1. This writ petition under Article 227 of the Constitution of India is by the applicant before the “Court” within the meaning of this expression as it occurs under Section 2(e) of the Arbitration & Conciliation Act, 1996 (for short ‘the Act’) who has filed an application under Section 34 of the Act before the Court for setting aside an Award that has been passed by the Arbitrator before whom the parties had their dispute referred for adjudication.
2. Obviously the Award being in favour of the other party and the writ petitioner who has to satisfy the Award being unhappy with the Award had invoked the jurisdiction of the Court under Section 34 of the Act for setting aside the Award.
3. It was during the pendency of such proceedings under Section 34 of the Act, the petitioner-applicant before the Court had come up with an application filed under Order XIV, Rules 1 & 3 of the Code of Civil Procedure (for short ‘CPC’) praying for the Court to frame issues in the matter before the Court.
4. Such an application having been dismissed in terms of the order dated 12-9-2006 (copy at Annexure-E), the petitioner being aggrieved by this order, has approached this Court seeking for setting aside this order and has prayed for allowing the application.
5. Petitioner has, inter alia, urged that in passing the impugned order, the Court below has failed to appreciate or understand the true scope of Rule 4(b) of the Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 (for short ‘the Rules’); that the said rule provides for application of the provisions of the Code of Civil Procedure, 1908 to the proceedings before the Court in respect of an application filed under Section 34 of the Act as in the instant case; that the provisions of Order XTV, Rules 1 & 3 of CPC is a very salient aspect of the procedure governing the civil Courts; that it is a tool which is an aid to the Court to determine the dispute in a satisfactory manner, that an application of this nature should not have been rejected. Reliance is placed on the ratio of the decision of the Supreme Court in the case of ‘Iti Ltd./ v. Siemens Public Communications Network Ltd..’, reported in AIR 2002 SC 2308 : (2002 AIR-Kant HCR 1738) and the decision of the Supreme Court in Makhan Lal Bangal v. Manas Bhunia, reported in AIR 2001 SC 490.
6. It is also urged that having regard to the provisions of Section 34 of the Act it may become necessary for the party seeking to set aside an arbitral Award to place necessary proof before the Court and if issues are framed in this regard, it will enable the parties to achieve this object in an effective manner etc.
7. Notice having been issued to the respondents, they have entered appearance through counsel Sri. Shashikiran Shetty. Respondents have also filed elaborate statement of objections along with several annexures. Respondents have supported the order and have prayed for dismissal of the writ petition.
8. I have heard Sri. Naganand, learned senior counsel appearing for the petitioner and Sri Shashikiran Shetty, learned counsel for the respondents.
9. Appearing on behalf of the petitioner, Sri. Naganand, learned senior counsel would by drawing attention to the provisions of Section 34 of the Act and rules framed under Section 82 of the Act by the High Court, particularly, with reference to rules 3 & 4 of the Rules, submits that the rule provides for treating an application under Section 34 of the Act as akin to a suit, applicant to be treated as plaintiff and the parties to the award other than the applicant to be treated as defendants and proceedings to go on for all purposes like a suit and all provisions of the Code of Civil Procedure shall apply to such proceedings so far as they could be made applicable and in this regard when the petitioner-applicant had expressly drawn the attention of the Court for framing the issues that arose for consideration or examination by the Court in the context of the objections filed by the respondents (defendants in the application under Section 34 of the Act) it was very necessary for the Court to have framed the issues and application should not have been simply brushed aside on the premise that it is not an express requirement under the Act or the Rules.
10. It is urged that when once all provisions of the Code of Civil Procedure are made applicable and by employing the word “shall”, it was not proper for the Court to ignore a salient procedural provision like framing of the issues under Order XTV of the CPC; that the Court could not have overlooked this provision to reject the application; that the order is virtually in the teeth of the provisions of Rule 4(b) of the Rules and therefore the order is not sustainable and should be set aside and the application allowed.
11. It is also submitted that the phrase “so far as they could be made applicable” is only an exception to the general requirement of applying all provisions of the CPC to the proceedings under Section 34 of the Act, but the learned Judge having understood that to be the rule and declining to frame the issues as though not making a provision being applicable to be the general rule is a most erroneous understanding of the provision of the rule; that irrespective of the order on merits, the view expressed by the learned Judge of the trial Court to say that the rule cannot be understood as one compelling the Court to apply the provisions of Order XIV of the CPC to a given situation is a very incorrect understanding of the rule; that the order requires correctness by elucidating the scope of the rules and laying down the law in this regard.
12. Learned counsel for the petitioner would place reliance on the decision of the Supreme Court in the case of Oil and Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd., reported in AIR 2003 SC 2629, particularly, the observations as contained in paragraphs 21 & 22 and would submit that having regard to the nature of proceedings under Section 34 of the Act and scope of examination in the dispute that may arise in the context of Section 34 of the Act it is a provision akin to the suit and it will be necessary to frame issues for proper determination.
13. Reliance is also placed on the Division Bench decision of the Andhra Pradesh High Court in the case of ‘B. Rama Swamy… v. B. Ranga Swamy….’ reported in AIR 2004 AP 280, particularly paragraphs 8, 9 and 10 of this judgment to submit that the law laid down by the Supreme Court in the case of ITI Limited's case (2002 AIR Kant — HCR 1738) (supra) has been followed by the Division Bench, that applying the ratio, the Division Bench of the Andhra Pradesh took the view that the provisions of Order IX, Rule 13 of CPC can be invoked seeking for restoration of an application which had been preferred under Section 34 of the Act and which had been dismissed for default; that the ruling would clearly demonstrate that all provisions of the CPC are applicable and the learned Judge of the trial Court could not have excluded the provisions of Order XIV of the CPC from the applicability as expressly sought for by the petitioner and therefore also the impugned order is bad in law etc.
14. Appearing on behalf of the respondents, Sri Shashikiran Shetty, learned counsel would however submit that the order impugned is very correct; that there was absolutely no scope for entertaining the application for the purpose of framing issues; that the question of framing issues in a matter of the nature of examination of the application under Section 34 of the Act does not arise at all; that it is not an adversarial proceeding in the sense of parties required to go to trial to prove their respective cases etc. that it is akin to a proceeding in the nature of an appeal; that the application is only for setting aside the Award already passed by the Arbitrator before whom the parties would have let in their evidence and only within the scope of the enumerated grounds under Section 34 of the Act; that having regard to the nature of the grounds urged in the application for setting aside, it was obvious that the petitioner was seeking to set aside the Award on a ground which is referable to sub-section 2(b) as one being opposed to public policy; that for examination of a question of this nature which is essentially a legal question there is no need for the parties to lead any evidence and while non-framing an issue will not in any way prejudice or affect the case of the applicant; that it was not even a requirement of law, particularly, having regard to the scope of the application under Section 34 of the Act and therefore submits that the order passed by the trial Court does not call for any interference and writ petition should be dismissed.
15. In support of the submission, for examination of an application calling in aid the provisions of Section 34(2)(b) of the Act, the entire provisions of the CPC are not made applicable as a mandatory provision, reliance is placed on the single Bench decision of the Punjab & Haryana High Court in the case of ‘Krishanlal Kacker v. Ram Chander’ reported in 2005 (139) PLR 269.
16. In that ruling, the High Court declined to interfere with an order passed by the Court while allowing the application under Section 34 of the Act for setting aside the Award, brushing aside the objections raised by the petitioner who had questions that order of the Court as an order which is vitiated for not framing the issues based on the objections that had been raised by the petitioner as objections filed to the application under Section 34 of the Act before the Court. The Court did not accept the contention that the provisions of Order XIV, Rules 1 & 3 of the CPC are mandatory and not following this provision and applying them and not framing issues vitiated the order was the submission which did not find favour with the Court. It is submitted that the view taken is that the provisions are not mandatory and therefore not framing issues will not in any way affect the order.
17. Reliance is also placed on the decision of the Supreme Court in the case of Surya Dev Rai v. Ram Chander Rai, reported in AIR 2003 SC 3044 to submit that the scope of examination in a petition under Article 227 of the Constitution of India is very limited; that unless a patent error or illegality is made out in respect of the order sought to be examined in a petition under Article 227 of the Constitution of India, the Court will not interfere in the exercise of this jurisdiction and the view taken by the ‘Court’ being not a view that can be characterized as one suffering from any patent illegality or error apparent on the face of the record, no interference is warranted in the present case in respect of the impugned order.
18. Reliance is also placed on the decision of the Division Bench of this Court in the case of Rail India Technical and Economic Services Ltd. v. Ravi Constructions, reported in 2002 (1) KLJ 419 : (2002 AIR Kant — HCR 272).
19. Placing reliance on the same, Mr. Shetty would submit that the scope of an application under Section 34 is not either for letting in evidence to examine the correctness of the award on its merits or even to re-appreciate the evidence as a Court of appeal, but only to set aside the award on the applicant making good any one of the enumerated grounds in Section 34 of the Act. For such purpose, there is no requirement to frame the issues and therefore, the impugned order is one which does not suffer from any error and does not call for interference.
20. I have bestowed my anxious consideration to the pleadings and the submission at the bar.
21. The Arbitration and Conciliation Act, 1996, which is successor to the Arbitration Act, 1940, and was enacted to bring the law relating to Arbitration in this country in conformity with the United Nations Commission on International Trade Law (‘UNCITRAL’ in short) resolution, to conform to the Uncitral Model Law on International Commercial Arbitration as evolved in 1985; is an alternative mode of dispute resolution. It is a dispute resolution mode supplementing the normal mode of dispute resolution before the Courts in the country.
22. Arbitration proceedings are essentially a proceeding which parties have agreed to have recourse to conciliation when normally aggrieved for, by a person who can examine their dispute and resolve the same. An Act also provides for appointment of an Arbitrator, if the parties by themselves seek for conciliation under the Act etc.
23. One of the main objects of this Act is to not only to reduce the length of litigation which otherwise may be prolonged. If the matters are fought before the Court applying all technicalities and procedural laws but also to provide a cheaper mode of remedy to the parties etc. The proceeding before the Arbitrator is comparatively an informal proceedings, in comparison with the proceedings before the Court.
24. Intervention by the Court is only when the award passed by the arbitrator is so apparently unacceptable to one of the parties and that non-acceptability being justified on the grounds enumerated under Section 34 of the Act, or otherwise, the award binds the parties and can be executed as though it is an award passed by the Civil Court. Provisions of S. 34 of the Act which reads as under:
34. Application for setting aside arbitral award.— (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application furnishes proof that—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this part; or
(b) the Court finds that—
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation.— Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
For getting over an award passed by such a Tribunal, which had been chosen by the parties and before whom the parties had participated. An examination of the provisions of the Act indicates that accepting the award, granting recognition in law to the award is the rule and to set aside the award in terms of Section 34 is the exception.
25. Section 34 of the Act provides specific grounds on which, an award can be sought for setting aside before a Court and it is only on these grounds and non other. The procedure to be followed by the Court in general, for the purposes of the provisions of the Act which has formulated by the High Court which is enabled under Section 82 of the Act or such purpose; which reads that the High Court may make rules consistent with this Act and as to all proceedings before the Court under this Act.
26. The rule making power is only to effectuate the provisions of the Act, by prescribing such a procedure, which can govern the proceedings. The rules provides the manner of the proceedings before the Court under the Act.
27. The relevant rules as framed by the Karnataka High Court in this context is known as “The High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001”, and particularly, Rule 4 of this Rules is as under:
“4. Contents of the application: Every application under Sections 14 and 34 of the Act shall be made in writing duly signed and verified in the manner prescribed by Order VI, Rules 14 and 15 of the Code of Civil Procedure, 1908. It shall be divided into paragraphs numbered consecutively and shall contain the names, description and places of residence of the parties. It shall contain a statement in concise form.
(i) of names and addresses of the persons likely to be affected by the application;
(ii) of the material facts constituting cause of action;
(iii) of facts showing that the Court to which the application is presented has jurisdiction; and
(iv) the relief asked for.
(b) Application under Section 14 or Section 34 shall be registered as an arbitration suit, the applicant being treated as the plaintiff and the parties to the award other than the applicant being treated as defendants and the proceedings thereafter shall be continued as in the case of a suit and all the provisions of the Civil Procedure Code, 1908, shall apply to such proceeding insofar as they could be made applicable.
(c) The Arbitrator/Arbitrators who made such award shall also be joined as respondent/respondents to the application; and along with the application under Section 34, a signed copy of the Award and the relevant material document referred to in the Application shall be filed. A certified copy of Arbitration Agreement together with relevant material documents referred to in the application under Section 14 shall be filed.
(d) to (f)…………………………………………”
For the purpose of the present discussion, we are concerned with the Rule 4(b) of the Rules. Reference can also be made to Rule 12 of these Rules, which reads as under:
“12. Applicability of the Civil Procedure Code, 1908; Subject to what is provided for in the Arbitration and Conciliation Act and these Rules, the provisions of the Code of Civil Procedure and Karnataka Civil Rules of Practice may be applied to the proceedings under the Act to the extent considered necessary or appropriated by the Court of Judicial Authority”.
28. It is because of the specific distinction made in Rule 4(b) of the Act, it is a provision which governs application filed under Section 14 or Section 34 of the Act and Rule 12, which is general in nature and which makes it applicable to the proceedings under the Act both the provisions of CPC as well as Karnataka Civil Rules of Practice, Sri Naganand learned counsel appearing for the petitioner urges that in so far as the application under Section 34 is concerned, the procedure to be followed is only akin to that of a suit and therefore framing of issues being a very essential part of such procedure nor, non-entertaining the application filed by the petitioner particularly in framing of issue amounts to an order in contravention of the provisions of the Rule 4(b) of the Rules. Submission is that the rule mandates the applicability of all the provisions of CPC unless it is excluded in respect of a proceeding for examination of an application under Section 34 of the Act.
29. While the rules as read in combination of Rules 4(b) and 12 of the Rules, does indicate that while Rule 12 provides for the procedure in general, Rule 4(b) contemplates the procedure for applications in particular under Section 14 and Section 34 of the Act. To this extent, there is no doubt, there is a distinction between the applicability of CPC to applications under Section 14 or Section 34 of the Act, and general applicability in respect of all other proceedings under the Act. But the applicability is also not expressly made in respect of all situations and all provisions. Even while it is mentioned that an application under Section 34 of the Act, shall be continued as if in the case of a suit and all provisions of CPC shall apply, care is taken to indicate such application is only in so far as it can be made applicable. Therefore, stress is laid on the phrase ‘in so far as they could be made applicable’. What provision would be made applicable are not necessarily depends upon the nature of the proceedings. Therefore, the expression ‘in so far as they could be made applicable’ shall take its colour from the nature of the proceedings and the scope of the proceedings. The proceedings is one for setting aside an arbitration award on an application filed under Section 34 of the Act. The nature of the proceedings is one common, where the Court examines as to whether the arbitral award suffers from one of the infirmities as indicated in clause A of sub-section (2) of Section 34 or in Sections 1 & 2, of clause (b) of sub-section (2) of Section 34.
30. The application is filed by the party I who is complaining that the award is bad for any one of these reasons:
31. It necessarily indicates that it is for the applicant Company, who invokes jurisdiction of the Court for the purpose of Section 34 of the Act to make good that ground and to seek the interference by the Court in respect of the award passed by the Arbitrator. Though the other parties of the award are also added as defendants, it is only for giving them an opportunity and there is nothing required to be done by them except perhaps to assist the Court. The ground urged by the applicant as to whether it is sustainable or not? As the Application under Section 34 of the Act, is not necessarily in the nature of an adverbial proceedings in the sense that there is a dispute between the two parties which is required to be resolved before the Court. Here it is only one of the parties to the award who is complaining that the award is bad for any one of the reasons. Whether, the other party joins the issue or not, there is a legal presumption in favour of the award being valid particularly as is evident in terms of the provisions of Sections 35 and 36 of the Act. Such an award is enforceable as a decree of a civil Court.
32. The burden is always on the applicant to make good the ground on which reliance is placed for setting aside the award. Even if the other party to the award arrayed as defendant in terms of the Karnataka Arbitration Rules does not join the issue or does not file objections, that burden on the Court is in no way reduce. It is for the ‘Court’ to be satisfied that the award is required to be set aside on the grounds urged in the manner contended by the applicant and in terms of the provisions of Section 34 of the Act.
33. In the very nature of the proceedings under Section 34 of the Act, it is always known that, it is only the applicant who has to make good the case before the Court and the burden is squarely on the applicant to prove the applicant's case to be within the scope of one of the enumerated grounds under Section 34 of the Act that Itself constitutes the issue before the Court and there is no question of the Court being bound to frame or determine issues like in a civil suit where the adversary joins the issue by disputing facts or averments on fact or law. While in a given case, if the Court does frame the issue, the order cannot be characterized as bad in law as even in terms of Rule 4, the applicability of provisions of CPC is not excluded in any manner indicated, if a particular provision is not invoked, it does not necessarily mean the order becomes bad for not applying such procedural provisions. It is not as though if the issues are not framed, the application under Section 34 of the Act cannot be decided satisfactorily by the Court. A requirement can be understood as a mandatory requirement only if non-adherence to the requirement vitiates the ultimate result or fails to achieve the object of the Act. Such is not the result, if issues are not framed as is done by the Court below. The phrase ‘in so far they can be made applicable’, therefore when examined in the light of the provisions of Section 34 of the Act, does not necessarily lead to the situation that a provision of the nature of Order 14 of IPC is a mandatory requirement to be applied as a provision of CPC to all situations in application under Section 34 of the Act. In fact, Section 34 application can be disposed of without framing any issues at all. If such is the scope of Rule 4 and the understanding of Rule 4, it cannot be said, the impugned order suffers from any error or illegality warranting interference. It is therefore, the order is not set aside or is modified as sought for.
The writ petition is dismissed.
Petition dismissed.