TMI Blog2010 (1) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporation filed an application u/s 34 - During the pendency of these proceedings the Appellant company pointed out that u/s 7 of the Interest Act the Corporation has to deposit 75 % of the amount awarded by Arbitrator under the Award - Division Bench of the High Court had held that if one considers the expression appeal in the context of the expression decree, it can only be a judicial determination by a Regular Civil Court considering the hierarchy of courts. HELD THAT:- We fail to understand why the expression appeal shall be construed solely in the context of a decree or order when the Section clearly makes reference to 'Awards' as well. According to the Respondents, the word 'award' appearing in Section 7 relates to those that result from a reference made under Maharashtra Cooperative Societies Act to the Industry Facilitation Council. The provisions for such reference, which is to be governed by Arbitration Act, were incorporated in 1998 by way of an amendment in the INterest Act. However, section 7 contained the word 'award' even before such reference mechanism was incorporated in the Interest Act by way of the Amendment Act, 1998. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the respondents as we cannot read the provision of a subsequent enactment into an Act which was repealed by the former. The interest Act is a beneficial piece of legislation intended to expedite timely payment of money owed to Small Scale Industries. Most of the contracts of supply or sale that Small Scale Industries enter into contain arbitration clauses. These arbitration proceedings result in an 'award'. If the term appeal' is interpreted in the limited context of a 'decree or order' and as excluding an application to set aside or remit such awards, the very purpose behind the enactment of Interest Act will be defeated. - TARUN CHATTERJEE AND V.S. SIRPURKAR JJ. A.K. Mishra, Abhay Chandrakant Mahimkar, Arjun Singh Bawa, Arjun V. Bobde, balvir, Dosanjh, Hrishikesh Baruah, Jagjit Singh Chhabra, M.P. Rao, S.K. Dholakia, Shyam Mudaliar and Vinod Bobde Advocates. JUDGEMENT TARUN CHATTERJEE, J. - (1.) LEAVE granted. (2.) THIS appeal by Special Leave arises from a judgment and order dated 5th of February, 2008 of the High Court of Bombay in Appeal No. 485 of 2006 whereby the Division Bench of the High Court had set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-company preferred an Arbitration Application under Section11 of the Arbitration and Conciliation Act, 1996 (for short the 'Arbitration Act') before the High Court of Bombay. The High Court appointed a former Judge of the High Court Mr. Justice S. W. Puranik as the Sole Arbitrator. The Arbitrator by his Award dated 30th of June, 2003 directed the Corporation to pay a sum of ₹ 78,19,540.73 to the Appellant company. (3.) AGGRIEVED, the Corporation filed an application under section 34 of the Arbitration Act before the High Court of Bombay for setting aside the award which came to be numbered as Arbitration Petition No. 499 of 2003. During the pendency of these proceedings the Appellant company pointed out that under section 7 of the Interest Act the Corporation has to deposit 75 % of the amount awarded by Arbitrator under the Award. The Learned Single Judge of the High Court, vide his order dated 23rd of August, 2005 dismissed the application filed under Section 34 of the Arbitration Act for setting aside the award of the Arbitrator. It was found that despite the statement made on behalf of the Corporation that a Bank Guarantee would be furnished to comply wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the expression 'appeal' in Section 7 of the Interest Act cannot include an application under Section 34 of the Arbitration Act. The term 'appeal' is in the context of a decree and can only include 'a judicial determination by a Regular Civil Court considering the hierarchy of Courts'. After considering the general scheme of awards and appeals under the Arbitration Act, 1940 and under the Arbitration Act. 1996, the Division Bench of the High Court was of the view that an order passed under Section 34 of the Arbitration Act is an order setting aside or refusing to set aside an arbitral award. Therefore. the decision of the competent court under Section 34 is neither a judgment nor a decree The order so passed is appealable under Section 37(1)(b) of the Arbitration Act Remedy by way of appeal, therefore, is provided under the Arbitration Act itself. The Arbitration Act therefore, in respect of an arbitral award makes a distinction between a challenge to an award and an appeal against an order refusing to set aside or setting aside an award in a Petition filed under Section 34(2) of the Arbitration Act. Under the Arbitration Act, in case, the award is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word 'appeal'. 14.2. Section 7 of the Interest Act reads as under: Appeal- No appeal against any decree, award or other order shall be entertained by any court or other authority unless the appellant company (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, other order in the manner directed by such court, or, as the case may be, such authority. The learned counsel for the appellant company strenuously, contended before us that the term 'appeal' in the aforementioned section shall include an application under section 34 of the Arbitration Act and hence deposit of 75 % of the amount awarded was a pre requisite for entertaining the application filed by the respondent corporation to set aside the award passed by the learned arbitrator. (8.) THE learned counsel for the corporation hotly contested this submission and argued that an appeal within the meaning of section 7 of the Interest Act cannot include an application filed under section 34 of the Arbitration Act and hence the corporation was not liable to deposit 75 % of the amount awarded by the learned arbitrator fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court observed that the dictionary was not helpful where word of common parlance with varied meanings is to be construed and it was held that such word shall be construed in the context in which it appears. Similarly in Central Bank of India v. State of Kerala [JT 2009 (3) SC 216] while interpreting the term debt' and 'security interest', this Court has followed the principle as mentioned herein above. Similar view was also expressed in Santa Singh v. State of Punjab [1976 (4) SCC 190] while dealing with the ambit of the expression 'shall hear' appearing in Section 235 of the Code of Criminal Procedure. At this stage, we may now deal with the decisions cited by the learned counsel for the appellant in which the meaning of the word 'appeal' was an issue. (11.) THE case of State of Gujarat v. Salimbhai Abudul Gaffar Shaikh and others (supra) on which the Single Judge of the High Court relied on while delivering his judgment, which was set aside by the Division bench of the High Court by the impugned order, had categorically held that the term 'appeal' cannot have a universal meaning fitting all contexts and purposes. In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r rejecting an application under Section 5 of the Limitation Act to excuse the delay in presentation was held to be one 'passed on appeal' within the meaning of Section 109 of the Code. (13.) THE learned senior counsel for the appellant-company further argued that an appeal may not necessarily always lead to the review of the impugned judgment on questions of fact and law. It may be an application for possible reversal of the impugned order or award on the ground of illegality or improper proceedings. Hence, an application under section 34 of the Arbitration Act which empowers the Court to set aside the arbitral award on limited grounds enumerated therein, can also be an appeal. In the case of S.R. Abhayankar v. K.D. Bapat [1969 (2) SCC 74], the question was whether the High Court could interfere under Articles 226 and 227 of the Constitution with the order of the Appellate Court in proceedings under an Act, when a petition for revision under Section 115 of the Code against the same order had been previously dismissed by a learned Single Judge of the High Court. THE following paragraphs from the judgment are apposite to the issue. (Paragraphs 5 and6) 5. It would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is a process of civil law origin and removes a cause, entirely subjecting the fact as well as the law, to a review and a retrial. A writ of error is a process of common law origin, and it removes nothing for reexamination but the law. THE former mode is usually adopted in cases of equity and admiralty jurisdiction; the latter, in suits at common law tried by a jury. 6. Now when the aid of the High Court is invoked on the revisional side it is done because it is a superior court and it can interfere for the purpose of rectifying the error of the court below. Section 115 of the CPC circumscribes the limits of that jurisdiction but the jurisdiction which is being exercised is a part of the general appellate jurisdiction of the High Court as a superior court. It is only one of the modes of exercising power conferred by the Statute; basically and fundamentally it is the appellate jurisdiction of the High Court which is being invoked and exercised in a wider and larger sense. We do not, therefore, consider that the principle of merger of orders of inferior Courts in those of superior Courts would be affected or would become inapplicable by making a distinction between a petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an appeal especially when even a power of revision is treated as an exercise of appellate jurisdiction by this Court and the Privy Council. According to the learned counsel for the respondent-Corporation, Arbitration Act treats appeals' and 'applications' separately under two distinct chapters: Chapter VIII and Chapter IX respectively. It was also strenuously contended by the learned counsel for the respondent that the Arbitration Act contains specific provisions for awarding interest and that Act being a special enactment will prevail over the Interest Act. He relied on the case of Jay Engineering Works v. Industry Facilitation Council and Anr. [JT 2006 (12) SC 171 : 2006 (8) SCC 677] to show that against the provisions of Interest Act, the provisions of Arbitration Act will prevail, as the latter is a complete code in itself. The Interest Act will apply only when the party prefers a suit to arbitration. (16.) THE preamble of Interest Act shows that the very objective of the Act was to provide for and regulate the payment of interest on delayed payments to small scale and ancillary industrial undertakings and for matters connected therewith or incidental th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The difference in procedures with respect to application and appeal under the Bombay High Court rules is only indicative of the procedural aspect of the matter, that too with limited application for matters pending before that Court. (17.) THE learned counsel for the respondent- corporation relied on the decision of Morgan Securities and Credit Pvt. Ltd. v. Modi Rubber Ltd. [JT 2007 (1) SC 432 : AIR 2007 SC 683] which held that: THE 1996 Act is a complete Code by itself. It lays down the machinery for making an arbitral award enforceable. In terms of Section 36 of the 1996 Act, an award becomes enforceable as if it were a decree; where the time for making the application for setting it aside under Section 34 has expired, or such application having been made, has been refused. (18.) HOWEVER, it can be seen that this case offers support, if any, to the case of appellant company. The question involved was whether the provisions of the Arbitration Act would prevail over the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, 'SICA'). It was held that when there is a conflict between the Arbitration Act and the SICA, latter whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore such reference mechanism was incorporated in the INterest Act by way of the Amendment Act, 1998. Therefore, it is difficult to see why 'award' in section 7 should not include an arbitral award other than the one arising from reference made to the INdustries Facilitation Council. Further, if the word 'appeal' is not construed as including an application under section 34 of Arbitration Act, we are afraid that it would render the term 'award' redundant and the requirement of pre-deposit a total nullity with respect to all cases where a Small Scale Industry undertaking preferred arbitral proceedings, prior to the incorporation of the reference procedure in 1998. Arbitration necessarily has to result in an award. The only way of challenging an award in a Court, in accordance with section 5 read with the opening clause of section 34 is filing an application under the latter section. If such challenge is not construed as an 'appeal', the requirement of pre-deposit of interest before the buyer challenging an award passed against him, becomes a total nullity. The fact that an order passed on such application/challenge under section 34 is appealable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itral award. Secondly, where there is an appeal provided, it lies to a higher Court from the decision of a lower Court, the application under Section 34 of the Arbitration Act lies to a Court against an award passed by an arbitrator and arbitrator cannot be termed as a Court inferior to the Court of appeal. According to the High Court of Andhra Pradesh, thus when the Court refuses to set aside an arbitral award under Section 34 of the Arbitration Act and an appeal is filed before an appellate Court, Section 7 of the 1993 Act would operate and not at the stage when an application under Section 34 of the Arbitration Act has been moved. We have already stated that the term appeal' does not always indicate a process where all questions of fact and law can be re- agitated. We have already seen that various Courts have held even a revision petition to be an appeal', keeping in mind the object of the legislation. (21.) IT is true that in almost all definitions of appeal', there is reference to removal of a cause from an inferior Court to a superior Court. IT is also trite that an arbitrator deriving his authority from a private agreement does not fit into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing the appeal. There is no prohibition contained in Section 7 of the Old Act with regard to filing of an original petition challenging the award under the provisions of the Arbitration Act without deposit of 3/4th of the awarded amount. On the other hand, filing of such original petition without deposit of any portion of the awarded amount is permissible under the provisions of the of Subsection (2) of Section 6 of the Old Act. The earlier batch Arbitration Act, which provisions are made applicable by virtue of petitions filed by the Appellant company seeking a direction to the first respondent for deposit of the 75% of the awarded amount were accordingly dismissed by the learned Additional Chief Judge and the same was confirmed by this Court also while dismissing the civil revision petitions filed in that regard. 48.1. This case does not, however, give any cogent reason for holding that the old Act did not require deposit of any interest. An application may sometimes be treated as appeal. As noted earlier, in the case of Promotho Nath Ray (supra) a decision passed on an application to condone the delay was held to be one passed on appeal. (23.) THE Law Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conciliation by O.P. Malhotra and Indu Malhotra, page 1270: ...Section 5 imposes a blanket ban on judicial intervention of any type in the arbitral process except 'where so provided under Part I' of this Act. Pursuant to this provision, Section 37(1) provides appeals against certain orders of the court, while Section 37(2) provides appeal against certain orders of the arbitral tribunal. However, Section 37(3) prohibits a second appeal against the appellate order under Section 37(1) and (2). However, in view of the provisions of Section 5, a second appeal against the appellate order under Section 37(1) and (2) would not be permissible, even if Section 37(3) had not been enacted. It was, therefore, not really necessary to enact this provision, and it seems to have been enacted by way of abundant caution. This decision elaborates on the true scope of Section 37. Hence, we are afraid we will have to disagree with the learned counsel for the respondent in this respect. The learned counsel for the appellant company further relied on the Act of 2006' which has repealed the Interest Act. Section 19 of this Act uses the term 'application' against award, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a subsequent enactment into an Act which was repealed by the former. (26.) THE learned counsel for the appellant company further contended that when there is doubt about the meaning of a word appearing in legislation, the interpretation that harmonizes the object and purpose of the object of the Statute should be adopted, rather than the one which renders the legislation a futility (See Nokes v. Doncaster Collieries [All ER 1940 HL 549, Supdt.] and Remembrancer of Legal Affairs to Govt. of West Bengal v. Abani Maity [1979 (4) SCC 85]. THE interest Act is a beneficial piece of legislation intended to expedite timely payment of money owed to Small Scale Industries. Most of the contracts of supply or sale that Small Scale Industries enter into contain arbitration clauses. THEse arbitration proceedings result in an 'award'. If the term appeal' is interpreted in the limited context of a 'decree or order' and as excluding an application to set aside or remit such awards, the very purpose behind the enactment of Interest Act will be defeated. We are in agreement with the learned counsel for the appellant company in this respect. According to the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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