 8 and Limitation Cases While Allowing Arbitration Appeal; Section 34 Petition Filed Within Limitation Cannot Be Rejected Solely Due to Arbitrator’s Appointment by High Court; District Judge Must Decide Arbitration Award Challenge on Merits.
The appeal before the Orissa High Court concerned the maintainability of an appeal arising from rejection of a challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.
The appellants contended that the impugned judgment dated 9 May 2012 was liable to be interfered with. It was submitted that although the arbitrator had been appointed under Section 11(6) of the Arbitration and Conciliation Act, the appellants had challenged the appointment by invoking Section 16 before the arbitral tribunal. After failing in that challenge, the appellants contested the claims before the arbitrator, following which an arbitral award dated 17 February 2010 was passed.
Read SC Judgment in this case: SC Upholds District Court Jurisdiction Under Arbitration Act as Orissa HC Lacks Original Civil Jurisdiction
Aggrieved by the award, the appellants challenged it before the District Judge under Section 34 of the Act. However, the Court below held that the challenge petition was not maintainable. According to the District Judge, since the arbitrator had been appointed by a judicial order of the High Court under Section 11(6), Section 42 of the Arbitration and Conciliation Act required the challenge to be filed before the same Court where the Section 11 application had been made.
The respondent opposed the appeal and relied upon several judicial decisions, including State of Maharashtra v. Ramdas Construction Co., Canbank Financial Services Ltd. v. Haryana PetroChemicals Ltd., Today Hotels (New Delhi) Pvt. Ltd. v. Intecture India Designs Pvt. Ltd., and a Division Bench judgment of the Calcutta High Court in APL Metals Ltd. v. Mountview Tracom LLP. It was argued that the impugned judgment was passed on an application invoking Section 42 and therefore did not fall within the scope of appealable orders under Section 37 of the Arbitration and Conciliation Act.
The High Court examined the precedents relied upon by the respondent. It observed that in State of Maharashtra v. Ramdas Construction Co., the issue related to dismissal of an application for condonation of delay and not adjudication on merits of a challenge to an arbitral award. The Bombay High Court had held there that an appeal under Section 37 is maintainable only where the Court either sets aside or refuses to set aside an arbitral award on merits.
The High Court further noted that the cases of Canbank Financial Services Ltd. and Today Hotels (New Delhi) Pvt. Ltd. involved orders passed under Section 8 of the Arbitration Act and therefore were not applicable to the present controversy. Similarly, the judgment in APL Metals Ltd. involved an order under Section 36(3) and did not assist the respondent’s contention regarding maintainability.
The High Court observed that the appellants’ Section 34 petition had been filed within the prescribed limitation period before the District Judge. It then considered whether rejection of the Section 34 petition on the ground of maintainability amounted to a refusal to set aside the arbitral award under Section 37.
Answering the question in the affirmative, the Court held that dismissal of the Section 34 petition on maintainability grounds effectively amounted to refusal to set aside the arbitral award. As a result, the appellants had been deprived of adjudication of their challenge to the award. Therefore, the appeal was maintainable under Section 37.
The Court also took note of a submission made by another counsel present in Court that the Orissa High Court does not exercise original civil jurisdiction. Consequently, it does not satisfy the definition of “Court” under Section 2(1)(e) of the Arbitration and Conciliation Act. The Court observed that because the High Court lacked original civil jurisdiction, it could not become the appellate court under Section 42 merely because an arbitrator had been appointed under Section 11(6).
The High Court stated that this aspect had not been brought to the attention of the Court below and was almost overlooked by the Bench itself, partly because the Judge’s parent High Court, Calcutta High Court, exercises original civil jurisdiction.
Accordingly, the High Court set aside the impugned judgment and restored the Section 34 petition before the District Judge for adjudication on merits as expeditiously as possible. The appeal was consequently allowed and disposed of.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. Mr. Parhi, learned advocate, Assistant Solicitor General appears on behalf of appellants and submits, impugned judgment dated 9th May, 2012 is required to be interfered with in appeal. He submits, it is true the arbitrator was appointed on request made under sub-section (6) in section 11, Arbitration and Conciliation Act, 1996 but his client invoked section 16 to challenge the appointment, in the reference. On being unsuccessful, his client thereafter contested the claims. Award dated 17th February, 2010 was made.
2. His clients being aggrieved by the award had challenged it before the District Judge. By impugned judgment, learned Court below held that challenge to the award was not maintainable, since the order of appointment of arbitrator under section 11(6) was a judicial order and section 42 required the appeal to be filed in the Court wherein that application was made.
3. Mr. Hota, learned advocate appears on behalf of respondent and relies on several decisions.
(i) State of Maharashtra v. Ramdas Construction Co. available at MANU/MH/0912/2006, paragraph-9
(ii) Canbank Financial Services Ltd. v. Haryana PetroChemicals Ltd. available at MANU/DE/0794/2008, paragraph-3 to 6.
(iii) Today Hotels (New Delhi) Pvt. Ltd. v. Intecture India Designs Pvt. Ltd. available at MANU/DE/0068/2016, paragraphs 6, 10, 12 and 13.
(iv) Judgment dated 5th April, 2022 by a Division Bench of the High Court at Calcutta in LPA 1 of 2022 (APL Metals Ltd. v. Mountview Tracom LLP and others).
4. Relying on above decisions Mr. Hota submits, impugned judgment was made on his client’s application invoking section 42. It, therefore, cannot be said to be a judgment coming under either clause (a) or clause (b) in sub-section (1) of section 37, before amendment. As such, the appeal be dismissed as not maintainable.
5. In State of Maharashtra (supra) the Division Bench of Bombay High Court said in paragraph-10, inter alia, the passage extracted and quoted below.
“…. .In other words, the Court has not dealt with the application for setting aside of the award on merits and the same has been disposed of solely as a consequence of rejection of the application for condonation of delay and there has been no enquiry as regards the rights of the parties on the issue of setting aside of the award. The appealable order which is contemplated for the purpose of exercise of appellate jurisdiction is the one which deals with the merits of the case in relation to the claim for setting aside or refusing to set aside an arbitral award. As already slated above, the appellate powers under Section 37 are not in relation to the proceedings which precedes the enquiry regarding setting aside or refusing to set aside an arbitral award. Being so, the consequence of the order of dismissal of the application for condonation of delay cannot itself amount to an appealable order under Section 34(1) for the purpose of appeal under Section 37(1) of the Act.”
Sub-section (3) in section 34 mandates a separate period of limitation for a petition made challenging the award. In that case, appellants had challenged the award beyond the period of limitation. In the circumstances, the Division Bench was of the view that order impugned therein was not one whereby the award was either set aside or there was refusal to set it aside.
6. In Canbank Financial Services Ltd. (supra) the appeal was against order of the learned single Judge allowing application of the respondent made under section 8, to refer parties to arbitration. Clearly such order did not come under either of the two clauses in un-amended section 37. So also in Today Hotels (New Delhi) Pvt. Ltd (supra) order impugned in the appeal had been made under section 8.
7. In APL Metals Ltd (supra) order impugned before the Division Bench was one made under sub-section (3) in section 36. As such it is of no help to respondent in contending that this appeal is not maintainable.
8. Challenge of appellants before the Court below was rejected on the ground of maintainability since appointment of arbitrator was by a judicial order of the High Court. On query from Court, it was ascertained that the challenge petition under section 34 was filed within time before the Court below.
9. Section 37 provides for appealable orders against, inter alia, setting aside or refusing to set aside an arbitral award under section 34. The section has undergone amendment to incorporate refusing to refer parties to arbitration under section 8, also as a ground of appeal. The question arising for adjudication is whether the Court below in rejecting the petition under section 34, refused to set aside the arbitral award. The question must be answered in the affirmative. Throwing out the challenge on ground of maintainability is a ground accepted by the Court below in refusing to set aside the award. As a consequence, appellants have been deprived adjudication on their challenge to the award.
10. Mr. Avijit Pal, learned advocate, who is present in Court waiting for his matter to be called on points out, this Court does not have original civil jurisdiction. Consequently, this Court does not satisfy definition of Court given in clause (e) under sub-section (1) of section 2. This High Court not having original jurisdiction in civil matters, it cannot become an appellate Court by applying section 42, as it is not a Court within meaning of section 2(1)e, in the facts and circumstances. This was not pointed out to the Court below and also almost missed by this Bench. The near omission by this Bench is attributable to myself having parent High Court, Calcutta, which has the original jurisdiction.
11. Impugned judgment is set aside and the petition under section 34 restored to the Court below, for adjudication as expeditiously as possible.
12. The appeal is allowed and disposed of as above.
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