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Itc Ltd. v. George Joseph Fernandes And Another
Factual and Procedural Background
ITC Limited entered into agreements with George Joseph Fernandes for the hire of two trawlers, “Ave Maria I” and “Ave Maria II”. The agreements contained an arbitration clause. Disputes arose, leading ITC to terminate the agreements and file Civil Suit No. 736 of 1978 before the Calcutta High Court, seeking declarations of illegality and a monetary decree of Rs 39.64 lakhs.
Fernandes invoked Section 34 of the Arbitration Act, 1940 to stay the suit. The Calcutta High Court granted the stay; its decision was affirmed up to the Supreme Court in ITC Ltd. v. George Joseph Fernandes, (1989) 2 SCC 1, where the Supreme Court ordered that the disputes be referred to arbitration.
The parties appointed Justice A. C. Gupta (retired Supreme Court Judge) as arbitrator. He issued an award dated 25-2-1996, filed the original award in the Supreme Court, and notified the parties. ITC paid Fernandes Rs 6,67,385 (principal, one-month interest at 18%, and costs). Fernandes accepted “without prejudice” and signalled intent to challenge the award insofar as it denied further claims.
On 22-4-1996 Fernandes filed an application under Section 14(2) of the Arbitration Act, 1940 before the Principal Senior Civil Judge, Visakhapatnam, seeking a direction to have the award filed there. While that application—along with a delay-condonation plea—was pending, the arbitrator died and ITC obtained a stay from the Andhra Pradesh High Court in related review proceedings.
Fernandes then filed the present application (IA No. 2 of 2004) in the disposed Supreme Court appeal, requesting that the Supreme Court Registry transmit the arbitral award to the Visakhapatnam court. ITC opposed, citing limitation and pendency of parallel proceedings. The Supreme Court’s order under review resolves only the request for physical transmission of the award.
Legal Issues Presented
- Whether the Supreme Court Registry should be directed to transfer the arbitral award dated 25-2-1996 to the Court of the Principal Senior Civil Judge, Visakhapatnam.
- Whether such transfer should occur notwithstanding ITC’s contention that any objection to the award is time-barred under Article 119-B of the Limitation Act, 1963 read with Section 14(2) of the Arbitration Act, 1940.
Arguments of the Parties
Applicant (George Joseph Fernandes)
- The award must be physically before the Visakhapatnam court to enable adjudication of his Section 14(2) application challenging parts of the award.
- Because the arbitrator has died, only the Supreme Court can transmit the award; the Visakhapatnam court cannot compel such action.
Appellant/Opponent (ITC Limited)
- The application is “hopelessly barred by time” because no objections to the award were filed within 30 days after notice of filing in the Supreme Court, as required by Article 119-B and Section 14(2).
- Transferring the award might allow Fernandes to argue for a fresh 30-day limitation period starting from its receipt in Visakhapatnam, which should not be permitted.
- A similar application is already pending before the Visakhapatnam court; duplicative relief should be refused.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| ITC Ltd. v. George Joseph Fernandes, (1989) 2 SCC 1 | Supreme Court’s earlier direction that disputes under the agreements be resolved through arbitration. | Provided the foundation for the arbitration; explained why the arbitrator filed the award in the Supreme Court, making it appropriate for that Court to decide the request for transmission. |
Court's Reasoning and Analysis
The Supreme Court confined itself to the narrow question of physically transmitting the arbitral award. It noted that:
- The arbitrator likely filed the award in the Supreme Court because the arbitration was ordered by its 1989 judgment.
- The Visakhapatnam court lacks power to direct either the Supreme Court or the (now-deceased) arbitrator to move the award; therefore, the applicant’s practical remedy is an order from the Supreme Court.
- Most objections raised by ITC—particularly on limitation—concern the validity of the award, not the logistics of its transfer. Those issues are better left to the Visakhapatnam court once the award is before it.
- Accordingly, transmitting the award promotes efficient adjudication while preserving both parties’ rights to raise all substantive and procedural objections before the Visakhapatnam court.
Holding and Implications
Holding: The application is allowed to the limited extent that the Supreme Court Registry is directed to transmit the arbitral award dated 25-2-1996 to the Court of the Principal Senior Civil Judge, Visakhapatnam. Both parties may raise all objections—including limitation—before that court. No order as to costs.
Implications: The decision facilitates further proceedings on the award in the appropriate forum but does not resolve any substantive challenge to the award itself. No new legal precedent is set; the order addresses only the administrative transfer of the award.
Order
1. By this application the applicant has prayed that the Registry of this Court be directed to transfer the arbitral award dated 25-6-1996 made by the learned arbitrator late Justice A.C Gupta, filed in this Court to the Principal Senior Civil Judge at Vishakhapatnam, Andhra Pradesh.
2. The circumstances under which the application has been made are as under:
The applicant and the respondent entered into an agreement with regard to the hiring of the applicant's trawlers Ave Maria I and Ave Maria II. The agreement contains an arbitration clause. Certain disputes arose between the parties pertaining to the subject-matter of the agreement. The appellant (ITC Limited) terminated the agreement by notice and followed it up with a suit CS No. 736 of 1978 on the original side of the Calcutta High Court seeking a declaration that the agreements dated 21-3-1977 and 2-2-1978 were illegal and for a decree for the sum of Rs 39.64 lakhs.
3. On 24-4-1979 the applicant filed a petition under Section 34 of the Arbitration Act, 1940 praying for stay of the aforesaid suit in view of the arbitration clause contained in the agreement. The High Court allowed the petition and ordered stay of the suit. An appeal carried before the Division Bench of the Calcutta High Court failed. The applicant carried the matter to this Court by Civil Appeal No. 1795 of 1982. The said appeal was disposed of by a judgment dated 6-2-1989 ITC Ltd. v. George Joseph Fernandes (1989) 2 SCC 1. By this judgment this Court upheld the view of the courts below that the reliefs claimed in the suit other than the question of ab initio illegality of the contract would be arbitrable, since the parties had agreed to have the disputes arbitrated. This Court disposed of the appeal by the following observation:
“29. Mr C.S Vaidyanathan for the respondents states that the respondent shall have no objection to a retired Judge of the Supreme Court being appointed as arbitrator and the respondents shall not raise the question of limitation as indicated by Mr Shanti Bhushan, learned counsel for the appellant. We have no doubt that the arbitrator so appointed shall proceed in accordance with law to decide the questions including that of jurisdiction, if raised.
30. In the result, we find no merit in this appeal and hence it is dismissed leaving the parties to bear their own costs.”
4. The parties thereafter agreed upon the name of late Justice A.C Gupta, a retired Judge of this Court, as arbitrator. The arbitrator commenced proceedings and made his award on 25-2-1996. On 27-2-1996 the learned arbitrator gave notice of making the award to the advocate for the applicant forwarding a copy of the award. He also informed the applicant's advocate that the original award and other papers had been filed in this Court.
5. On 22-3-1996 the appellant forwarded to the applicant a sum of Rs 6,67,385 towards the amount payable under the award, one month's interest thereon at the rate of 18%, and the costs of reference. This amount was received by the applicant who acknowledged it by a letter dated 6-4-1996. By this letter, the applicant declared his intention to challenge the award insofar as it negatived his claim in excess of Rs 6,67,385 and stated that he had received the demand draft sent by the appellant “without prejudice to our right to challenge the award before the competent court of law”.
6. On 22-4-1996 the applicant filed an application under Section 14(2) of the Arbitration Act, 1940 before the Court of Principal Senior Civil Judge at Vishakhapatnam. In this application he prayed for a direction to the learned arbitrator to take back the award from this Court and to file it in the court at Vishakhapatnam. He also filed an application for condoning the delay of 25 days in filing the said application.
7. On 27-1-1998 the applicant filed IA No. 1 of 1998 in Civil Appeal No. 1795 of 1982 in this Court. The substantive prayer made in this IA was as under:
“(a) direct the Registry of this Hon'ble Court to transfer the arbitral award dated 25-2-1996 passed by Justice Shri A.C Gupta, learned arbitrator filed in this Hon'ble Court to the file of the Hon'ble Court of the Subordinate Judge at Vizag;”
8. On 23-4-1998 an office report was made by the Registry of this Court informing advocates of both the parties that the arbitrator had sent the award to this Court.
9. On 12-5-1998 the appellant filed its counter-affidavit in IA No. 1 of 1998 opposing it, inter alia, on the ground that a similar application was already pending before the Vishakhapatnam court.
10. On 13-5-1998 this application was heard and dismissed as withdrawn.
11. On 2-7-2002 the Principal Senior Judge, Vishakhapatnam disposed of the application for condonation of delay by condoning the delay upon payment of costs. The main application under Section 14(2) of the Arbitration Act, 1940 before the Principal Civil Judge, is still pending.
12. On 7-2-2003 the appellant filed Civil Review Petition No. 3214 of 2002 before the High Court of Andhra Pradesh which was admitted and further proceedings in the arbitration application were stayed.
13. Sometime during the year 2003 the learned arbitrator died.
14. On 28-1-2004 the present IA No. 2 of 2004 was taken out for directions as indicated hereinabove.
15. The application has been vehemently opposed by the appellant and we have heard learned counsel on both sides.
16. Although the learned counsel for the appellant raised a number of objections, it appears to us that most of the objections pertain to the validity of the award, which is really not in issue before us. As and when such objections are raised before the appropriate court, the appropriate court will deal with them. In the present application we are only concerned with physical transmission of the arbitral award to the court at Vishakhapatnam. This request has been made to this Court on account of the peculiar facts and circumstances of the case. The arbitration was suggested and directed by the order dated 6-2-1989 of this Court made in its judgment in ITC Ltd. (1989) 2 SCC 1 The award was accordingly made by the learned arbitrator. The arbitrator perhaps thought that the arbitration having been directed by this Court, it was appropriate that the award should be filed in this Court. The appellant has already paid the amount payable under the award to the applicant. It is the applicant who wants to challenge the award insofar as the award is restricted to the amount as indicated. He had filed an application under Section 14(2) of the Arbitration Act, 1940 before the court at Vishakhapatnam to issue a direction to the arbitrator to take back the award from the Registry of this Court and to file it before the court at Vishakhapatnam. Pending this application, the learned arbitrator passed away.
17. It is obvious that the court at Vishakhapatnam would not be in a position to give any direction to this Court, nor to the arbitrator. Hence, the attempt on the part of the applicant to see that the award is physically transmitted to the court at Vishakhapatnam.
18. The learned counsel for the appellant however contends that the appellant is entitled to object to the petition being entertained at this stage by any court as it is hopelessly barred by time. He contends that, upon receiving notice from this Court about the filing of the award, no objection was filed within 30 days as provided in Article 119-B read with Section 14(2) of the Arbitration Act, 1940 and thus the applicant has lost his opportunity to object to and challenge the said award. It is further urged that if this Court transmits the award to the Vishakhapatnam court, the applicant is likely to take the stand that the objections can be filed within a period of 30 days from the date on which the Vishakhapatnam court receives the award. According to the appellant this should not be permitted.
19. In our view, it is not necessary for us to decide even this contention. It would be appropriate if the award is transmitted to the court at Vishakhapatnam and the parties are left at liberty to raise all contentions, including the aforesaid contention before the said court.
20. In the result, the application is disposed of by the following order:
1. The Registry is directed to transmit the award filed by late Justice A.C Gupta, in the matter of arbitration between ITC Ltd. v. George Joseph Fernandes (1989) 2 SCC 1 under cover of its letter dated 27-2-1996 to the Court of Principal Senior Civil Judge at Vishakhapatnam for being dealt with in accordance with law.
2. Both the parties are at liberty to raise all their contentions before the said court. The transmission of the award to the said court shall be without prejudice to the contentions of the appellant that the application/objection for setting aside the award is barred by limitation as it was not filed before this Court within 30 days as provided in Article 119-B of the Limitation Act, 1963 read with Section 14(2) of the Arbitration Act, 1940. It shall also be without prejudice to the contentions of the applicant to the contrary.
21. The application is accordingly disposed of without any order as to costs.
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