Holding

An appeal against an order setting aside or refusing to set aside an arbitral award is maintainable under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996.

Summary

The Chief Engineer of B.P.D.P./R.E.O., Ranchi appealed against a High Court order that dismissed its arbitration appeal as non‑maintainable. The appeal concerned whether an order setting aside or refusing to set aside an arbitral award falls within Section 37(1)(b) of the Arbitration and Conciliation Act, 1996. The High Court had held it did not, but the Supreme Court examined the statutory language and held that the appeal is clearly maintainable under the said provision. Consequently, the Supreme Court set aside the High Court’s order and remitted the matter for merits‑determination, disposing of the appeal without costs. The decision reaffirmed that appeals against orders to set aside or refuse to set aside an award are appealable under Section 37(1)(b).

Issues considered

Whether an appeal against an order setting aside or refusing to set aside an arbitral award is maintainable under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996

Legislation cited

Arbitration Act, 1940s. 39(1)(vi)
Arbitration and Conciliation Act, 1996s. 37(1)(b)
Code of Civil Procedure, 1908s. Order IX Rule 13, s. Order XX Rule 4(2)
Limitation Act, 1963s. 5

Subjects

ArbitrationAppealSection 37Arbitral awardMaintainabilitySupreme CourtHigh CourtLimitation ActSection 30Section 33

Judgment

.....
A CHIEF ENGINEER OF B.P.D.P./R.E.O., RANCHI
v.
M/S. SCOOT WILSON KIRPA TRICK INDIA PVT. LTD.

NOVEMBER 10, 2006

B [ARIJITPASAYAT ANDLOKESHWARSINGHPANTA,JJ.]

Arbitration and Conciliation Act, 1996-Section 37(l)(b)-An appeal
clearly lies against an order setting aside award or refusing to set aside the
C award-High Court erroneously held otherwise-Arbitration Act, 1940-
Section 39(l)(vi).

The question which arose for consideration in the present appeal was
whether the High Court has erred in dismissing the arbitration appeal on
the ground of its non-maintainability as the same does not fall within the ambit
D of Section 37 of Arbitration and Conciliation Act, 1996.

Disposing of the appeal, the Court

HELD: The question in the instant case is whether appeal was
maintainable. The High Court did not consider this aspect. The appeal is
E clearly maintainable u/s. 37(1)(b) of Arbitration and Conciliation Act, 1996.
Therefore, the order of the High Court is set aside. The High Court shall
deal with the matter and examine the respective stand on merits treating the
appeal to be maintainable. (842-C-D]

Union of India v. Popular Construction Co., (2001) 8 SCC 470; State
F of Goa v. Western Builders, (2006) 6 SCC 239; Dharma Prathishthanam v.
Madhok Construction (P) Ltd, (2005) 9 SCC 686; Essar Constructions v.
N.P. Rama Krishna Reddy, (2000) 6 SCC 94; Union of India and Ors. v.
Manager, Mis Jain and Associates, (2001) 3 SCC 277 and Fairgrowth
Investment Ltd. v. Custodian, (2004) ll SCC 472, referred to.

G CIVIL APPELLATE JURISDICTION: Civil Appeal No.4759 of2006.

From the Judgment and Final Order dated 4/6.4.2005 of the High Court
of Jharkhand at Ranchi in Arbitration Appeal No. 2/2005.

Pinky Anand and Vishwajit Singh for the Appellant.
II 836
CHIEF ENGINEER Of B.P.O.P./R.E.O .. RANCHI v. SCOOT WILSON KIRPATRICK !NOIA PVT. LTO. IPASAY AT, 1.1 83 7

Dr. Rajeev Dhawan, Vivek Singh and Lakshmi Raman Singh for the A
Respondent.

The judgment of the Court was delivered by:

ARIJIT PASAYAT, J. Leave granted.
B
Challenge in this appeal is to the order passed by a learned Single
Judge of the Jharkhand High Court holding that the appeal filed by it was not
maintainable as the same does not fall within the ambit of Section 37 of the
Arbitration and Conciliation Act, 1996 (in short the 'Act').

Learned counsel for the appellant submitted that the appeal is clearly C
maintainable under Section 37(l)(b) of the Act.

Per contra, learned counsel for the respondent submitted that the case
is covered by the decision of this Court in Union of India v. Popular
Construction Co., (2001] 8 SCC 470 and State of Goa v. Western Builders,
(2006] 6 sec 239, and the High Court was justified in holding that the appeal D
was not maintainable. Therefore, it is submitted that certain aspects which
have not been raised specifically in the grounds raised before this Court but
submitted during the course of arguments cannot be taken note of.

Section 37(I)(b) of the Act is in pari materia to Section 39(I)(vi) of the E
Arbitration Act, 1940 (in short 'Old Act'). The provisions in the Acts read
as follows:

"1996 Act:

Section 37(l)(b) "An appeal shall lie from the following orders of
the Court authorized by law to hear appeals from original decrees of f
the Court passing the order, namely :-

b. Setting aside or refusing to set aside an arbitral award under
Section 34 of the Act".

1940 Act: G
Section 39. Appealable orders: "(I) An appeal shall lie from the
following orders passed under this Act (and from no others) to the
Court authorized by law to hear appeal from original decrees of the
Court passing the order :-
H
838 SUPREME COURT REPORTS (2006] SUPP. 8 S.C.R.

A An order:

xxx xxx xxx xxx

(vi) Setting aside or refusing to set aside an award".

In Dharma Prathishthanam v. Madhok Construction (P) Ltd, [2005] 9
B sec 686 it has been held by this Court as follows:
"2 7. In the event of the appointment of an arbitrator and reference of
disputes to him being void ab initio as totally incompetent or invalid
the award shall be void and liable to be set aside de hors the provisions
of Section 30 of the Act, in any appropriate proceedings when sought
c to be enforced or acted upon. This conclusion flows not only from
the decided cases referred to hereinabove but also from several other
cases which we proceed to notice.

28. In Chhabba Lal v. Kallu Lal and Ors., AIR (1946) P.C. 72 their
Lordships have held that an award on a reference presupposes a valid
D
reference. If there is no valid reference, the purported award is a
nullity.

29. On this point, there is near unanimity of opinion as amongst the
High Courts of the country as wefl. Illustratively, we may refer to a
few cases. In Union of India v. Ajit Mehta and Associates, Pune and
E
Ors., AIR (1990) Bom 45, the Division Bench held that the Court has
suo motu power to set aside an award on ground other than those
covered by Section 30 such as an award made by arbitrators who can
never have been appointed under Section 8, as such an award would
undoubtedly be ab initio void and non est. In Union of India v. South
F Eastern Railway, AIR (1992) M.P. 47 and Rajendra Dayal v. Govind
(1970) MPLJ 322, both Division Bench decisions, the High Court of
Madhya Pradesh has held that in certain situations the Court may set
aside an Award even without there being an application under Sedion
30 or even if the petition under Section 30 has not been fifod within
the period of limitation if the Court finds that the award is void or
G
directs a party to do an act which is prohibited by law or is without
jurisdiction or patently illegal. We need not multiply the number of
authorities on this point as an exhaustive and illuminating conspectus
of judicial opinion is found to be contained in Law of Arbitration and
Conciliation - Practice and Procedure by S.K. Chawla (Second Edition,
H
CHIEF ENGINEER OF B.P.D.P./R.E.O., RANCHI v. SCOOTWILSONKIRPATRICK INDIAPVT. LTD. IPASAYAT,J.J 839

2004 at pp. 181-184) under the caption - "Whether the Court has suo A
motu power to set aside an Arbitral Award - " anci the answer given
in the discussion thereunder is in the affirmative.

30. Though it has been held in the Union of India v. Shri Om Prakash,
[ 1976] 4 sec 32, that an objection on the ground of invalidity of a
reference is not specifically covered by Clauses (a}, (b) and (c) of B
Section 30, yet it is included in the residuary expression "or as otherwise
invalid" and could have been set aside on such an application bein$
made. However, the above decision cannot be treated as an authority
to hold that an award which is void ab initio and hence a nullicy
consequent upon an invalid appointment and an invalid reference in
clear breach of the provisions contained in Sections 8, 9 and 20 of the C
Act, can still be held to be valid if not objected to through an
objection preferred under Section 30 of the Act within the prescribed
period of limitation.

31. Three types of situations may emerge between the parties and D
then before the Court. Firstly, an arbitration agreement, under
examination from the point of view of its enforceability, may be one,
which expresses the parties' intention to have their disputes settled
by arbitration by using clear and unambiguous language then the
parties and the Court have no other choice out to treat the contract.
as binding and enforce it. Or, there may be an agreement suffering E
from such vagueness or uncertainty as is not capable of being,
construed at all by culling out the intention of the parties with certainty,
even by reference to the provisions of the Arbitration Act, then it
shall have to be held that there was no agreement between the parties
in the eye of law and the question of appointing an arbitrator or
making a reference or disputes by reference to Sections 8, 9 and 20 F
shall not arise. Secondly, there may be an arbitrator or arbitrators ,
named, or the authority may be named who shall appoint an arbitrator,
then the parties have already been ad idem on the real identity of the
arbitrator as appointed by them before hand; the consent is already
spelled out and binds the parties and the Court. All that may remain G
to be done in the event of an occasion arising for the purpose, is to
have the agreement filed in the Court and seek an order of reference
to the arbitrator appointed by the parties. Thirdly, if the arbitrator is
not named and the authority who would appoint the arbitrator is also
not specified, the appointment and reference shall be to a sole arbitrator
H
840 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A unless a different intention is expressly spelt out. The appointment
and reference - both shall be by the consent of the parties. Where the
parties do not agree, the Court steps in and assumes jurisdiction to
make an appointment, also to make a reference, subject to the
jurisdiction of the Court being invoked in that regard. We hasten to
add that mere inaction by a party called upon by the other one to act
B does not lead to an inference as to implied consent or acquiescence
being drawn. The appellant not responding to respondent's proposal
for joining in the appointment of a sole arbitrator named by him could
not be construed as consent and the only option open to the
respondent was to have invoked the jurisdiction of Court for
c appointment of an arbitrator and an order of reference of disputes to
him. It is the Court which only could have compelled the appellant to
join in the proceedings."

Reference may be made to some observations in Essar Constructions
v. NP. Rama Krishna Reddy, [2000] 6 SCC 94, where it was held that appeal
D is maintainable against the dismissal of objections on the ground of limitation.
Similar views were expressed in Union ofIndia and Ors. v. Manager, Mis Jain
and Associates, [2001] 3 SCC 277. Para 11, 12 and 19 read as follows:

"11. In view of the aforequoted Sections, it can be stated that-

E (a) after receipt of an award, the Court can suo motu refuse to make
award rule of the Court on the ground that (i) part of the award is
upon a matter not referred to arbitration; and (ii) the award is imperfect
in form or contains any obvious error. The Court can also remit the
award to arbitrator in case (i) where the award has left undetermined
any matter referred to arbitration; or (ii) where it has ·determined any
F matter not referred to arbitration; or (iii) the award is so indefinite as
to be incapable of execution; or (iv) is on the face of it illegal. This
is also provided under parenthesis clause of section 17 which provides
"Where the Court sees no cause to remit the award or any of the
matters referred to arbitration for reconsideration or to set aside the
award, the Court shall .. proceed to pronounce judgment.." Therefore,
G
it cannot be stated that in case where objections under Section 30 or
33 are not filed the Court is bound to pass decree in terms of the
award.

(b) Section 5 of Limitation Act gives discretion to the Court to extend
H the time for filing application under Section 30 or 33 raising objections
CHIEFENGINEEROFB.P.D.P./RE.0., RANCHI v. SCOOTWILSON KIRPATRICK INDIAPVT. LTD. (PASAYAT,J.j 84}

to the award. A
(c) The Civil Procedure Code including Order IX Rule 13 is applicable
to the proceedings initiated by producing award before the Court for
passing.a decree.

(d) The power of the Court to modify the award under Section 15 or B
to remit the award to the arbitrator for reconsideration under Sectioi:t
16 varies from the jurisdiction of the Court to set aside the award
under Section 30 or to determine the validity of the arbitration
agreement or an award under Section 33.

12. The result is-before pronouncing judgment, the Court has to C
apply its mind to arrive at the conclusion whether there is any cause
to modify or remit the award. Further the phrase 'pronounce judgment'
would itself indicate judicial determination by reasoned order for
arriving at the conclusion that decree in terms of award be passed.
One of the meaning given to the word "Judgment" in Webster's
Comprehensive Dictionary [International Edition, Vol. 1 (1984)] reads D
thus: "the result of judging; the decision or conclusion reached, as.
after consideration or deliberation". Further, Order XX Rule 4(2) C.P.C.
in terms provides that 'Judgment' shall contain a concise statement
of case, the points for determination, the decision thereon, and the
reasons for such decision. This is antithesis to pronouncement of E
non-speaking order.

19. Further, large part of the controversy involved in this appeal is ·
covered by the decision rendered by this Court in Essar Constructions ·
v. N.P. Rama Krishna Reddy, [2000] 6 SCC 94. The Court observed
that because of the applicability of Section 5 of the Limitation Act, F
1963, if the court has not pronounced judgment for whatever reason,
although the time prescribed for making the application has expired
and an application for setting aside the award is made with a prayer
for condonation of delay, the court cannot pronounce judgment until
the application is rejected. The Court also observed that even after a
decree is passed under Section 17, an application under Section 30 G
can be entertained provided sufficient cause is established. In either
case, the rejection of the application would be a refusal to set aside
the award. In case where such application is rejected on the ground
that it is delayed and no sufficient cause has been made out under
Section 5 of the Limitation Act, it would be an appealable order under ll
842 SUPREME COURT REPORTS [2006] SUPP, 8 S.C.R.

A Section 39(1)(vi) of the Act".

The decision in Popular Construction's case (supra) did not deal with
specific issues in this case. In that decision it. was held that in respect of
"sufficient cause cases" the provisions of Section 34(3) of the Act which are
special provisions relating to condonation of delay override the general
B provisions of the Section 5 of the Limitation Act, 1963 (in short 'Limitation
Act'). The position was reiterated in the Western Builders ca.se (supra) and
also in Fairgrowth Investment Ltd. v. Custodian, [2004) 11 SCC 472. There
can be no quarrel with the proposition that Section 5 of the Limitation Act
providing for condonation of delay is excluded by Section 34(3) of the Act.

c But the question in the instant case is not about the applicability of
Section 5 of the Limitation Act, and question really is whether the appeal was
maintainable. The High Court did not consider this aspect. The appeal is
clearly maintainable. Therefore, the order of the High Court is set aside. The
High Court shall deal with the matter and examine the respective stand on
D merits treating the appeal to be maintainable.

The appeal is accordingly disposed of with no order as to costs.

D.G. Appeal disposed of.