2001 (2) TMI 979 - SC - Indian Laws

Supreme Court clarifies arbitration procedures under CPC and Arbitration Act

The Supreme Court held that Order IX Rule 13 of the CPC is applicable to arbitration proceedings, including cases where objections are not filed under the ... Applicability of Order IX Rule 13 CPC to proceedings under the Arbitration Act - application of the Code of Civil Procedure to arbitration proceedings under Section 41 of the Arbitration Act - power of the Court to modify or remit awards under Sections 15 and 16 of the Arbitration Act - condonation of delay under Section 5 of the Limitation Act in applications under Sections 30/33 of the Arbitration Act - ex parte decree in arbitration proceedings - requirement of judicial determination and speaking judgment before pronouncing decreeApplicability of Order IX Rule 13 CPC to proceedings under the Arbitration Act - ex parte decree in arbitration proceedings - application of the Code of Civil Procedure to arbitration proceedings under Section 41 of the Arbitration Act - Whether the principles and procedure of Order IX Rule 13 CPC apply to proceedings for making an award rule of the Court under the Arbitration Act when no objections under Sections 30/33 have been filed and a decree is passed in terms of the award. - HELD THAT: - Section 41 of the Arbitration Act makes the provisions of the Code of Civil Procedure applicable to proceedings under the Act, and Section 141 CPC requires the procedure for suits to be followed as far as applicable. The Court therefore held that Order IX Rule 13 CPC is applicable to proceedings initiated by producing an award before the Court for passing a decree. For the party who seeks to challenge the award, a decree pronounced in terms of the award without consideration of the court's powers under the Act is, for practical purposes, an ex parte decree; Order IX Rule 13 permits setting aside such a decree where sufficient cause is shown for non appearance or non presentation of an objection. The High Court's contrary reasoning - that an award based decree is not an ex parte decree, or that Order IX is inapplicable because there is no plaintiff/defendant nomenclature - was rejected as inconsistent with Sections 41 and 141 and with the court's duty to apply Sections 15 and 16 before pronouncing judgment.Order IX Rule 13 CPC and its principles apply to award based proceedings under the Arbitration Act; a decree in terms of an award can be treated as ex parte vis a vis the objecting party and may be set aside under the procedure of Order IX Rule 13 if sufficient cause is shown.Power of the Court to modify or remit awards under Sections 15 and 16 of the Arbitration Act - requirement of judicial determination and speaking judgment before pronouncing decree - Whether the Court must apply Sections 15 and 16 of the Arbitration Act and exercise its power to modify or remit the award before pronouncing judgment and drawing a decree under Section 17. - HELD THAT: - Sections 15 and 16 empower the Court to modify, correct or remit an award in specified circumstances (e.g., award containing matters not referred, obvious errors, indefiniteness, or illegality apparent on the face). Section 17 directs the Court to pronounce judgment according to the award only where it 'sees no cause' to remit or set aside. The Court held that 'pronounce judgment' contemplates a judicial determination supported by reasons (contrast with non speaking orders); therefore before passing judgment the Court must apply its mind to whether modification or remission under Sections 15/16 is necessary. Blindly converting an award into a decree without such consideration is impermissible.The Court must consider and, where appropriate, exercise its powers under Sections 15 and 16 before pronouncing judgment under Section 17; pronouncement requires judicial determination and reasons rather than a non speaking order.Condonation of delay under Section 5 of the Limitation Act in applications under Sections 30/33 of the Arbitration Act - ex parte decree in arbitration proceedings - Whether the delay in filing objection applications under Sections 30/33 could be condoned in the facts of the case and whether the decree dated 28.4.1997 should be set aside. - HELD THAT: - Article 119 of the Limitation Act prescribes 30 days for filing challenge to an award; Section 5 permits extension of limitation upon sufficient cause. Precedent (Essar Constructions) was applied: a court should not pronounce judgment until a pending application for condonation is disposed of, and even after decree an application under Section 30 may be entertained if sufficient cause is shown. On the facts, the Executive Engineer had instructed counsel within the limitation period; the delay in preparation and presentation of the objection was attributable to the advocate's conduct but amounted to sufficient cause for a short delay. The Division Bench had correctly concluded that the delay was explainable and would have condoned it absent the larger question referred. Applying settled law, the Supreme Court found sufficient cause to condone the delay and held that the ex parte decree ought to have been set aside.Delay in filing objections under Sections 30/33 is condoned on the facts; the decree dated 28.4.1997 is quashed and set aside and the application challenging the award is to be entertained.Final Conclusion: The appeal is allowed: the High Court's Full Bench conclusion rejecting applicability of Order IX Rule 13 was set aside; delay in filing objections under Sections 30/33 was condoned under Section 5 of the Limitation Act; the impugned Full Bench order is set aside and the decree dated 28.4.1997 passed in terms of the award is quashed and set aside; no order as to costs. Issues Involved:1. Applicability of Order IX Rule 13 of the Code of Civil Procedure (CPC) to arbitration proceedings.2. Whether a decree passed in terms of an arbitration award without objections is an ex-parte decree.3. Extension of time for filing objections under Section 30/33 of the Arbitration Act, 1940.4. Court's duty to pronounce judgment in terms of the award under Section 17 of the Arbitration Act.5. Applicability of Section 5 of the Limitation Act to arbitration proceedings.Issue-wise Detailed Analysis:1. Applicability of Order IX Rule 13 of the CPC to Arbitration Proceedings:The Supreme Court examined whether the provisions of Order IX Rule 13 CPC or its principles apply to cases where objections under Section 33 of the Arbitration Act, 1940, are not filed, and an ex-parte decree is passed based on the award. The High Court concluded that Order IX Rule 13 CPC is not applicable in such cases. However, the Supreme Court held that Section 41 of the Arbitration Act makes the provisions of the CPC applicable to all proceedings before the Court under the Act, including Order IX Rule 13. Thus, in proceedings initiated for making the award rule of the Court, provisions of CPC, including Order IX Rule 13, are applicable.2. Whether a Decree Passed in Terms of an Arbitration Award Without Objections is an Ex-parte Decree:The Full Bench of the High Court held that a decree passed in terms of Section 17 of the Arbitration Act, where no objection is filed, cannot be said to be an ex-parte decree. The Supreme Court disagreed, stating that for all purposes, such a decree is ex-parte for the party objecting to the award. If the party satisfies the Court that there was sufficient cause for not filing objections within the prescribed time, the Court has the power to set aside such a decree by following the procedure prescribed under Order IX Rule 13 CPC.3. Extension of Time for Filing Objections under Section 30/33 of the Arbitration Act:The Supreme Court noted that Section 5 of the Limitation Act, 1963, allows for the extension of the prescribed period of limitation in civil proceedings if the applicant shows sufficient cause for not making the application within such period. The relevant provision for filing objection applications before the Court is Article 119 of the Limitation Act, 1963, which provides a 30-day period for setting aside the award. The Court held that on showing sufficient cause, the delay in filing an application for setting aside the award could be condoned.4. Court's Duty to Pronounce Judgment in Terms of the Award under Section 17 of the Arbitration Act:The Supreme Court emphasized that before pronouncing judgment, the Court must apply its mind to determine whether there is any cause to modify or remit the award. The phrase 'pronounce judgment' indicates a judicial determination by a reasoned order. The Court cannot pass a decree blindly without considering the provisions of Sections 15 and 16 of the Arbitration Act, which provide for modification or correction of the award or remitting it to the arbitrator for reconsideration.5. Applicability of Section 5 of the Limitation Act to Arbitration Proceedings:The Supreme Court reiterated that Section 5 of the Limitation Act is applicable to arbitration proceedings. Even after a decree is passed under Section 17 of the Arbitration Act, an application under Section 30 can be entertained if sufficient cause is established. The rejection of such an application would be a refusal to set aside the award and would be an appealable order under Section 39(1)(vi) of the Arbitration Act.Conclusion:The Supreme Court allowed the appeal, condoned the delay in filing the objection application under Section 30/33 of the Arbitration Act, and set aside the impugned judgment and order of the High Court. Consequently, the judgment and decree passed by the learned Single Judge were also quashed and set aside. The Court emphasized the necessity of judicial determination before pronouncing judgment in terms of the award and upheld the applicability of CPC provisions, including Order IX Rule 13, to arbitration proceedings.