(Per
: HONOURABLE THE CHIEF JUSTICE MR. K.S.RADHAKRISHNAN)
This
writ petition has been preferred under Articles 226 and 227 of the
Constitution of India, for a declaration that Section 36 of the
Arbitration and Conciliation Act, 1996 is unconstitutional. Prayer
has also been made for issuance of a writ of certiorari to quash
order dated 2.11.2007 passed by the City Civil Court, rejecting
request for execution of the arbitration award.
2. Petitioner,
a Mercantile Co-operative Bank, is having an award in its favour for
Rs.17,95,81,261.75 paise. Bank filed Darkhast No. 339 of 2007 before
the City Civil Court at Ahmedabad for enforcement of that award. In
fact, respondents had given three cheques for a total amount of Rs. 2
lakhs towards payment of the amount due to the Bank. Cheques could
not be encashed as by the time contesting respondents herein moved an
application before the City Civil Court for setting aside the award
under Section 34 of the Arbitration Conciliation Act, 1996 (for
brevity ?Sthe Act??). By applying the principle laid down by the
apex Court in National Aluminium Company Limited Vs. Pressteel and
Fabrications Ltd. - AIR 2005 SC 1514, the Court took the view that
since application for setting aside arbitration award was filed, the
award becomes unexecutable till the application is finally disposed
of. The City Civil Court therefore, passed an order to send back the
petition to the Darkhast Department, and Department was directed to
release the matter for further hearing only after final order is
passed on the petition filed under Section 34 of the Act. Execution
of award was suspended and Bank was directed to return cheques to the
judgment-debtor.
3. Learned
counsel for the Bank Mrs. Avani S. Mehta while challenging vires of
Section 36 of the Act, submitted that principle laid down by the
apex Court in the above mentioned decision would not apply to the
facts of the present case. Learned counsel submitted that validity
of Section 36 of the Act was not challenged before the apex Court
and therefore, this Court should independently examine the scope and
ambit of Section 36 of the Act, and the same be declared as
unconstitutional. Learned counsel submitted that Section 36 of the
Act was beyond the object and purpose sought to be achieved by the
Act, which is considered as an alternative dispute redressal
mechanism for speedy disposal of disputes. Learned counsel submitted
that defeated party would deploy all conceivable and inconceivable
procedure devices to delay the matter to the dis-advantage of a
person who is favoured with an arbitration award. Learned counsel
submitted that if the Court is not bestowed with appropriate powers
to pass interim orders, that may ultimately defeat the execution of
the award itself. Learned counsel also submitted that delay in
execution of the award would cause serious injustice to the
depositors of the bank and public interest would suffer.
4. Senior
Counsel Shri S.B. Vakil on the other hand contended that the Supreme
Court while interpreting Section 36 of the Act, felt that the matter
requires attention of the Parliament and unless and until Section 36
of the Act is amended, the award cannot be executed, if an
application for setting aside the award is pending consideration.
Learned counsel also submitted that similar provisions are also found
in various legislations also and therefore, it is not unusual for the
legislature to enact a provision like Section 36 of the Act.
5.
The scope and ambit of Section 36 of the Act, directly came up for
consideration of the apex Court in National Aluminium Co.Ltd. Vs.
Pressteel & Fabrications Pvt.Ltd. (supra) and the provision was
enlarged by the Supreme Court as follows:-
?S.....But
then we noticed from the mandatory language of Section 34 of the 1996
Act, that an award, when challenged under Section 34 within the time
stipulated therein, becomes unexecutable. There is no discretion
left with the Court to pass any interlocutory order in regard to the
said award except to adjudicate on the correctness of the claim made
by the applicant therein. Therefore, that being the legislative
intent, any direction from us contrary to that, also becomes
impermissible. On facts of this case, there being no exceptional
situation which would compel us to ignore such statutory provision,
and to use our jurisdiction under Art. 142, we restrain ourselves
from passing any such order, as prayed for by the applicant.
11. However,
we do notice that this automatic suspension of the execution of the
award, the moment an application challenging the said award is filed
under Section 34 of the Act leaving no discretion in the Court to put
the parties on terms, in our opinion, defeats the very objective of
the alternative dispute resolution system to which arbitration
belongs. We do not find that there is a recommendation made by the
concerned Ministry to the Parliament to amend Section 34 with a
proposal to empower the Civil Court to pass suitable interim orders
in such cases. In view of the urgency of such amendment, we
sincerely hope that necessary steps would be taken by the authorities
concerned at the earliest to bring about the required change in law.??
6. The
Constitutional validity of Section 36 of the Act was, as such not
challenged before the Supreme Court. However, Supreme Court
expressed the opinion that even under Article 142, the Apex Court has
to restrain itself from passing any order ignoring the statutory
provision. We also find no ambiguity in Section 36 of the Act, which
reads as follows:-
?S36.
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.??
7. The
language of Section 36 of the Act is clear and it specifically deals
with enforcement of arbitration award. Section 34 deals with
application for setting aside the arbitration award. Only where the
time for making application to set aside the arbitral award under
Section 34 of the Act has expired, or such an application has been
rejected, the arbitral award can be enforced. True, arbitration
award can be enforced under the Code of Civil Procedure in the same
manner as if it was a decree of the Court. Under Section 151 of the
Code of Civil Procedure, the Civil Court has got inherent power to
make such orders as may be necessary to prevent the abuse of the
process of Court. But the Court while exercising power under Section
151 of the Code, first has to consider whether exercise of such power
is expressly prohibited by any other provisions of the Code of Civil
Procedure and if there is no such prohibition, then the Court will
consider whether such power should be exercised or not on the basis
of facts mentioned in the application. In view of Section 36 of the
Act placing an embargo on executing the arbitration award, the Civil
Court cannot exercise powers under Section 151 of the Civil Procedure
Code by issuing interim orders.
8. Section
35 of the Arbitration and Conciliation Act, 1996 provides that
subject to Part I of the Act, an arbitral award shall be final and
binding on the parties and persons claiming under them. Section 36
of the Act makes an arbitral award enforceable under the Code of
Civil Procedure in the same manner as if it were a decree of the
Court once either 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 to been refused. Section 34, in turn,
provides for certain grounds only on which an arbitral award can be
set aside by the Court. Thus when an award of the Arbitrator is made
enforceable through the Court machinery as if it were the decree of
the Civil Court, the Legislature has in its wisdom found it
appropriate to provide that such an enforcement can be made only
after the time for setting aside the arbitral award under Section 34
has expired or such application having been made has been refused.
This ensures that the person aggrieved by the award of the Arbitrator
gets reasonable time to approach the Court for setting aside the
award and if such an application is made, the same is disposed of by
the Civil Court before the award can be enforced. Learned advocate
for the petitioner has not been able to point out any
unconstitutionality in the provision contained in Section 36. The
provision is not shown to be outside the legislative competence of
the Parliament or opposed to any of the constitutional provisions.
The challenge to the constitutional validity of Section 36 of the
Act, therefore, must be repelled.
9. We
also find no reason to interfere with the interim order dated
10.3.2008 passed by the Division Bench of this Court in Special Civil
Application No. 4206 of 2008, directing the City Civil Court to
dispose of Misc. Civil Application No. 567 of 2006 expeditiously.
The respondent in no way said to have been aggrieved by such
direction of early disposal of the application for setting aside the
award. The direction was issued by the Court exercising powers under
Article 226 and 227 of the Constitution of India. We find no
illegality in that direction. Several factors may weigh with the
Court for issuing such direction. The stake involved in the case is
very high running into several crores of rupees and the public
interest may also suffer if respondent takes any steps to defeat the
ultimate execution of the award. We therefore find no reason to vary
the interim order passed by the Division Bench.
10. City
Civil Court is therefore, directed to dispose of Misc. Civil
Application No. 567 of 2006 as expeditiously as possible at any rate,
on or before 31st December, 2008.
11. With
the aforesaid direction, petition stands disposed of.
12. Consequently,
Civil Application for vacating order dated 10.3.2008 also stands
disposed of.
(K.S.
Radhakrishnan, C.J.)
(Akil
Kureshi, J.)
*/Mohandas
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