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Union Of India And Another v. Monoranjan Mondal And Others

Calcutta High Court

Dec 6, 1999

Judgment

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Judgment Summary — V.K. Gupta, J. (with concurrence of Prodyot Kumar Sen, J.)

Factual and Procedural Background

This appeal was filed by the Union of India and the General Manager, Eastern Railway against the judgment dated 25 September 1998 of the learned single Judge in AP No. 161 of 1998 (reported AIR 1999 Cal 117). The single Judge had allowed applications under Sections 10 and 11 of the Arbitration and Conciliation Act, 1996 and directed that the matter be referred to the Chief Justice of the High Court for appointment of five several sole arbitrators in terms of Section 11 of the 1996 Act, in respect of contract agreements relating to the jurisdictions of five courts (Howrah, Burdwan, Bolpur, Suri and the High Court of Calcutta). The respondents in the present appeal raised an objection to the maintainability of the appeal, relying on Section 37 of the 1996 Act; the appellants relied on Letters Patent jurisdiction and alternatively urged that the Arbitration Act, 1940 applied to these disputes because they arose before the 1996 Act came into force.

Legal Issues Presented

Whether the appeal from the single Judge's order under Section 11 of the Arbitration and Conciliation Act, 1996 is maintainable in view of the restrictive language of Section 37 of the 1996 Act.
Whether an appeal which would otherwise be barred by Section 37 of the 1996 Act could be entertained under the Letters Patent jurisdiction (clause relied upon by appellants).
Whether the Arbitration Act, 1940 applies to these disputes under Section 85(2)(a) of the 1996 Act because the arbitral proceedings had commenced before the 1996 Act came into force (26 January 1996), and if so, whether the appeal is maintainable under Section 39 of the 1940 Act.
If the applicability of the 1940 Act arises, the subsidiary question: on what date did arbitral proceedings "commence" for the purposes of determining whether the 1940 Act or the 1996 Act governs (including the relevance of Section 21 of the 1996 Act and judicial interpretation under Sarbeswar Rout).

Arguments of the Parties

Respondents' Arguments

The respondents contended that the appeal is not maintainable under Section 37 of the Arbitration and Conciliation Act, 1996, because Section 37 expressly limits appeals to the orders specified in that section and "from no others," and an order passed under Section 11 is not one of the appealable orders enumerated in Section 37.

Appellants' Arguments

The appellants argued that even if Section 37 were taken to bar the appeal, an appeal could be maintained under clause 15 of the Letters Patent (i.e., the Letters Patent jurisdiction to appeal from one Judge to a Division Bench).
Alternatively, the appellants relied on Section 85 of the 1996 Act and submitted that the disputes had arisen prior to the 1996 Act coming into force; therefore, the Arbitration Act, 1940 should apply to these proceedings and the order would be appealable under Section 39 of the 1940 Act.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Union Of India v. Mohindra Supply Co., AIR 1962 SC 256	Held that the right to appeal under Letters Patent is restricted by statutory provisions (thereby limiting Letters Patent appeals where statute precludes them); examined interaction of Letters Patent clause with Section 39 of the Arbitration Act, 1940.	The court relied on this Four-Judge Bench decision to support the proposition that Letters Patent jurisdiction cannot be used to bypass a statutory bar on appeals (applied analogously to Section 37 of the 1996 Act).
State Of West Bengal v. M/s Gourangalal Chatterjee, (1993) 3 SCC 1	Discussed Section 39 of the 1940 Act and noted the restriction on second appeals; referred to Mohindra Supply Co. in this context.	The court cited this decision as recognizing the conclusion in Mohindra that the statute (Section 39) restricts appeals and that Letters Patent jurisdiction cannot override such restriction; this bolstered the court's view about Section 37 of the 1996 Act.
Shetty's Constructions Co. Pvt. Ltd. v. Konkan Railway Construction, (1998) 5 SCC 599 : AIR 1999 SC 1535	Interpreted Section 85(2)(a) of the 1996 Act together with Section 21: where arbitration proceedings commenced prior to 26-1-1996, the old Act (1940) governs; emphasized determining the date when requests for reference to arbitration were received.	The court noted this decision but observed that Shetty's Constructions did not address the precise question peculiar to the present facts (i.e., the 1940 Act's notion of commencement where arbitrators had to indicate willingness). The decision was considered but the court relied on Sarbeswar Rout for the applicable principle here.
The Secretary to the Govt. of Orissa v. Sarbeswar Rout, AIR 1989 SC 2259	Held that, under the Arbitration Act, 1940, arbitral proceedings commence when the arbitrator indicates willingness to act (and analogously when a proper claim is filed in court proceedings the proceeding is deemed to commence on filing).	The court applied this ratio directly to determine that, since no arbitrator had indicated willingness to act (i.e., proceedings had not commenced under the 1940 Act) before 26 January 1996, the 1940 Act did not apply and the 1996 Act governed these proceedings.
Executive Engineer (Irrigation) v. Abhaduta Jena, (1988) 1 SCC 418 : AIR 1988 SC 1520	Earlier authority on aspects of arbitration commencement (mentioned in Sarbeswar Rout).	The court noted that these earlier cases did not assist the present appeal on the facts; they were referenced in the Sarbeswar Rout discussion but were not taken as determinative here.
Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd., (1989) 1 SCC 532 : AIR 1989 SC 973	Another authority dealing with arbitration matters referenced in Sarbeswar Rout.	The court observed these authorities were not helpful to the issues before it and therefore did not rely on them for its decision.

Court's Reasoning and Analysis

The court's analysis proceeded in a sequence driven by statutory interpretation and precedential application:

The court examined the language of Section 37 of the Arbitration and Conciliation Act, 1996. It noted that subsection (1) lists two kinds of appealable orders (granting/refusing measures under Section 9; setting aside/refusing to set aside awards under Section 34) and includes the phrase "and from no others," which the court interpreted as a clear legislative intent to confine appeals strictly to the orders enumerated in Section 37.
Confronted with the appellants' contention that Letters Patent jurisdiction (clause 15 relied on by appellants) permitted the appeal, the court applied the principle from Union of India v. Mohindra Supply Co. (AIR 1962 SC 256). Mohindra established that a statutory bar on appeals (there, Section 39 of the 1940 Act) restricts the exercise of appellate power under the Letters Patent; Letters Patent cannot override a statutory prohibition on appeals. The court treated Mohindra as directly analogous and binding on the question whether Letters Patent could be used to escape the bar in Section 37 of the 1996 Act.
The appellants next argued that Section 85(2)(a) of the 1996 Act saves the Arbitration Act, 1940 for arbitral proceedings that commenced before the 1996 Act came into force, so the 1940 Act (and its Section 39) would apply. The court therefore considered whether, as a factual and legal matter, the arbitral proceedings had commenced prior to 26 January 1996.
The court observed that Section 21 of the 1996 Act defines commencement for proceedings under the 1996 Act, but it held that Section 21 is not the relevant provision to determine commencement for proceedings under the 1940 Act. Instead, the court followed the Supreme Court's decision in The Secretary to the Govt. of Orissa v. Sarbeswar Rout (AIR 1989 SC 2259) for the test applicable under the 1940 Act: arbitral proceedings commence when the arbitrator indicates his willingness to act (and analogous principles concerning the date of institution of proceedings).
Applying Sarbeswar Rout to the facts, the court found that at no time prior to 26 January 1996 had arbitrators been appointed who indicated their willingness to act or otherwise entered upon the reference. Therefore the arbitral proceedings had not commenced for the purposes of Section 85(2)(a) before the 1996 Act came into force.
Because the 1940 Act did not apply (the proceedings did not commence before 26 January 1996), the 1996 Act governed these proceedings. Section 37 of the 1996 Act therefore constituted a clear statutory bar to the appeal against the Section 11 order. Applying the Mohindra principle, Letters Patent jurisdiction could not circumvent this statutory bar.
On this basis the court concluded that the appeal was not maintainable and dismissed it. The court also recorded concurrence by Prodyot Kumar Sen, J., and directed procedural compliance regarding copies of the judgment.

Holding and Implications

Holding: Appeal dismissed. The court held that the appeal was not maintainable under Section 37 of the Arbitration and Conciliation Act, 1996, and that Letters Patent jurisdiction could not be invoked to evade the statutory bar. It further held that the Arbitration Act, 1940 did not apply because arbitral proceedings had not commenced before 26 January 1996 (per the test in Sarbeswar Rout).

Implications:

The direct effect is that the appeal against the single Judge's order (directing reference under Section 11 for appointment of five several sole arbitrators) was dismissed without any order as to costs.
The court applied existing precedents (notably Mohindra Supply Co. and Sarbeswar Rout) to interpret the interplay between statutory appeal bars and Letters Patent jurisdiction, and to determine the proper test for when arbitral proceedings are to be treated as having commenced for the purpose of transitional savings under Section 85(2)(a) of the 1996 Act.
The opinion does not announce or claim to establish a new broad precedent beyond application of the cited authorities to the facts: it applies established principles to conclude that the 1996 Act governs these proceedings and that Section 37 bars the appeal.

Procedural note recorded in the opinion: a xerox copy of the judgment was to be given to the parties upon their undertaking to apply for and obtain a certified copy on usual undertakings.

Show all summary ...

V.K Gupta, J.:— This appeal has been filed by the Union of India and General Manager, Eastern Railway against the judgment dated 25th September, 1998 passed by the learned single Judge of this Court in AP No. 161 of 1998 (reported in AIR 1999 Cal 117) whereby, applications filed under Ss. 10 and 11 of the Arbitration and Conciliation Act 1996 (1996 Act for short) have been allowed and the Learned Single Judge has directed that the matter be referred to the Chief Justice of the High Court for appointing 5 several — sole Arbitrators in terms of S. 11 of 1996 Act in respect of the contract Agreements relating to the jurisdiction of 5 Courts at Howrah, Burdwan, Bolpur, Suri and the High Court of Calcutta.

2. At the very outset the respondents in the appeal have raised the basic question of maintainability of the appeal, relying upon S. 37 of 1996 Act. The contention of the respondents is that in view of the clear language employed in S. 37 of 1996 Act, no appeal lies against an order passed under S. 11 of the Act since S. 37 is restrictive with respect to the filing of appeals and is specifically confined to appeals only in respect of such specific types of orders as are mentioned therein. Analogy is drawn to S. 39 of 1940 Act.

3. In order to understand and appreciate the basic objection regarding the maintainability of the appeal, we have to look to S. 37 of the Act which reads thus:

“37. Appealable orders

(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—

(a) granting or refusing to grant any measure under S. 9.

(b) setting aside or refusing to set aside an arbitral award under S. 34.

(2) An appeal shall also lie to a Court from order of the arbitral tribunal.

(a) accepting the plea referred to in sub-section (2) or sub-section (3) of S. 16; or

(b) granting or refusing to grant as interim measure under S. 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

4. A bare look at S. 37 clearly suggests that only two kinds of orders passed by a Court are appealable to a Court authorised by law to hear appeals and those two orders are mentioned in Clauses (a) & (b) of sub-sec. (1) of S. 37, viz. granting or refusing to grant any measure under S. 9 of the Act or setting aside or refusing to set aside an arbitral award under S. 34 of the Act. In the very opening part of S. 37, namely in sub-section (1) the expression “and from no others” clearly suggests the legislative intent that no appeal other than those relating to the orders mentioned in S. 37 shall lie before an Appellate Court.

5. When confronted with this situation the Learned Advocate for the appellant submitted that even if the appeal is not maintainable under S. 37 of 1996 Act, it lies under clause 15 of the Letters Patent.

6. A four Judge Bench of the Supreme Court in the case of Union Of India v. Mohindra Supply Co. reported in, AIR 1962 SC 256 while dealing with similar question regarding the maintainability of appeal under S. 39 of Arbitration Act, 1940 vis-a-vis Letters Patent held as under:—

“The problem to which attention must then be directed is whether the right to appeal under the Letters Patent is at all restricted by S. 39, sub-secs. (1) and (2). Clause 10 of the Letters Patent of the High Court, in so far as it is material, provides:

“And we do further ordain that an appeal shall lie to the said High Court…….from the judgment (not being a judgment passed in exercise of appellate jurisdiction in respect of a decree or order made in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High Court and not being an order made in the exercise of revisional jurisdiction…….) of one Judge of the High Court.”

By this clause, a right to appeal except in the cases specified, from one Judge of the High Court to a Division Bench is expressly granted. But the Letters patent are declared by Cl. 37 subject to the legislative power of the Governor-General in Council and also of the Governor-in-Council under the Government of India Act, 1915, and may in all respects be amended or altered in exercise of legislative authority. Under S. 39(1), an appeal lies from the orders specified in that sub-section and from no others. The legislature has plainly expressed itself that the right of appeal against orders passed under the Arbitration Act may be exercised only in respect of certain orders. The right to appeal against other orders is expressly taken away. If by the express provision contained in S. 39(1), a right to appeal from a judgment which may otherwise be available under the Letters Patent is restricted, there is no ground for holding that cl. (2) does not similarly restrict the exercise of appellate power granted by the Letters Patent. If for reasons aforementioned the expression “second appeal” includes an appeal under the Letters Patent, it would be impossible to hold that notwithstanding the express prohibition, an appeal under the Letters Patent from an order passed in appeal under sub-sec. (1) is competent.”

7. It may be worthwhile to mention that clause 37 of Letters Patent of Punjab is in pari materia to Clause 44 of our Letters Patent. Mohindra Supply Co. (AIR 1962 SC 256) came to be noticed in a later judgment of the Supreme Court in the case of State Of West Bengal v. M/S Gourangalal Chatterjee. reported in (1993) 3 SCC 1 wherein their Lordships held as under:—

“Section 39 of the Arbitration Act came up for consideration in Union Of India v. Mohindra Supply Co. (AIR 1962 SC 256). The Court after going into detail and examining various authorities given by different High Courts held that no second appeal lay under S. 39(2) against a decision given by a learned single Judge under S. 39(1). In respect of the jurisdiction under Letters Patent the Court observed that since Arbitration Act was a consolidating and amending Act relating to arbitration it must be construed without any assumption that it was not intended to alter the law relating to appeals. The Court held that in view of bar created by sub-section (2) of S. 39 debarring any second appeal from an order passed in appeal under sub-section (1) the ‘conclusion was inevitable that it was so done with a view to restrict the right of appeal within strict limits defined by S. 39’. Therefore, so far the second part is concerned, namely, the maintainability of the appeal under Letters Patent it stands concluded by this decision.”

8. Learned Advocate appearing for the appellants relied upon S. 85 of 1996 Act and submitted that since the disputes in this case had arisen prior to the coming into force of 1996 Act, 1996 Act has no applicability and that the provisions of Arbitration Act, 1940 shall have application and therefore the order passed by the Learned single Judge is appealable. Section 85 of 1996 Act reads thus:

“85. Repeal and savings

(1) The Arbitration (Protocol and Convention) Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961 are hereby repealed.

(2) Notwithstanding such repeal

(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.”

9. Since applicability of Arbitration Act 1940, despite its repeal by S. 85 of 1996 Act has been made conditional with respect to such arbitral proceedings which had commenced before 1996 Act came into force, we have to look to S. 21 of 1996 Act to find out about the stage and the date as to when in respect of a particular dispute the arbitral proceedings shall be considered to have commenced. Section 21 reads thus:—

“21. Commencement of arbitral proceedings unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”

10. Learned Advocate appearing for the appellants referred to the decision of the Supreme Court in the case of Shetty's Constructions Co. Pvt. Ltd. v. Konkan Railway Construction reported in (1998) 5 SCC 599 : (AIR 1999 SC 1535) wherein their Lordships held as under (at p. 1536 of AIR):

“A mere look at sub-section (2)(a) of S. 85 shows that despite the repeal of Arbitration Act, 1940, the provisions of the said enactment shall be applicable in relation to arbitration proceedings which have commenced prior to the coming into force of the new Act. The new Act came into force on 26-1-1996. The question therefore, arises whether on that date the arbitration proceedings in the present four suits had commenced or not. For resolving this controversy we may turn to S. 21 of the new Act which lays down that unless otherwise agreed to between the parties, the arbitration suit in respect of arbitration dispute commenced on the date on which the request for referring the dispute for arbitration is received by the respondents. Therefore, it must be found out whether the requests by the petitioner for referring the disputes for arbitration were moved for consideration of the respondents on and after 26-1-1996 or prior thereto. If such requests were made prior to that date, then on a conjoint reading of S. 21 and S. 85(2)(a) of the new Act, it must be held that these proceedings will be governed by the old Act. As seen from the aforenoted factual matrix, is at once becomes obvious that the demand for referring the disputes for arbitration was made by the petitioners in all these cases months before 26-1-1996, in March and April 1995. These suits were obviously filed prior to 26-1-1996 and hence they had to be decided under the old Act of 1940. This preliminary objection, therefore, is answered by holding that these four suits will be governed by the Arbitration Act, 1940 and that how the High Court in the impugned judgments has impliedly treated them.”

11. In order to properly understand the true import of the argument raised by the learned Advocate for the appellant about the non-applicability of 1996 Act and the application of Arbitration Act 1940, we have to actually refer to the judgment of the Supreme Court in the case of The Secretary to the Govt. of Orissa v. Sarbeswar Rout reported in AIR 1989 SC 2259 wherein their Lordships while referring to the commencement of arbitral proceedings in terms of Arbitration Act 1940 held as under:

“So far an action in a Court of law is concerned, it must be held that it commences on the filing of a proper claim in accordance with the prescribed procedure before the authority empowered to receive the same. If a plaint, drawn up in accordance with the prescribed law, is filed before a Civil Court, the suit must be deemed to have been instituted on that date, and not on a later date when the Court takes up the plaint and applies its mind. Ordinarily the plaint is examined by stamp reporter of the Court who scrutinises whether proper court-fee has been paid or not, and then makes a report. The Court generally takes up the plaint only later. Similar is the position with respect to other applications and memoranda of appeals. It must, therefore, be held that the proceeding is instituted when the claimant files his claim. We do not see any reason to apply a different approach in the case of an arbitration proceedings. As soon as the arbitrator indicates his willingness to act as such, the proceeding must be held to have commenced. This aspect did not arise for decision in the cases Executive Engineer (Irrigation) v. Abhaduta Jena, (1988) 1 SCC 418 : AIR 1988 SC 1520 or Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd., (1989) 1 SCC 532 : AIR 1989 SC 973 and no assistance from them can be taken in the present appeal. The learned counsel for the appellant is, therefore, right in saying that the arbitrator in the present case, by directing on 20-4-1982 the parties to file their statements of claim, clearly indicated that he accepted the offer to arbitrate. The proceedings must, therefore, be deemed to have been instituted not later than this date. We accordingly hold that the award so far it allowed interest for the period after 20-4-1982, is without jurisdiction and must be excluded. The appeal is accordingly allowed in part. The parties shall bear their own costs. Appeal partly allowed.”

12. In order therefore to find out as to whether arbitral proceedings as indicated in S. 85 of 1996 Act had commenced prior to the coming into force of 1996 Act we have to find out whether prior to 26th January 1996 when 1996 Act had come into force, in terms of the ratio laid down in the judgment of the Supreme Court in Sarbeswar Rout (AIR 1989 SC 2259) (supra) the Arbitrators had entered upon the reference by indicating their willingness to act as such. Applicability of S. 21 of 1996 Act is not relevant in our case for determining the commencement of arbitral proceedings because S. 21 of 1996 Act relates to and deals with the commencement of arbitral proceedings under 1996 Act. The definition of “commencement of arbitral proceedings” as occurring in S. 21 of 1996 Act will have a bearing only to a point of time after 1996 Act had come into force and will have no relation to the commencement of arbitral proceedings at a point of time before 1996 Act had come into force. We are saying so because S. 21 does not deal with the scope of commencement of arbitral proceedings under Arbitration Act 1940 on the other hand when S. 85 of 1996 Act talks about the commencement of arbitral proceedings before the coming into force of 1996 Act, it clearly means that the arbitral proceedings should have commenced before the coming into force of 1996 Act, in the manner such commencement is understood under the Arbitration Act, 1940. The expression used in S. 85, viz. “which commenced before this Act came into force” clearly and conclusively suggests that the principles governing the scope of commencement of arbitral proceedings as were applicable under 1940 Act were to be applied for understanding as to whether 1996 Act would have repealed 1940 Act with respect to such proceedings or not. We are therefore clearly of the opinion that S. 21 of 1996 Act will have no manner of application to decide and determine whether the arbitral proceedings had commenced before the coming into force of 1996 Act or not. We are saying so for a very logical and valid reason. If arbitral proceedings as contemplated under the Arbitration Act, 1940 had commenced before the coming into force of 1996 Act, in terms of S. 85 thereof, this Act will have no application and the provisions of the Arbitration Act 1940 will have applicability. But if the proceedings in terms of and as contemplated under the Arbitration Act 1940 had not commenced before the coming into force of 1996 Act, undoubtedly 1996 Act would apply. With utmost respect therefore we have no hesitation in saying that their Lordships of the Supreme Court in the Case of Shetty's Construction (P) Ltd. (1998) 5 SCC 599 : (AIR 1999 SC 1535), while noticing S. 21 of 1996 Act had no occasion to deal with this particular aspect of the matter, peculiar to the facts of our case because of the claim of the appellants that the provisions of Arbitration Act 1940 are attracted in this case, on the other hand the judgment by a larger bench of three Hon'ble Judges in the case of Sarbeswar Rout (supra) is apposite to this Case and the ratio as laid down in para 8 of the judgment regarding the stage when arbitral proceedings are deemed to commence under the Arbitration Act 1940 is fully applicable to the facts of our case.

13. In the aforesaid legal backdrop therefore if we examine the factual matrix of this case we find that at no point of time prior to the coming into force of 1996 Act, in the light of law laid down by Sarbeswar Rout (AIR 1989 SC 2259) (supra) the arbitral proceedings ever commenced in the sense that arbitrators ever appointed had ever indicated their willingness to act as such or had ever entered upon any reference. In that view of the matter therefore, we are clearly of the view that arbitral proceedings not having commenced under the Arbitration Act 1940 before 26th January, 1996 in any manner whatsoever, the provisions of the Arbitration Act 1940 cannot be held attracted in this case and therefore the present appeal cannot be held to be one under S. 39 of the Arbitration Act, 1940 also. In other words therefore, when we say that what we mean is that the 1996 Act is applicable in our case and therefore, S. 37 of that Act being a clear bar, the appeal is held not maintainable. The same accordingly is dismissed but without any order as to costs.

Prodyot Kumar Sen, J.:— 14. I agree.

15. Let a xerox copy of this judgment, duly counter-signed by the Assistant Registrar of this Court be given to the parties upon their undertaking to apply for and obtain certified copy of the same upon usual undertakings.

Appeal dismissed.