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Wednesday, April 26, 2017

whether an intra-Court Letters Patent Appeal under clause 15 of the Letters Patent of High Court at Calcutta can be maintained against an order passed by the Single Judge on an application for condonation of delay filed along with the petition (for setting aside an Arbitration Award) under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’)?= No appeal is provided against an order passed by the Court of competent jurisdiction condoning the delay in filing the petition under Section 34 of the Act as such. - While parting, we may take note of the order dated 7th November, 2016 passed by this Court directing the Appellant to deposit Rs. 5,00,00,000/- (Rupees Five Crores) in the Registry of this Court and further to invest the same in a short term fixed deposit. We are informed that the Appellant has complied with the said order and deposited the amount in the Registry. That has been invested by the Registry. The said amount along with interest accrued thereon be transferred to an escrow account linked to the proceedings pending before the High Court at Calcutta being A.P. No.224 of 2016. The High Court will be free to pass appropriate directions regarding disbursement or investment of the said amount.

                                                               REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                   CIVIL APPEAL NOS. 4892-4893     OF 2017
            (Arising out of SLP (Civil) Nos. 33363-33364 of 2016)

Union of India                                         …. Appellant

Versus

M/S. Simplex Infrastructures Ltd.                .... Respondent


                               J U D G M E N T

A.M.KHANWILKAR, J.

1.    The short question that arises for consideration in  this  appeal  is:
whether an intra-Court Letters Patent Appeal under clause 15 of the  Letters
Patent of High Court at Calcutta can be maintained against an  order  passed
by the Single Judge on an application for condonation of delay  filed  along
with the petition (for setting aside an Arbitration Award) under Section  34
of the Arbitration and Conciliation Act, 1996 (hereinafter  referred  to  as
‘the Act’)?

2.    Briefly stated, the Respondent being the lowest bidder was allotted  a
contract by the Appellant in respect of  work  styled  as  “Construction  of
Tsunami Reconstruction Project in A & N Islands.  SH:  Construction  of  821
units of  permanent  shelters  (single  stories)  including  internal  water
supply sanitary installation & internal Electrification  in  the  Island  of
Teressa.” The contract agreement was entered into  between  the  parties  on
5th October, 2006.  According to the Appellant,  the  Respondent  failed  to
adhere to the time frame for completion of the contract.   As  a  result,  a
show cause notice was issued to the Respondent on 27th April, 2007  to  show
cause as to why the contract should not be rescinded by  invoking  clause  3
of the agreement.  The Respondent submitted  its  response  thereto  on  8th
May, 2007.  Despite the dismal performance of the Respondent, the  Appellant
gave it one more opportunity to improve on the  performance  vide  a  letter
dated 20th June, 2007.  The Respondent, however, submitted its 12th  revised
completion plan dated 10th October, 2007.  Since the  Respondent  failed  to
adhere to the extended time line and also miserably failed to  maintain  the
quality and progress of work, the Appellant served it  with  a  second  show
cause notice on 4th January, 2008.  The Respondent replied to the said  show
cause notice on 1st February 2008. However, the explanation offered  by  the
Respondent,  in  the  perception  of  the  Appellant,  was   found   to   be
unsatisfactory and baseless.  Hence, the Appellant  rescinded  the  contract
vide letter No. 57(12)/RE/TRP/Kamorata/07-08/638 dated 25th February,  2008.


3.    The Respondent then invoked the arbitration clause in  the  agreement,
pursuant to which the  competent  authority  appointed  an  Arbitrator  vide
letter no. 23(6)/(1)ADG(SR)/TRP/08-09/469  dated  27th  August,  2008.   The
arbitration hearing concluded on 27th March, 2014.  An Award  was  published
vide letter No.ARB/RKM/TRP/Case 005/2014-20 dated 27th October,  2014.   The
Appellant received a hard copy of the Award on 31st October,  2014,  wherein
the Arbitrator held that the rescindment order passed by the  Appellant  was
illegal as time was not the essence of the  contract  and  further  directed
the Appellant to pay the final bill submitted by the Respondent.  Aggrieved,
the Appellant filed a petition for setting aside the arbitral  award  before
the District  Court  at  Port  Blair  being  Appeal  No.  2  of  2015.   The
Respondent, on the other hand, filed an execution proceeding in relation  to
the self same Award before the High Court at Calcutta being EC  Case  No.734
of 2015.  The Appellant then preferred an  application  in  Appeal  No.2  of
2015 before the District Court, for stay of the Award.  The  District  Judge
allowed the said application. That fact was brought to  the  notice  of  the
High  Court  at  Calcutta  in  execution  proceedings   initiated   by   the
Respondent. The High Court vide order dated 15th September,  2015,  disposed
of the Execution petition filed by the Respondent and gave  liberty  to  the
Respondent  to  appear  before  the  District  Court  and  to   resist   the
proceedings pending in that court.

4.    The Respondent then filed objections in  the  proceedings  before  the
District  Court.   According  to  the  Respondent,  the  appeal  before  the
District Court was not maintainable as the application under  Section  9  of
the Arbitration Act with regard to the subject  matter  of  the  arbitration
proceedings was filed before the  High  Court  at  Calcutta.   It  was  then
contended that the District Court did not have territorial  jurisdiction  as
per Section 42 of the Act and that the petition  under  Section  34  against
the subject award can proceed only before  the  High  Court.   The  District
Court vide order dated 12th February, 2016 accepted that objection. It  held
that the petition filed by the Appellant under Section 34  of  the  Act  was
not maintainable on account of territorial jurisdiction.

5.     The  Appellant  then  challenged  the  Award  by  filing  Arbitration
Petition No. 224 of 2016 before the High Court at Calcutta under Section  34
of the Act and prayed for setting aside the Arbitral Award.   The  Appellant
also filed an application being G.A. No: 958 of 2016  for  condoning  delay,
mentioning the circumstances in which the  Appellant  had  to  approach  the
High Court under Section 34 of the Act.   The  learned  Single  Judge  after
hearing the parties allowed the said application for condonation  of  delay,
being satisfied that sufficient cause was made  out  by  the  Appellant  for
condoning the delay of 131 days.  The said order reads thus:

“The Court: After considering the submissions made by the  learned  advocate
for  the  applicant/petitioner  and  upon  perusing  the   application   for
condonation of delay, it appears that sufficient cause  has  been  shown  to
explain the delay in filing the application, being AP No.224 of 2016 and  as
such the delay is condoned.   The  application  for  condonation  of  delay,
being GA No.958 of 2016, is accordingly allowed.”

6.    Aggrieved by the aforementioned order  dated  27th  April,  2016,  the
Respondent preferred  an  intra  court  letters  patent  appeal  being  G.A:
No.1650 of 2016.  This appeal was contested by the Appellant inter  alia  on
the ground that such  letters  patent  appeal  was  not  maintainable.   The
Division Bench adverted to the relevant decisions pressed  into  service  by
both the sides including the decision of this Court  in  Fuerst  Day  Lawson
Limited v. Jindal Exports Limited.[1]  It has  also  noted  that  the  order
under appeal is not appealable under Section 37 of  the  Act.  The  Division
Bench, however, relied on the judgment of the Division  Bench  of  the  High
Court at Calcutta in the case  of   Modi  Korea  Telecommunication  Ltd.  V.
Appcon Consultants Pvt. Ltd.[2]   and of the special Bench  of  three-Judges
in M/s. Tanusree Art Printers & Anr. V.  Rabindra  Nath  Pal,[3]    to  hold
that the three-Judge Bench decision of the High Court was  directly  on  the
point and was binding on it. It then proceeded to conclude  that  the  order
passed by the learned Single Judge, sensu stricto  was  not  falling  within
the provisions of the Act and was without jurisdiction.  On that  logic  the
Division Bench reversed the order of the learned Single  Judge  by  invoking
its jurisdiction under Letters Patent Appeal.

7.    The Appellant contends that  the  Division  Bench  committed  manifest
error in entertaining the appeal disregarding  the  settled  legal  position
restated by this  Court  in  Fuerst  Day  Lawson  Limited  (supra).   It  is
submitted that the Act is a self contained code.  It provides for  a  remedy
against the arbitral award, including for condonation of delay in filing  of
the petition under Section 34 of the Act.  The order passed by  the  learned
Single Judge on the subject application for condonation of delay  in  filing
petition under Section 34 was, therefore, in  relation  to  the  arbitration
proceedings.  Even if the discretion or  for  that  matter  jurisdiction  is
misapplied and is not in accordance with law, that can be no reason to  hold
that the order in such proceedings was not under the provisions of  the  Act
as such.  It would nevertheless come within the ambit of the Act.   Further,
such order has not been made appealable under  Section  37  of  the  Act  as
applicable at the relevant time. The correctness whereof could  be  assailed
before the appropriate forum, but not by way  of  a  Letters  Patent  Appeal
under clause 15.  The Appellant has stoutly relied on  the  dictum  of  this
Court in the case of Fuerst Day Lawson  Limited  (supra)  to  buttress  this
contention.

8.    The Respondent, on the other hand, has supported  the  view  taken  by
the Division Bench in the impugned judgment being  in  conformity  with  the
dictum of the special bench of the High Court of three-Judges  in  the  case
of M/s. Tanusree Art Printers & Anr.(supra).  It is submitted  that  as  the
order passed by the learned Single Judge is not in terms of  the  provisions
of the Act and thus without jurisdiction, the exercise  of    powers   under
clause 15 of the  letters  patent  appeal  was  just  and  proper.   It  was
submitted that Section 34 of the Act gives no jurisdiction to the  court  to
condone delay in filing of the petition for setting aside the award,  beyond
the period prescribed in sub-Section  (3)  thereof.   After  expiry  of  the
prescribed period, it is submitted that even though it  may  be  a  case  of
gross hardship caused to the Appellant because of  the  ill  advised  remedy
pursued before the District Court and virtually being  rendered  remediless,
that is the inevitable consequence of the mandate of Section 34 of the  Act.
 Further, the explanation offered by the Appellant in  the  application  for
condonation of delay cannot be reckoned as a sufficient cause in law.  Thus,
the learned Single Judge committed manifest error in entertaining  the  same
to show indulgence to the Appellant by condoning the delay of  131  days  in
filing of the petition under Section 34 of the Act.

9.    After hearing the counsel  for  the  parties  and  going  through  the
decisions relied upon by both sides, we have no hesitation in allowing  this
appeal.  The efficacy of the provisions of the Act  has  been  expounded  by
this Court in  the  case  of   Fuerst  Day  Lawson  Limited  (supra).  After
analyzing the relevant provisions and the decisions on the  subject  and  in
particular the decision in P.S. Sathappan v. Andhra Bank Ltd.[4],    it  has
been held that the Act is a self contained Code relating to arbitration.  In
paragraphs 88 and 89 of the reported judgment, this Court opined:

“88. Mohindra  Supply  Co.3  was  last  referred  in  a  Constitution  Bench
decision of this Court in P.S. Sathappan16, and  the  way  the  Constitution
Bench understood and interpreted Mohindra Supply Co.3 would  be  clear  from
the following para 10 of the judgment: (P.S. Sathappan case16, SCC pp.  689-
90)
“10. … The provisions in the Letters Patent providing  for  appeal,  insofar
as they related to orders passed in arbitration proceedings,  were  held  to
be subject to the provisions of Sections 39(1) and (2)  of  the  Arbitration
Act, as the same is a self-contained code relating to arbitration.”

89. 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,  amends  and  designs  the  law
relating to arbitration 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.   After this decision, there is no scope to contend that the  remedy  of
Letters Patent Appeal was available in relation to judgment of  the  learned
Single Judge in question. This legal  position  has  been  restated  in  the
recent decision of this Court (to which one of us was party,  Justice  Dipak
Misra), in the case of Arun Dev Upadhyaya V/s. Integrated Sales Service  Ltd
& Anr.[5]

11.    The  Division  Bench  of  the  High  Court,  however,  made  a   fine
distinction by holding that the judgment of  the  learned  Single  Judge  of
condoning delay in filing of the petition under Section 34 of  the  Act  was
without jurisdiction and not in terms of the provisions of the Act.   It  is
not possible to countenance this  approach.   The  Division  Bench,  in  our
opinion, was not right in observing that the decision in M/s.  Tanusree  Art
Printers & Anr. (supra) being of a special  bench  of  three-Judges  of  the
same Court, was binding,  in spite of having noticed the  decision  of  this
Court in Fuerst Day Lawson Limited (supra) – which is directly on the  point
and was pressed into service by the Appellant.  Neither the  Division  Bench
of the High Court at Calcutta which  dealt  with  the  case  of  Modi  Korea
Telecommunication Ltd. (supra) nor the three-Judges Bench which decided  the
case of M/s. Tanusree Art Printers & Anr.(supra), had  the  benefit  of  the
judgment of this Court in Fuerst Day Lawson Limited (supra), which is  later
in time.

12.   The Act as applicable to the present case, provides for  a  remedy  of
appeal in terms of Section 37 of the Act.  The same reads thus:-

“37. Appealable orders. – (1) An appeal shall lie from the following  orders
(and from no others) to the Court authorized by law  to  hear  appeals  from
original decrees of the Court passing the order, namely:-
[(a) Refusing to refer the parties to arbitration under section 8;
(b) granting or refusing to grant any measure under section 9;
(c) 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.”

13.   On a bare reading of this provision, it  is  noticed  that  remedy  of
appeal has been provided only against an order of setting aside or  refusing
to set aside an arbitral award  under  Section  34(1)  (c).   No  appeal  is
provided against an order passed by  the  Court  of  competent  jurisdiction
condoning the delay in filing the petition under Section 34 of  the  Act  as
such.   The Division Bench in  the  impugned  Judgment,  therefore,  rightly
noted that remedy of appeal  against  the  impugned  order  of  the  learned
Single Judge was not otherwise available under Section 37 of the Act.

14.   In our opinion, the issue is squarely answered against the  Respondent
by the decision of this Court in Fuerst  Day  Lawson  Limited  (supra).   In
that, the Judgment of the learned Single Judge dated 27th April,  2016,  was
passed on an application purported to be under Section  34(3)  of  the  Act,
for condoning delay  in  filing  of  the  petition  for  setting  aside  the
arbitral award. Hence, the remedy of  Letters  Patent  Appeal  against  that
decision is unavailable.  The question as  to  whether  the  learned  Single
Judge had rightly exercised the discretion or otherwise, could  be  assailed
by the Respondent before this Court by way of special leave  petition.  But,
certainly not by way of a Letters Patent Appeal under clause 15.  For,  even
if the learned Single Judge may have committed  manifest  error  or  wrongly
decided  the  application  for  condonation  of  delay,  that  judgment   is
ascribable to exercise of jurisdiction under Section 34(3) of  the  Act.  In
other words, whether the prayer for condonation of delay can be accepted  or
whether the application deserves to be rejected, is  a  matter  well  within
the jurisdiction of that court.

15.   The learned counsel for the Respondent was at  pains  to  persuade  us
that the decision of the learned Single Judge is palpably wrong  and  cannot
be sustained in law.  However, we cannot permit the  Respondent  to  agitate
that plea in the present appeal preferred by the Appellant  challenging  the
impugned decision of the Division Bench.  Instead, we  deem  it  appropriate
to leave all contentions available to both sides open and  give  liberty  to
the Respondent to challenge the judgment of the learned Single  Judge  dated
27th April, 2016 in G.A.No.958 of 2016, if so advised.

16.   Accordingly, the impugned judgment of the Division Bench of  the  High
Court at Calcutta dated 20th June, 2016 passed in  G.A.No.1650  of  2016  in
APOT No. 183/2016 in A.P. No. 224/2016 is set  aside  with  liberty  to  the
Respondent to challenge the judgment of the learned Single Judge dated  27th
April, 2016 in  G.A.  No.  958  of  2016  in  AP  No.:  224  of  2016.   All
contentions available to both sides with regard to the  correctness  of  the
Judgment of the Learned Single Judge dated 27th April, 2016, are kept  open.


17.   While parting, we may take note of the order dated 7th November,  2016
passed by this Court directing the Appellant to  deposit  Rs.  5,00,00,000/-
(Rupees Five Crores) in the Registry of this Court  and  further  to  invest
the same in a short term fixed deposit.  We are informed that the  Appellant
has complied with the said order and deposited the amount in  the  Registry.
That has been  invested  by  the  Registry.   The  said  amount  along  with
interest accrued thereon be transferred to an escrow account linked  to  the
proceedings pending before the High Court at Calcutta being A.P.  No.224  of
2016.  The High Court will be free to pass appropriate directions  regarding
disbursement or investment of the said amount.

18.   The appeals are allowed in the above terms with no order as to costs.

                                       …..……………………………..J.
                                     (Dipak Misra)




                                              .…..…………………………..J.
                                  (A.M.Khanwilkar)

New Delhi,
Dated: April 13,  2017
-----------------------
[1]    (2011) 8 SCC 333
[2]    (1999) 2 CHN 107
[3]    (2000) 2 CHN 213
[4]    (2004) 11 SCC 672
[5]    (2016) 9 SCC 524


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