Supreme Court of India
SUPERINTENDING ENGINEER AND ORS.versusB. SUBBA REDDY
- Citation
- 1999 INSC 204
- Decided
- 26 April 1999
- Disposal
- Appeal(s) allowed
- Bench
- D P WADHWA
Holding
A cross‑objection is not maintainable under Section 41 of the Arbitration Act, and the award of pre‑reference interest as damages must be set aside, restoring the trial court's reduced interest rate.
Summary
The appellant (Superintending Engineer) and respondent (B. Subba Reddy) entered into four contracts which were later arbitrated, resulting in awards that granted damages for delay and interest at 18% per annum on the total award, EM Deposit, Bank Guarantee and damages. The Principal Subordinate Judge, applying the rule of court, reduced the interest rate to 12% per annum, but the respondent did not appeal this reduction. The appellant filed an appeal under Section 39 of the Arbitration Act, 1940, and the respondent filed cross‑objections under Order 41 Rule 22 of the CPC challenging the reduction. The High Court dismissed the appeal but allowed the cross‑objections, restoring the 18% interest rate. On appeal, the Supreme Court held that Section 41 of the Arbitration Act is merely procedural and does not confer a substantive right to file a cross‑objection, rendering the High Court's order untenable, and also held that interest for the period prior to the reference could be awarded only if agreed or permitted by the Interest Act, 1978, which was absent. Consequently, the award of damages as pre‑reference interest was set aside and the reduced interest rate of 12% per annum was restored.
Issues considered
- The cross‑objection filed under Order 41 Rule 22 CPC is maintainable in an appeal filed under Section 39 of the Arbitration Act, 1940.
- Whether an arbitrator can award interest for the period prior to the reference of disputes in the absence of an agreement or statutory provision.
- Whether Section 41 of the Arbitration Act confers a substantive right to file a cross‑objection or is merely procedural.
Legislation cited
- Arbitration Act, 1940s. 39, s. 41
- Code of Civil Procedure, 1908s. Order 41 Rule 22
- Interest Act, 1978
Subjects
Arbitration Act 1940Section 39 appealSection 41 proceduralcross‑objectionOrder 41 Rule 22 CPCinterest awardpre‑reference interestInterest Act 1978rule of courtcivil procedure
Judgment
A SUPERINTENDING ENGINEER AND ORS.
v.
B. SUBBA REDDY
/
APRIL 26, 1999
B [D.P. WADHWA AND N. SANTOSH HEGDE, JJ.]
Civil Procedure Code, 1908-0rder 41 Rule 22-Arbitration Act,
1940-Sections 41 and 39-Filing of cross-objections in second ap,peal-
lnterest granted in form of damages for period prior to reference-Further
C interest at 18% p.a. awarded on total amount of award, Earnest Money
Deposit and damages-Trial Court made award rule of Court and reduced
interest awarded from 18% p.a. to 12% p.a.-No appeal filed by respondent-
contractor-Appellant filed appeal in High Court in which respondent filed
cross objections challenging order of trial court-High Court dismissed the
D appeal but allowed the cross-objections-On appeal Held, cross-objection is
an appeal-Right to file cross-objection is only substantial not procedural
in nature but right to file cross-objection under Section 41 is procedural as
Section 39 provides that CPC would apply-If there is no right of cross-
objection under Section 39 it cannot be read into Section 41-Cross-objection
filed before· High Court was not maintainable and interference in decree of
E trial court was unwarranted-Award granting damages by way of interest for
the period phor to reference set aside-Interest can be awarded for a period
prior to reference only if there is an agreement to that effect or it is allowable
under the Interest Act, 1978.
Appellants and the respondent had entered into four agreements which
F were the subject matter of dispute. The arbitration in a series of four awards,
in addition to the claims of the respondent, awarded damages towards delay
in payment of claims which was calculated at the rate of 15% per annum.
Respondent was further awarded interest at the rate of 18% per annum on
the total amount of the award, Earnest Money Deposit, Bank Guarantee and
G the said damages from the date of reference till payment, whichever is
earlier. All the awards were made rule of court by order of the Principal
Subordinate Judge reducing the interest awarded to 12% from 18%. The
respondent-contractor did not appeal against this. However, the appellant
filed· an appeal before the High Court under Section 39 of the Arbitration-
Act, 1940. The respondent then filed cross-objections under Order 41 Rule
H 22 CPC challenging the order of the Principal Subordinate Judge. High
880
SUPERINTENDING ENGR. v. B. SUBBA REDDY 881
Court dismissed the appeal but allowed the cross-objections restoring the A
arbitrator's order awarding 18% interest per annum. Hence this appeal.
The appellants contended before this court that cross-objections were
not maintainable under Section 41 of the Act, and that arbitrator could not
award interest for the period prior to reference.
B
The respondent contended before this court that since provisions of
CPC are applicable to the appeal filed under Section 39 of the Act, cross
objections are also maintainable.
Allowing the appeal, this Court
c
HELD : 1. Appeal is a substantive right and is a creation of statute.
Right to appeal does not exist unless it is specifically conferred. Cross-
Objection is like an appeal having all trappings of an appeal. It is filed in
the form of memorandum and the provisions of Ord!r 41 Rule 1 CPC, so far
as these relate to the form and contents of the memorandum of appeal apply D
to cross-objection as well. Court fee is payable on cross-objection like that
on the memorandum of appeal. Provisions relating to appeal by an indigent
person also apply to cross-objection. Even where the appeal is withdrawn or
is dismissed for default, cross-objection may nevertheless be heard and
determined. The respondent even though has not appealed may support the
decree on any other ground but if he wants to modify it he has to file cross- E
objection to decree which objections he could have taken earlier by filing an
appeal. Cross-objection is nothing but an appeal. [893-C)
Sadhu Ganjaram Bhagade v. Special Dy. Collector, [1970] J SCC 685;
Alopi Nath v. Collector, Varanasi, (1986) Supp. SCC 693; HM Kamaluddin F
Ansari & Co. v. Union ofIndia, [1983) 4 SCC 417; Hakam Singh v. Gammon
(India) Ltd, (1971) 1 SCC 286; N. Jayaram Reddy v. Revenue Divisional
Officer and Land Acquisition Officer, [1979) 3 SCC 578; R. Mc Dill & Co.(P)
Ltd. v. Gouri Shankar Sarda, [1991) 2 SCC 548; Ramanbhai Ashabhai Patel
v. Dabhi Ajit Kumar Fulsinji, (1965) 1 SCR 712 and Bhanu Kumar Shastri
v. Mohan Lal Sukhudi, (1971) 1 sec 370, relied on. G
--- Ramasray Singh v. Bibhisan Sinha, AIR (1950) Cal. 372 and Bihar
State Electricity Boardv. Khalsa Bros., AIR (1988) Pat. 304, distinguished.
2. Section 41 of the arbitration Act is merely procedural in nature. If
there is no provision for cross-objection given under section 39 of the Act, H
882 SUPREME COURT REPORTS [1999) 2 S.C.R.
A it cannot be read into Section 41 as filing of cross-objection is not procedural
in nature. Section 41 merely prescribes that procedure of CPC would be
applicable to the appeal under Section 39 of the Act. Therefore, cross-
objection filed by the respondent was not maintainable in the High Court.
I (887-Fl
B 3. The arbitrator has in fact given interest, though in the shape of
damages for a period prior to the date of reference of dispute. Interest for
-
.
a period prior to the reference could be awarded only if there was an
agreement or it was allowable under Interest Act of 1978. There is nothing
on record to show the same, therefore, the award of damages has to be set
C aside. (884-G]
Secretary Irrigation Department, Government of Orissa v. G.C. Roy,
(1992] 1 SCC 508; Hindustan Construction Co. Ltd. v. State of Jammu and
Kashmir, AIR (1992) SC 2192 and State of Orissa v. Agarwalla, (1997] 2
sec 469, relied on.
D
4. The award to the extent it grants damages by way of interest at the
rate of 15% per annum for the period prior to the reference is set aside;
the award of interest at the rate of 12% per annum as decreed by the trial
Court is restored. [894-C)
E
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 451-58of1994.
From the Judgment and Order dated 23.12.92 of the Andhra Pradesh
High Court in A.A.0. Nos. 5, 386, 493 & 1268/90 and CRP Nos. 1135, 1136,
1134 and 818of1990.
F
Mrs. K. Amareshwari, Ms. Anameka, G. Prabhakar and G. Venkatesh for
the Appellants.
Mrs. D. Bharathi Reddy for the Respondent.
G The Judgment of the Court was delivered by
D.P. WADHWA, J. This appeal is against the judgment dated December
23, 1992 ofa Division Bench of the Andhra Pradesh High Court in proceedings
arising out of the Arbitration Act, 1940 (for short, the 'Act') where the High
H Court made the award as given by the arbitrator, rule of the court. High Court
SUPERINTENDING ENGR. v. B. SUBBA REDDY [D.P. WADHWA, J.] 883
dismissed the appeal filed by the Superintending Engineer, the same appellant A
as now before, us and allowed the cross-objections of tbe respondents-
contractor.
Two objections have been raised by Mrs. K. Amareshwari, Senior
Advocate appearing for the appellant: (I) cross-objections are not maintainable B
-- under Section 41 of the Act; and (2) the arbitrator could not award interest
for the period prior to reference of disputes to him. Not only that the arbitrator
awarded interest over interest which he had no authority to do.
An agreement was entered into between the appellant and the respondent
for execution of the work called "providi~g lining to bet and side slopes of C
Pamidipadu Branch Canal ofN.S. Canals from K.M. 0-0-008 to 1-00-004 KM".
Four separate ~greements were entered into. As is usual· in such contracts,
disputes arose and these were referred to sole arbitrator who gave separate
awards dated April 18, 1986 in respect of each of the agre~ments as
under:-
D
SI. No No. of agreement Amount awarded
I. A.S. No. 8/SE, dated 20-5-82 Rs. 3,73,486 + final Bill,. with-held
amounts and damages.
E
2. A.S. No.9/SE, dated 20.5.82 Rs. 4,08,377 + final Bill, with!held
amounts and damages.
3. A.S. No. IO/SE dated 20.5.82 Rs. 1,23,250 + E.M.D., Bank Guarantee
work not executed) and damages.
F
4. A.S. No. 11/SE, dated 20.5.82 Rs. 1,23,250 + E.M.D., Bank Guarantee
(work not executed) and damages.
G
-
.;---
At the same time, the award also directed payment of interest at the rate
of 18% per annum on the amounts so awarded.
To understand the rival contentions, we may refer to one of the awards
in agreement No. 11/SE (serial No. 4 above). The arbitrator allowed five claims
of the respondents and these are : H
T
884 SUPREME COURT REPORTS (1999] 2 $.C.R.
·A ~I. Claims Amount Amount
No. claimed awarded
1. Towards loss of advances to labour Rs. 40,000 Rs. 40,000
2. Towards loss of advance on machi~ery Rs. 30,QOO Rs. 20,000
B
3.
and crew
Towards over-head charges Rs. 10,000 Rs. 5,000
---
4. Loss of Profit Rs. 40,000 Rs. 20,000
c 5.
· .. Damages towards delay in payments .
under four claims
Rs. 28,800
Rs. 21,600
Rs. 38,250 ---
Rs. 7 ,200 and
Rs. 28,800 ,,:
Mr. Amateshwari did not challenge award on claims 1,2,3 and 4. She
D said claim No. 5 was inadmissible. We may note as to how the arbitrator
anived. at the figure of Rs. 38,250 under claim No. 5. He held that a total
.:.
amount of claims allowed under claims 1, 2, 3 and 4 worked out to Rs. 85,000.
The date of completion of the co1Jtract:was 21.lO.l.982. The date ofreference
ofdisputes was 21. l 0.1985. He awarded. interest as measure of damages at the
rate of 15% per annum on the amount of Rs. 85,000 for three years from
·E 21.l0.1982 till the date of reference, i.e., 21.10.1985. The arbitrator further gave
interest to the respondent at the rate of 18% per annum on the total amount
of award of Rs. 85,000 E.M.D; (Earnest Money Deposit), B.G. (Bank Guarantee)
and Rs .. 38,250 (being damages), fro~ the d~te of reference till the date of the
·F
actual payment or the decree whichever is earlier: ,
. .
We find that under claim No. 5 what the arbitrator has given though in
the shape of damages is in fact interest on the amount of RS; 85,000 for a
--
period prior to the date of reference· of disputes to him. The amount of
Rs. 38,251,) is nothing but interest for a period prior to the date of reference
of disputes to him. Interest for a period prior to the reference could be
G awarded only ifthere was an agreement or it was allowable under the Interest
Act, 1978, ·There is nothing on the record to· show as to how the respondent
could claim interest whether under the agreement or under the Interest Act.
• By giving the name of damages, when, in fact it is claim of interest it cahnot
be permitted. Award of Rs. 38,250 as damages has to be set aside.
H In view of the decision of this Court in Secretary, Irrigation Department,
SUP.ERINTENDING ENGR. v. B. SUBBA REDDY [D.P. WADHWA, J.] 885
Government of Orissa v. G.C. Roy, [1992] I SCC 508; Hindustan Construction A
Co. Ltd. v. State of Jammu & Kashmir, AIR (1992) SC 2192, and the latest
being State of Orissa v. B.N. Agarwal/a, [1997] 2 SCC 469, the arbitrator could
award interest both pendante lite and future which he gave at the rate of 18%
per annum.
When the matter was pending before the Principal Subordinate Judge, B
he reduced the award of interest from 18% per annum to 12% per annum.
Otherwise he made all the four awards rule of the court and passed decrees
in terms thereof. The respondent did not challenge the grant of interest at the
lower rate of 12% per annum by the Principal Subordinate Judge by filing any
appeal against his judhgmenthmaking the awards rule odf law. It wfas the appellant C.
who appealed to t e Hig Court against the ju gment o the Principal
Subordinate Judge. When notice of appeal was served on the respondent, he
filed cro~s-objections under Order 41 · Rule 22 of the Code of Civil Procedure
(for short, the 'Code') challenging the judgment of the Principal Subordinate
Judge whereby the award of interest was interfered with. The High Court
while dismissing the appeals allowed the cross-objections and restored the D
award of interest at the rate of 18% per annum as given by the arbitrator. This,
now the appellant says, High Court could not do as cross-objections were
not competent in appeal filed by the appellant under Section 39 of the Act.
Respondent, however, says that since provisions of the Code are applicable
to the appeal filed under Section 39 of the Act, cross objection filed under E
Order 41 Rule 22 is maintainable. Sections 39 and 41 of the Act and provisions
of Order 41 Rule 22 of the Code are as under :
"Arbitration Act
39. Appealable orders:- (1) An appeal shall lie from the following F
orders passed under this Act (and from no others) to the Court
authorised by law to hear appeals from original decrees of the Court
passing the order.
An order-
(i) superseding an arbitration;
G
(ii) on an award stated in the form of a special case;
(iii) modifying or correcting an award;
(iv) filing or refusing to file an arbitration agreement; H
886 SUPREME COURT REPORTS [1999] 2 S.C.R.
A (v) ~taying or refusing to stay !~gal proceedings where there -
is an arbitration agreement;
(vi) setting aside or refusing :to set aside an award:
Provided that the provisions of this section shall not apply to any
order passed by a Small Cause Court.
B
(2) 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.
41 . .Procedur£4. and powers of Court. - Subject to the provisions of this
c Act and of rules made thereunder-
(a) the provisions of the Code of Civil Procedure, 1908 (5of1908),
shall apply to all proceedings before the Court and to all appeals,
under this Act; and
D (b) the Court shall have, for the purpose of, and in relation to,
arbitration proceedings, the same power of making orders in
respect of any of the· matters set out in the Second Schedule as
it has for the purpose .of, and in relation to, any proceedings
before the Court:
E Provided that nothing in clause (b) shall be taken to prejudice any
power which may be vested in an arbitrator' or umpire for making
orders with respect to any of such matters.
Code ·of Civil Procedure
22. Upon hearing respondent may object to decree as if he had
F preferred separate appeal.-(1) Any respondent, Ulough he may not
have appealed from any.part of the decree, may not only support the
decree .but m~y also state that ihe finding against' him in· th~ Court
below in respect of any issue ought to have been .in his favour; and
may also take any cross-objection to the decree. which he could have
G taken by way of appeal, provided he has filed such objection in the
Appellate Court within one month from the date of service on him or
his pleader of notice of the day fixed for hearing the appeal, or within
such further time as the Appellate Court may see fit to allow.
Explanatior..-A respondent aggrieved by a finding of the Court in
H the judgment on which the decree appealed against is based may,
SUPERINTENDING ENGR. v. B. SUBBA REDDY [D.P. WADHWA, J.) 887
under this rule, file cross-objection in respect of the decree in so far A
as it is based on that finding notwithstanding that by reason of the
decision of the Court on any other finding which is sufficient for the
decision of the suit, the decree, is, wholly or in part, in favour of that
respondent.
(2) Form of objection and provisions applicable thereto.-Such cross- B
objection shall be in the fonn of a memorandum, and the provisions
of Rule 1, so far as they relate to the form and contents of the
memorandum of appeal, shall apply thereto.
(3) Unless the respondent files with the objection a written
acknowledgment from the party who may be affected by such objection C
or his pleader of having received a copy thereof, the Appellate Court
shall cause a copy to be served, as soon as may be after the filing
of the objection, on such party or his pleader at the expense of the
respondent.
(4) Where, in any case in which any respondent has under this rule D
filed a memorandum of objection, the original appeal is withdrawn or
is dismissed for default, the objections so filed may nevertheless be
heard and determined after such notice to the other parties as the
Court thinks fit
(5) The provi&ions relating to appeals by indigent persons shall, so E
far as they can be made applicable, apply to an objection under this
rule."
Court fee is payable on cross-objection as is payable on appeal.
It was contended by Mrs. Amareshwari that Section 41 of the Act did F
not confer any substantive right oq the respondent to fil~cross-objection and
it is only the procedure of the Code which is made applicable while dealing
with the appeal filed under Section 39 of the Act. As to what is the scope
of cross-objection, whether it is a substantive right or merely procedural, we
may refer to some of the decisions cited at the Bar. G
In Sahadu Gangaram Bhagade v. Special Deputy Collector.
Ahmadnagar & Anr., [ 1970] l SCC 685, this Court was considering the
question of nature of cross-objections in the context of payment of court fee
under the Bombay Court Fees Act, 1959. It was submitted that Article 3 of
Schedule 1 of the said Act was inapplicable because that article referred to H
888 SUPREME COURT REPORTS [1999] 2 S.C.R.
A "plaint, application or petition (including memorandum of appeal), to set aside
or modify any award otherwise than under the Arbitration Act, 1940" and that
no court fee was payable on cross-objections. This Court held as under :
"Before Article 3 of Schedule 1 can be attracted, there must be (1)
a plaint, application or petition (including a memorandum of appeal);
B (2) in that plaint, application or petition (including memorandum of
appeal), there must be a prayer to set aside or modify any award; and
(3) the award in question must not be one under the Arbitration Act,
1940. There is no dispute that the proceedings with which we are
concerned in this case fulfil two out of the three requirements
enumerated above. The award concerned in the proceedings is not
c one made under the Arbitration Act, 1940 and through his cross-
objection the appellant seeks to get the award modified. The only
point in controversy is whether the cross-objection filed by the
appellant can be considered as "application or petition" within the
meaning of Article 3 of Schedule I. The words in the bracket "including
D memorandum of appeal" in our opinion refer to the word 'petition'
immediately preceding those words. In other words the word 'petition'
includes the memorandum of appeal as well. The question is whether
a cross-objection filed by a respondent in an appeal can be considered
as a memorandum of appeal. We have no doubt that it is a memorandum
of appeal in substance though not in form. It is a right given to a
E respondent in an appeal to challenge the order under appeal to the
extent he is aggrieved by that order. The memorandum of cross-
objection is but one form of appeal. It takes the place of a cross-
appeal. It is true that while Article 1 of Schedule 1 refers to 'cross-
objection', Article 3 of that Schedule does not refer to cross-objection
F as such but that in our opinion make no difference. It is only an
inartistic drafting."
In Hakam Singh v. Mis. Gammon (Jfldia) Ltd, [1971] l SCC 286, the
appellant was aggrieved by the order of the Allahabad High Court directing
that a petition filed under Section 20 of the Arbitration Act, 1940 in a subordinate
G court be returned to him for presentation to the proper court. This Court
upheld the order of the High Court and said, with reference to Section 41 of
the Act, that the Code in its entirety applied to proceedings under that Act
and that the jurisdiction of the courts under the Act to entertain a proceeding
for filing an award was accordingly governed by the provisions of the Code.
H In N. Jayaram Reddy & Anr. v. Revenue Divisional Officer and Land
SUPERINTENDING ENGRi v. B. SUBBA REDDY [D.P. WAPHWA, 1.J 889
Acquisition Officer, Kurnool, [1979] 3 SCC 578, this Court was considering_. A
the nature of cross-appeals and cross-objections. It said:
"Cross-appeal and cross-objections provid<'; two different remedies for
the same purpose and that is why undet'Order 41, Rule 22, cross·
objections can be preferred in respect of such points on which that
party could have preferred an appeal. If such be the position of cross- B
objections and cross-appeal a differentiation in the matter of their
treatment under Rules 3 and 4 cannot be justified merely- on the
ground that in case of cross-objections they fonn part of the same
record while cross-appeals are two independent pro~eedings."
"To say that cross-appeals are independent of each is to overlook the C
obvious position which parties adopt i.n cross-appeals.
Interdependence of cross-appeals is the same as interdependence
appeal and cross-objections because as in the case of appeal and
cross-objections a decision with regard to appeal would directly
impinge upon the decision in cross-objections and vice versa. D
Indubitably the decision in one of the cross-appeals would directly
impinge upon the decision in the other because both ultimately arise
from the same decree. This is really the interdependence of cross- ·
appeals and it is impossible to distinguish cross-appeals from appeal
and cross-objections".
E
"This Court then said that the cases which have taken the view that
the view in cross-appeals the position is different than the one in
appeal and cross-objections do not proceed on any discernible legal
principle. Nor can they be explained by any demonstrable. legal
principle but in fact they run counter to the established legal principle." F
InM!s. HM KamaluddinAnsari& Co. v. Union ofIndia& Ors., [1983]
4 SCC 417, this Court was again considering the ambit and scope of Section
41 •of the Arbitration Act. It said:
"The appellant in the instant case took the stand that there was no G
concluded contract between the parties including arbitration. Therefore,
the order of injunction passed in the instant case could not be for the
· purpose of and in relation to arbitration proceedings. Faced with this
difficulty Shri S.N. Kaicker, learned counsel for the appellant, fell back
upon clause (a) of Section 41 to content that clause (a) makes the
Code of Civil Procedure applicable to all proceedings before the court H
890 SUPREME COURT REPORTS [1999] 2 S.C.R.
A and to all appeals under the Act and, therefore, the appellant was
entitled to invoke Order 39 of the Code to get an injunction order even
ifthe conditions of clause (b) of Section 41 were not satisfied. We are
afraid this contention cannot be accepted.
Clause (a) of Section 41 makes only the procedural rules of the
B Code of Civil Procedure applicable to the proceedings in court under
the Arbitration Act. This clause does not authorise the court to pass
an order of injunction. The power is conferred by clause (b) of Section
41. The source of power, therefore, cannot be traced to clause (a). If
the contention of Shri Kaicker is accepted, the app>!als would lie
under Sections 96, 100 or 104 of the CPC but the Arbitration Act itself
-
c provides for appeal under Section 39. Besides, if clause (a) of Section
41 gave wide powers to pass an order of injunction, clause (b) of
Section 41 would become otiose."
In Alopi Nath & Ors. v. Collector, Varanasi, [1986] Supp. SCC 693 this
D Court in a brief order said:
"We have heard learned counsel for the parties. The short question
is as to the admissibility of the cross-objection under the provisions
of the Uttar Pradesh Nagar Mahapalika Adhiniyam, I 959 where an
appeal against quantum has been filed and the respondent has not
E preferred an appeal. We have looked into the provisions of Sections
377, 379 and 381 of the Act and are inclined to take the view that the
provision of Order 4 I Rule 22 of the Code of Civil Procedure would
be inconsistent with the provisions of the Act inasmuch as an appeal
is admissible only by a certificate or special leave as provided in
provisions (a) and (b) respectively of Section 381(1). It is difficult to
F contend that a cross-objection is anything other than an appeal as
generally understood in law. In the circumstances, benefit of Section
377 or of sub-section (4) of Section 381 of the Act is not available .
The appeal therefore fails. There is no order as to costs." •
G In R. Mcdill & Company Pvt. Ltd. v. Gouri Shankar Sarda & Ors.
[ 1991] 2 SCC 548, one of questions before the Court was whether the provisions
of Order 23 of the Code apply to an application for stay of suit filed under
Section 34 of the Act. It referred to Section 41 of the Act which provided that
provisions of the Code shall apply to all proceedings before the court subject
of course to the provisions of the Arbitration Act and of any rules made
H thereunder. This Court in that case referred to a commentary by R.S. Bachawat
SU PERIN I ENDING ENGR. v. R. ''.Tf313A. REDDY [D.P. WAD HWA, J.] 891
on the Law of Arbitration wherein the author· with reference to various A
decisions of the High Court pointed out as to which provisions of the Code
have been held to be applicable to proceedings under the Act. Reference w_as
also made to some early decisions of this Court and it was held that provisions
of Order 23 of the Code were applicable in view of Section 41 of the Act.
In Ramanbhai Ashabhai Patel v. Debhi Ajitkumar Fu!sinji & Ors., B
[ 1965] 1 SCR 712, the main question for consideration before this Court was
whether the appellant could be said to be guilty of a corrupt practice as
contemplated by Section 123(3) of the Representation of People Act, 1951.
When counsel for the respondent referred to the finding of the High Court
regarding the validity of the second respondent's nomination paper, counsel C
for the appellant raised a preliminary objection to the effect that the first
respondent was not competent to challenge the correctness of the finding as
he had not preferred an appeal therefrom. In the course of discussion in the
judgment, this Court observed:
"Apart from that we think that while dealing with the appeal before D
it this Court has the power to decide all the points arising from the
judgment appealed against and even in the absence of an express
provision like O.XLI, 22 of the Code of Civil Procedure it can devise
the appropriate procedure to be adopted at the hearing. There could
be no better way of supplying the deficiency than by drawing upon
the provisions of a general law like the Code of Civil Procedure and E
adopting such of those provisions as are suitable. We cannot lose
sight of the fact that normally a party in whose favour the judgment
appealed from has been given will not be granted special leave to
appeal from it. Considerations of justice, therefore, require that this
Court should in appropriate cases permit a party placed in such a F
posit!on to support the judgment in his favour even upon grounds
which were negatived in that judgment."
Following this decision, this Court again in Bhanu Kumar Shastri v.
Mohan Lal Sukhadia & Ors., [1971] l SCC 370, on the question of challenging
of findings without preferring an appeal observed that the considerations of G
-- justice required that ''this court should in appropriate cases permit a party
placed in such a position to support the judgment in his favour even upon
grounds which are negatived in that judgment."
However, both the above cases are not the cases where the Court was
considering the scope and substance of cross-objection. H
892 SUPREME COURT REPORTS (1999] 2 S.C.R.
A We may also refer to two decisions of the High Courts-one of the
Patna High Court and the other of the Calcutta High Court. A Division Bench
of the Calcutta High Court in Ramasray Singh v. Bibhisan Sinha, AIR (I 950)
Cal. 3 72, was considering the objection that though statutory right of appeal
is given under Section 38(3) of the Bengal Money Lenders Act, there is no
right given to file cross-objection and that if a litigant is aggrieved by a
B decision of any court under Section 38 of the said Act his remedy is to file
an appeal. High Court negatived the contention and held:
"It is to be observed that by S. 38, Bengal Money-Lenders Act, a right
of appeal is given in express terms. By sub-section (3) of S. 38, a
declaration under that section is to be subject to an appeal, if any, as
c if it were a decree of the Court .. The right of appeal, under that section
is-given to an established Court, namely, the Court of the District
Judge. Nothing is stated expressly in the sub-section as to the
procedure regulating such appeal. In our view, where nothing is stated
expressly as to the procedure of an appeal before a District Judge, the
D law will import that the ordinary procedure of that Court on appeal will
apply. The ordinary procedure of an appeal is that the respondent has
the right to file cross-objection and therefore it is quite clear that the
respondent has the right to file a cross-objection."
In Bihar State Electricity Board v. Khalsa Bros., AIR (I 988) Patna 304,
E a Division. Bench of the Patna High Court speaking through L.M. Sharma, J.
(as His Lordship then was) said:
"The Supreme Court cases arose under the Representation of the
F
People Act, 1951 and the Calcutta case under the Bengal Money
Lenders Act. The observations made in these cases support the
principle which Mr. Chatterjee is relying. So far the arbitration Act is
concerned, the view in favour of the maintainability of a cross-objection
-
appears to be stronger inasmuch as S. 41 of the Act says that subject
to the provisions of, and the rules made under the Act, the Civil
Procedure Code shall apply to all proceedings before the court and
G to all appeals under the Act. There does not appear to be any provision
inconsistent with the application of t~e Civil Procedure Code. The
decision of the Court so far it has gone against the plaintiff-respondent
is clearly appealable under S. 39 and I, therefore, hold that the cross-
objection is maintainable."
H While there was no provision like Section 41 of the Arbitration Act in
SUPERINTENDING ENGR. v. B. SUBBA REDDY [D.P. WADHWA, J.) 893
the Bengal Money Lenders Act in the Calcutta case. Patna case was under A
· the Arbitration Act itself. As we will presently see Patna case does not appear
to lay good law.
From the examination of these judgments and the provisions of Section
41 of the Act and Order 41 Rule 22 of the Code, in our view, following
principles emerge: B
(1) Appeal is a substantive right. It is a creation of the statute. Right
to appeal does not exist unless it is specifically conferred.
(2) Cross objection is like an appeal. It has all the trappings of an
appeal. It is filed in the form of memorandum and the provisions c
of Rule 1 of Order 41 of the Code, so far as these relate to the
form and contents of the memorandum of appeal apply to cross-
objection as well.
(3) Court fee is payable on cross-objection like that on the
memorandum of appeal. Provisions relating to appeals by indigent D
person also apply to cross-objection.
(4) Even where the appeal is withdrawn or is dismissed for default,
cross-objection may nevertheless be heard and determined.
(5) Respondent even though he has not appealed may support the
decree on any other ground but if wants to modify it, he has to E
file cross-objection to the decree which objections he could
have taken earlier by filing an appeal. Time for filing objection
which is in the nature of appeal is extended by one month after
service of notice on him of the day fixed for hearing the appeal.
This time could also be extended by the Court like in appeal.
F
(6) Cross-objection is nothing but an appeal, a cross-appeal at that.
It may be that the respondent wanted to give quietus to whole
litigation by his accepting the judgment and decree or order
even if it was partly against his interest. When, however, the
other party challenged the same by filing an appeal statute gave
G
the respondent a second chance to file an appeal by way of
~
cross-objection if he still felt aggrieved by the judgment and
decree or order.
In the present case, as noted above, the respondent did not file any
appeal under Section 39 of the Act in the High Court which right he admittedly H
894 SUPREME COURT REPORTS [1999) 2 S.C.R.
A had when the award of interest@ 18% per annum was reduced to 12% per
annum by the trial Court. Section 41 of the Act is merely procedural in nature.
If there is no right o_f cross-objection given under Section 39 of the Act, it
cannot be read into Section 41 of the Act. Filing of cross-objection is not
procedural in nature. Sec!ion 41 of the Act merely prescribes that procedure
of the Code would be applicable to the appeal under Section 39 of the Act.
B We are, therefore, of the opinion that cross-objection by the respondent was
not maintainable and th~ High Court was not correct in holding otherwise and
restoring the award of interest to 18% per annum and, thus, interfering in the
decree of the Trial Court.
C We would, therefore, set aside the award so far it grants damages by
way of interest at the rate of 15% per annum on the amount found due to
the respondent for the period prior tO the date of reference. We would further
restore the award of interest at the rate of 12% per annum as decreed by the
trial court.
D The appeals partly succeed. Judgment of the High Court appealed
against is reversed to the extent aforesaid. There will be no order as to costs.
A.Q. Appeal allowed.
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