Case Law Details
Yashpal Chopra And Co. Vs Union of India & Ors. (Supreme Court of India)
The appeal before the Orissa High Court arose from a dispute regarding maintainability of proceedings challenging an arbitral award under the Arbitration and Conciliation Act, 1996. The appellants sought interference with the judgment dated 9 May 2012 by which the Court below had held that their challenge to the arbitral award was not maintainable.
The appellants submitted that an arbitrator had been appointed under Section 11(6) of the Arbitration and Conciliation Act. They had challenged the arbitrator’s appointment before the arbitral tribunal under Section 16, but the objection was unsuccessful. Thereafter, the appellants participated in the arbitration proceedings, following which an arbitral award dated 17 February 2010 was passed.
Read HC Judgment in this case: Rejection of Section 34 Petition on Maintainability Grounds Amounts to Refusal to Set Aside Award: Orissa HC
Aggrieved by the award, the appellants filed a challenge petition under Section 34 before the District Judge. However, the District Judge dismissed the petition as not maintainable on the ground that the arbitrator had been appointed through a judicial order of the High Court under Section 11(6), and therefore, Section 42 required the challenge to be filed before the same Court where the Section 11 application had been entertained.
The respondents argued that the appeal itself was not maintainable under Section 37 of the Arbitration Act. Reliance was placed on several judgments 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 APL Metals Ltd. v. Mountview Tracom LLP.
The High Court examined these precedents in detail. In State of Maharashtra v. Ramdas Construction Co., the Bombay High Court had held that dismissal of an application for condonation of delay in filing a Section 34 petition did not amount to refusal to set aside an arbitral award because there was no adjudication on merits. Similarly, the judgments in Canbank Financial Services Ltd. and Today Hotels (New Delhi) Pvt. Ltd. related to orders under Section 8 of the Arbitration Act and therefore did not fall within the scope of appealable orders contemplated under the unamended Section 37. The decision in APL Metals Ltd. involved an order under Section 36(3) and was also held to be inapplicable.
The High Court noted that the appellants’ Section 34 petition had been filed within the limitation period before the District Judge. The central issue before the Court was whether dismissal of the Section 34 petition on maintainability grounds amounted to refusal to set aside the arbitral award under Section 37.
Answering the issue in the affirmative, the High Court held that rejection of the Section 34 petition on maintainability grounds effectively constituted refusal to set aside the award. The Court observed that by dismissing the challenge petition, the appellants had been deprived of adjudication of their objections to the arbitral award. Therefore, the appeal was maintainable under Section 37.
The High Court also considered an important submission made during the hearing 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 since the High Court lacked original civil jurisdiction, it could not become the appellate forum under Section 42 merely because the arbitrator had been appointed by the High Court under Section 11(6).
The Court further noted that this aspect had neither been brought to the attention of the Court below nor adequately noticed earlier. It remarked that the omission was nearly overlooked because the Judge’s parent High Court, namely the Calcutta High Court, exercises original civil jurisdiction.
Accordingly, the Orissa 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.
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FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Feeling aggrieved and dissatisfied with the impugned judgment and order dated 04.05.2022 passed by the High Court of Orissa at Cuttack in Arbitration Appeal No. 31 of 2012 by which the High Court has allowed the said Appeal and set aside the order passed by the concerned District Court dismissing the application under section 34 of the Arbitration and Conciliation Act, 1996 (for short `the Arbitration Act’) as not maintainable and has consequently remanded the matter to the concerned District Court to decide and dispose of Section 34 application on merits, the original respondent before the High Court has preferred the present Petition.
Ms. Meenakshi Arora, learned Senior Advocate appearing on behalf of the petitioner has heavily relied upon Section 42 of the Arbitration Act and Section 11 of the Arbitration Act, as amended, in support of her submission that the High Court, who has exercised the jurisdiction under Section 11 of Arbitration Act alone can be said to be `Court’ and, therefore, Section 34 application shall lie before the concerned High Court only. The aforesaid has no substance. It is an admitted position that so far as Orissa High Court is concerned, the same does not possess the original jurisdiction. The `Court’ is defined under Section 2 (e) of the Arbitration Act, which reads as under-
“2(e) “Court” means-
i. in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;
ii. in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;”
Therefore, in the absence of the High Court of Orissa having original jurisdiction, the concerned District Court can be said to be `Court’ and, therefore, the proceedings under Section 34 of the Arbitration Act against the award passed by the Arbitrator shall lie before the concerned District Court, as defined under Section 2(e) of the Arbitration Act. Ïn that view of the matter, the High Court has not committed any error in passing the impugned judgment and order and remanding the matter to the concerned District Court/Court to decide Section 34 application in accordance with law and on its own merits. Therefore, in the facts and circumstances of the case, impugned judgment and order passed by the High Court is not required to be interfered with. The Special Leave Petition stands dismissed.
Pending application(s) shall stand disposed of.
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