TaxTMI 
TaxTMI 
2009 (12) TMI 1053
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..... Heard Mr. R. Senthil Kumar, learned Counsel for the Petitioner and Mr. T.A. Srinivasan, learned Counsel for the Respondent in the main original petition. Since the main O.P., is being disposed of by this order, I refer to the parties, only as per their status in the main original petition. 3. The Petitioner herein was awarded a contract for the construction of a Masonry Dam across the Tamiraparani river basin in Mekarai Village, Shenkottah Taluk, Tirunelveli District, by the Public Works Department of the Government of Tamil Nadu. A part of the said work namely, the construction of Masonry Spillway and Masonry non-overflow Dam from Block No. 11 to Block No. 18, was assigned by the applicant to the Respondent, by way of sub contract, under a work order dated 2.11.2000. 4. Disputes arose between the parties, compelling the Respondent herein to file an application under Section 11 of the Arbitration and Conciliation Act, 1996. By an order dated 16.4.2005 passed in O.P. No. 538 of 2003, Mr. Justice N.V. Balasubramanian (Retired) was appointed as the Arbitrator. He entered reference and passed an interim award dated 16.12.2006, directing the Petitioner herein to deposit a sum of....
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....umbai and (ii) that the Arbitrator had already completed the hearing 3 months ago and award was reserved. 9. Taking into account the above two submissions made by the learned Counsel for the Petitioner and also in view of the absence of the counsel for the Respondent, I disposed of the original petition by an order dated 24.10.2009, directing that the amount deposited in the office of the Sheriff of Mumbai, could be retained till the award is passed by the Arbitrator and also making it clear that after the award was passed, the successful party could withdraw the amount. 10. However, after I passed orders, the learned Counsel for the Respondent made a mention stating that he was not well and could not attend Court. He also pointed out that arguments had not concluded before the Arbitrator, as was represented by the learned Counsel for the Petitioner, at the time of disposal of the O.P., on 24.10.2009. Therefore, I directed the O.P., to be posted "for being mentioned" on 28.10.2009. 11. On 28.10.2009, the learned Counsel appearing on both sides made contradictory claims on the question whether the hearing in the arbitration had concluded or not. Therefore, I directed both c....
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...., the Petitioner herein filed a "Statement of Defence and Counter Claim". In paragraph 15.1 of the Statement of Defence, the Petitioner herein had dealt with the claim under Item No. 1, in the following words: 15.1 Withholding of bills and adjusting the same for the amount due to the Respondent are in order. The Claimant has stated that an amount of Rs. 68.84 lakhs is outstanding and payment due. But as per the quantity arrived by initial level and final level taken jointly with the Claimant, the amount of bill due to Claimant works out to Rs. 56,63,990/- Annexure v. with working sheet is attached. The Respondent submits that as a matter of fact an amount of Rs. 131,80,266/- is due to the Respondent from the Claimant vide details furnished in the counter claim. The amount of Rs. 56,63,990/- payable to Claimant has been adjusted towards the amount due to Respondent. (c) In view of the above stand taken by the Petitioner in their statement of defence, the Respondent filed an application before the Arbitrator in I.A. No. 2 of 2006, seeking an interim direction to the Petitioner to pay the sum of Rs. 68.84 lakhs for the work done. The Petitioner filed a count....
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....distinction drawn by the Apex Court in McDermott International Inc. v. Burn Standard Co. Ltd (2007) 3 Comp. LJ 213 between a partial award and an interim award, the learned Counsel submitted that an interim award is actually final, in respect of matters covered thereby. This is why, a petition under Section 34 is maintainable as against an interim award passed under Section 31(6), though no such petition is maintainable against an interim measure ordered under Section 17. Therefore, in essence, it is the contention of the learned Counsel for the Petitioner that a power to pass an interim award on admission, cannot be read into Section 31(6), by importing the provisions of Order XII, Rule 6, Code of Civil Procedure. 15. But the above contention of the learned Counsel for the Petitioner is actually fallacious. Under the Arbitration Act, 1940, the word "Award" was defined under Section 2(b) only to "mean an Arbitration Award". However, Section 27(1) of the old (1940) Act, empowered the Arbitrators, if they think fit, to make an interim award, unless a different intention appeared in the Arbitration Agreement. Sub-section (2) of Section 27 made it clear that all references in the Ac....
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....th in deviation of the Model Law and also in deviation of Section 27(1) of the old Act, is quite clear. 17. After making a comparison between Section 14 of the (English) Arbitration Act, 1950 and Section 47 of the (English) Arbitration Act, 1996, "Russell on Arbitration" says in paragraph 6-008 (21st Edition-1997) as follows: 6-008 Power to make more than one award. An award may dispose of only some of the issues in the arbitration, leaving others to be determined in a subsequent award or awards. In some jurisdictions and certain sets of arbitration rules these awards are referred to as "partial awards". Section 14 of the Arbitration Act 1950 used the term "interim award" and gave an express power to grant interim awards in the absence of agreement to the contrary. This has now been replaced by Section 47 of the Arbitration Act 1996 which provides that the Tribunal may make more than one award at different times on different aspects of the matters to be determined. Again this is subject to agreement otherwise by the parties. The section specifically avoids using the term "interim award" on the basis that it was thought to be confusing and time will tell whether the expr....
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.... question whether an interim award is final to the extent it goes or has effect till the final award is delivered will depend upon the form of the award. If the interim award is intended to have effect only so long as the final award is not delivered it will have the force of the interim award and it will cease to have effect after the final award is made. If, on the other hand, the interim award is intended to finally determine the rights of the parties it will have the force of a complete award and will have effect even after the final award is delivered. 21. In his book "Arbitration And Conciliation" (First Edition-2001, Page 225). Mr. V.A. Mohta, the learned author quotes John Parris on "Arbitration-Principles And Practice" as follows: It is always open to the Arbitrator to make an interim award and frequently it is in the interest of the parties that he should do so. 22. In their book "The Law and Practice of Arbitration and Conciliation" (Second Edition-2006, Page 145), O.P. Malhotra and Indu Malhotra, the learned authors, say the following on interim awards passed on admission: The Arbitral Tribunal is called upon to give a partial award particularly ....
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....with the said position of law, which is well settled for a fairly long period of time. As pointed out by the Apex Court in Razia Begum v. Sahebzadi Anwar Begum AIR 1958 SC 886, quoted with approval in Balraj Taneja v. Sunil Madan 1999 (8) SCC 396, the provisions of Order XII, Rule 6, Code of Civil Procedure, have to be construed along with the proviso to Order VIII, Rule 5, Code of Civil Procedure. Therefore, it is trite to point out that a Court cannot act blindly upon the admission of a fact. 26. But unfortunately for the Petitioner, the Arbitrator in the case on hand, has not acted blindly on a statement made by the Petitioner in their Statement of Defence and Counter Claim. The Arbitrator has actually applied his mind to the question whether there was an admission on the part of the Petitioner. He has also applied his mind on the question whether such admission is clear, unequivocal and positive and whether there are other circumstances entitling the Respondent to an interim award on such admission. 27. As seen from the Statement of Claim filed by the Respondent before the Arbitrator, which I have extracted earlier, the first item of claim in paragraph V.1 is for Rs. 68.8....
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....unt, so that the claim made by the Petitioner against the Respondent is reduced to that extent. An adjustment or appropriation would never take place, unless the party making such adjustment or appropriation, concedes its liability to that extent in clear cut terms. The Petitioner might have succeeded in creating a doubt in my mind, if the Petitioner had actually made a claim for the entire amount of Rs. 131,80,266/-. But by adjusting the amount of Rs. 56,63,990/- towards the said amount and by asking for a decree only in respect of the balance amount, the Petitioner has steered clear of any such doubt. Therefore, I hold that the Petitioner has clearly and categorically admitted their liability to the extent of Rs. 56,63,990/- before the Arbitrator and hence the Arbitrator was right in passing an interim award on the strength of such admission. 31. Emphasising the object underlying Order XII, Rule 6, Code of Civil Procedure, the Supreme Court held in paragraph-12 of its decision in Uttam Singh Duggal & Co. Ltd v. United Bank Of India (2000) 7 SCC 120 : 2001 (1) L.W. 250 as follows: 12. As to the object of Order 12, Rule 6, we need not say anything more than what the leg....
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....ned Counsel relied upon the opinion of the Division Bench of the Delhi High Court in Cofex Exports Ltd v. Canara Bank AIR 1997 Delhi 355. In paragraphs-8 to 10 of the said decision, the Delhi High Court held as follows: 8. A Defendant has a right to defend himself by raising all possible pleas permitted by the law. No Court-fee is leviable on a written statement. The nature of the several pleas which can be taken by a Defendant faced with a suit for recovery of a debt, in so far as relevant for the purpose of the present order may broadly be classified as payment, adjustment, set off and counter-claim. 9. A payment is the satisfaction or extinguishment of a debt prior to the filing of the written statement. 10. An adjustment contemplates existence of mutual demands between the same parties in the same capacity. The broad distinction between a payment and an adjustment is that in an act of payment one party deals with the other, which in an adjustment it is an act of me party himself prior to the filing of the written statement though the benefit of both is claimed by raising a plea in the written statement. 35. The distinction between an adjustment, se....
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....e claim before it and leave the Defendant high and dry for the present unless he files a cross-suit of his own. When a plea in the nature of equitable set-off is raised it is not done as of right and the discretion lies with me Court to entertain and allow such plea or not to do so. 36. Incidentally, the author of the judgment of the Division Bench of the Delhi High Court in Cofex Exports Ltd v. Canara Bank, is also the author of the decision of the Apex Court in Union of India v. Karam Chand Thapar. The law laid down in Cofex Exports Ltd v. Canara Bank has also been followed in the recent decision of the Delhi High Court in Numero Uno International Ltd v. Prasar Bharti, which I have referred to in para-22 above. Therefore, it is clear that the law is well settled on the distinction between an adjustment and a set off/counter claim. 37. But what is the effect of such a distinction, on the interim award passed by the Arbitrator, which is the subject matter of the present petition ? Nothing, in my considered view. As seen from the pleadings, the relevant portions of which have been extracted above, the Petitioner claimed to have adjusted a sum of Rs. 56,63,990/- against his own....