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Arbitral tribunal

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Arbitration and conciliation Act – Disputes between the parties – whether to send it for expert opinion or to arbitrator – High Court instead of deciding issue whether there is any arbitration clause or not-open the issue on merits of disputes – billing – date of billing – billing disputes etc., and appointed arbitrator – Apex court set aside the orders of high court to that extent of opening of issues on merits as it should be decided by the Arbitrator but not by the court = Arasmeta Captive Power Company Private Limited and another … Appellants Versus Lafarge India Private Limited …Respondent = published in / cited in / Reported in judis.nic.in/supremecourt/filename=41075

Arbitration and conciliation Act – Disputes between the parties whether to send it for expert opinion or to arbitrator – High Court instead of deciding issue whether there is any arbitration clause or not-open the issue on merits of disputes – billing – date of billing – billing disputes etc., and appointed arbitrator – Apex court set aside the … Continue reading

Arbitration Act – No Arbitration clause = Vishnu (dead) by L.Rs. …Appellant versus State of Maharashtra and others …Respondents published in judis.nic.in/supremecourt/filename=40853

Arbitration Act – No Arbitration  clause =     Whether Clause 30  of  B-1  Agreements  entered  into  between  the         Government of Maharashtra and the appellant is in  the  nature  of  an         arbitration clause is the question which arises for  consideration  in         this appeal … Continue reading

Production of Documents for inspection can be filed under sec. 27 of Arbitration and conciliation Act = scope of Section 27, and the circumstances in which the Arbitral Tribunal or a party before the Arbitral Tribunal can apply to the court for assistance in taking evidence.= a notice to the advocate on record of the appellant on 17.3.2007, calling upon them to give inspection and to produce the following documents before the learned Arbitrator:- (a) All sales tax returns filed by the appellant with the sales tax authorities for the assessment years 1995-1996 to 2001-2002. (b) All sales tax assessment orders passed with regard to the appellant for the above-mentioned period, and all appellate orders, if any passed in any appellate proceedings arising out of the same. (c) The objection, if any, filed by the appellants against the Notice in Form 40, and proposed order at pages 123 & 124 of Volume VI of the documents filed in the arbitration, the order, if any, passed thereon, and the appellate proceedings, if any, therein. (d) The letter dated 26th May 2000 mentioned in the letter at page 32 of Volume III of the documents filed in the arbitration.- The advocate of the appellant vide his reply dated 21.3.2008, protested and objected to the production of these documents, since according to the appellant the same were being sought at a late stage when the proceeding had reached the stage of cross-examination of the witnesses of the respondent No.1. – Inasmuch as the appellant declined to give inspection / and produce the document as sought for, the respondent No. 1 made an application on 26.3.2007 before the learned Arbitrator, and in paragraph No. 5 thereof, sought a direction to produce the documents mentioned at Sl. Nos.(a) to (c) in the notice dated 17.3.2007. The learned Arbitrator by her order dated 27.3.2007 allowed the application only to the extent of the assessment orders relating to the period 1995-1996 to 2001-2002 and the appellate orders mentioned in paragraph 5(b). The prayer for producing the sales tax returns mentioned in paragraph 5(a) was not entertained. Similarly, the prayer to produce the documents as sought in paragraph 5(c) was not entertained. = It is a settled principle of law that the words used in a statute are to be read as they are used, to the extent possible, to ascertain the meaning thereof. Both these provisions contained a bar only against the Government officers from producing the documents mentioned therein. There is no bar therein against a party to produce any such document. In Tulsiram Sanganaria and Another v. Srimati Anni Rai and Ors. reported in 1971 (1) SCC 284, a bench of three Judges of this Court interpreted an identical provision in Section 54(1) of the Income Tax Act, 1922, and held that the said provision created a bar on the production of the documents mentioned therein by the officials and other servants of the Income Tax Department, and made it obligatory on them to treat as confidential the records and documents mentioned therein, but the assessee or his representative-in-interest could produce assessment orders as evidence, and such evidence was admissible. Thus, if a claim is to be decided on the basis of an order of assessment, the claimant as well cannot be denied the right to seek a direction to the party concerned to produce the assessment order. It is this very prayer which has been allowed by the earlier order dated 27.3.2007 passed by the then Arbitrator, and also by the subsequent order dated 16.9.2011 passed by the Arbitral Tribunal, and in our view rightly so. There is no substance in the second objection as well. 25. There is one more aspect which we must note, i.e., when the first respondent made an application for production of the assessment orders, the defence taken by the appellant in their affidavit dated 16.9.2011 was that those documents were confidential documents, and could not be directed to be produced. It was not stated at that time that the said documents were not available. It is ten months thereafter, that when the second affidavit was filed in the High Court, that the respondent for the first time contended that the said documents were not available. This was clearly an after thought, and this attitude of the Respondent in a way justified the earlier order permitting an application under Section 27 passed by the Arbitral Tribunal. The Assistant Commissioner of Sales Tax of the concerned area was also joined as respondent so that he could be directed to produce the required documents. However, he reported that those documents were old records, and were destroyed. The learned Single Judge did not pass any order against the respondent No.2 to produce the documents, as sought. However, the learned Single Judge rightly allowed the petition as against the appellant in terms of prayer clause ‘A’, directing the appellant to produce the documents which were sought by the respondent no. 1. 26. In the circumstances, there is no merit in the appeal. The appeal is, therefore, dismissed.

published in http://judis.nic.in/supremecourt/imgst.aspx?filename=40827         REPORTABLE   IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 8426 OF 2013 (@ out of SPECIAL LEAVE PETITION (CIVIL) NO. 28418/2012 ) Delta Distilleries Limited … Petitioner   Versus   United Spirits Limited & Anr. … Respondents   J U D G E M … Continue reading

Gas sale Agreement = Whether the Division Bench of the Gujarat High Court was justified in entertaining the writ petition filed by the respondent under Article 226 of the Constitution in the matter of fixation of price of the gas supplied by the appellant and whether a mandamus could be issued requiring the appellant to engage itself with the respondent to arrive at the price of gas effective from 1.1.2014 are the questions which arise for consideration in this appeal. =the remedy of arbitration available to the respondent under paragraph 15.5 of the GSA was an effective alternative remedy and the High Court should not have entertained the petition filed under Article 226 of the Constitution of India. The contents of the GSA, the Price Side Letters and the correspondence exchanged between the appellant and the respondent give a clue of the complex nature of the price fixation mechanism. Therefore, the High Court should have relegated the respondent to the remedy of arbitration and the Arbitral Tribunal could have decided complicated dispute between the parties by availing the services of experts. Unfortunately, the High Court presumed that the negotiations held between the appellant and the respondent were not fair and that the respondent was entitled to the benefit of the policy decision taken by the Government of India despite the fact that it had not only challenged that decision but had also shown disinclination to accept the offer made by the appellant to supply gas at the pooled price and had insisted on mutually agreed price. – In the result, the appeal is allowed, the impugned order is set aside and the Special Civil Application filed by the respondent is dismissed.

published in http://judis.nic.in/supremecourt/imgst.aspx?filename=40784 NON-REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No.8263 OF 2013 (Arising out of SLP (C) No. 21932 of 2013) GAIL (India) Limited ….Appellant versus Gujarat State Petroleum Corporation Limited ….Respondent   J U D G M E N T G.S. SINGHVI, J. 1. Leave granted. 2. Whether the … Continue reading

Arbitration and Conciliation Act, 1996: s. 45 – Reference to arbitration under – Scope of – International commercial arbitration – Multi-party agreements – Joint venture agreements with different parties – Some of the agreements contained arbitration clause while the others did not – Dispute between parties leading to filing of suit – High Court referred the entire suit (including the non-signatory parties to the arbitration agreement) for arbitration u/s. 45 – Joinder of non-signatory parties to arbitration – Permissibility – Held: Joinder of non-signatory parties to arbitration is permissible – They can be referred to arbitration, provided they satisfy the pre-requisites u/ss. 44 and 45 r/w Schedule I of the Act – The cases of group companies or where various agreements constitute a composite transaction with intrinsically interlinked cause of action, can be referred to arbitration, even if the disputes exist between signatory or even non-signatory parties – However, the discretion of the court has to be exercised in exceptional, limiting, befitting and cases of necessity and very cautiously – Expression `any person claiming through or under him’ used in s. 45, takes within its ambit persons who are in legal relationships via multiple and multi-party agreements, though they may not all be signatories to the arbitration clause – In the present case, the corporate structure of the companies demonstrates a definite legal relationship between the parties to the lis or persons claiming under them – Their contractual relationship spells out the terms, obligations and roles of the respective parties which they were expected to perform for attaining the object of successful completion of the joint venture agreement – All the other agreements were intrinsically inter-connected with the mother agreement – All the agreements were part of a composite transaction to facilitate implementation of principal agreement – Hence, all the parties to the lis were covered under expression “any person claiming through or under” the principal (mother) agreement – Arbitration clause in the principal agreement was comprehensive enough to include all disputes arising “under and in connection with” principal agreement – Conduct of parties and even subsequent events show that the parties had executed, intended and actually implemented composite transaction contained in principal/mother agreement – Hence, direction to refer the disputes to arbitration -Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) – Article II (3) – ICC Rules – UNCITRAL Model Rules. s. 45 – Issues under – Determination of – Issue of jurisdiction should be decided at the beginning of the proceedings itself and they should have finality – Determination of fundamental issues as contemplated u/s. 45 at the very first instance is not only appropriate but is also the legislative intent – Jurisdiction. Code of Civil Procedure, 1908 – s. 9 – Jurisdiction of civil courts – Jurisdiction of the court and the right to a party emerging from s. 9 is not an absolute right, but contains inbuilt restrictions – Civil courts have jurisdiction to try all suits except those which is either expressly or impliedly barred – The provisions of s. 45 of the 1996 Act would prevail over the provisions of CPC – Arbitration and Conciliation Act, 1996 – s. 45. Doctrines/Principles: `Group of Companies’ Doctrine; Principle of `incorporation by reference’; Principle of `composite performance’; Principle of `agreements within an agreement’ and Principle of `Kompetenz kompetenz’ – Discussed. Precedent – Observations – Precedential value – Held: The observations to be construed and read to support the ratio decidendi – They would not constitute valid precedent as it would be hit by the doctrine of stare decisis – Doctrine – Constitution of India, 1950 – Art. 141. Words and Phrases: Expression `connection’ – Meaning of. The questions which inter alia arose for consideration in the present appeals were: (1) What is the ambit and scope of Section 45 of the Arbitration and Conciliation Act, 1996; (2) Whether in a case where multiple agreements were signed between different parties some containing an arbitration clause and others not and where the parties were not identically common in proceedings before the Court (in a suit) and the arbitration agreement, a reference of disputes as a whole or in part could be made to the arbitral tribunal, more particularly, where the parties to an action were claiming under or through a party to the arbitration agreement; and (3) Whether the principles enunciated in the case of *Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya was the correct exposition of law.= Dismissing the appeals, the Court HELD: 1.1 Section 45 is a provision falling under Chapter I of Part II of the Arbitration and Conciliation Act, 1996 which is a self-contained Code. The expression `person claiming through or under’ would mean and take within its ambit multiple and multi-party agreements, though in exceptional case. Even non-signatory parties to some of the agreements can pray and be referred to arbitration provided they satisfy the pre-requisites under Sections 44 and 45 r/w Schedule I. Reference of non-signatory parties is neither unknown to arbitration jurisprudence nor is it impermissible. [Para 167] 1.2 An arbitration agreement, under Section 45 of the 1996 Act, should be evidenced in writing and in terms of Article II of Schedule 1, an agreement in writing shall include an arbitral clause in a contract or an arbitration agreement signed by the parties or contained in an exchange of letters or telegrams. Thus, the requirement that an arbitration agreement be in writing is an expression incapable of strict construction and requires to be construed liberally, as the words of this Article provide. Even in a given circumstance, it may be possible and permissible to construe the arbitration agreement with the aid and principle of `incorporation by reference’. Though the New York Convention is silent on this matter, in common practice, the main contractual document may refer to standard terms and conditions or other standard forms and documents which may contain an arbitration clause and, therefore, these terms would become part of the contract between the parties by reference. The solution to such issue should be case-specific. The relevant considerations to determine incorporation would be the status of parties, usages within the specific industry, etc. Cases where the main documents explicitly refer to arbitration clause included in standard terms and conditions would be more easily found in compliance with the formal requirements set out in the Article II of the New York Convention than those cases in which the main contract simply refers to the application of standard forms without any express reference to the arbitration clause. [Para 72] M.V. “Baltic Confidence” and Anr. v. State Trading Corporation of India Ltd. and Anr. (2001) 7 SCC 473: 2001 (1) Suppl. SCR 699; Olympus Superstructure Pvt. Ltd. v. Meena Vijay Khetan and Ors. (1999) 5 SCC 651: 1999 (3) SCR 490 – relied on 1.3 Under the Indian Law, greater obligation is cast upon the Courts to determine whether the agreement is valid, operative and capable of being performed at the threshold itself. Such challenge has to be a serious challenge to the substantive contract or to the agreement, as in the absence of such challenge, it has to be found that the agreement was valid, operative and capable of being performed; the dispute would be referred to arbitration. [Para 78] State of Orissa v. Klockner and Company and Ors. AIR 1996 SC 2140: 1996 (1) Suppl. SCR 368 – relied on. Abu Dhabi Gas Liquefaction Co. Ltd. v. Eastern Bechtel Corp.(1982) 2 Lloyd’s Rep. 425, CA – referred to. Law and Practice of International Commercial Arbitration by Alan Redfern and Martin Hunder (Fourth Edition) 1.4 The legislative intent and essence of the 1996 Act was to bring domestic as well as international commercial arbitration in consonance with the UNCITRAL Model Rules, the New York Convention and the Geneva Convention. The New York Convention was physically before the Legislature and available for its consideration when it enacted the 1996 Act. Article II of the Convention provides that each contracting State shall recognize an agreement and submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not concerning a subject matter capable of settlement by arbitration. Once the agreement is there and the Court is seized of an action in relation to such subject matter, then on the request of one of the parties, it would refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of performance. Still, the legislature opted to word Section 45 somewhat dissimilarly. Section 8 of the 1996 Act also uses the expression `parties’ simpliciter without any extension. In significant contra-distinction, Section 45 uses the expression `one of the parties or any person claiming through or under him’ and `refer the parties to arbitration’, whereas the rest of the language of Section 45 is similar to that of Article II(3) of the New York Contention. The Court cannot ignore this aspect and has to give due weightage to the legislative intent. It is a settled rule of interpretation that every word used by the Legislature in a provision should be given its due meaning. The Legislature intended to give a liberal meaning to this expression. [Paras 88 and 89] 1.5 The language and expressions used in Section 45, `any person claiming through or under him’ including in legal proceedings may seek reference of all parties to arbitration. Once the words used by the Legislature are of wider connotation or the very language of Section is structured with liberal protection then such provision should normally be construed liberally. [Para 90] 1.6 In view of the legislative object and the intent of the framers of the statute, i.e., the necessity to encourage arbitration, the Court is required to exercise its jurisdiction in a pending action, to hold the parties to the arbitration clause and not to permit them to avoid their bargain of arbitration by bringing civil action involving multifarious cause of action, parties and prayers. [Para 91] 1.7 The scope of concept of `legal relationship’ as incorporated in Article II(1) of the New York Convention vis-

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7134 OF 2012 (Arising out of SLP (C) No.8950 of 2010)   Chloro Controls (I) P. Ltd. … Appellant Versus Severn Trent Water Purification Inc. & Ors. … Respondents WITH CIVIL APPEAL NOS. 7135-7136 OF 2012 (Arising out of SLP (C) No.26514-26515 … Continue reading

Enforceability of Foreign Awards under Section 48 of the Arbitration and Conciliation Act, 1996 (for short, “1996 Act”) = whether appeal award no. 3782 and appeal award no. 3783 both dated 21.09.1998 passed by the Board of Appeal of the Grain and Feed Trade Association, London (for short, “Board of Appeal”) in favour of the respondent are enforceable under Section 48 of the Arbitration and Conciliation Act, 1996 (for short, “1996 Act”)? = While considering the enforceability of foreign awards, the court does not exercise appellate jurisdiction over the foreign award nor does it enquire as to whether, while rendering foreign award, some error has been committed. Under Section 48(2)(b) the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The objections raised by the appellant do not fall in any of these categories and, therefore, the foreign awards cannot be held to be contrary to public policy of India as contemplated under Section 48(2)(b). 46. The contention of the learned senior counsel for the appellant that the Board of Appeal dealt with the questions not referred to it and which were never in dispute and, therefore, these awards cannot be enforced being contrary to Section 48(1)(c) is devoid of any substance and is noted to be rejected. 47. In the circumstances, we hold that appeal has no merit. It is dismissed with no order as to costs.

published in http://judis.nic.in/supremecourt/imgs1.aspx?filename=40512 Page 1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5085 OF 2013 (Arising out of SLP(C) No. 13721 of 2012) Shri Lal Mahal Ltd. ……. Appellant Vs. Progetto Grano Spa ……Respondent JUDGMENT R.M. LODHA, J. Leave granted. 2. The question for consideration in this appeal by special leave … Continue reading

ARBITRATION ACT= The matter was, thereafter, taken up by the designate Judge who came to a finding that the agreement dated 24.05.2005 was not legal and valid and, therefore, the disputes between the parties arising out of the said agreement could not be referred to an arbitrator. The application under Section 11(6) of the 1996 Act was, therefore, dismissed. 9. It is the said decision of the designate Judge, which is the subject matter of challenge in these appeals. The issue regarding the continued existence of the arbitration agreement, notwithstanding the main agreement itself being declared void, was considered by the 7-Judge Bench in SBP & Co. (supra) and it was held that an arbitration agreement could stand independent of the main agreement and did not necessarily become otiose, even if the main agreement, of which it is a part, is declared void. has to first decide his own jurisdiction and whether the party concerned has approached the right High Court.; whether there is an arbitration agreement and as to whether the person who has made the request before him, is a party to such agreement. ; whether the claim was a dead one or a long-barred claim, that was sought to be resurrected. = The above views expressed by the 7-Judge Bench and by the learned Single Judge are sufficient to dispose of these appeals. In the light of what has been indicated hereinbefore, we have no hesitation in setting aside the impugned judgment and the order of the designated Judge once again and directing that the matter be again considered de novo in the light of the observations made hereinabove and the various decisions cited at the Bar.

Page 1 1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.4596 OF 2013 [Arising out of SLP(C)No.7334 of 2010] M/s Today Homes & Infrastructure Pvt. Ltd. …Appellant Vs. Ludhiana Improvement Trust & Anr. …Respondents WITH C.A. No.4597 of 2013 @ SLP(C)No.11778/2010, C.A. No.4598 of 2013 @ SLP(C)No.10795/2010, C.A. No.4595 of 2013 … Continue reading

forfeited its right to appoint the arbitrator = whether respondent No. 1 has forfeited its right to appoint the arbitrator having not done so after the demand was made and till the appellant had moved the court under Section 11(6) and, if the answer is in the affirmative, whether the appointment of the arbitrator by respondent No. 1 in the course of the proceedings under Section 11(6) is of any legal consequence and the Chief Justice of the High Court ought to have exercised the jurisdiction and appointed an arbitrator? – In the present case, the Corporation has failed to act as required under the procedure agreed upon by the parties in Clause 29 and despite the demand by the dealer to appoint the arbitrator, the Corporation did not make appointment until the application was made under Section 11(6). Thus, the Corporation has forfeited its right of appointment of an arbitrator. In this view of the matter, the Chief Justice ought to have exercised his jurisdiction under Section 11(6) in the matter for appointment of an arbitrator appropriately. The appointment of the arbitrator by the Corporation during the pendency of proceedings under Section 11(6) was of no consequence. In the course of arguments before us, on behalf of the appellant certain names of retired High Court Judges were indicated to the senior counsel for the Corporation for appointment as sole arbitrator but the Corporation did not agree to any of the names proposed by the appellant. In the circumstances, we are left with no choice but to send the matter back to the Chief Justice of the Allahabad High Court for an appropriate order on the application made by the dealer under Section 11(6). 25. Civil Appeal is, accordingly, allowed. The impugned order is set aside. Arbitration Case No. 107 of 2004, M/s. Deep Trading Company v. M/s. Indian Oil Corporation and others, is restored to the file of the High Court of Judicature at Allahabad for fresh consideration by the Chief Justice or the designate Judge, as the case may be, in accordance with law and in light of the observations made above. No costs.

Page 1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2673 OF 2013 (Arising out of SLP(C) No. 24686 of 2007) M/s. Deep Trading Company …… Appellant Vs. M/s. Indian Oil Corporation and Ors. ……Respondents JUDGMENT R.M. LODHA, J. Leave granted. 2. The questions that arise for consideration in this appeal, … Continue reading

Arbitration and Conciliation Act, 1996; Ss. 35-36/Presidency Towns-Insolvency Act, 1909; S. 9 and 9(2): Arbitration award-Nature of-Issuance of an insolvency notice in pursuance of an award-Correctness of-Held: Since 1909 Act is a statute weighed down with grave consequence of civil death for a person adjudged as an insolvent, it has to be construed strictly-Since an arbitration is not an adjudication, an award is not a decree/order for payment-Therefore, it could not be enforced as a decree-Issuance of Notice under the Insolvency Act is fraught with serious consequences-Such a notice, therefore, could be issued in pursuance of decree/order for payment of money passed by a Court/Judicial organ established for dispensation of justice-Notice under 1909 Act is not a mode of enforcing debt-Enforcement could be done in terms of provisions of CPC-No insolvency notice could be issued under Section 9(2) of the 1909 Act on the basis of an Arbitration Award-Hence, notice so issued and order passed by the Division Bench of the High Court in Notice of motion set aside-Code of Civil Procedure, 1908-S. 2(2) and 2(14)-Indian Arbitration Act, 1899-Ss. 4(a), 11 & 15. Words and Phrases: ‘Decree’, ‘order’ and ‘an award’-Distinction between. ‘Courts’, ‘tribunal’ and ‘arbitrator’-Distinction between. Words ‘Litigation’, ‘as if-Meaning of. The questions which arose for determination in this appeal were as to whether an arbitration award is a “decree” for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909 and as to whether an insolvency notice could be issued under section 9(2) of the 1909 Act in pursuance of an arbitration award. Appellants contended that the Presidency Towns Insolvency Act (PTI Act) is a statute fraught with the grave consequence of ‘civil death’ for a person sought to be adjudged an insolvent, therefore, it has to be construed strictly; that it is impermissible to enlarge or restrict the language of the Act having regard to supposed notions of convenience, equity or justice; that the Indian Arbitration Act, 1899 clearly draws the distinction between Courts and Arbitrators; that only for the purpose of enforcement of the award, it is treated as if it were a decree of the Court; that issuance of a notice under the Insolvency or Bankruptcy statutes is not a mode of enforcement of a decree; that it is settled law that where the arbitration is governed by the Arbitration Act, 1899, the Second Schedule will not apply thereto; that PTI Act does not define ‘decree’ or ‘order’ for the simple reason that the meaning of these terms had been well-known since the enactment of Civil Procedure Code; that the words ‘suit or other proceeding in which the decree or order was made’ mean a suit in which a decree is made or a proceeding under the CPC which results in an order by a Civil Court which is not a decree; that the word ‘proceeding’ does not refer to arbitrations because they do not result in an ‘order’ but an ‘award’, much less an order of a Civil Court; that the ‘proceeding’ means a proceeding such as appellate or execution proceedings or applications under the CPC during the pendency of the suit or appeal; that the words ‘or other proceedings’ were added not for covering arbitrations but by way of abundant caution to make it clear that other proceedings in relation to or arising out of suits were to be included; that “Litigation” has been held to mean “a legal action, including all proceedings therein, initiated in a court of law”; that Arbitrators are not tribunals set up by the State to deal with special matters as they are not part of the judiciary exercising the judicial power of the State; that the legislative intendment was that only if a debt found due by the Courts and was not paid in spite of notice, it would amount to an act of insolvency; that the Legislatures never contemplated that a mere award given by persons chosen by parties to resolve their disputes should lead to an act of insolvency; that it is impermissible to substitute the word ‘Court’ with ‘arbitrators’ and the words ‘decree’ or ‘order’; that the Insolency Notice shall be in Form 1-B; that Form 1-B unambiguously points to the fact that the decree or order has been obtained from a Court in a suit or proceeding; that since the Parliament has amended the Act of 1909 in 1978 on the lines of the Bombay Amendment, it has expressly provided that the Notice ‘shall’ be in the prescribed form; and that there is no room left for the argument that variations according to circumstances can bring in arbitrators and awards when the form uses the words Court, decree and order. Respondents submitted that if an Award rendered under the Arbitration and Conciliation Act, 1996 is not challenged within the requisite period, the same becomes final and binding as provided under Section 35 of the Act, thereafter, the same can be enforced as a Decree as it is as binding and conclusive as provided under Section 36 of the Act; that there exists no distinction between an Award and a Decree, in view thereof, there is no impediment in taking out Insolvency Notice as contemplated under Section 9(2) of the Presidency Towns Insolvency Act; that the provisions of Section 9(2) to 9(5) of the PTI Act which are brought in by the amending Act of 1978 in the Presidency Towns Insolvency Act have to be viewed in the light of the statement of objects and reasons; that an Insolvency Notice by itself does not lead to the adjudication of the Debtor as Insolvent but the non-compliance thereof only results in an act of Insolvency, which enable the creditor to file an Insolvency Petition against the Debtor for having him adjudicated Insolvent; that any order, which has become final and enforceable, irrespective of whether passed by any Court, judicial authority, quasi-judicial authority, Tribunal etc. could be the basis of an Insolvency Notice under Section 9(2) of the said Act; that in Section 9(1) clauses (c) and (h), the legislature has used the phraseology “Decree of any Court” in Section 9(2), the legislature has consciously omitted the prefix “of Court” and has added the words “or Order”. Thus the legislative intent being to make it necessary to have a Decree of Court for the purpose of conferring Act of Insolvency under Clause (e) and (h) of Section 9(1) of the said Act, that when two words of different import are used in a statute in two consecutive provisions, it would be difficult to maintain that they are used in the same sequence; that it will be doing injury/offence to the legislative intent if even for the purpose of taking out Insolvency Notice under Section 9(2) of the said Act “a Decree of Court” is made necessary; and that it will be a misconception to borrow the definition of “Decree” or “Order” from the provisions of Civil Procedure Code, while interpreting and giving effect to the provisions of PTI Act, in particular Sections 9(2) to (5) of the Act. Allowing the appeal, the Court HELD:1.1. The Presidency Towns Insolvency Act, 1909 is a statute weighed down with the grave consequence of ‘civil death’ for a person sought to be adjudged an insolvent and therefore the Act has to be construed strictly. The Arbitration Act was in force when the PTIA came into operation. Therefore there can be seen that the law makers were conscious of what a ‘decree’, ‘order’ and an ‘award’ are. Also the fundamental difference between ‘Courts’ and ‘arbitrators’ were also clear as back as in 1909. [195-d-e] 1.2. The Indian Arbitration Act, 1899 clearly draws the distinction between Courts and Arbitrators. The preamble of the Act shows that it is an Act for dealing with ‘arbitration by agreement without the intervention of a Court of Justice’. It is only for the purpose of enforcement of the award, the arbitration award is treated as if it were a decree of the Court. [195-e-f] 2.1. The words ‘Court’, ‘adjudication’ and ‘suit’ conclusively show that only a Court can pass a decree and that too only in suit commenced by a plaint and after adjudication of a dispute by a judgment pronounced by the Court. It is obvious that an arbitrator is not a Court, an arbitration is not an adjudication and, therefore, an award is not a decree. [196-e-f] Tribhuvandas Kalidas v. Jiwan Chand, (1911) 35 Bombay 196, Manilal v. The Bharat Spinning & Weaving (35) Bom. L.R. 941; Ramshai v. Joylal , AIR (1928) Calcutta 840 and Ghulam Hussein v. Shahban AIR (1938) Sindh 220, referred to. 2.2. Section 36 of the Arbitration & Conciliation Act, 1996 makes it clear that enforceability is only to be under the CPC. It rules out any argument that enforceability as a decree can be sought under any other law or that initiating insolvency proceeding is a manner of enforcing a decree under the Code of Civil Procedure. [199-f] 2.3. The fact that the Bombay Amendment and later the Central Amendment intended to refer only to decrees and orders as defined in the CPC is clear from the Statement of Objects and Reasons of the Central Amendment Act No. 28 of 1978 which introduced sub-sections (2) to (5) in Section 9 of the Presidency Towns Insolvency Act. [199-g-h] 2.4. The words ‘litigant’, ‘money decree’, judgment-debtor’, ‘decretal amount’ and ‘decree-holder’ plainly show that Parliament intended to deal with litigants who do not pay amounts decreed by Civil Courts. [201-e] 2.5. “Litigation” has been held to mean “a legal action, including all proceedings therein, initiated in a court of law”. Obviously therefore Parliament had in mind debts due to ‘litigants’. It is well settled that Courts, unlike arbitrators or arbitral tribunals, are the third great organ under the Constitution: legislative, executive and judicial. Courts are institutions set up by the State in the exercise of the judicial power of the State. [201-f-g] 2.6. It is clear that litigation is very different from arbitration. The former is a legal action in a Court of law where judges are appointed by the State; the latter is the resolution of a dispute between two contracting parties by persons chosen by them to be arbitrators. These persons need not even necessarily be qualified trained judges or lawyers. [203-a-b] Engineering Mazdoor Sabha & Anr. v. Hind Cycles Ltd., AIR (1963) SC 874 and Collector, Varanasi v. Gauri Shankar Misra & Ors., AIR (1968) SC 384, relied on. 2.7. All tribunals are not courts, though all courts are tribunals. The word ‘courts’ is used to designate those tribunals which are set up in an organized State for the administration of justice. [202-g] 2.8. Arbitrators are persons chosen by parties to adjudge their disputes. They are not Courts and they do not pass orders or decrees for the payment of money; they make awards. [203-g-h] 3.1. The Insolvency Act of 1909 was amended by the Bombay Amendment of 1939 and also by Parliament in 1978 when two laws, namely, the Arbitration Act, 1899 and the Civil Procedure Code, 1908 were on the statute book. Parliament and the Bombay Legislature were well aware of the difference between awards on the one hand and decrees and orders on the other and they chose to eschew the use of the word ‘award’ for the purposes of the Insolvency Act. [204-a-b] 3.2. Section 15 of the Arbitration Act, 1899 provides for ‘enforcing’ the award as if it were a decree. Thus a final award, without actually being followed by a decree (as was later provided by Section 17 of the Arbitration Act of 1940), could be enforced, i.e. executed in the same manner as a decree. For this limited purpose of enforcement, the provisions of CPC were made available for realizing the money awarded. However, the award remained an award and did not become a decree either as defined in the CPC and much less so far the purposes of an entirely different statute such as the Insolvency Act. [204-b-c-d] 4.1. Issuance of a notice under the Insolvency Act is fraught with serious consequences: it is intended to bring about a drastic change in the status of the person against whom a notice is issued viz. to declare him an insolvent with all the attendant disabilities. Therefore, firstly, such a notice was intended to be issued only after a regularly constituted court, a component of judicial organ established for the dispensation of justice, has passed a decree or order for the payment of money. Secondly, a notice under the Insolvency Act is not a mode of enforcing a debt; enforcement is done by taking steps for execution available under the CPC for realizing moneys. [204-e-f] 4.2. The words “as if” demonstrate that award and decree or order are two different things. The legal fiction created is for the limited purpose of enforcement as a decree. The fiction is not intended to make it a decree for all purposes under all statutes, whether State or Central. [204-g] 4.3. No insolvency notice can be issued under Section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an Arbitration Award; an insolvency notice should be in strict compliance with the requirements in Section 9(3) and the Rules made thereunder. Hence, the Insolvency Notice issued under section 9(2) of P.T.I. Act cannot be sustained on the basis of arbitral award which has been passed under the Arbitration & Conciliation Act, 1996. [204-h; 205-a; 205-f; 206-b-c] V.A. Bobde, Shrikant Shah, Mahesh Agrawal and E.C. Agarwala, for the Appellant. L.Nageswara Rao,Subramonium Prasad, Kishore P. Jain, Raghavendra S. Srivastava, Gaurang P. Mehta, Vijay Sondhi and Karun Mehta for the Respondents.

CASE NO.: Appeal (civil) 4130 of 2006 PETITIONER: Paramjeet Singh Patheja RESPONDENT: ICDS Ltd. DATE OF JUDGMENT: 31/10/2006 BENCH: Dr. AR. Lakshmanan & Lokeshwar Singh Panta JUDGMENT: J U D G M E N T Dr. AR. Lakshmanan, J. This appeal was filed against the impugned interlocutory judgment and order dated 19.3.2003 passed in Notice … Continue reading

Arbitration and conciliation act= The arbitrator was, therefore, not right in law in coming to the conclusion that the agreement between the appellant and the respondent No.2 was void and not enforceable as the consideration or object of the agreement was hit by the letter dated 31.08.1990 of the Government of India, Ministry of Defence. This letter may be an instruction to the officers of the Defence Department to reject a tender where the rate quoted by the tenderor is more than 20% below the reasonable rates but the letter was not an Act of the legislature declaring that any supply made at a rate below 20% of the reasonable rates was unlawful. The finding of the arbitrator on Issue No.4 is thus patently illegal and opposed to public policy. In Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. (2003) 5 SCC 705 at page 727], this Court after examining the grounds on which an award of the arbitrator can be set aside under Section 34 of the Act has said: “31……However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term “public policy” in Renusagar case it is required to be held that the award could be set aside if it is patently illegal.” 12. We accordingly set aside the Award of the arbitrator and the judgments of the City Civil Court, Hyderabad and the

1 Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2755 OF 2007 Union of India … Appellant Versus Col. L.S.N. Murthy & Anr. … Respondents J U D G M E N T A. K. PATNAIK, J. This is an appeal by way of special leave under Article 136 of … Continue reading

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