Arbitration award can be executed partly

The executing court would have to examine such an application filed under section 36 before proceeding to enforce the award where challenge vis-a-vis some claims stands rejected in a petition under Section 34, while the others are still at large as to ascertain whether they are severable or inextricably interconnected. Where claims can be sustained on a stand-alone basis, there is no reason as to why a court cannot execute the award vis-a-vis those claims in respect of which a challenge laid in Section 34 proceedings is fully and completely adjudicated upon. In coming to this conclusion, we may remind ourselves dicta of the judgment of the Supreme Court in the case of Ambika Quarry Works vs State of Gujarat & Ors. (1987) 1 SCC 213 para 18 & 19 at page 221 andUttaranchal Road Transport Corpn. & Ors. vs Mansaram Nainwal (2006) 6 SCC 366 at page 370 that judgments of the Supreme Court have to be read and understood in the context of what they decide, and not what logically follows from a decision. Each fact may lend a different weave to the final texture. [Also see Quinn vs Leathem (1901) A.C. 495]1

Delhi High Court

National Highway Authority Of ... vs Oriental Structure Engineers Ltd on 12 September, 2012

CORAM :-
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J

1. By an order dated 22.11.2011 a Division Bench of this court which comprised of Sanjay Kishan Kaul, J and myself (Rajiv Shakdher, J) the captioned appeal was referred to a Larger Bench, to examine the issue as to whether the court while entertaining a petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act) could issue notice restricted to some or one of the grounds on which the award of arbitrator is impugned. A Division Bench of this court in the case of Simplex Engineering & Foundry Works Pvt. Ltd. & Ors. vs FAO 115/2010 Page 1 of 25 Ministry of Railways & Anr. (2011) 184 DLT 640 has come to the conclusion that it is impermissible under the provisions of the Arbitration Act for a court to issue a notice limited to some or one of the grounds of challenge articulated in the petition filed under Section 34 of the Arbitration Act. GENERAL BACKGROUND

2. For the sake of completion, we may also note that the initial judgment passed on 09.09.2011, in the Simplex case, was corrected on 18.11.2011, as a typographical error had crept in the last paragraph of the said judgment.

3. The issue before the Bench, therefore, is confined to an inquiry as to whether, in law, there is any impediment in the court issuing, what we would hereon refer to as, for the sake of convenience, limited notice, in a petition under Section 34 of the Arbitration Act.

3.1 The appeal in the instant case came to be filed, as a Single Judge of this court vide order dated 03.11.2009, had opined, (which is the order impugned in the appeal) that the issue which arose in the Section 34 petition was covered, according to the learned Single Judge, by a judgment of another Single Judge of this court in the case of Punj Lloyd vs National Highway Authority of India, passed in OMP No. 340/2008, dated 17.02.2009; which on being challenged by the appellant, was pending adjudication before the Supreme Court. The learned Single Judge, therefore, directed issuance of limited notice to await the judgment of the Supreme Court in the Punj Lloyd case. The petition was, however, adjourned "sine die" giving liberty to the parties to seek revival of the petition after the disposal of the said special leave petition.

3.2 This is how the matter travelled to the Division Bench and thereafter to the present Bench. In this reference, we are therefore not called upon to examine the merits of the case. However, only to provide a contextual framework of the issue at hand, we propose to touch upon the broad contours FAO 115/2010 Page 2 of 25 of the dispute.

FACTS OF THE CASE

3.3 It is noticed that the petitioner had awarded a contract to the respondent, which is a joint venture company between Oriental Structural Ltd. & GAMMON India Ltd. for four lanning and strengthening of existing two land sections from km. 199.66 in Agra to km. 250.50 of NH-2 to Makhanpur, in the State of U.P.

3.4 The contract was awarded on 26.03.2002, at a lump sum price of 328,49,37,824/-. Twenty percent (20%) of the contract price was payable in USD, at a fixed rate of exchange of 1 USD equivalent to Rs 48.09. Disputes arose between the parties qua the delay in execution of the first section of works carried out between 29.03.2002 and 30.06.2003. The respondent raised a claim for Extension of Time (in short E.O.T). The respondent sought extension, it appears initially, for a period of 236 days, on the ground that delay was attributable to the appellant. The reasons advanced by the respondent were with regard to delay in issuance of drawings and instructions, unforeseen physical obstructions and the failure to provide clear access to the site where works at hand had to be executed. 3.5 According to the appellant, even though permissible under the contract, no compensatory cost was sought by the respondent; though this claim could have been made, subject, however, to a timely notice being served upon the appellant under clause 53.1 of the conditions incorporated in the contract. It appears that, the engineer appointed under the contract granted EOT to the respondent to the extent of 99 days.

3.6 Being aggrieved, by the decision of the engineer, as enjoined under the contract, the matter was carried to the Dispute Review Board (in short DRB). Apparently, the respondent initially did not include his claim for compensatory cost on account of alleged delay before the DRB. Evidently, FAO 115/2010 Page 3 of 25 the claim for compensation to the extent of 34,63,45,327/- was lodged subsequently; which the appellant claims was calculated on a notional basis without the requisite evidence.

3.7 Before the DRB, however, the respondent claimed EOT of only 223 days against 236 days which was its initial claim. The DRB, after due deliberation, recommended grant of EOT to the respondent, to the extent of 204 days. The DRB, however, rejected the respondent's claim for compensatory cost and directed the respondent to submit the relevant contemporaneous record to the engineer for due verification, so that appropriate recommendations could be made to the appellant in that behalf. 3.8 The appellant, however, being dissatisfied with the recommendation of the DRB, after giving due notice to the respondent sought reference of the dispute to an arbitral tribunal. Accordingly, on 22.08.2005 the disputes between the parties came to be referred to a two-member tribunal, who nominated a presiding arbitrator.

3.9 Before the arbitral tribunal, the respondent appears to have made a prayer for grant of EOT of 231 days with appropriate compensatory cost. Notably, costs were not quantified and on the other hand a direction was sought against the appellant to assess the compensation payable for the relevant period ending on 30.06.2003.

4. It appears that, in the meanwhile, the work in issue was reviewed by the engineer and based on what the appellant understood as an agreement with the respondent, the work executed by the respondent till 30.06.2003, on a re-definition of "sectional milestones" was accepted by the appellant as due completion of section-I of the total work assigned under the contract. Therefore, according to the appellant there was nothing left to arbitrate. 4.1 On the other hand, the respondent sought amendment of its claim before the arbitral tribunal, by restricting its prayer to the compensatory cost FAO 115/2010 Page 4 of 25 quantified at Rs 34,63,45,327/- alongwith interest at the rate of 12% per annum. The respondent thus filed an application qua the issue of arbitrability of the dispute pertaining to compensatory costs claimed by the respondent, on 28.03.2007. The arbitral tribunal, however, vide its order dated 28.04.2007, dismissed the said application and proceeded to order that it would adjudicate upon the claim in respect of EOT with cost vis-a-vis section-I of the works assigned to the respondent.

4.2 The appellant, once again, filed an application under Section 16(2) of the Arbitration Act, challenging the tribunal's direction contained in its order dated 28.03.2007 whereby it had observed that it would adjudicate upon the claim pertaining to EOT. Even this application was dismissed by the tribunal vide order dated 28.04.2007.

4.3 Thus, came the stage of completion of pleadings in the main matter. The appellant in its reply took a preliminary objection with regard to the arbitrability of the claim due to the respondent's failure to comply with the provisions of clause 53.1 of the contract, which required, issuance of a mandatory notice before a dispute could be adjudicated upon by the arbitral tribunal. It is this issue which the learned Single Judge in the impugned order dated 03.11.2009 was alluding to when he observed that it was covered by the judgment in the case of Punj Lloyd (supra).

4.4 The Arbitral tribunal, however, rejected this contention and by a 2:1 majority on merits vide award dated 18.04.2009, came to the conclusion that the appellant was required to pay a sum of Rs 18,92,00,000/- towards compensatory cost alongwith interest at the rate of 12% per annum for the period 15.01.2007 to 18.01.2009, quantified at Rs 5,12,00,000/-. A further interest at the rate of 15% per annum was awarded from the date of the award till satisfaction. The dissenting member of the arbitral tribunal, however, came to the conclusion that delays to the extent of 101 days was attributable FAO 115/2010 Page 5 of 25 to the appellant and on this account, awarded a sum of Rs 2.22 crores towards overhead charges alongwith pendente lite interest. Since there were certain errors in the award, upon an application moved by the respondent, the arbitral tribunal corrected the same vide its communication dated 30.05.2009. 4.5 It was this award which is challenged by way of a petition under section 34 of the Arbitration Act by the appellant. One of the main grounds for the challenge was that the presiding arbitrator suo moto, by a communication dated 29.10.2008, sought further information/ document from the respondent, after the arbitral tribunal had, at the hearing held on 07.06.2008, reserved the matter for pronouncing its judgment. The appellant, as was expected, has raised an objection to this communication of the presiding arbitrator in its written submissions filed with the arbitral tribunal. The learned Single Judge, however, by the impugned order, rejected this ground articulated by the appellant in its petition under Section 34 since, according to him, not only an opportunity was granted to the appellant to file additional documents, but also that, neither the provisions of the Indian Evidence Act, 1872 nor the provisions of Code of Civil Procedure, 1908 (in short CPC) were strictly applicable to arbitration proceedings. As indicated above, it is this order which was assailed in an appeal, whereupon the Division Bench referred the matter for consideration to a larger Bench.

SUBMISSIONS OF COUNSELS

5. The appellants before us, were represented by Mr Sudhir Nandrajog, Sr. Adv. instructed by Ms Meenakshi Sood, while the respondents were represented by Mr P.V. Kapoor, Sr. Advocate, instructed by Mr Anil Airi. The appellant before us, briefly, made the following submissions on the aspect of limited notice.

5.1 The avowed purpose of the Arbitration Act to ensure expedition can FAO 115/2010 Page 6 of 25 only be achieved if, a composite order is passed at one go and not in stages. This would ensure that a single appeal is filed by an aggrieved party and would thus avoid multiple appeals at different points in time. In support of this, reference was made to the provisions of Section 16 of the Arbitration Act where objections to an arbitrator's jurisdiction, if taken, are assailed by a single action by the aggrieved party upon pronouncement of the final award. Support in this regard was also taken of Section 5 of the Arbitration Act which prohibits intervention by a judicial authority with the Arbitral process save and except to the extent provided in the said Act. It was thus contended that, the scheme of the Arbitration Act provides for a continuum whereby, challenge, if at all, to the final award can be laid by an aggrieved party only to the final award rather than at different stages of the arbitration proceedings. Therefore, applying the principle of parity, the court should interpret the provisions of Section 34 in a manner, which promotes a unified and a single challenge to the award, whereby all grounds taken to challenge the award are decided together.

5.2 It was also contended that the aforesaid is borne out also from the provisions of Section 36 of the Arbitration Act, in as much as, once a petition under Section 34 is filed, the arbitration award in its entirety, becomes inexecutable. Thus, neither Section 34 nor Section 36 provides for enforceability of the award in stages.

5.3 A reference was also made to Section 37 of the Arbitration Act to contend that it provides for "an appeal" against an order "setting aside" or "refusing to set aside" an arbitral award under Section 34 of the Arbitration Act. Meaning thereby, it excludes scope for multiple appeals in an action arising out of a petition under Section 34 of the Arbitration Act. 5.4 Recourse was also taken to provisions of Order 14 Rule 2 of the CPC, to contend that all issues arising in a proceeding should be heard and decided FAO 115/2010 Page 7 of 25 in one go save and except where the entire lis could be disposed of based on a preliminary issue of law or jurisdiction. It was contended that provisions of CPC can be taken recourse to by the court while deciding petitions under Section 34 or an appeal under Section 37 of the Arbitration Act. Reliance in this regard was placed on the judgment of the Supreme Court in the case of M/s I.T.I. Ltd. vs Seimens Public Communication Networks Ltd (2002) 5 SCC 510. Reliance was also placed on the judgment of this court in the case of Nitco Roadways Pvt. Ltd. vs National Insurance Co. & Ors. 27 (1985) DLT 444, to contend that where an appeal was maintainable, all issues arising in the suit, should ordinarily be tried together, so as to avoid a remand in the matter.

5.5 To buttress this argument hypothetical examples were given of cases where issues are interconnected and, therefore, decision on one issue may have a bearing on the decision on the other issue(s). Similarly, examples were given of situations which could arise if a party is permitted to challenge every order passed by the court in a Section 34 petition, the appellate court may sustain the challenge and remand the matter to the original court, while in the meantime other issues may get decided by the original court - which would then become subject matter of yet another appeal under Section 37 of the Arbitration Act, thus, giving rise to the multiple appeals. This, according to the appellant, would defeat the purpose of the Arbitration Act. 5.6 It was, however, conceded that if the original court hearing the petition under Section 34 were to take the limited notice route, it should be adopted only in "rare" cases, and that too where there are issues which can be decided at interim/ interlocutory stage on the principle of severability.

6. On the other hand, the learned senior counsel appearing for the respondent made a fervent appeal to uphold the route adopted by the courts of issuing limited notice keeping in mind the objective of the Arbitration Act, FAO 115/2010 Page 8 of 25 which is, expedition. Mr. Kapoor in this behalf made the following submissions in rebuttal to what was stated by the appellant: 6.1 The decision of the learned Single Judge could not be impugned on the ground that the award cannot be executed in view of the fact that a Section 34 petition is still alive. In other words, executability or the non-executability of the award cannot determine the point in issue.

6.2 Even though an executable award may not come into being, the Court could issue appropriate orders under Section 9 of the Arbitration Act for securing the interest of the successful party. Section 9 of the Arbitration Act operates: "..before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36..". The Division Bench of this Court in Simplex case, while taking recourse to the judgment of the Supreme Court in the case of National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd.(2004) 1 SCC 540 and National Buildings Construction Corpn. Ltd. v. Lloyds Insulation India Ltd. (2005) 2 SCC 367: did not notice that the said judgments of the Supreme Court did not deal with the provisions of Section 9 of the Arbitration Act. In any event, the said judgments of the Supreme Court dealt with the provisions of Section 36 and not with Section 34 of the Arbitration Act, with which we are concerned.

6.3 It cannot be said that Section 37 of the Arbitration Act contemplates only one appeal just because the word "an" precedes the word "appeal". The word "an" being an article merely precedes a vowel. Similar expression obtains in Section 96 of the CPC, which does not preclude multiple appeals in the same suit, at different points in time. By way of example, a reference was made to a decree for possession followed by a decree for mesne profits in the same suit.

FAO 115/2010 Page 9 of 25 6.4 In any event, if the Court would restrict notice in a Section 34 petition to one or more grounds, a single appeal can be filed after the petition is finally disposed of.

6.5 There is no bar to the appellant filing an appeal qua the grounds in respect of which notice is refused, and thereafter, if necessary file a second appeal qua the grounds in which initially notice was issued against the petitioner. It was contended that when a court refuses to issue notice on some grounds or a ground, an appeal under Section 37(b) of the Arbitration Act would be maintainable as it would amount to an order "refusing to set aside" an arbitrable award under Section 34.

6.6 There is in fact no period of limitation provided in Section 37 of the Arbitration Act. The Division Bench in the Simplex case erroneously imported the limitation prescribed for preferring a petition under Section 34 of the Arbitration Act qua an appeal under Section 37. Reliance in this regard was placed on the judgment of the Bombay High Court in ONGC v. Jagson AIR 2005 Bom. 335 @ 341/paragraph 15.

6.7 The Division Bench in the Simplex case cited five judgments to support its conclusion that the petition under Section 34 of the Arbitration Act can either be admitted or rejected. The said cases dealt with the provisions of Order 41 Rule 11 of the CPC. It was contended that while the judgments in the case of Vattipalle Eswariah v. Vattipalle Rameshwarayya AIR 1940 Madras 83 and Ramji Bhagala v. Krishna Rao Karirao Bagre (1982) 1 SCC 433 supported the view that there were only two courses open to the Court, which was to either admit the appeal or dismiss it, the other three judgments, namely, Krishnaji Shrinivas Jalvadi v. Madhusa Appansa Ladaba AIR 1934 Bombay 207, Motia Kaur v. Shanti Devi 1974 RLR 231 (Delhi) and Bolin Chetia v. Jogadish Bhuyan (2005) 6 SCC 81 state to the contrary

FAO 115/2010 Page 10 of 25 and/or allude to the exceptions to the absolute rule of dismissal or admission of an appeal in its entirety.

6.8 It was submitted, in this context that, Krishanji's case speaks about severability, i.e., it is open to the judge hearing an appeal under Order 41 Rule 11 of the CPC to dismiss it in part and also admit the appeal in part just as, at the stage of final hearing, the Court may either dismiss it in part and allow it in part. Similarly, in Motia Kaur's case the Court observed that Rule 11 of Order 41 does not envisage admittance of appeal in part unless other issues sought to be agitated by the appellant are duly considered by the Court and negatived by a specific order. Lastly, in Bolin Chetia's case, the Supreme Court alluded to the following:-

"Once the appeal is admitted, the appellate court may not, except in very exceptional cases, restrict any grounds on which the appeal should be heard."

6.9 It was contended that the Division Bench in the Simplex case did not deal with the expression "except in very exceptional case". The three judgments, according to the respondents, carved out exceptions which gave discretion to the court to issue notice limited to one or more grounds. These exceptions being (i) where grounds are severable (ii) grounds in respect of which court refuses to admit the petition are negatived by a specific order (iii) where exceptional circumstances require recourse to such a route.

7. The proceedings under Section 34 are neither in the nature of a suit nor an appeal. Section 34 proceedings are unique and hence cannot be equated with proceedings under a suit or an appeal. These proceedings are supervisory in nature and hence the Rules of CPC in relation to suits or appeals cannot be applied per se, simply because of absence of any other rule governing the situation. The CPC which is an enactment dating back to 1908 was last amended in 2002. The Arbitration Act which was enacted in 1996; FAO 115/2010 Page 11 of 25 though amended twice in 1999 and 2002; did not evolve a procedure qua proceedings under Section 34. Therefore, the court should device its own procedure under its inherent power to give effect to the objective of the Arbitration Act. It would be erroneous to import principles of Order 41 of the CPC in relation to proceedings under Section 34 of the Arbitration Act. The provision operates in an altogether different field.

8. We have heard the learned counsel for the parties, and considered their submissions. In our view the answer to the issue at hand necessarily lies in the answers to the following questions which arise for consideration: (i) Is the Arbitration Act a complete code by itself both on substantive and procedural laws?

(ii) Is the route of limited notice adopted by the court in derogation of any known principle of law or can it be amalgamated in the principles of law generally adopted by civil courts, while dealing with actions of various nature i.e. suits, appeals, revisions, statutory appeals, etc.? (iii) Is there a bar in Section 37 of the Arbitration Act in maintaining more than one appeal?

(iv) Did the Supreme Court totally exclude the possibility of the award being executed qua the claims which stand rejected in a proceeding under Section 36 of the Arbitration Act?

9. The Arbitration and Conciliation Act, 1996 is a broad amalgam of the Arbitration Act, 1940 (in short 1940 Act), the Arbitration (Protocol and Convention) Act, 1937 (in short 1937 Act) and the Foreign Awards (Recognition & Enforcement) Act, 1961 (in short 1961 Act). In that sense it consolidates and amends the aforementioned Acts. The Supreme Court in its judgment in the case of Fuerst Day Lawson Ltd. vs Jindal Exports Ltd. 2011 (8) SCC 333, in the context of an issue raised before it as to whether a remedy by way of a Letters Patent Appeal would be available in respect of an FAO 115/2010 Page 12 of 25 order which otherwise is not appealable under Section 50 of the 1996 Act came to the conclusion that since 1996 Act was a self-contained code the provisions of the Letter Patent Act, which provides for an intra code appeal, would stand excluded. The relevant observations of the court in that regard are contained in paragraph 89 at page 371; which for the sake of convenience is extracted hereinbelow:

".....It is, thus, to be seen that Arbitration Act, 1940 from its inception and right, through to 2004 (in P.S. Sathappan) was held to be a self-contained code. Now, if the Arbitration Act, 1940 was held to be a self-contained code, on matters pertaining to arbitration, the Arbitration and Conciliation Act, 1996, which consolidates, amend and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a self-contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it "a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not

mentioned therein are not permissible to be done". In other words, a letters patent appeal would be excluded by the

application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded....."

10. As a matter of fact the Supreme Court in an earlier judgment passed in the case of Sundaram Finance Ltd. Vs. NEPC Ltd., 1999 (2) SCC 479 while dwelling upon the issue as to whether a court would have jurisdiction to pass interim orders even before arbitral proceedings commence or the arbitrator is appointed by taking recourse to provisions under Section 9 of the 1996 Act, observed that: The 1996 Act was very different from the provisions of the 1940 Act and, therefore, the provisions of the 1996 Act would have to be interpreted and construed independently of the 1940 Act. The Supreme Court in fact had gone on to say that a reference to the provisions of the 1940 FAO 115/2010 Page 13 of 25 Act in interpreting the provisions of 1996 Act may lead to mis-construction. In sum and substance the Supreme Court opined that provisions of the 1996 Act should be interpreted without being influenced by principles underlying the 1940 Act. Therefore, the debate as to whether the 1996 Act is a self- contained code is no longer res integra, in so far as what is contained therein. Thus, 1996 Act in effect displaces all such aspects of substantive and procedural law in respect of which there is an explicit or implied reference in the said Act.

10.1 Would that mean that every aspect of CPC is excluded. The answer to this has to be in the negative. The reason for this according to us is simple, as the 1996 Act itself envisages the recourse to be taken to the provisions of CPC in certain circumstances. For example, in this context regard may be had to Section 9, 27 and 36 of the 1996 Act. Under Section 9, where power has been conferred on the court to put in place interim measures on a party approaching the court prior to the proceedings under the 1996 Act reaching the stage of enforcement, as envisaged under Section 36, the Court is conferred with all such powers for making orders as envisaged in Section 9 as it would in "any" proceedings before it.

10.2 Likewise, under Section 27 where either the arbitral tribunal or the party, before the arbitral tribunal, with its approval applies to the court for assistance in taking evidence, recourse can be taken to the provisions of the CPC, as would be evident from the following.

10.3 Under sub-section (4), the court while making an order for provision of evidence under Sub-section (3) is empowered to issue the same processes as it may to witnesses before it in a suit being tried before the court. Upon failure of persons to attend in accordance with such processes being issued to them or committing a default or refusing to give evidence or even being guilty of contempt of the arbitral tribunal, they would be subject to such like FAO 115/2010 Page 14 of 25 disadvantages, penalties and punishments, which the court may impose by its order on a representation of the arbitral tribunal as it can do in suits being tried before it.

10.4 Similarly, while enforcing an award under Section 36, the court is empowered to resort to the provisions of the CPC, in the same manner as if the award was a decree of the court. The only caveat being that the enforcement of the award would have to await the expiry of time provided in Section 34 of the 1996 Act for making an application to set aside the award or the rejection by a court of a petition in that respect. The interesting aspect is while some aspects of the procedural law are available to the court while dealing with issues arising in arbitral proceedings both before, during and after passing of the award as also at the stage of execution of the award an attempt is made by the legislature, quite consciously, to not to super impose the entire web of procedural law.

10.5 Therefore, while in one sense both the arbitrator and the civil court before whom the proceedings arise, under the 1996 Act, are free from the entanglement of any other substantive or procedural law, in respect of which provisions are contained in the 1996 Act, there is yet the scope for taking recourse to procedural law that is the CPC to provide greater efficacy to the arbitral process. Therefore, while interpreting the provisions of Section 34 and 37 of the 1996 Act, in our view, this aspect will have to be borne in mind.

11. This brings us to our second question, which is, is the route of limited notice in derogation of any known principle of law. In our view, having regard to the fact that there is no limitation in Section 34 of the 1996 Act, which dis-empowers a court while entertaining a petition under Section 34 of the 1996 Act, to issue a notice limited qua some or one of the grounds laid out to challenge the award, it cannot be held to be contrary to the provisions of the 1996 Act. The procedural limitations, if any, in an appeal arising from FAO 115/2010 Page 15 of 25 a decree in a suit, cannot be applied. The reasons for this is that : the award under the 1996 Act upon its pronouncement, eo instanti, attains the attributes of a decree, which lies dormant, till such time, either the period prescribed under Section 34 for setting aside expires, or a petition under Section 34 is rejected by the court. Having said so, the proceedings under Section 34 do not necessarily take the shape of execution proceedings, as the remit of the court dealing with a petition under Section 34 is much wider than that of an executing court, while executing a decree, which emanates from a suit. A court while adjudicating upon a petition under Section 34 is not limited to the mandate of Section 47 of the CPC. In other words, the courts' power of scrutinizing an award at the section 34 stage is not limited to examination of issues, such as, inherent lack of jurisdiction or that the resultant award is a nullity; as this would be the remit of the Court if it was examining objections to a decree obtained in a suit. Therefore, by its very nature, an award which is a result of culmination of proceedings before the arbitral tribunal, excludes by implication, the application of provisions of Section 96 and Order 41 Rule 11 of the CPC. The judgments, which the Division Bench, took recourse to in the Simplex case to provide a plank for its conclusion that a petition under Section 34 would have to be, either admitted or rejected, is in our view, flawed.

12. There being no limitation on the courts' power to issue limited notice, what requires to be examined is, would a limited notice effect the interest of an aggrieved party. In our view, the answer to even this question would have to be in the negative. The reasons for this is that, while issuing a limited notice on one or more grounds, the court would necessarily have to give reasons, in respect of those grounds, it is not inclined to issue notice. As long as reasons are provided, a party cannot have any grievance whatsoever.

FAO 115/2010 Page 16 of 25 The reasons, set out for rejection, would form a basis for preferring an appeal by the aggrieved party.

13. It was argued on behalf of the appellant that this would entail a possibility of an aggrieved party having to file more than one appeal. This possibility undoubtedly cannot be ruled out, as possibly the following scenarios could arise. There could be a scenario, the limited the grounds on which notice is issued, are ultimately found by the court to be sufficient in the award being assailed and, therefore, no cause may arise qua the petitioner to carry the matter in appeal. There could also be a situation, where upon, hearing the opposing party, the court may come to a conclusion that the limited grounds on which notice was issued even those do not pass muster. In such a situation the petitioner could carry the matter in appeal, both with respect to the initial order whereby the court refused to issue notice on grounds which were agitated before it as also qua those grounds on which notice was issued but on hearing the opposing party, it refused to interfere with the award. There could be a third situation, where even though the petitioner succeeds in persuading a court to assail the award on the grounds on which notice was issued, however, the appellate court, in an appeal, carried to it by the opposing party, may be persuaded to interfere on a ground in which the court originally hearing the petition under Section 34 refused to issue notice. In other words, though the petitioner did not carry the matter in appeal, in the appeal of the opposing party, the appellate court while rejecting the appeal may sustain the decision of the original court on grounds on which it had refused to issue notice. Therefore, issuance of a limited notice could throw up several situations. But this by itself would not have us come to the conclusion that the court is not empowered to issue limited notice as long as it supplies reasons for rejecting grounds, qua which no notice is issued.

FAO 115/2010 Page 17 of 25

14. This brings us to the third question, which is, whether there is any bar to more than one appeal being maintained by an aggrieved party. Here again we find that there is no bar. An expression "an appeal" would only mean that at a given point of time, when 'a' cause of action arises, the court would entertain an appeal, therefore, logically where the court refuses to issue notice qua certain grounds, an aggrieved party would be well within its right to prefer an appeal under the provisions of Section 37. The fact that an aggrieved party would have to, perhaps, prefer a second appeal in the event that the court may come to a conclusion, upon hearing an opposing party, that there is no merit even in respect of the grounds vis-a-vis which notice was issued, cannot come in the way of our holding that the court is not empowered to issue a limited notice. There is in the 1996 Act no such limitation. There is as a matter of fact complete autonomy given to the party to prefer an appeal as soon as the provision of Section 37 of the 1996 Act get triggered under sub-section (1)(b) of Section 37 of the Act. It is another matter that if a party prefers an appeal against a court order issuing limited notice and while the appeal is pending, the award get successfully set aside on the grounds on which limited notice was issued, would result in the appeal becoming infructuous. The appellate court could in such a situation either pass such an order or, call upon the opposing party to disclose whether it wishes to prefer an appeal against a decision of the original court, whereby the award gets set aside, albeit on limited grounds. There are thus several possibilities that may arise in a given case. The party filing a petition under Section 34 of the 1996 Act could as well wait till the entire proceedings come to an end and then make a decision as to whether it needs to file an appeal. Quite logically if the award is set aside, on one or more grounds, the petitioner would have no cause to carry the matter in appeal. Before the appellate court, however, it may have to, in a given situation, as articulated FAO 115/2010 Page 18 of 25 above, argue those grounds, which did not pass muster with the original court when notice in the first instance was issued by that court.

15. This brings us to the last question as to whether the Supreme Court by virtue of its decision in National Aluminum Company Ltd. and National Building Constructions Corporation Ltd. excluded the possibility of the award being executed viz-a-viz those claims on which adjudication under Section 37 is complete.

16. In this context, one would have to briefly advert to the facts obtaining in the two cases. In National Aluminium Company Ltd. the facts with which the court was concerned with were as follows: The court was adjudicating upon an application which was filed before it in 2003 in a civil appeal of 1999, which was disposed of by the Supreme Court after hearing, by appointing a sole arbitrator, with the consent of parties before it. The special leave petition, which was converted into a civil appeal on leave being granted, was preferred by one of the parties, i.e., the respondent in that case, assailing the decision of the opposing party in the unilateral appointment of an arbitrator under the 1940 Act. Before the arbitrator, both parties had consented to being governed by the 1996 Act, and it was on that basis, that the arbitrator proceeded and rendered a final award. In the interlocutory application filed in the Supreme Court, modification of the award was sought, based on the argument that since the dispute between the parties, and the agreement by which recourse was taken to arbitration proceedings, was prior to the 1996 Act, the court which was competent to modify the award, was the one which appointed the arbitrator. In other words, it was contended since the arbitrator had been appointed by the Supreme Court, the application for modification could be entertained and tried only by the Supreme Court. This contention was rejected by the court for the reasons articulated on that issue. We need not dwell on the reasons articulated on that issue, as they do not FAO 115/2010 Page 19 of 25 impact the case. What is noticeable is that, while the Supreme Court was dealing with the prayer of the applicant before it that it should consider directing the opposite party to deposit in the competent civil court at least the amount which represents that part of the award, which was in favour of the applicant, it made the following observations:

".....At one point of time, considering the award as a

money decree, we were inclined to direct the party to deposit the awarded amount in the court below so that the applicant can withdraw it on such terms and conditions as the said court might permit to do as an interim measure. But then we noticed from the mandatory language of Section 34 of the 1996 Act, than an award, when challenged under Section 34 within the time

stipulated therein, becomes unexecutable. There is no discretion left with the court to pass any interlocutory order in regard to the said award except to adjudicate on the correctness of the claim made by the applicant therein. Therefore, that being the legislative intent, any direction from us contrary to that, also become impermissible. On facts of this case, there being no exceptional situation which would compel us to ignore such statutory provision, and to use our jurisdiction under Article 142, we restrain ourselves from passing any such order, as prayed for by the applicant......" (emphasis supplied)

16.1 As is apparent from the facts delineated above, the main issue in the case did not pertain to the issue that concerns us in the present matter, that is, the issue as to whether the award can be executed vis-a-vis claims which are fully and completely adjudicated upon. However, it can be forcefully argued that even an obiter dicta of the Supreme Court is binding on the High Court. Therefore, one needs to examine quite closely as to the observations made by the Supreme Court, in respect to, the applicant's prayer before it, for a direction to the opposite party to deposit those sums which represented that part of the award, which was in favour of the applicant. A closer scrutiny of the observations would make it clear that the court consciously chose to refer

FAO 115/2010 Page 20 of 25 to three aspects: (i) that once a petition under Section 34 is filed, an award become un-executable; (ii) there is no discretion left in the court to pass interlocutory orders in regard to the said award; (iii) the only remit that the court has, is to adjudicate on the correctness of the "claim" made by the applicant/ petitioner before it.

16.2 There is, therefore, in our view, nothing in the observations of the Supreme Court which would indicate that if a court while hearing a petition under Section 34 were to reject certain grounds set up to assail the award, which are relatable to "claims", which are severable, that proceedings cannot be taken out to execute that part of the award. This, of course, would be subject to any stay being granted by an appellate court. Read in this context, while it may not be possible to pass interlocutory orders qua the award impugned in the section 34 proceedings, it may still be open for the court to pass interim orders in terms of Section 9 of the 1996 Act. In particular, measures that the court views as necessary to protect the interest of parties, in terms of Section 9(a) to (e).

17. This brings us to the second judgment of the Supreme Court in the case of National Building Construction Co. Ltd. This was a case where on disputes having erupted between parties, the matter was referred to an arbitrator. The arbitrator, upon adjudication, allowed certain claims of the appellant before the Supreme Court and some claims of the respondent. Since the claims of the respondent, which were allowed, were of a higher value than those of the appellant, a direction was issued qua the appellant that it would have to pay a certain sum of money to the respondent. The respondent simultaneously filed an application both for challenging that part of the award which was in favour of the appellant as also an application to execute that part of the award which was in its favour. The application for execution filed by the respondent was allowed. The appellant being FAO 115/2010 Page 21 of 25 aggrieved preferred an appeal to the Division Bench. Pending the appeal, the division bench granted a stay of the order of the executing court subject to the appellant depositing the sum so directed by the Division bench. The respondent on being submitted a security in the form of bank guarantee, withdrew the sums deposited by the appellant. The Division Bench came to the conclusion that since the appellant had not challenged that part of the award, which was in favour of the respondent, the respondent was entitled to execute the award for that amount. Based on this view, the Division Bench directed the appellant, while disposing of the appeal, to deposit a further sum in court, with liberty to the respondent to withdraw the said amount by furnishing a security. Aggrieved by the said order the appellant preferred an appeal to the Supreme Court. In the Supreme Court the respondent contended that since it was the only party which had laid challenge to that part of the award which was in favour of the appellant, it was open to the respondent to execute the award, as no application under Section 34 was pending qua that part of the award. The Supreme Court allowed the appeal and set aside the impugned order of the Division Bench. The rationale supplied by the Supreme Court in coming to that conclusion is set out in paragraph 6 of the said judgment. For the sake of convenience the same is extracted hereinbelow:

"....we are of the view that the award clearly states that "after an adjustment of accounts", the only amount payable by the appellant to the respondent was Rs.4,11,756/-. How the arbitrator arrived at this figure is not for us to see. For the purpose of Section 36 of the Act, the court cannot be called upon to go behind the awarded amount and deal with the processes by which the amount was arrived at. There is on record only one award for the amount of Rs.4,11,756/-. Even though the respondent claims that the applicant under Section 34 was filed in respect of part of the award, it is in fact only a process by which the arbitrator has arrived at the awarded amount. This would mean that the award as a whole cannot be enforced under Section 36 of the Act. FAO 115/2010 Page 22 of 25 As held by this court in National Aluminum Co. Ltd. (SCC p. 546 para 10)...." (emphasis supplied)

17.1 A close scrutiny of the observations would show that the court was conscious of the fact that the net figure payable under the award had been arrived at "after an adjustment of accounts" and, therefore, the court enforcing the award under Section 36 could not have gone behind the "processes" by which the amount was arrived at. The fact situation obtaining in this case, cannot be extended to a situation where the claims are severable and not interconnected. The executing court would have to examine such an application filed under section 36 before proceeding to enforce the award where challenge vis-a-vis some claims stands rejected in a petition under Section 34, while the others are still at large as to ascertain whether they are severable or inextricably interconnected. Where claims can be sustained on a stand-alone basis, there is no reason as to why a court cannot execute the award vis-a-vis those claims in respect of which a challenge laid in Section 34 proceedings is fully and completely adjudicated upon. In coming to this conclusion, we may remind ourselves dicta of the judgment of the Supreme Court in the case of Ambika Quarry Works vs State of Gujarat & Ors. (1987) 1 SCC 213 para 18 & 19 at page 221 andUttaranchal Road Transport Corpn. & Ors. vs Mansaram Nainwal (2006) 6 SCC 366 at page 370 that judgments of the Supreme Court have to be read and understood in the context of what they decide, and not what logically follows from a decision. Each fact may lend a different weave to the final texture. [Also see Quinn vs Leathem (1901) A.C. 495]

18. Having regard to our discussion above, our conclusion are as follows: (i) There is no limitation in the court issuing a limited notice at the stage of admission of a petition under Section 34 of the 1996 Act provided the grounds which are raised and argued are rejected by a reasoned order. FAO 115/2010 Page 23 of 25 (ii) There is complete autonomy conferred under the 1996 Act on the party aggrieved, to prefer an appeal under Section 37 against grounds which the court rejects either at that stage or at the stage when the petition under Section 34 is finally disposed of.

(iii) In view of our conclusion arrived at, as indicated in sub-clause (ii) above, what would necessarily follow is that the aggrieved party can maintain more than one appeal.

(iv) A fresh cause of action would arise at both stages, i.e., at the initial stage and at the final stage when the petition under Section 34 of the 1996 Act is finally disposed of as at each stage the award would get impacted. (v) If an application is filed in the executing court, pursuant to rejection of some grounds, in Section 34 proceeding, the executing court would have to discern as to whether that part of the order of the court pertains to those claims which can be sustained on a stand-alone basis. If the executing court comes to such an conclusion, undoubtedly, the execution proceedings can proceed against that part of the order subject, however, to intercession by an appellate court.

19. Before we conclude, we must say it appears that in the Simplex case, the Division Bench was persuaded to come to a conclusion which it did, by reason of the fact that limited notice would involve multiple appeals and thus delay in the ultimate conclusion of the proceedings at hand. Apart from the fact that our deliberations above have had us come to the conclusion that there is no prohibition in 1996 Act in a court issuing limited notice, in our opinion, the aspect of delay has also to be examined from the point of view of the beneficiary of the award as well. The beneficiary of the award is keen to secure its fruits, as soon as possible, after the award is passed. If a court, therefore, to achieve expedition, at the first hearing itself, rejects certain grounds which may pertain to, in a given case, to specific claims, and if, those FAO 115/2010 Page 24 of 25 claims are severable, it would undoubtedly meet to the optimum goal of expedition as, execution of those claims would follow immediately. The spectre of having objections pending on one or more grounds without the beneficiary of an award having secured, if not wholly, some part of the benefits of the award, undoubtedly reflects poorly on the process of arbitration, which was conceived by its propounders as a quick and effective alternate mode of dispute resolution before a judge of ones own choice. In our opinion, in the long run, the view we have taken should sub-serve the interest of parties.

20. The reference is disposed of bearing in mind our discussion above. The appeal be placed before the roster Bench for appropriate orders.

RAJIV SHAKDHER, J

ACTING CHIEF JUSTICE

SANJAY KISHAN KAUL, J

SEPTEMBER 12, 2012

kk

FAO 115/2010 Page 25 of 25

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