Burn Standard Co. Ltd. v. Mc. Dermott International Inc. & Ors.

N.K Mitra, J.:—The petitioner Company filed an application under Ss. 5, 11, 12, 33 and 41 of the Arbitration Act in the Original Side of this Hon'ble Court being A.P.N 121 of 1996 praying inter alia, for the following reliefs:

“(A) Leave be given to revoke the authority of respondents 2, 3 and 4 to act as arbitrators in the Case No. 6394.BGD;

(B) The arbitrators being respondents 2, 3 and 4 be removed;

(C) Further arbitration proceedings before the respondents 2, 3 and 5 be suspended;

(D) Determination of the scope and effect of the agreement for arbitration dated 25th September, 1984 with its addendum dated 29th December, 1984 more particularly with reference to the SICA, Sick Industrial Companies (Special Provisions) Act, 1985 as amended and appropriate directions upon the respondents 2, 3, 4 and 5 with regard to the suspension of the proceedings in view of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 as amended by the Sick Industrial Companies (Special Provisions) (Amendment) Act, 1993;

(E) Stay of further proceedings in the arbitration;

(F) Injunction restraining the respondents from further proceedings with the arbitration;

(G) Ad-interim order in terms of the above prayers;

(H) Appropriate order and directions as to costs;

(I) Such further and other orders be made and directions be given as to this Hon'ble Court may deem fit and proper;”

2. Since the facts are not disputed, those are not stated, except that, in terms of the Technical Collaboration Agreement (hereinafter referred to as TCA) entered into by and between the petitioner company and the respondent No. 1 Company, which contained inter alia, an arbitration clause, an arbitration proceeding is pending for deciding the claim of the respondent no. 1 company as made against the petitioner company. In the meantime, on the application of the petitioner company, the Board for Industrial and Financial Reconstruction (hereinafter referred to as the BIFR) set up under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Act) declared the petitioner company as a sick industrial undertaking, and appointed a Special Director to the Board of the petitioner company, and further appointed the Instruction Reconstruction Bank of India (hereinafter referred to as the IRBI) as the operating agency to prepare a rehabilitation scheme and/or report which is still under process. Subsequent to the declaration of the petitioner company as a sick industrial undertaking, the petitioner company made an application before the Arbitrators, appointed under the Arbitration Clause of the TCA, for suspension of the said arbitration proceeding under s. 22(1) of the Act till the finalisation of the rehabilitation scheme by the BIFR so far as the petitioner company was concerned. As the arbitrators by a majority judgement dated 21st July, 1996 refused to suspend the arbitration proceeding under the said s. 22(1) holding inter alia, that the said section did not apply to the arbitration proceeding, the petitioner company prayed before this Hon'ble Court for suspension of the said arbitration proceeding invoking s. 22(1) of the Act. Hon'ble Justice Sujit Kumar Sinha by his judgement and/or order dated 10th September, 1996, referring to his earlier unreported judgement dated 6th August, 1996 in Matter No. 3787 of 1994 (Larsen & Toubro Ltd. v. Jessops and Company Ltd.) held inter alia, that the arbitration proceeding cannot be stayed or remain suspended under the said s. 22(1) and as such, rejected the petitioner's aforesaid application. The learned judge in his judgement had also referred to the other Single Bench decision of Basudev Panigrahi, J. in the case of Braithwaite and Co. Ltd. v. D.T.M Construction Pvt. Ltd. 1996 (1) CHN 181, wherein a contrary view was taken, holding inter alia, that the decision of Panigrahi, J. as referred to above, was of doubtful authority having regard to the express provisions of s. 22(1) of the Act. Against the said order of Sujit Kumar Sinha, J. a special leave petition was filed before the Hon'ble Supreme Court of India which was disposed of on 20th February, 1997 by the Apex Court of India holding inter alia, that since there were conflicting Single Bench decisions of this Hon'ble Court on the same issue, the matter should be decided by a Division Bench of this Hon'ble Court so that no uncertainty remains in the matter. After the said order of the Apex Court of India, the matter has came up before us for consideration in the light of the observation made by the Hon'ble Supreme Court.

3. Therefore, whether the proceeding before the arbitrators in the present case is hit by s. 22(1) of the Act is the central issue for consideration by us.

4. Section 22(1) of the Act reads as follows:

“22. Suspension of legal proceedings, contracts, etc.—(1) Where in respect of an industrial company, an enquiry under section 16 is pending or any scheme referred to under section 17 is under preparation of consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the Memorandum and Articles of Association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.”

The bracketed portions of the said section was not in the original section in s. 22(1), but it was inserted by the Sick Industrial Companies (Special Provisions) Amendment Act, 1993. From the wordings of s. 22(1) it would appear that in order to apply s. 22(1), the following conditions would be necessary namely, (a) the pendency of an enquiry under s. 16; (b) preparation of scheme under s. 17; (c) consideration of a scheme under s. 17; (d) implementation of sanctioned scheme under s. 17; (e) pendency of appeal under s. 25 of the Act.

5. Mr. R.N Chatterjee, learned counsel for the petitioner company has relied mainly upon the decision of Panigrahi, J. in support of his contentions and all sorts of proceedings would come within the purview of s. 22(1) of the Act and the word ‘suit’ as used in the said s. 22(1) would also include proceeding. According to him, the word ‘proceedings’ as mentioned in s. 22(1) of the Act should not be given a narrow meaning to include only legal proceedings though in the marginal note of s. 22, it is stated that only legal proceedings, contracts are to be suspended, and if the word ‘proceedings’ as mentioned in s. 22(1) of the Act is given such a narrow and restricted meaning to limit that only legal proceedings are to be suspended, such narrow meaning would run counter to the scheme of the Act itself, thereby frustrating the aim and object of the Act altogether. In support of his contention. Mr. Chatterjee also refers to the decision of the Supreme Court in the case of Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd., (1993) 2 SCC 144, which was also referred to by Panigrahi, J., in his aforesaid decision. The Supreme Court in paragraph 10 at page 157 of the said decision held inter alia, as follows:—

“It was next contended that the right conferred on the Financial Corporation by s. 29 of the 1951 Act is not a ‘legal proceeding’ but merely an action permitted by statute and, therefore, s. 22(1) will have no application as it only bars legal proceedings for the winding up of any industrial company or for execution, distress or the like against any of its properties or for the appointment of a Receiver in respect thereof. Now s. 22(1) uses the expression ‘proceedings’ and not ‘legal proceedings’ which expression is albeit used in the marginal note to the said provision. Mr. Rao contended that s. 22 must be read in the light of the marginal note and when so read it becomes obvious that only legal proceedings of the type mentioned in sub-s. (1) thereof are barred and not the exercise of a right such as the one conferred by s. 29 of the 1951 Act. In support of his contention that the marginal note can be used as an aid to interpretation he invited our attention to a seven-Judge Bench decision of this Court in Bengal Immunity Company Ltd. v. State of Bihar. In that case the marginal note to Art. 286 of the Constitution was referred as to the meaning and purpose of the Article. But at the same time the Court pointed out that unlike the marginal notes in the statutes of the British Parliament, the various Articles of the Constitution were passed by the Constituent Assembly with the marginal notes and, therefore, the Court considered it permissible to use the marginal note to understand the meaning and purport of the Article. But so far as statutes are concerned this Court in the case of Board of Muslim Wakfs, Rajasthan v. Radha Kishan held in no uncertain terms that the view that the marginal note appended to a section cannot be used for construing the section (see paragraph 24 at p. 479). Section 22(1) shorn of the irrelevant part provides that where an appeal under s. 25 relating to an industrial company is pending, then, notwithstanding anything contained in any other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for appointment of a Receiver in respect thereof shall lie or be proceeded with further, except with the consent of the BIFR or, as the case may be, the appellate authority. The purpose and object of this provision is clearly to await the outcome of the reference made to the BIFR for the revival and rehabilitation of the sick industrial company. The words ‘or the like’ which follow the words ‘execution’ and ‘distress’ are clearly intended to convey that the properties of the sick industrial company shall not be made the subject matter of coercive action of similar quality and characteristic till the BIFR finally disposes of the reference made under s. 15 of the said enactment. The legislature has advisedly used an omnibus expression ‘the like’ as it could not have conceived of all possible coercive measures that may be taken against a sick undertaking. The action contemplated by s. 29 of the 1951 Act is undoubtedly a coercive measure directed at the take over of the management and property of the industrial concern and confers a further right on the Financial Corporation to transfer by way of lease or sale the properties of the said concern and any such transfer effected by the Financial Corporation would vest in the transferee all rights in or to the transferred property as if the transfer was made by the owner of the property. So also under the said provision the Financial Corporation will have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. It is, therefore, obvious on a plain reading of s. 29 of the 1951 Act that it permits coercive action against the defaulting industrial concern of the type which would be taken in execution or distress proceedings, the only difference being that in the latter case the concerned party would have to use the forum prescribed by law for the purpose of securing attachment and sale of property of the defaulting industrial concern whereas in the case of a Financial Corporation that right is conferred on the creditor corporation itself which is permitted to take over the management and possession of the properties and deal with them as if it were the owner of the properties. If the Corporation is permitted to resort to the provision of s. 29 of the 1951 Act while proceedings under Ss. 15 to 19 of 1985 Act are pending it will render the entire process nugatory. In such a situation the law merely expects the corporation and for that matter any other creditor to obtain the consent of the BIFR, or, as the case may be, the appellate authority to proceed against the industrial concern. The law has not left them without a remedy. We are, therefore, of the option that the word ‘proceedings’ in s. 22(1) cannot be given a narrow of restricted meaning to limit the same to legal proceedings. Such a narrow meaning would run counter to the scheme of the law and frustrate the very object and purpose of s. 22(1) of the 1985 Act.”

(Emphasis added by this Court)

Mr. Chatterjee also refers to the decisions of the Supreme Court in the case of Gram Panchayet v. Shree Vallabh Glass Works Ltd., (1990) 2 SCC 440 and Shree Chamundi Mopeds Ltd. v. Church of South Indian Church Association, Madras, AIR 1992 SC 1439, in support of his said contention.

6. The next submission of Mr. Chatteijee is, that the word ‘suit’ as mentioned in s. 22(1) of the Act has not been defined under the Act, but s. 32 of the Act provides inter alia, that the provisions of the Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law, except the provisions of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as FERA) and the Urban Land Ceiling and Regulation Act, 1976, for the time being in force or in the Memorandum of Articles of Association of an industrial company or in any other instruments having effect by virtue of any law other than the Act. Reference has also been made by Mr. Chatterjee to s. 26 of the Act which bars the jurisdiction of Civil Court in respect of any matter which the Appellate Authority or the Board is empowered by, or under the Act to determine and therefore, according to Mr. Chatteijee, if the words ‘suit’ has been defined in any other law for the time being in force, that definition cannot be imported for the purpose of defining the word ‘suit’ as stated in the said s. 22(1).

7. Mr. Chatterjee further contends that since the Act was passed by the Indian Parliament in accordance with the Constitution of India with the following preamble namely,—

“An act to make in public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto.”

the interpretation given to different words by various judgments pronounced either by the Privy Council or the Supreme Court of India, prior to the enactment of the said Act, cannot have any effect so far as the words used in the Act or the provisions of the Act are concerned. In other words the words ‘suit’ as included in s. 22(1) of the Act by its amendment made in the year 1993 shall not be interpreted, according to Mr. Chatterjee, to give a technical and narrow meaning of the said word. Moreover, according to Mr. Chatterjee, arbitration proceeding is also a proceeding for recovery of money and the Act having an overriding effect so far as the Code of Civil Procedure is concerned, the word ‘suit’ as mentioned in the Act must be interpreted in a manner to fulfil the object and purpose of the Act.

8. Mr. Gupta learned senior counsel appearing on behalf of the respondent no. 1 company has sought to analyse the provisions of s. 22(1) of the Act by breaking down the elements of the said s. 22(1) into three heads namely, (a) the pre-conditions for application of the section; (b) the types of proceedings; and (c) the types of suits covered under the said section

9. Mr. Gupta also contends the ultimate effect of s. 22(1) of the Act is, that the actions coming under clauses (b) and (c) above shall not lie or be proceeded with further excepting with the consent of the Board or, as the case may be, the Appellate Authority as mentioned therein. Mr. Gupta no doubt contends inter alia, that there is no dispute that the pre-conditions for application of the said s. 22(1) are otherwise satisfied so far as the present case is concerned, but the only question remain is, whether the arbitration proceeding filed by the respondent no. 1 company for recovery of its alleged dues against the petitioner company would come within the category of proceedings as mentioned in the said s. 22(1) or is a suit of a nature as described therein.

10. According to Mr. Gupta, there is no doubt that an arbitration proceeding is not a proceeding for winding up, nor is a proceeding for execution or distress or appointment of a receiver in respect of the properties of the industrial company and the only question is, whether such a proceeding is covered by the words ‘the like’ as contained in s. 22(1) of the Act. Mr. Gupta contends that the words ‘the like’ in the context of the section, have to be construed ejusdem generis with the proceeding words namely, ‘execution’ and ‘distress’. In other words, according to Mr. Gupta, the proceedings or the like proceedings as mentioned in s. 22(1) of the Act will have to be coercive in nature and must be directed against the properties of the industrial company. In support of his said contention Mr. Gupta refers to three judgements of the Supreme Court in the case of Gram Panchayet v. Shree Vallabh Glass Works, (1990) 2 SCC 440; Shree Chamundi Mopeds Ltd. v. Church of South Indian, (1992) 3 SCC 1 and Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation, (1993) 2 SCC 144, Referring to the said decisions of the Supreme Court, Mr. Gupta contends that an arbitration proceeding is not a proceeding of a coercive nature directed against the properties of the sick company and hence it does not fall within the category of proceedings as mentioned in s. 22(1) of the Act.

11. Mr. Gupta contends further that the next question would be, whether the arbitration proceeding is included within the expression ‘suit for recovery of money’ as introduced in s. 22(1) of the Act by way of amendment in 1993. According to Mr. Gupta, legislature has used the word ‘suit’ only and not ‘suit or proceeding’ by way of amendment brought to the Act in the year 1993, and the word ‘suit’ has not been defined in the Act nor any extended meaning has been given to the said word in any other provisions thereof. Referring to the decision of the Apex Court in the case of Panduarang v. Shantabai AIR 1989 SC 2240 wherein it has been held inter alia, by the Apex Court, that suit is a proceeding in a court of justice which is commenced by a plaint. Mr. Gupta submits that since an arbitration proceeding is not a proceeding commenced in a curt of justice by a plaint, it is not a suit for recovery of money at all. Lastly, Mr. Gupta also relies upon the decision of Sujit Kumar Sinha, J., as referred to above in support of his contention.

12. Now, if we analyse s. 22(1) of the Act, it would be quite clear that the said section can be subdivided into three parts, namely, (I) there are certain pre-conditions for application of the said section; (II) certain proceedings and suits are covered by the said section, and (III) effect of the said section. So far as the pre-conditions for application of the said section are concerned, it would appear that there are four such pre-conditions namely, (A) pendency of an enquiry under s. 16, or (B) a scheme referred under s. 17 is under preparation or consideration, or (C) a sanctioned scheme is under implementation, or (D) pendency of an appeal under s. 25 relating to an industrial company.

13. So far as the proceedings covered by said section 22(1) of the Act are concerned, on a plain reading of the said section, it would appear that only the following proceedings namely:

(a) proceeding for the winding up of the industrial company;

(b) proceeding for execution against any of the properties of the industrial company;

(c) proceeding for distress against any of the properties of the industrial company;

(d) the like proceeding against any of the properties of the industrial company;

(e) the proceedings for appointment of a receiver in respect of the properties of the industrial company would come within the purview of the said section.

14. By way of amendment of the said section brought in the year 1993, inserted by the Sick Industrial Companies (Special Provisions) Amendment Act, 1993, the following types of suits were also included within the fold of section 22(1) namely:

(i) suit for recovery of money;

(ii) for the enforcement of any security against the industrial company;

(iii) for the enforcement of any guarantee in respect of any loans;

(iv) or advance granted to the industrial company.

15. Lastly, the effect of the said s. 22(1) as would appear from the provision of the said section itself, would be, that the actions namely, the proceedings and suits as mentioned above, would not lie or be proceeded with further except with the consent of the Board or, as the case may be, the Appellate Authority.

16. So far as the pre-conditions for application of s. 22(1) as referred to above are concerned, admittedly the pre-condition numbers (a) and (b) as referred to above have been fulfilled in the present case and as such, there is no difficulty in applying the said section so far as the petitioner company is concerned.

17. We also accept the submission of Mr. Chatterjee, relying upon the Supreme Court decision in the case of Maharashtra Tubes Ltd. (supra), that the word ‘proceedings’ as mentioned in s. 22(1) should not be given a narrow meaning to include only legal proceeding. But the question is, whether all sorts of proceedings would come within its purview or only proceedings of certain nature apart from legal proceedings as mentioned in the said s. 22(1) would come within its fold. According to Mr. Chatterjee all sorts of proceedings would be included within s. 22(1), but it appears that there are some chinks in the armour of Mr. Chatterjee. On the contrary, the contention of Mr. Gupta appear to be relating on solid footings.

18. Section 22(1) itself has specified certain types of proceedings which would come within the purview of the said section namely, proceedings for winding, up of the industrial company; proceedings for distress against any of the properties of the industrial company; or the like proceeding against any of the properties of the industrial company or the proceedings for appointment of a receiver in respect of the properties of the industrial company. From the nature of the proceedings mentioned above, it would be quite clear that only proceedings of coercive nature would come within the fold of s. 22(1) and not other proceedings. The Supreme Court also has observed on the same line in the case of Maharashtra Tubes Ltd. (supra), inasmuch as, in paragraph 10 of the said judgement, the Supreme Court, while interpreting the words ‘or the like’ observed inter alia as follows:

“The words ‘or the like’ which follow the words ‘execution’ and ‘distress’ are clearly intended to convey that the properties of the sick industrial company shall not made the subject matter of coercive action of similar quality and characteristic till the BIFR finally disposses of the reference made under s. 15 of the said enactment. The legislature has advisedly used an omnibus expression ‘the like’ as it could not have conceived of all possible coercive measures that may be taken against sick undertaking.”

(Emphasis added by this court).

19. The Supreme Court also in its other decision of Shree Chamundi Mopeds Ltd. (supra), has explained the words ‘or the like’ in paragraph 11 of the said judgement on the same line as submitted by Mr. Gupta inter alia, as follows:

“The words ‘or the like’ have to be construed with reference to the proceeding words, namely ‘for execution’, ‘distress’ which means that the proceedings which are contemplated in this category are proceeding whereby recovery of dues is sought to be made by way of execution, distress or similar proceedings against the property of the company.”

(Emphasis added by this Court)

20. In its earlier decision, in the case of Gram Panchayet (supra), the Supreme Court has also held inter alia, as follows in paragraph “7” of the said decision:

“7:— Section 22(1) provides that in case the enquiry under s. 16 is pending or any scheme referred to under s. 17 is under preparation of consideration by the Board or any appeal under s. 25 is pending then certain proceedings against the sick industrial company are to be suspended or presumed to be suspended. The nature of the proceedings which are automatically suspended are: (1) Winding up of the industrial company; (2) Proceedings for execution, distress or the like against the properties of sick industrial company; and (3) Proceedings for the appointment of receiver. The proceedings in respect of these matters could, however, be continued against the sick industrial company with the consent or approval of the Bard or of the appellate authority as the case may be.”

21. It is thus quite clear from the wordings of s. 22(1) and the above observations of the Apex Court of India, that only proceedings of coercive nature, be that legal or otherwise, would come within the purview of the expression ‘proceedings’ as mentioned in s. 22(1), and not all proceedings and the words ‘or the like’ should be construed ejusdem generis with the preceding words namely, ‘execution’ and ‘distress’, or in other words, the said words ‘or the like’ should be read as proceedings analogous to execution or distress proceedings against any of the properties of the industrial company.

22. In this context it will not be out of place to refer to the conditions under which review of a judgement and/or order can be made as per the provisions of Order XLVII Rule 1 of the Code of Civil Procedure. From the wordings of Order XLVII Rule 1 of the Code, it is clear, that the Court of review has only a limited jurisdiction circumscribed by the definitive limits fixed by the language used in Order XLVII Rule 1 of the Code. It may allow a review on three specific grounds namely;

(1) discovery of new and important matter or evidence which after the exercise of due diligence, was not within the applicant's knowledge or could not be produced by him at the time when the decree was passed or order was made;

(2) mistake or error apparent on the face of the record; or

(3) for any other sufficient reason.

Now, the words “any other sufficient reason”, have been interpreted to mean a reason, sufficient on grounds at least analogous to those specified immediately previously, i.e conditions (1) and (2) above.

24. The Privy Council in its very well known decision in the case of Chhujju Ram v. Neki (which was a seven (7) judges decision), reported in AIR 1922 PC 112 = 49 Indian Appeals 114 (PC) also held inter alia, as follows:—

“……………….The three cases in which alone mere review is permitted are those of new material overlooked by excusable misfortune, mistake or error apparent on the face of the record, or “any other sufficient reason.” The first two alternatives do not apply in the present case, and the expression ‘sufficient’ if this were all, would naturally be read as meaning sufficiency of a kind analogous to the two already specified, that is to say, to excusable failure to bring to the notice of the court new and important matters or error apparent on the face of the record.”

(Emphasis added by this Court).

The Supreme Court in the case of Moran Mar Basselios Catholicos v. Most Rev. Mar Pulose Athanasius, AIR 1954 SC 526 had made similar observations in paragraph 32 of the said judgement in the following manner;

“It has been held by the Judicial Committee that the words “any other sufficient reason” must mean “a reason sufficient on grounds, at least analogous to those specified in the rule”. See—Chhajju Ram v. Neki, AIR 1922 PC 112(D). This conclusion was reiterated by the Judicial Committee in — ‘Bisheshwar Pratap Sahi v. Parath Nath, AIR 1934 PC 213(E) and was adopted by our Federal Court in—Hari Shankar v. Anath Nath, AIR 1949 PC 106 at pp. 110, 111(F).”

The said Court also in its later judgement in the case of Raja Shatrumjit (Dead) by his legal representatives v. Mahammad Azmat Azim, AIR 1971 SC 1474 had held on the same lien in paragraph 13 of the said judgement as follows;

“13………….. Under Order 47 of the Code of Civil Procedure the principles of review are defined by the Code and the words ‘any other sufficient reason’ in Order 47 of the Code would mean a reason sufficient on grounds analogous to those specified immediately previously in that order.

(Emphasis added by this Court)

25. By the Sick Industrial Companies (Special Provisions) Amendment Act, 1993, certain types of suits were also included within the fold of s. 22(1) of the said Act namely, suit for recovery of money or for the endorsement of any security against the industrial company. It is now to be seen whether an arbitration proceeding comes within any of the said different types of suits as introduced under s. 22(1) by the aforesaid Amendment Act of 1993.

26. It is to be noted that the legislature in introducing the aforesaid amendment has used the word ‘suit’ only and nor ‘suit or other proceeding’. The word ‘suit’ has not been defined in the said Act not any extended meaning of the word suit has been given under any other provisions of the said Act.

27. In Bouvier's Law Distationary, 3rd Revision (1984) volume-I, the word “arbitration” has been defined at page 225 of the book as follows:

“Arbitration is the investigation and determination of a matter or matters of difference between contending parties, by one or more unofficial persons, chosen by the parties, and called arbitrators, or referees.”

“An arbitration is a domestic tribunal created by the will and consent of the parties litigant, and restored to avoid expense, delay and ill feeling consequence upon litigation in courts of justice.”

28. Arbitration is thus a substitution by consent of the parties of another tribunal for those provided by the ordinary processes of law. It is an arrangement for taking and abiding by the judgement of the selected persons in some disputed matter, in respect of carrying it to the established tribunal of justice, and is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation.

29. The word “suit” has also been defined in Bouvier's Law Dictionary, 3rd Revision (1984) volume III at page 3180 as follows:

“Suit is a generic term of comprehensive signification, and applies to any proceeding in a court of justice in which the plaintiff pursues, in such court, the remedy which the law affords him for the redress of an injury or the recovery of a right.”

“It is more general than action, which is almost exclusively applied to law, and denotes any legal proceeding of a civil kind brought by one person against another. It includes action at law as well as proceeding in equity.”

(Emphasis added)

30. Panigrahi, J. in his decision in the case of Braithwaite and Company Ltd. v. D.T.M Construction Pvt. Ltd. (supra), though in paragraph 8 of the said judgement sought to avert the contention raised by the learned advocate for the opposite party before him as to whether the arbitration proceeding can at all be said to be a suit but he has not given any finding as to whether an arbitration proceeding can be termed as a suit, but merely held inter alia, that a proceeding filed under the Arbitration Act with a view to determining the rights and liabilities of the parties decided by a judge of their own, is a judicial proceeding and the provisions of the Code of Civil Procedure have full attractions. The term ‘proceeding’ is frequently used to denote a step-in-aid action, and, obviously, it is the meaning in such phrases as “proceeding in any cause or matter” and finally held that if no stay of the arbitration proceeding is granted, the provisions of s. 22 of the said Act will be stultified and would be rendered otiose. According to His Lordship, therefore, while making an harmonious construction to the provisions of s. 22(1) of the Act, it is to be understood that the section was aimed at rehabilitation, revival and also for the amelioration of the sick industry. His Lordship, however distinguished the judgements of the Supreme Court in the case of Shree Chamundi Mopeds Ltd. (supra) and Khalil Ahamed Basir Ahamed v. Tufelhussein Samasbhai Sarangpurwala, AIR 1988 SC 184 cited before him, on facts. If, however, appears that His Lordship misread the Supreme Court decision in Shree Chamundi Mopeds Ltd. (supra) absolutely, in omitting to consider the interpretation given by the Apex Court of India to the words, “or the like” in the said decision. That decision also dealt with the provisions of s. 22(1) of the Act and we reiterate the interpretation given by the Supreme Court to the words “or the like” which have already been quoted above namely;

“The words ‘or the like’ have to be construed with reference to the preceding words, namely, ‘for execution, distress’ which means that the proceedings which are contemplated in this category are proceedings whereby recovery of dues is sought to be made by way of execution, distress or similar proceedings against the property of the company”.

(Emphasis added by this court)

31. The said judgement of Panigrahi, J., however, was distinguished by Sujit Kumar Sinha, J. in his decision in the case of Burn Standard Company Ltd. v. Mc. Dermott Inc., 1997 (1) CLJ 241 holding inter alia, that the attention of Panigrahi, J., did not appear to have been drawn to the provisions of s. 22(3) of the said Act. According to Sinha, J., the first limb of sub-s. (1) of s. 22 envisages a situation where a threat to any of the properties of an industrial company exists by any proceeding, either for its winding up of for levying execution, distress or the like proceeding, and the phrase ‘or the like’ can only be referred to any other proceeding which poses such threat. The second limb of the said sub-section, according to His Lordship, refers to a proceeding where a threat to the dispossession of such property by the appointment of a receiver arises, and the third limb of the said sub-section refers to the institution of a suit against an industrial company, of the nature, specified in the said sub-section. His Lordship further held that an arbitration proceeding itself cannot be said to pose any threat, and it is only when such proceeding culminates in an award, and a decree thereupon is passed in terms of such award, and put in execution, then a threat can be said to have arisen. His Lordship has also referred to sub-s. (3) of s. 22 which relates to a sick industrial company and holds that from the wordings of the said sub-s. (3), it is quite clear that the BIFR has the power to suspend the operation of any award which obviously also means an arbitral award, The sum total of the findings of Justice Sujit Kumar Sinha, J. is, that an arbitration proceeding does not come within the purview of s. 22(1) of the said Act.

32. Examining the above two Single Bench decisions, we, however, fully agree with the view taken by Sujit Kumar Sinha, J. and also accept the contentions raised by Mr. Gupta. As discussed above, we hold that an arbitration proceeding is not a coercive proceeding at all, nor it is a suit for recovery of money to include such a proceeding within the fold of s. 22(1) of the said Act. It is only a proceeding started by consent of parties before the Judge or Judges appointed by themselves, for determining the rights and liabilities of the parties to the proceeding. Even if, it is found by the arbitrators at the end of such proceeding that certain amounts are due from the company by its creditor, and the arbitrators pass an award accordingly, even then the straightway the said award cannot be executed. The award is to be presented in a Court, and a decree is to be passed upon such award, which can only be executed, and if such an execution proceeding is initiated, then it may amount to a coercive proceeding and not prior to that, and that stage admittedly has not come as yet, so far as the present case is concerned.

33. Secondly, Panigrahi, J. has observed that the arbitration proceeding is a judicial proceeding and the provisions of the Code of Civil Procedure have full attractions. If that view is taken as correct, then suit according to s. 26 of the Code of Civil Procedure is to be instituted by presentation of a plaint or in any manner as prescribed. The Supreme Court of India in the case of Panduarang v. Shantabai (supra) has also observed inter alia, that a suit is a preceeding which is commenced by a plaint. The Supreme Court in paragraph 16 of the said judgment referring to s. 11 of the Code of Civil Procedure which deals with res-judicata, observed inter alia, as follows:

“Section 11 bars the trial of a suit or issue in which the matter directly and substantially in issue has already been adjudicated upon in a previous suit. This section applies in terms to cases where the matter in issue in a subsequent ‘suit’ was an issue in a “former suit”. A ‘suit’ is a proceeding which is commenced by a plaint. As provided in s. 26 of the C.P.C every suit shall be instituted by the presentation of a plaint or in such other manner as may be prescribed.

(Emphasis added by this Court)

In paragraph 18 thereof, the Supreme Court further held as follows:

“It is true that s. 11 is now made applicable by the Explanation and interpretation to certain proceeding giving more extensive meaning to the word ‘suit’. In its comprehensive sense the word ‘suit’ is understood to apply to any proceeding in a Court of justice by which an individual pursues that remedy which the law affords. The modes of proceedings may be various but that if a right is litigated between parties in a court of justice the proceeding by which the decision of the Court is sought may be a suit.

(Emphasis added by this Court)

34. In its earlier decision in the case of Nawab Usman Ali Khan v. Sagarmoy, AIR 1965 SC 1798, the Apex Court of India also observed inter alia, that the word ‘suit’, ordinarily, apart from some context, must be taken to be a civil proceeding instituted by the presentation of a plaint. The Bombay High Court in its Full Bench decision in the case of Farkhundali Nannhay v. V.B Potdar*, AIR 1962 Bom 162 (FB) has also observed inter alia, as follows:

“…………………..the word “suit” is a term of art and ordinarily means a proceeding instituted in a civil court by the presentation of a plaint”

(Emphasis added)

35. Accordingly, the suit as introduced in s. 22(1) of the said Act by Amendment Act, 1993 as referred to above, therefore, must be given its ordinary meaning and not artificial and/or extended meaning as sought to be given by Mr. Chatterjee. Reference may be made to the decision of the Privy Council in the case of Mayor, Councillors and Bargesses of Borough of New Plymouth v. Taranki Electric Power Board, AIR 1933 PC 216, wherein Their Lordships quoted with the approval the following observations of Lord Hewart, C.J, in the case of Spillers Ltd. v. Cardiff (Borough) Assessment Committee, (1931) 2 KB 21:—

“It ought to be a rule and we are glad to think that it is the rule that words are used in an act of Parliament correctly and exactly and not loosely and inexactly. Upon those who assert that rule has been broken the burden of establishing their proposition lies heavily. And they can discharge it only by pointing to something in the context which goes to show that the loose and inexact meaning must be preferred.”

36. We have already observed that Panigrahi, J. in his judgement as referred to above has not held that the word ‘suit’ as introduced to s. 22(1) of the said Act by the Amendment Act of 1993 also covers arbitration proceeding. It appear from paragraph 13 of the said judgement that His Lordship accepted the submissions of the opposite party that the words ‘or the like’ included proceedings for recovery of money and, therefore, the arbitration proceedings were also covered. But that interpretation is totally contrary to the Supreme Court decisions as referred to above, wherein the Apex Court of India sought to interprete and/or explain the words ‘or the like’ and secondly, if the interpretation as given by Panigrahi, J. is taken as correct, then suits for recovery of money would also have been covered by the words ‘or the like’ and there would have been no necessity for introducing the amendment in 1993 by incorporating the words ‘suits for recovery of money’ in s. 22(1) of the said Act.

37. It is true that the object of s. 22(1) of the Act is to ameliorate the hardship of a sick industry while the matter is pending before the BIFR but such amelioration is by way of suspension of only certain time of proceedings and certain types of suits and not every kind of proceedings or every kind of suits. The scope of the proceedings mentioned in the section cannot be extended. Why certain kinds of proceedings have been included in the section and others have not, is a matter of legislative wisdom and policy, which cannot questioned while interpreting a section.

38. In this context, s. 22(3) of the Act may also be referred to. The said section does not cover proceedings and there is no automatic suspension. Certain instruments or rights of privileges thereunder can be suspended by a specific order of the BIFR. Such instruments include awards which would definitely include awards passed in an arbitration proceeding, but the stage for suspension of an award can only be made after the award is made in the arbitration proceeding, and that too, by an express order of the BIFR, suspending the award. Moreover, that stage has not come as yet, so far as the present case is concerned.

39. It is submitted on behalf of the petitioner company that it has borne heavy costs in conducting the arbitration proceeding which it can ill afford in the present financial conditions of the company. But that question is not germane in the context of the construction of the s. 22(1) in the present case, and secondly, the petitioner company itself had gone to court at least on two earlier occasions to stop the arbitration proceeding but failed in each case. On the first occasion, the petitioner company unsuccessfully challenged the validity of the Technical Collaboration Agreement which contains the arbitration clause upto the Supreme Court of India and the Apex Court of India while deciding the case (as reported in AIR 1991 SC 1191) observed inter alia, in paragraph 15 at page 1201 thereof as follows:

“Before we part, we are constrained to observe that we were pained at the attitude of the appellant company attempting to thwart a valid agreement, part perform by the payment of the first instalment, on high per technical grounds, and attitude which would scare away collaborators and tarnish the image and credibility of our entrepreneurs abroad. We hope the appellant-company will honour its obligation under the agreement and settled its difference with the respondent across the table in a business-like manner, rather than litigate.”

On the second occasion, the petitioner company again filed an application in this Hon'ble Court challenging the Rules of Arbitration of the International Chamber of Commerce, requiring the deposit of advance cost of arbitration, and that challenge too also failed, by the order of Shyamal Kumar Sen, J. which is also a reported decision being AIR 1997 Cal 45.

40. Accordingly, we are of the view that the decision of Panigrahi, J. as referred to above cannot be considered as a correct one in view of our observations as referred to above and as such, is hereby overruled. On the contrary, we concur with the judgement of Sujit Kumar Sinha, J; as referred to above.

41. The reference before the Division Bench by the Apex Court of India in the present case is thus disposed of as above, without any order as to costs.

42. We, however, make it clear that we have not decided the other points raised in the application filed by the petitioner, excepting the point referred to us by the Hon'ble Supreme Court.

43. So far as the application for addition of party is concerned, that is to be heard out along with the main application.

44. All parties are to act on the signed copy of the operative part of the order of this judgement on the usual undertaking.

Asish Baran Mukherjee, J.:—I agree.

Point referred to for decision decided against the petitioner and in favour of the Respondents.

J.H.N