R IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE2D DAY OF JUNE2015PRESENT THE HON’BLE MR. JUSTICE N.KUMAR AND THE HON’BLE MR. JUSTICE B.SREENIVASE GOWDA WRIT PETITION No.49557/2013 (GM-RES) BETWEEN : M/s Crompton Greaves Ltd., A Company registered under the provisions of the Indian Companies Act, 1913, having its registered office at CG House, 6th Floor, Dr.Annie Besant Road Worli, Mumbai-400 030. And also its location at 10A, Jigani Industrial Area, Anekal Taluk, Bangalore Rural District, Bangalore-562 106 Rep. by its General Manager, Corporate Legal & GPA Holder, Mr.Sushant Arora. ...PETITIONER (By Sri Udaya Holla, Senior Counsel a/w Sri Vivek Holla, Adv.) 2 AND :
1. M/s Annapurna Electronics No.1/4, B1, NGEF Guest House, Near ESI Hospital Road, Krishnaiahna Palya, Bangalore-560 038, Rep. by its Proprietor. The Karnataka Industry Facilitation Council Bangalore, Khanija Bhavana, High Grounds, Bangalore-560 001 By its Chairman/the Commissioner for Industrial Development and Director of Industries Commerce, Bangalore. President, Karnataka Small Scale Industrial Association (KASSIA), No.2/106, 17th Cross, Magadi Chord Road, Vijayanagar, Bangalore-560 040. The General Manager, SLBC, Syndicate Bank, Regional Office No.69, 9th Main, III Block, Jayanagar, Bangalore-560 011. The Executive Director (Finance) Karnataka State Financial Corporation, Recovery-II, Head Office, KSFC Bhavan, No.1/1, Thimmaiah Road, Bangalore-560 052. …RESPONDENTS (By Sri M.G.S.Kamal, Adv. for R-1; R-2 to R-5 served.) 2.
3. 4.
5. 3 This Writ Petition is filed under Articles 226 & 227 of Constitution of India, praying to set aside the order/judgment dated 20.09.2013, passed by the Hon'ble Prl. City Civil & Sessions Judge at Bangalore [Bangalore Dist.]. in Arbitration Suit No.44/2008, vide Ann-P. hearing this day, N.Kumar J., made the following: This Writ Petition coming on for preliminary
ORDERThis Writ Petition is preferred challenging the order dated 20.09.2013 passed by the Principal City Civil and Sessions Judge at Bangalore in Arbitration Suit No.44/2008 dismissing the suit for non-compliance of the order dated 20.08.2013 passed in W.P. No.12465/2010 by this Court.
2. The petitioner is a Public Limited Company registered under the provisions of the Indian Companies Act, 1913. The petitioner is carrying on the business inter alia, of developing, manufacturing and marketing Telecom products. Respondent No.1 M/s. Annapurna 4 Electronics, a proprietary firm situated at Bangalore, is carrying on the business inter alia of providing telecom related services and has its Offices at various strategic locations for the purposes of servicing of C-Dot Cards and test equipment procured from different officers of C- DOT and reputed manufacturers. By an agreement dated 14th May, 2004 respondent No.1 agreed to provide services to the petitioner by way of providing its infrastructure and personnel to support the petitioner in execution of the Work Order dated 29th April, 2002 awarded by M/s. Bharath Sanchar Nigam Limited in favour of the petitioner. For the services so rendered, the petitioner was required to reimburse 76% of the revenue collected by respondent No.1. However, even before the BSNL Work Order could be executed in full, respondent No.1 stopped providing the necessary services. Thus disputes arose between the parties relating to their respective rights and obligations under 5 the said agreement dated 14th May, 2004. The respondent claims that it is a “Supplier” under the provisions of the repealed Act called “the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. Accordingly, the 1st respondent initiated proceedings under the provisions of Section 9 of the said repealed Act by approaching the Karnataka Industry Facilitation Council. The said Act was repealed from 2nd October, 2006 and substituted by Micro, Small and Medium Enterprises Development Act, 2006 (for short hereinafter referred to as the `MSMED’ Act).
3. In the said proceedings, the petitioner was called upon to file its written statement, which was duly filed. The petitioner raised a specific stand in the said objection that the 1st respondent was not covered either under repealed Act or under the new Act. However, 6 overruling the said objection an award came to be passed on 14th July, 2008.
4. Aggrieved by the said award, the petitioner filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (for short hereinafter referred to as ‘the Arbitration Act’) before the Civil Court, which is numbered as Arbitration Suit No.44/2008. In the said Arbitration suit, the respondent No.1 filed an application under Section 19 of the MSMED Act praying that the Arbitration Suit is not maintainable in view of non deposit of 75% of the arbitral amount by the petitioner. The petitioner filed its reply to the above said Interim application. After hearing the said application, by an order dated 01.04.2010, the learned City Civil Judge, Bangalore City ordered that the petitioner shall deposit 75% of the award amount on or before 12th 7 April, 2010 failing which, further orders would be passed to reject the Arbitration suit.
5. Aggrieved by the said order, the petitioner filed a writ petition before this Court in W.P. No.12465/2010. This Court by an order dated 16.04.2010, which was a consent order directed the petitioner herein to furnish a Bank guarantee to the tune of 75% of the award amount. The said order was challenged by the 1st respondent in Writ Appeal No.2432/2010. The Division Bench of this Court, by its order dated 29th July, 2010 set-aside the order dated 16.04.2010 passed by the learned Single Judge and requested the learned Single Judge to reconsider the matter afresh in accordance with law. After reconsideration, by an order dated 20.08.2013, the learned Single Judge dismissed the writ petition. 8 6. Against the said order of dismissing the writ petition, petitioner preferred writ appeal No.5780/2013 challenging the order of the learned Single Judge. In the meanwhile, respondent No.1 filed one more application in Arbitration suit No.44/2008 for dismissal of the suit for non-compliance of the requirement of 75% deposit. Though the learned City Civil Judge was informed about the already filed W.A. No.5780/2013 and the fact that it was pending for admission before the Hon’ble High Court, the impugned order came to be passed dismissing the arbitration suit for non- compliance of the order passed by this Court in W.P. No.12465/2010. Aggrieved by the said order, this writ petition is filed.
7. The learned Senior Counsel appearing for the petitioner, assailing the impugned order urged that the award, which is the subject matter of the proceedings 9 before the Civil Court under Section 34 of the Arbitration Act is one without jurisdiction. It is void as the statutory requirements as contemplated under the Arbitration Act is not followed. That is why there was no obligation on the part of the petitioner to deposit 75% of the award amount. However, by virtue of the interim order passed by this Court on 25.04.2014 a sum of Rs.6,93,00,000/- has been deposited before this Court. This is in addition to the amount of Rs.4,07,00,000/- provided by way of Bank Guarantee issued by Union Bank of India, Mumbai. The said amount, in terms of the order, has been kept in Fixed Deposit in a Nationalized Bank. Therefore, he submits that as the requirement as contemplated under Section 19 of the MSMED Act has been complied with, the impugned order requires to be set-aside. The application under Section 34 is to be restored to its original file and the said application should be decided 10 on merits. He submits that as the Civil Court has not passed any order on merits rejecting the application under Section 34 of the Arbitration Act, no appeal lies under Section 37 of the Arbitration Act. The only remedy available to the petitioner is to challenge the said order by way of a writ petition and therefore, the writ petition is maintainable.
8. Per contra, the learned counsel for the 1st respondent submitted that the impugned order is passed under Section 34 of the Arbitration Act. The reason for dismissal of the application is immaterial. Once an order is passed by a Civil Court, in exercise of the power conferred under Section 34 of the Arbitration Act, a statutory appeal is provided under Section 37 of the Arbitration Act, then writ petition is not maintainable. Even otherwise, he submits that if the application is to be restored by setting-aside the 11 impugned order, the petitioner should be directed to pay 75% of the amount due as on the date of restoration and if that is taken into consideration, the amount already deposited would not satisfy the requirement of Section 19 of the MSMED Act. Therefore, the impugned order cannot be set-aside and no order of restoration of the application could be passed.
9. In the light of the aforesaid facts and rival contentions, the points that arise for our consideration in this writ petition is as under: (1) Whether a writ petition is maintainable against the order passed dismissing the petition under Section 34 of the Arbitration Act for failure to comply with the requirements of Section 19 of the MSMED Act?. 12 (2) If such a writ petition is maintainable, whether a case for interference of the impugned order is made out?. Point No.(1) 10. The Parliament enacted the Micro, Small and Medium Enterprises Development Act, 2006 for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto which came into force from 2.10.2006. It repealed the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. Chapter V of the MSMED Act deals with delayed payments to micro and small enterprises. Section 15 of the MSMED Act prescribes a maximum of 45 days for payment of the amounts due to the supplier under the Act. In the event the amount is 13 not paid within the aforesaid period, Section 16 of the MSMED Act provides for payment of compound interest with monthly rests to the supplier. Section 17 provides for recovery of the amount due. Section 18 provides for the forum where the claim for recovery of the amount could be initiated. In fact, sub-section (5) of Section 18 mandates that the reference under Section 18 to the Micro and Small Enterprises Facilitation Council shall be decided within a period of 90 days from the date of making such a reference. Once the said Council passes a decree or an order or an award, Section 19 of the MSMED Act provides for an appeal. However, keeping in mind the object with which the Act was enacted, deposit of 75% of the amount in terms of the decree, award or order, is made a condition precedent. The proviso to Section 19 makes a provision for payment of a portion of the amount so deposited to the supplier. 14 Section 20 provides for establishment of Micro and Small Enterprises Facilitation Council.
11. Therefore, under the scheme of the MSMED Act once an award is passed, though the said award or order could be challenged by filing an application, deposit of 75% of the amount in terms of the decree, is made a condition precedent as is clear from Section 19 which reads as under : - “19. Application for setting aside decree, award or order.—No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the 15 other order in the manner directed by such court: Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose”.
12. In fact emphasizing the importance of this enactment, the Apex Court in the case of SNEHADEEP STRUCTURES PRIVATE LIMITED vs MAHARASHTRA SMALL SCALE INDUSTRIES DEVELOPMENT CORPORATION LIMITED [(2010) 3 SCC34 observed as under :- “47. The requirement of predeposit of interest is introduced as a disincentive to prevent dilatory tactics employed by the buyers against 16 whom the small-scale industry might have procured an award, just as in cases of a decree or order. Presumably, the legislative intent behind Section 7 was to target buyers, who, only with the end of pushing off the ultimate event of payment to the small-scale industry undertaking, institute challenges against the award/decree/order passed against them. Such buyers cannot be allowed to challenge arbitral awards indiscriminately, especially when the section requires predeposit of 75% interest even when appeal is preferred against an award, as distinguished from an order or decree.” 13. Sub-section (3) of Section 18 makes the provisions of the Arbitration Act apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of 7 of the Act. In view of the aforesaid provision, an application to be filed for setting aside the decree, order or award is 17 under Section 34 of the Arbitration Act to a Court as defined under the Arbitration and Conciliation Act, 1996. It is in pursuance of the aforesaid provision, being aggrieved by the award passed by the Micro and Small Enterprises Facilitation Council, the petitioner filed an application under Section 19 of the MSMED Act read with Section 34 of the Arbitration Act before the Civil Court seeking for setting aside of the award on the grounds mentioned in the said application. In view of Section 19(1) of the MSMED Act, the petitioner ought to have deposited 75% of the amount awarded which was not done. Therefore, on an application filed by the respondent, the Court directed the petitioner to deposit 75% of the amount awarded. Challenging the said order, the petitioner preferred a Writ Petition. In spite of that order, the amount was not deposited. Therefore, the impugned order came to be passed dismissing the arbitration suit on the ground of non-compliance of the 18 High Court order in the Writ Petition. It is that order which is now challenged in this Writ Petition. If the impugned order is to be treated as an order under Section 34 of the Arbitration Act, Section 37 provides for an appeal to this Court. In that view of the matter, normally this Court would not decline to entertain a Writ Petition under Article 226 of the Constitution on the ground of availability of an alternate remedy. However, Writ Petition is not a bar. This point has been agitated in various Courts both under the present Arbitration Act and also under the repealed Arbitration Act.
14. A Division Bench of the Bombay High Court in the case of STATE OF MAHARASHTRA AND ANOTHER vs RAMDAS CONSTRUCTION CO AND ANOTHER [2006 (6) MH.L.J.
678 dealing with rejection of a petition filed under Section 34 (3) of the Arbitration 19 Act on the ground of bar by limitation was called upon to decide whether an appeal under Section 37 of the Arbitration Act is maintainable. Dealing with the said question, it was held as under : “6. .It is not in dispute that by the impugned order the lower Court has dealt with the issue relating to the delay in filing application for setting aside the award, as to whether such delay should be condoned and whether the application for setting aside the award should be entertained. The issue as to whether the arbitral award should be set aside or not has not been dealt with under the impugned order.
7. Section 37(1) clearly provides that an appeal shall lie from the orders passed either granting or refusing to grant any measure under Section 9, or setting aside or refusing to set aside an arbitral award under Section 34 of the Act. Undisputedly, therefore, whenever there is order passed either for setting aside of the award or refusing to set aside the arbitral 20 award and such order is passed in exercise of powers under Section 34, the same would be appealable under Section 37(1)(b) of the Act. In the case in hand, since it is not in dispute nor it can be disputed that the impugned order does not deal with the issue as to whether the arbitral award should be set aside or not and it merely deals with the issue in relation to the delay in filing an application for setting aside of the award, evidently the impugned order cannot be said to be an appealable order within the meaning of the said expression under Section 37(1)(b) of the Act.
8. Section 34(1) of the Act provides that recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3). In other words an application for setting aside of award should satisfy the requirements of Subsection (2) as well as Sub-section (3) of Section 34 of the Act. Merely because the application satisfies the requirements of any 21 one of Sub-sections (2) and (3) of Section 34 of the Act, it cannot be said that it is a valid and lawful application under Section 34(1) of the Act. Such application has necessarily to satisfy the requirements of both the Sub- sections.
9. Sub-section (3) of Section 34 of the Act provides that an application for setting aside may be made after three months have elapsed from the date on which the party making such application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal, provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months, it may entertain the application within a further period of thirty days, but not thereafter. This provision of law expressly reveals that the legislature has provided a specific period of limitation for filing an application for setting aside of the award 22 and simultaneously the Court has been given discretion to extend such period only by thirty days, and not beyond the said period of thirty days. The provision is very clear in that regard. However, the scope of enquiry under Sub-section (3) is restricted to the cause for delay in filing the application but it does not relate to the merits of the application for setting aside of the award. Being so, a order which is to be passed in exercise of powers under Sub-section (3) of Section 34 of the Act cannot extend to the subject matter of the application for setting aside of the award but has to restrict to the aspect of delay in filing such application only. Such an order is not contemplated to be an appealable order within the meaning of the said expression under Section 37 of the Act. It is very clear from the fact that Section 37 refers to the orders dealing with the aspect of setting aside or refusing to set aside an arbitral award. It does not refer to the proceedings preceding the enquiry in relation to the issue of setting aside 23 or refusing to set aside an arbitral award. The subject-matter of delay in filing an application and the condonation thereof relates to the proceedings preceding the enquiry for setting aside or refusing to set aside an arbitral award. Once it is clear that Section 37(1)(b) does not contemplate any order passed in such proceeding relating to the matter preceding the enquiry in relation to setting aside or refusing to set aside an arbitral award, such an order cannot be considered as an appealable order within the meaning of the said expression under Section 37 of the Act.
10. Undoubtedly the impugned order while rejecting the application for condonation of delay, clearly observes: “Consequently, application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the award is also rejected being barred by time.” 24 In other words, the Court has not dealt with the application for setting aside of the award on merits and the same has been disposed of solely as a consequence of rejection of the application for condonation of delay and there has been no enquiry as regards the rights of the parties on the issue of setting aside of the award. The appealable order which is contemplated for the purpose of exercise of appellate jurisdiction is the one which deals with the merits of the case in relation to the claim for setting aside or refusing to set aside an arbitral award. As already stated above, the appellate powers under Section 37 are not in relation to the proceedings which precedes the enquiry regarding setting aside or refusing to set aside an arbitral award. Being so, the consequence of the order of dismissal of the application for condonation of delay cannot itself amount to an appealable order under Section 34(1) for the purpose of appeal under Section 37(1) of the Act.” 25 15. The Lucknow Bench of the Allahabad High Court in the case of UNION OF INDIA AND OTHERS vs RADHA KRISHNA SETH AND ANOTHER [2006 (2) ARBLR441 (ALL) again dealing with an order passed under Section 34 (3) of the Arbitration Act held as under:- “18. Rejection of application under Section 5 of the Limitation Act for condonation of delay can be challenged only in revision. No appeal lies against the impugned order because under Section 37 of the Act an appeal lies against the following orders only: (a) granting or refusing to grant any measure under Section 9; (b) setting aside or refusing to set aside an arbitral award under Section 34. An appeal shall also lie to a court from an order of the arbitral tribunal: (a) accepting the plea referred to in Sub- section (2) or Sub-section (3) of Section 16; or 26 (b) granting or refusing to grant an interim measure under Section 17.” 16. Per contra, the learned counsel for the first respondent relying on a judgment of the Apex Court in the case of ESSAR CONSTRUCTIONS vs N.P. RAMA KRISHNA REDDY [(2000) 6 SCC94 held as under : “19. The section makes it clear that limitation may be a ground for rejecting a suit already instituted, an appeal preferred and, in the context of this case, most importantly, an application already made. What is before the Court is the substantive application when the question of limitation is decided.
20. Limitation, like the question of jurisdiction may be provided for in a separate statute but it is a defence available in the suit, appeal or application. When the defence is upheld it is the suit or the appeal or the application itself which is dismissed. Of course, the question as far as appeals are concerned may be debatable having regard to 27 the provisions of Order 41 of the Code of Civil Procedure relating to admission of appeals as an appeal may not be admitted at all because it is barred by limitation. We express no final view in the matter. But there is no corresponding requirement for admission of applications or suits after overcoming the barriers of limitation. A suit which is dismissed on the ground of limitation may be appealed against as a decree. By the same token an application under Section 30 which is dismissed on the ground of limitation is a refusal to set aside the award.
21. Section 39 (1)(vi) of the Arbitration Act, 1940 does not indicate the grounds on which the court may refuse to set aside the award. There is nothing in its language to exclude a refusal to set aside the award because the application to set aside the award is barred by limitation. By dismissing the application albeit under Section 5, the assailability of the award is concluded as far as the Court rejecting the application is concerned. Ultimately therefore, 28 it is an order passed under Section 30 of the Arbitration Act though by applying the provisions of the Limitation Act.
31. Besides Madanlal case was decided in the context of the Indian Limitation Act, 1908 when the provisions of Section 5 were inapplicable to applications under Section 30 of the Arbitration Act. The period prescribed under Article 158 of the 1908 Act for challenging an award was absolute. It was therefore held that an objection filed more than 30 days after the notice “could not be treated as an application for setting (aside)(sic), the award for it would then be barred by limitation. The position thus is that in the present case there was no application to set aside the award on grounds mentioned in Section 30 within the period of limitation.” It was also observed that even the Court could not set aside an award suo motu under 29 Section 30 beyond the period of limitation for if that were so the limitation provided under Article 158 of the Limitation Act would be completely negatived.
32. Apart from the decision not being relevant to the issue before us, it is entirely distinguishable in law. Section 5 of the Limitation Act, 1963 is now applicable to all applications under the Arbitration Act. Provided that the delay is sufficiently explained, there is no such compulsion on the Court to reject an application filed beyond the prescribed period of limitation nor is there any question of the prescribed period of limitation being negatived by entertaining an application under Section 30 beyond the period of limitation.
33. We therefore conclude that the order of the Senior Civil Judge rejecting the application of the respondent under Section 5 was appealable under the 1940 Act. The application under Section 115 of the Code 30 therefore did not lie. Despite the fact that this issue was neither raised before nor considered by the High Court, we cannot take a blinkered view of the situation in law. Had the issue been raised, it would have been open to the High Court to have converted the revision petition into an appeal.
34. To set aside the order of the High Court on this technical ground and to remand it for a reconsideration of the sufficiency of the cause shown by the respondent, would be an unnecessary exercise. In the view we have taken, the High Court had the jurisdiction to reappraise the evidence and condone the delay. It has given its reasons for doing so. It cannot, in the circumstances, take a different view on the merits of the respondent’s case on the question of delay if the matter were to be remanded. In our opinion, this would be an appropriate case for us to exercise our powers under Article 142 of the Constitution and decide on the merits of the sufficiency cause shown”. 31 17. The Lucknow Bench of the Allahabad High Court in the case of U.P. CO-OPERATIVE SUGAR FACTORIES FEDERATION LIMITED, LUCKNOW AND OTH`ERS vs M/S P.S.MISRA, GORAKHPUR AND ANOTHER [AIR2003ALLAHABAD123 held as under:- “18. Learned District Judge refused to entertain the application under Section 34 of the Act on the ground that in view of Clause33 of the agreement, jurisdiction of Lucknow Courts stands excluded and construed it to be a clause ousting the jurisdiction of Lucknow Courts and confining it to the jurisdiction of Gorakhpur Courts and the application of the appellants has been rejected. In our opinion, the view taken by the learned District Judge cannot be upheld, as the jurisdiction clause, for the reasons stated above, cannot be construed to mean that it ousts the jurisdiction of Lucknow Courts. 32 19. Another argument was raised against the maintainability of the appeal by the learned counsel for respondent No.1 on the ground that the present judgment and order is an order by means of which the application of the appellants moved under Section 34 has been rejected for want of jurisdiction and, therefore, in view of the provisions of Section 37 of the 1996 Act, the appeal would not be maintainable, as no such appeal is envisaged under the said provision. We are unable to accept the submission made by the learned counsel for respondent No.1 in view of the specific provisions of Section 37 of the Act. Section 37 of the Act, occurring in Chapter IX of the Act, deals with appeals and provides as under :
37.
"1. An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely- 33 (a) granting or refusing to grant any measure under Section 9; (b) setting aside or refusing to set aside an arbitral award under Section 34. (2) An appeal shall also lie to a Court from an order of the arbitral Tribunal- (a) accepting the plea referred to in sub Section (2) or Sub-section (3) of Section 16; or (b) granting or refusing to grant an interim measure under Section 17, (3) No second appeal shall lie from an order passed in appeal under this section but nothing in this section shall affect or take away any right to appeal to the Supreme Court.
20. Sub-section 1 (b) of Section 37 specifically makes such an order appealable, which either set aside or refuse to set aside the arbitration award under Section 34. The rejection of the application moved under Section 34 of the Act of the appellants would fall within the aforesaid clause and it would be immaterial 34 as to whether the application under Section 34 has been rejected for want of jurisdiction or otherwise on merit. The said provision does not clarify anywhere that if an application under Section 34 is rejected on merits alone, only then the appeal would lie. The ground of rejection may be multifarious but it is only the rejection of application, which would give a right to the appellant to file an appeal. The argument of the learned counsel for respondent No.1 attempts to create artificial classification with respect to the orders passed on the application under Section 34 which classification is neither provided in the aforesaid provisions of the Act nor can be imported nor infused in the specific provisions. The application of the appellants having been rejected, the appellants have rightly filed an appeal under Section 37 of the Act.” 18. The Madhya Pradesh High Court in the case of BISLERI INTERNATIONAL PRIVATE LIMITED AND OTHERS vs SUN PETPACK JABALPUR PRIVATE35LIMITED AND ANOTHER [2010 (1) MPHT200]. dealing with the case arising under the Act itself after referring to Sections 34 and 37 of the Arbitration Act, held as under : - “It is apparent that under Section 37(1)(b) of the Act of 1996 every order is appealable setting aside or refusing to set aside an arbitral award under Section 34 of the Act of 1996. The effect of non-compliance of order passed under Section 19 of the Act 2006 in the instant case is that main application under Section 34 of the Act of 1996 stands dismissed in which prayer was made to set aside the award. Such an order in our considered opinion would be appealable within provision of Section 37(1)(b) of the Act of 1996. Refusal may be on some other ground also. The matter is not res integra, the Apex Court in Essar Constructions v. N.P.Rama Krishna Reddy (supra), has held that the outcome of an order dismissing an application for condonation of delay in filing an 36 application under Section 30, Arbitration Act, 1940 for setting aside an award, held, in effect is that the prayer for setting aside the award has been refused on the ground of delay, such an order is ultimately, therefore, an order under Section 30 and so appealable under Section 39 of the Arbitration Act, 1940. We do not find any ground under the scheme of the new Act, 1996 to hold that such order would not be appealable under Section 37.” 19. From the aforesaid judgments, we find two divergent views on the subject. The first view is that, if an application under Section 34 is dismissed under Section 34 (3) of the Arbitration Act or under the old Arbitration Act if an application under Section 5 of the Limitation Act is dismissed, consequently the award passed by the arbitrator is affirmed, it is not a case of the Court either setting aside the award or refusing to set aside the award on merits and, therefore, the 37 statutory appeal provided under the statute is not attracted. Such an order is to be challenged by way of a revision or a Writ Petition. The other view is, whatever may be the reason for not entertaining an application under Section 34 of the Act, the ultimate result is the application is dismissed and the award passed by the arbitrator stands affirmed. Therefore, an appeal lies under Section 37 of the Act. In this background, let us look into Section 34 of the Act.
20. Section 34 of the Arbitration and Conciliation Act, 1996 reads as under : - “34 Application for setting aside arbitral award. — (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). 38
2) An arbitral award may be set aside by the Court only if— (a) the party making the application furnishes proof that— (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions 39 on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation. —Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. 40 (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral Tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub- section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral Tribunal will eliminate 41 the grounds for setting aside the arbitral award.” 21. Sub-section (2) of Section 34 of the Arbitration Act provides that, an arbitral award may be set aside by the Court only if the party making the application furnishes proof of the grounds set out in the said application. Therefore, only if the aforesaid statutory ground is made out, the Court gets the jurisdiction to set aside the award. Otherwise the question of setting aside the award would not arise. Sub-section (3) of Section 34 provides the period of limitation within which an application for setting aside the said award is to be made. Even if such an application is made the Court is to be satisfied that the applicant was prevented by sufficient cause from making the application, within a period of three months, to condone the delay. The Court has the discretion to 42 condone the delay and entertain the application and decide the application on merits. Then the question of setting aside the award, on the grounds mentioned under sub Section (2) arises. If the delay is not condoned, the application for condonation of delay is dismissed, consequently the application under sub– section (1) of Section 34 of the Arbitration Act, also stands dismissed. The resultant position is that the court is declining to set aside the award. The other scenario is that if the application is not made within the prescribed period, an application for setting aside the award under Section 34 is not maintainable, and consequently the application stands dismissed.
22. Section 37 of the Arbitration Act provides for a statutory appeal. It reads as under:- “37. Appealable orders.— (1) An appeal shall lie from the following orders (and from no others) to the Court 43 authorised by law to hear appeals from original decrees of the Court passing the order, namely:— (a) granting or refusing to grant any measure under section 9; (b) setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a Court from an order of the arbitral tribunal.— (a) accepting the plea referred to in sub- section (2) or sub-section (3) of section 16; or (b) granting or refusing to grant an interim measure under section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.
23. The opening words of sub-section (1) of Section 37 of the Arbitration Act makes the intention of the legislature clear, without any ambiguity. Appeal is a statutory remedy. A right of appeal has to be construed 44 strictly. The right of appeal which is a statutory right can be conditional or qualified. The right of appeal being a creature of the statute, its scope must be determined by reference to the provisions of the statute conferring it. The appellate Court can exercise only such powers as are confided in it. Beyond what is provided, there is no right of appeal. Sub-section (1) sets out the orders from which the appeal lies. It does not stop there. It also explicitly states an appeal shall not lie from no other orders. Section 37 refers to the orders passed setting aside or refusing to set aside an arbitral award. It does not refer to the proceedings preceding the enquiry in relation to the issue of setting aside or refusing to set aside an arbitral award. Therefore, while interpreting Section 37, this legislative mandate has to be kept in mind. When the object of the Arbitration Act is to minimize judicial intervention in an arbitration proceedings and the award passed, in such 45 proceedings, by providing a remedy by way of statutory appeal, they did not want to open the flood-gates of litigation.
24. Clause (b) of sub-section (1) of Section 37 of the Arbitration Act makes it clear that, an appeal shall lie from an order setting aside or refusing to set aside an arbitral award under Section 34. A conjoint reading of Sections 34 and 37 of the Arbitration Act makes it clear that, a Court can decline to set aside an arbitral award if the applicant fails to furnish proof of the grounds mentioned in sub-section (2) of Section 34 or if the application is not made within the time prescribed under sub-section (3) of Section 34. In either of these circumstances, an appeal under Section 37 of the Arbitration Act can be made. Section 37 of the Arbitration Act does not apply to a case where a pre- deposit of a portion of the amount awarded is not made 46 and consequently the application is dismissed. Because such an order would not fall either under Section 34 (2) or Section 34 (3) of the Arbitration Act. Only against the order passed under Section 34 of the Arbitration Act, appeal lies under Section 37. The Court is declining to entertain an application as the statutory requirement under Section 19 of the MSMED Act is not complied with. Having regard to the language employed in Section 19 of the MSMED Act, no application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre shall be entertained by any Court unless the appellant has deposited with it 75% of the amount in terms of the decree, award, as the case may be. Therefore, there is a threshold bar for entertaining an application under Section 19 of the MSMED Act read with Section 34 of the Arbitration Act. If the Court declines to entertain the application for non-compliance of the said statutory 47 requirement, the question of such a Court refusing to set aside the arbitral award under Section 34, i.e., the grounds mentioned under Section 34 (2) or 34(3) would not arise. Therefore, an order passed dismissing an arbitration suit for non-compliance of Section 19 would not fall within the mischief of Section 34 of the Arbitration Act. Though the effect of non-compliance of an order passed under Section 19 of the MSMED Act is that the main application under Section 34 of the Arbitration Act stands dismissed in which prayer was made to set aside the award, it cannot be construed as an order passed under Section 34 of the Arbitration Act. For the Court to pass an order under Section 34 of the Arbitration Act, the Court should first entertain the application. It should assume jurisdiction over the said matter. Then only can it pass an order under Section 34 of the Arbitration Act. When the threshold bar is entertaining the application itself, for non-payment of 48 the amounts mentioned in Section 19 (1) of the MSMED Act , the question of the Court exercising power under Section 34 of the Arbitration Act would not arise. In that view of the matter, the contention that the petitioner has an alternative and efficacious remedy by way of a statutory appeal under Section 37 of the Arbitration Act and accordingly the Writ Petition is not maintainable, is without any substance. In fact, the impugned order in this case reads as under : - “Sri DGP files memo of appearance for R4. Sri RL for NSB/for petitioner present, compliance of the order passed by the Hon’ble High Court W.P. 12465/10 dated 20.8.2013 is not complied. Hence the appeal is dismissed for non-prosecution”.
25. Therefore, this is not a case where the Court declined to set aside or refused to set aside an arbitral award under Section 34 of the Arbitration Act on the 49 ground that the applicant failed to furnish proof of the grounds mentioned in sub-section (2) of Section 34 or on the ground of bar of limitation as provided under sub-section (3) of Section 34 and, therefore, the Writ Petition is maintainable. POINT No.(2) 26. The arbitral award directs the respondent to pay the total dues of Rs. 5,19,37,281/- with simple interest at 6% within 90 days from the date of issue of the order i.e., before 14th day of October 2008 failing which the interest shall be compounded with monthly rests until the date when the dues identified under these proceedings is paid in full, to the petitioner as per MSMED Act. The petitioner preferred an application under Section 19 of the MSMED Act read with Section 34 of the Arbitration Act on 13.10.2008. The petitioner ought to have deposited a sum of Rs.6,28,74,436/- on 50 the date of application. Admittedly, the said amount was not paid. Now, it is not in dispute that in terms of the order passed in W.P. No.5780/2013 on 25.4.2014 a sum of Rs.6,93,00,000/- has been deposited before this Court in addition to the amount of Rs.4,07,00,000/- provided by way of bank guarantee with Union Bank of India, Mumbai. The said bank guarantee is kept alive. Thus, the said requirement of law is now fulfilled. The learned counsel for the respondent contends that, when the said amount was not deposited along with the application, in the eye of law there was no application at all. Even if this Court were to set aside the impugned order and direct restoration of the application, then the petitioner has not deposited 75% of the amount due in terms of the award. In other words, from the date of filing of the application till today for nearly 7 years interest is accumulated and 75% of interest also should be deposited. If the application were to be restored 51 today in view of Section 34(1) of the Arbitration Act as interpreted by the Apex Court the question of condonation of delay in filing the application under Section 34(1) of the Arbitration Act beyond the period prescribed under Section 34 (3) of the Arbitration Act would not arise and therefore, he submits that the aforesaid reasons either for an order of restoration to be passed and even passed it would be barred by limitation.
27. We do not find any substance in this contention.
28. The application for setting aside the award is in time. Because the requirement of Section 19(1) of the MSMED Act is not complied, the application is not entertained. Once the requirement is complied with it dates back to the date of application. If the application had been entertained after complying with the 52 requirement of Section 19(1) of the MSMED Act, if for disposal of such application considerable time has been spent, the petitioners were not expected to pay 75% of the interest accrued from time to time to make the said application maintainable and therefore, the contention that the amount already deposited would not fulfill the requirement of Section 19(1) of the MSMED Act, cannot be accepted.
29. The effect of setting aside the order passed by the trial Court coupled with the fact that the amount as prescribed under Section 19(1) of the MSMED Act which is now deposited, the application filed on 13.10.2009 is filed well within time and the Court has to consider the said application on merits and in accordance with law.
30. The petitioner is contending that the award, which is impugned before the Civil Court, is an award passed without jurisdiction void-ab-initio and the 53 prescription of the Act is not followed, therefore, that is a matter to be inquired into by the Civil Court. In that view of the matter, the impugned order is to be set aside and the application filed under Section 19(1) of the MSMED Act read with Section 34(1) of the Arbitration Act is to be restored. Hence, we pass the following order:
ORDER(a) The writ petition is allowed. (b) The impugned order is hereby set aside. (c) The application filed under Section 19(1) of the MSMED Act read with Section 34(1) of the Arbitration Act is restored to its original file. (d) As parties are agitating in various forums for the last seven years, without going into the merits of the claim, it is proper in the facts of this case, having regard to the object with which the Act is enacted that the Civil Court 54 has to take up this matter out of turn, hear the matter on day to day basis and shall decide the application on merits and in accordance with law within three months from the date of appearance of the parties. The parties shall appear before the Civil Court on 22.06.2015. It is made clear the trial Court shall decide the case on merits and in accordance with law un- influenced by any of the observations made by this Court in the aforesaid proceedings. No costs. Sd/- JUDGE Sd/- JUDGE SPS/ckl/VK