In support of his contention that neither the provisions of the
1940 Act nor the judgments rendered in respect of the provisions
thereunder are relevant or can be relied upon while construing the
provisions of the 1996 Act, Dr. Saraf relied upon the following observations
of the Supreme Court in M/s. Sudaram Finance Ltd. vs. M/s.
NEPC India Ltd., (1999) 2 SCC 479 = AIR 1999 SC 565.
“9. The 1996 Act is very different from the
Arbitration Act, 1940. The provisions of this Act have,
therefore, to be interpreted and construed
independently and in fact reference to the 1940 Act
may actually lead to misconstruction. In other words,
the provisions of the 1996 Act have to be interpreted
being uninfluenced by the principles underlying the
1940 Act. In order to get help in construing these
provisions, it is more relevant to refer to the
UNCITRAL Model Law rather than the 1940 Act.”
We do not read the judgment as laying down an absolute
proposition that the provisions of the 1940 Act and the judgments rendered
thereunder can never be relied upon while construing the provisions
of the 1996 Act. The Supreme Court held that the provisions of
the 1940 Act “may” actually lead to misconstruction and not that the
provisions of the 1940 Act necessarily would in all cases lead to misconstruction.
If the provisions of the two Acts are almost identical
and if there is nothing in the framework in the new Act that suggests
that the provisions of the old Act are different, we see no reason why
the provisions of the old Act and the judgments rendered thereunder
cannot be relied upon to construe or at least to indicate the possible
construction of the provisions of the 1996 Act.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 806 OF 2011
IN
NOTICE OF MOTION NO. 3709 OF 2010
IN
SUIT NO. 2358 OF 2010
Conros Steels Pvt. Ltd.,
Versus
Lu Qin (Hong Kong) Company Ltd.,
CORAM : S.J. VAZIFDAR, K.R. SHRIRAM
& A.K. MENON, JJ.
PRONOUNCED ON: 27TH NOVEMBER, 2014
Citation; 2015(1) MHLJ 434
Read original judgment here;click here
1. A Division Bench of this Court, by an order dated 13th March,
2012, directed the office to place the papers before the Chief Justice
for appropriate orders. The Division Bench opined that the following
question ought to be referred for consideration to a larger bench.
“Whether an appeal under the provisions of clause 15 of
the Letters Patent, against an order passed by the learned
Single Judge of this Court in a civil suit in an application filed
in that civil suit because of the provisions of section 8 of the
Arbitration and Conciliation Act, is maintainable or not ?”
The learned Chief Justice constituted this Full Bench and
referred the above question to it.
2. We have held that an appeal against an order in an application
under section 8 is not maintainable under clause 15 of the Letters
Patent. Our conclusion is based on principle and on authority. It is
based on our interpretation of the Arbitration and Conciliation Act,
1996 in the framework in which it now stands. It is also based on
precedent. The precedents are under the Arbitration Act, 1940 and
under the 1996 Act.
3. It is not necessary to deal with the merits of the case and it is
sufficient to refer to the facts only briefly. The appellant filed the
above suit to recover a sum of about Rs.4.19 crores together with
interest from the first defendant. No relief has been claimed against
the second and third defendants. The reference to the respondent /
defendant in this judgment will be to respondent No.1 / defendant
No.1. The respondent filed the above Notice of Motion for an order
that the disputes raised in the suit be referred to arbitration in
accordance with the arbitration agreement between the parties as
stipulated in the sales contracts dated 28th April, 2010, and for an
order terminating the above suit. In the affidavit in support, the
respondent stated that the Notice of Motion was also for an order
referring the parties to arbitration in view of the arbitration agreement.
The learned single Judge granted the prayers in the Notice of
Motion. The above appeal is filed against that order.
4. The respondent raised a preliminary objection as to the
maintainability of the appeal. The respondent contended that the
appeal is not maintainable in view of section 37 of the Arbitration &
Conciliation Act, 1996. The Division Bench, after recording the
submissions and noting the authorities relied upon, passed the said
order dated 13th March, 2012, which ultimately lead to the present
reference. The contentions raised before the Division Bench were
reiterated before us.
5. Several High Courts, have taken the view that an appeal against
an order under section 8 of the Act is not maintainable. We are in
respectful agreement with the judgments. Dr. Saraf, the learned
counsel appearing on behalf of the appellant, however, submitted that
none of the judgments have considered his submissions before us. He
invited us to take a different view, also on the ground that most of
these judgments relied upon the judgments rendered under the
Arbitration Act, 1940. This, according to him, is impermissible, both
on authority and in principle.
6. Sections 8 and 37 of the Arbitration and Conciliation Act, 1996,
read as under :
“8. Power to refer parties to arbitration where there
is an arbitration agreement.- (1) A judicial authority
before which an action is brought in a matter which is
the subject of an arbitration agreement shall, if a
party so applies not later than when submitting his
first statement on the substance of the dispute, refer
the parties to arbitration.
(2) The application referred to in sub-section 1
shall not be entertained unless it is accompanied by
the original arbitration agreement or a duly certified
copy thereof.
(3) Notwithstanding that an application has
been made under sub-section (1) and that the issue is
pending before the judicial authority, an arbitration
may be commenced or continued and an arbitral
award made.
... ... ... ...
37. Appealable orders.-(1) An appeal shall lie
from the following orders (and from no others) to the
Court authorised by law to hear appeals from
original decrees of the Court passing the order,
namely:-
(a) Granting or refusing to grant any measure
under section 9;
(b) Setting aside or refusing to set aside an
arbitral award under section 34.
(2) An appeal shall also lie to a Court from an
order of the arbitral tribunal -
(a) Accepting the plea referred to in sub-section
(2) or sub-section (3) of section 16; or
(b) Granting or refusing to grant an interim
measure under section 17.
(3) 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."
7. It would be appropriate first to refer to some of the judgments
under the 1996 Act relied upon by Mr. V.P. Sawant, the learned
counsel appearing on behalf of the respondent in support of his
submission that an appeal from an order under section 8 of the Act is
not maintainable in view of section 37 of the Act.
8. In Canbank Financial Services Limited vs. Punjab & Haryana
Papers Chemical and another, 2008(2) Arb.LR 365 (Delhi), a Division
Bench of the Delhi High Court dealt with an identical issue. The
appeal was against an order of the learned single Judge allowing the
first respondent's application for referring the disputes in the suit to
arbitration. It was contended that the impugned order amounted to the
plaint being rejected and therefore, the appeal was maintainable under
section 96 of the Code of Civil Procedure and under section 10 of the
Delhi High Court Act, 1966. The Division Bench held that the
embargo on appeals in section 37 is absolute and categorical ; that
the Act which is a special Act dealing with arbitrations, specifically
limits the extent of judicial intervention. It was further held that the
language of section 37 consciously takes away the right of the
appellant against the orders other than those mentioned thereunder and
that any other interpretation would render the expression “and from no
others” otiose or nugatory. The Division Bench referred to the similar
provisions in section 39 of the Arbitration Act, 1940 and to the
judgment of the Supreme Court in Union of India vs. Mohindra
Supply Company AIR 1962 SC 256, and the judgments of the Delhi
High Court also under the 1940 Act in support of the conclusions.
We are in respectful agreement with the observations even
without recourse to section 5.
9. A Division Bench of this Court by a judgment dated 19th March,
2009 in the case of International Technology Kirchner Italia Branch,
S.P.A. vs. Esteem Projects Pvt. Ltd. in Appeal No.485 of 2005 in
Notice of Motion No.1238 of 2003 in Summary Suit No.332 of 2003
dealt with a similar case. That was an appeal against the order of the
learned single Judge, dismissing the appellant's motion for referring
the disputes under section 8 of the Act. The Division Bench held that
on a plain construction of the provisions of section 37, it is clear that
an appeal is provided only from the orders specified therein. The
Division Bench held in paragraphs 4 and 5 :-
“4. The words in parenthesis (and from no
others), are equally important. These words are
intended to remove any doubt that might arise about
the maintainability of an appeal from any order other
than those specified. The words emphasise that an
appeal only lies from orders specified in the section
and no others. The only thing that needs to be seen
therefore is whether an appeal lies from an order
under section 8 of the Arbitration and Conciliation
Act, 1996. It is clear that an appeal is not provided
under section 37. An order refusing to refer the
dispute to arbitration under section 8 is not an order
which falls in any of the categories specified in
section 37 and therefore is not appealable.
5. The view taken by us finds support in a decision of
a Division Bench of the Punjab and Haryana High
Court in the case of Hind Samachar Limited,
Jalandhar – Smt.Sudarshan Chopra and others V.
Vijay Kumar Chopra and others, reported in (2002) 4
Company Law Journal 1, pointed out by Ms Shah, the
learned Counsel for the respondent. The Division
Bench of Punjab and Haryana High Court observed
in para 36 as follows:-
"Having dealt with all issues canvassed by
learned counsel, we now endeavour to draw
conclusions based on our interpretation of
section 37 of the Arbitration Act, 1996. In the
absence of judicial precedent on the pointed
issue, we will embark upon the controversy on
first principles. We have already concluded
above that even a remedy of appeal would not
be available unless expressly provided for, while
interpreting section 5 of the Arbitration Act,
1996. We have also concluded that the term
"orders" referred in Section 37 of the
Arbitration Act, 1996, refers to orders passed
under Part I of the Arbitration Act, 1996. The
question then is whether the remedy of appeal is
excluded against an order passed by a "judicial
authority" under section 8 of the Arbitration
Act, 1996? In our view, it is. The reason for the
aforesaid conclusion are the words ’and from no
others’ qualifying the word ’orders’ it leaves no
doubt that section 37 (1) of the Arbitration Act,
1996, does not delineate an inclusive list of
appealable order, but defines the exhaustive list
of orders from which an appeal under the
provisions of the Arbitration Act, 1996, is
competent. Since the list is exhaustive, and since
an order passed by a "judicial authority" under
section 8 of the Arbitration Act, 1996, is not
included therein, it would been enevitable to
conclude that the remedy of appeal there from is
expressly excluded."
Dr. Saraf relied upon the judgment of the Supreme Court in P.
Anand Gajapathi Raju vs. P.V.G. Raju, AIR 2000 SC 1886 in support
of his contention that an application taken out pursuant to the
provisions of section 8 is not one under Part I of the 1996 Act. We
will refer to this judgment of the Supreme Court in another context
later. Suffice it to note at this stage that that in our view the Supreme
Court did not hold that an order under section 8, does not fall under
Part I of the Act.
10. In Rites Limited vs. JMC Projects (India) Ltd. 2009 (2) Arb. LR
64 (Delhi), another Division Bench of the Delhi High Court
considered the appeal against an order of the learned single Judge
dismissing the application under section 8. The Division Bench relied
upon several judgments, including the earlier judgment of the Division
Bench of the Delhi High Court in Canbank (supra). The contention
that the judgment in Canbank was per-incuriam was rejected. The
Division Bench held :-
“17. It is, therefore, clear that no appeal could be
maintained from an order of the Court passed under
the old Act, by resort either to the Letters Patent or
Section 104 CPC, unless the same fell within Section
39 of the old Act, even though the order passed by the
Court may qualify as being a “judgment” within the
meaning ascribed to that term in Shah Babulal
Khimji (supra). The Act, having adopted the same
terminology in so far as it defines the scope of the
right to appeal against the orders of the Court passed
under the Act, as used in the old Act, in our view the
decision in Mohindra Supply Co. (supra) is squarely
applicable, and resort cannot be had by the appellant
to either the Letters Patent or Section 104 of the CPC
to maintain the present appeal.
20. Reliance placed by the appellant on the
Constitution Bench’s decision in P.S. Sathaappan
(supra) appears to be misplaced. Firstly, we may
notice that in P.S. Sathaappan (supra), the earlier
decision of the Supreme Court in Mohindra Supply
Co. (supra) was approved. Secondly, the Supreme
Court in P.S. Sathaappan (supra) observed “a
specific exclusion may be clear from the words of a
statute even though no specific reference is made to
Letters Patent”.
In the face of a specific exclusion of the right to
appeal contained in Section 37 of the Act, except in
respect of orders passed by the Court:
(a) Granting or refusing to grant any measure under
Section 9
(b) Setting aside or refusing to set aside any arbitral
award under Section 34;
it cannot be said that a Letters Patent appeal is
maintainable against an order passed under Section
8 of the Act. In our view the legislative intent to
exclude a Letters Patent appeal from orders passed
under the Act, except those specifically mentioned in
Section 37(1) of the Act is clear.
22. We find no merit in the appellant’s
submission that the impugned order having been
passed in a civil suit, Section 37 of the Act cannot be
invoked to bar the appeal. The order has been passed
by the learned Single Judge on an application
preferred by the appellant by invoking Section 8 of
the Act. Obviously, it is an order passed under the
Act. This submission of the appellant is, therefore,
rejected.”
11. In Tandav Films Entertainment Pvt. Ltd. vs. Four Frames
Pictures 2010(1) Arb.LR, 79 (Delhi), the appeal was against the order
allowing the application under section 8 in the appellant's suits which
were actions, inter-alia, for infringement of copyright. Following the
earlier judgment of the Delhi High Court in Canbank (supra), the
Division Bench held :-
“12. A bare reading of the provisions of the
aforesaid section is sufficient to show that the only
orders of a court arising out of the Act against which
an appeal lies under Section 37(1) of the Act are
those granting or refusing to grant any measure
under Section 9 [clause(a)] and setting aside or
refusing to set aside an arbitral award under Section
34 of the Act [clause (b)]. The legislature in order to
place matters beyond the pale of controversy has
mandated that “an appeal shall lie only from the
orders covered by clause (a) and clause (b) of
sub-section (1) of Section 37 and from no others”.
There is no manner of doubt that the impugned order
passed by the learned Single Judge under Section 8 of
the Act is neither an order granting or refusing to
grant any measure under Section 9 of the Act nor an
order setting aside or refusing to set aside an arbitral
award under Section 34. Sub-section (2) of Section 37
clearly has no application since the said sub-section
deals with the appeals to the court from orders of the
arbitral tribunal. Mr. Sagar, the learned counsel for
the appellant, when faced with this situation
contended that even if the impugned order was
otherwise a correct order under Section 8 of the Act
(and not erroneous as it is), the decision to dismiss
the appellant's suit would still be appealable in view
of the fact that the Arbitration and Conciliation Act,
1996 does not contemplate such an order of dismissal
nor even requires stay of the suit upon reference to
arbitration.
18. In a recent Division Bench judgment of this
court in RITES Limited vs. JMC Projects (India) Ltd.
in FAO (OS) No.173/2007 decided on 18.03.2009
(reported as 2009(2) Arb. LR 64 (Del.) (DB) another
Division Bench of the Delhi High Court while dealing
with the scope and ambit of Section 37 of the 1996
Act, after referring to several judgments of the
Hon'ble Supreme Court and the Delhi High Court,
including Groupe Chimique Tunisien SA vs. Southern
Petrochemicals Industries Corpn. Ltd., (2006) 5 SCC
275=2006 SCACTC 332 (SC) = 2006(2) Arb. LR 435
(SC); P.S. Sathappan (Dead) by LRs. vs. Andhra Bank
Ltd. and others, AIR 2004 SC 5152; Vanita M.
Khanolkar vs. Pragna M. Pai, AIR 1998 SC 424; R.K.
Sharma vs. Ashok Nagar Welfare Association & Co.,
AIR 2001 Delhi 272; Gurmauj Saran Baluja vs. Joyce
C. Salim and others, AIR 1990 Delhi 13; Jugal
Kishore Paliwal vs. Sat Jit Singh, (1984) 1 SCC 358;
Shah Babulal Khimji; Mohindra Supply Co.; A.S.
Dhupia; and Banwari Lal Radhey Mohan expressed
concurrence with the view taken by the Division
Bench in the Canbank case. The Division Bench also
rejected the contention of the respondent that the
judgment rendered in Canbank was per incuriam. In
paragraph 22 of its judgment, it held as follows (at
p.73 of Arb.LR ) :
“22. We find no merit in the appellant's
submission that the impugned order having been
passed in a civil suit, Section 37 of the Act cannot be
invoked to bar the appeal. The order has been passed
by the learned Single Judge on an application
preferred by the appellant by invoking Section 8 of the
Act. Obviously, it is an order passed under the Act.
This submission of the appellant is, therefore,
rejected.”
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12. In Maruti Clean Coal & Power Limited vs. Kolahai Infotech
Pvt. Ltd. MANU/DE/1387/2010, the Division Bench considered the
maintainability of an appeal against an order allowing an application
under section 8. The Division Bench held that the appeal was not
maintainable in view of section 37 of the Act.
The earlier decisions of the Delhi High Court, some of which
we have referred to were followed. The Division Bench also held that
section 39 of the 1940 Act is analogous to section 37 of the 1996 Act.
This view has also been taken by the Supreme Court in a judgment we
will refer to later.
13. A learned single Judge of this Court dealt with this issue in
considerable detail, in an order and judgment dated 6th November,
2012 in a group of matters, the first of which was in Masusmi SA
Investment LLC vs. Keystone Realtors Pvt. Ltd. & Ors., Company
Appeal (Lodging) No.47 of 2012 in Company Law Board No.57 of
2012 and came to the same conclusion. The learned Judge referred to
the above judgments and to other judgments as well in coming to this
conclusion. We are entirely in agreement with this submission.
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14. We are in respectful agreement with the above judgments.
15. As we also noted earlier, Dr. Saraf however, contended that
reliance cannot be placed upon the provisions of the Arbitration Act,
1940 and the judgments, even of the Supreme Court rendered
thereunder. He submitted therefore, that the judgment of the Supreme
Court in Union of India vs. Mohindra Supply Company AIR 1962 SC
256, can be of no assistance in answering this reference.
The opening words of section 39(1) of the 1940 Act are identical
to section 37(1) of the 1996 Act. Only the orders against which
appeals are maintainable are different. It is settled law that an appeal
against an order not referred to in section 39 of the 1940 Act is not
maintainable even under clause 15 of the Letters Patent. There is no
reason to take a different view with respect to section 37(1). We are
bound by the judgment of the Supreme Court in Union of India vs.
Mohindra Supply Company.
16. In support of his contention that neither the provisions of the
1940 Act nor the judgments rendered in respect of the provisions
thereunder are relevant or can be relied upon while construing the
provisions of the 1996 Act, Dr. Saraf relied upon the following observations
of the Supreme Court in M/s. Sudaram Finance Ltd. vs. M/s.
NEPC India Ltd., (1999) 2 SCC 479 = AIR 1999 SC 565.
“9. The 1996 Act is very different from the
Arbitration Act, 1940. The provisions of this Act have,
therefore, to be interpreted and construed
independently and in fact reference to the 1940 Act
may actually lead to misconstruction. In other words,
the provisions of the 1996 Act have to be interpreted
being uninfluenced by the principles underlying the
1940 Act. In order to get help in construing these
provisions, it is more relevant to refer to the
UNCITRAL Model Law rather than the 1940 Act.”
We do not read the judgment as laying down an absolute
proposition that the provisions of the 1940 Act and the judgments rendered
thereunder can never be relied upon while construing the provisions
of the 1996 Act. The Supreme Court held that the provisions of
the 1940 Act “may” actually lead to misconstruction and not that the
provisions of the 1940 Act necessarily would in all cases lead to misconstruction.
If the provisions of the two Acts are almost identical
and if there is nothing in the framework in the new Act that suggests
that the provisions of the old Act are different, we see no reason why
the provisions of the old Act and the judgments rendered thereunder
cannot be relied upon to construe or at least to indicate the possible
construction of the provisions of the 1996 Act.
Dr. Saraf has not invited our attention to any other aspect of the
1996 Act in general or of section 37 thereof in particular that would be
contrary to or even at a variance with the provisions of section 39 of
the 1940 Act and the construction thereof in the judgment of the
Supreme Court in Union of India vs. Mohindra Supply Company,
(1962) 3 SCR 497 = AIR 1962 SC 256. The ratio of the judgment is
applicable to section 37 of the 1996 Act and has, with respect, been
rightly relied upon by the judgments of the various High Courts in
deciding this issue.
17. This view is also supported by the judgment of the Supreme
Court in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2011) 8 SCC
333. We will be dealing with this judgment on the main issue later.
We find it convenient, however, to deal with this judgment even on the
present aspect towards the end of our judgment.
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18. Dr. Saraf contended that the 1940 Act does not have a provision
similar to section 8 of the 1996 Act and therefore, the judgments regarding
the maintainability of an appeal under the 1940 Act ought not
to be relied upon.
The fallacy in this argument is that what must be seen is
whether the 1940 Act has a provision similar to section 37 of the 1996
Act and not whether it has a provision similar to section 8. This is
obvious for we are here concerned with the maintainability of an
appeal and not with the rights of a defendant or respondent seeking
enforcement of the right under an arbitration agreement.
19. Dr. Saraf relied upon the following observations from the
judgment of the Privy Council in The Administrator - General of
Bengal vs. Premlal Mullick, 1895(22), ILR 788.
"The respondent maintained this singular proposition,
that, in dealing with a consolidating Statute, each enactment
must be traced to its original source, and
when that is discovered must be construed according
to the state of circumstances which existed when it
first became law. The proposition has neither reason
nor authority to recommend it. The very object of consolidation
is to collect the statutory law bearing upon
a particular subject, and to bring it down to date, in
order that it may form a useful code applicable to the
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circumstances existing at the time when the consolidating
Act is passed."
We do not read the judgment as having held that the provisions
of the previous enactments cannot be relied upon and that the judgments
rendered in respect of the previous enactments can never be of
any assistance in interpreting a consolidating statutes. The Privy
Council merely held that the consolidating Statutes must be interpreted
considering inter-alia the circumstances existing at the time when
the consolidating act is passed. We have done so. Having done so, we
see no reason to take a view in respect of section 37 of the 1996 Act
different from the view taken in respect of section 39 o the 1940 Act.
20. Dr. Saraf also relied upon the following observations of Lord
Wrenbury in Food Controller vs. Cork, 1923 All ER 463 (HL):-
"I listened with interest to the historical review which
the Attorney-General gave your Lordships of the
development of the statute law relevant to the matter
before the House. But I derive little, if any, assistance
from the knowledge that, for instance, a particular
section is in terms identical with a section which, as
the law previously stood, was found in a framework
different from that in which it is now found. To ascertain
the present law it is necessary to consider such a
section in the framework in which it now stands."
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The judgment does not hold that the provisions of an enactment
and the judgments rendered in respect thereof can never be relied upon
while construing similar or identical provisions of a subsequent
enactment. If the framework of two enactments is different, it would
be another matter. It is indeed necessary to consider section 37 in the
framework in which now it stands. There is nothing in the framework
of the 1996 Act that persuades us to take a different view in respect of
section 37 of the 1996 Act different from the one taken by the judgments
rendered in respect of section 39 of the 1940 Act.
21. This brings us to Dr. Saraf's contention which he says has not
been considered in detail in any of the above cases. His submission is
as follows: Section 8 is only a provision whereby a defendant /
respondent brings to the notice of the judicial authority the fact that
the subject matter of the proceedings are covered by an arbitration
agreement between the parties. If the contention is accepted, the
judicial authority declines to entertain the proceeding. Such an order
is akin and similar to the orders upholding objections as to the
maintainability of a proceeding or jurisdiction of the Court raised in
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the proceedings. The bar contained in section 37 is to the orders in
the applications made and decided under the 1996 Act. An order on
an objection taken on the basis of section 8 is not under the 1996 Act.
Section 37 would not be a bar to an appeal from such an order.
Therefore, the order in cases where section 8 is invoked are passed in
the proceedings (in this case the above suit) and are not orders under
the Arbitration & Conciliation Act, 1996. The reference is only by
refusing to entertain the suit. (For the purposes of our judgments, we
will presume that to be so.) Section 37 only relates to the applications
which originate under the Act and are contemplated to be made to the
Court as defined under section 2(e) of the 1996 Act, which reads as
under :-
“2. Definitions.—(1) In this Part, unless the context
otherwise requires,—
(e) “Court” means the Principal Civil Court of
Original Jurisdiction in a district, and includes the
High Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the
arbitration if the same had been the subject-matter of
a suit, but does not include any civil court of a grade
inferior to such Principal Civil Court, or any Court of
Small Causes;”
Section 8 is not an application that originates under the Act. It
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is but a permissible objection to the proceeding which is not under the
Act, such as a suit. The order is on an objection in the proceedings,
which are sought to be terminated. It follows therefore, that the order
is not on an application under the Act but in the proceeding.
An application under section 8 is not an application under Part-I
of the Act. Section 37 is applicable only to the orders passed by the
Court on the applications made under Part-I and the application must
be made under the Act. If it is held that an order passed on an
application taken in view of the provisions of section 8 is not an
application under the Act, it must follow that section 37 is inapplicable
to such an order. In other words, the bar under section 37 does not
apply to the orders which are the passed in applications not made
under the Act although they may be made on the basis of the
provisions of the Act.
Relying upon the judgment of the Supreme Court in State of
Goa vs. Praveen Enterprises, JT 2011 (8) 359, Dr. Saraf contended
that the Court does not actually make a reference to the Arbitral
Tribunal inter-alia by appointing the arbitrator and compelling the
parties to proceed with the arbitration.
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As section 8 does not empower the judicial authority to refer the
parties to arbitration establishes that the authority decides only an
objection and not an application.
22. Before we deal with these submissions, we must note that Dr.
Saraf rightly conceded that if the order under section 8 is held to be
one under the Act and it is found that the appeal against the same is
barred by the provisions of section 37 of the Act, no appeal would lie
against it under clause 15 of the Letters Patent. The crucial question
therefore, is whether an order under section 8 is one under the Act or
not. The impugned order was passed in an application in terms of
section 8 made in the above suit. The question therefore, is whether
the impugned order was passed under the provisions of section 8 or
not. We are of the view that it is.
23. We come to the conclusion that the impugned order was passed
"under" section 8 in two stages. Firstly section 8 confers upon the
judicial authority the power to pass the order referring the parties to
arbitration. Secondly, an application made pursuant to such a
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provision and the order passed thereon are "under" and are said and
considered to be "under" that provision. The word "under" in an
enactment signifies that the application made in accordance with or
pursuant to the provisions thereof is authorized by the provisions and
initiated under it.
24. The first indication that the application is under section 8 is
contained in the section itself. Sub-section (3) of section 8 itself
establishes that an application to refer a party to arbitration is under
sub-section (1) of section 8. This is clear from the opening words of
sub section (3) : “Notwithstanding that an application has been made
under sub-section (1) …... (emphasis supplied).
Dr. Saraf however, submitted that the use of the expression
“under sub-section (1)” in sub-section (3) of section 8 is not
conclusive of the matter and the Court must determine whether in law
it can be said that the application is under section 8.
25. Firstly, we see no reason to ignore or brush aside the language
used in the legislation. It clearly indicates that the application referred
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to in sub-section (1) of section 8 is "under" section 8(1). This is the
language of the section. There is nothing either in the Act generally or
in section 8 in particular that suggests that the word “under” is used
casually.
26. Even otherwise an application pertaining to the reliefs claimed
in section 8 is clearly under section 8 and thereby is one under the
provisions of the Act and in particular Part-I thereof which relates to
domestic arbitrations. Where a matter is subject of an arbitration
agreement, sub-section (1) of section 8 requires a party, (in this case
the defendant / respondent,) to apply to the judicial authority (in this
case this Court) before which the action (in this case the suit) is
brought to refer the parties to arbitration. The application is therefore,
undoubtedly to be made in the action but the power to refer the parties
to arbitration as mandated by sub-section (1) is conferred by and flows
from section 8 (1).
27. The present suit is filed to recover money. The suit obviously is
not filed under the Arbitration & Conciliation Act, 1996. It makes no
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difference which enactment the suit is filed under or pursuant to. It is
filed neither under the 1996 Act nor pursuant or in relation to any of
the provisions thereof. The application to refer the parties to
arbitration is not and could never have been under any enactment or
other law in force under which the suit was filed. To refer the parties
to arbitration upon an application for the same, the court must derive
its power from an enactment or other law in force. It was not even
suggested that there is any enactment or law in force other than the
1996 Act which entitles the Court to refer the parties to arbitration
where the action is brought in a matter which is the subject of an
arbitration agreement. It follows, therefore, even by elimination that
the power of the Court to refer the parties to arbitration is contained in
section 8 alone. Once section 8 (1) is held to be the source of power
to pass such an order, it must follow that the application in which such
an order is passed is under section 8 in general and under sub-section
(1) thereof in particular.
28. Section 8 being mandatory, it must follow that an order made on
an application under section 8 (1) is under the section, albeit in the
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application. It is not even suggested that such an order is made under
any other provision of law, statutory or otherwise. Even assuming
that the order is made in the action in which the section 8 application
is taken out as contended by Dr. Saraf, it would make no difference.
Merely because the order is made in the action and the effect thereof
operates on the application, it does not follow that the order is not
under section 8. There is nothing inconsistent or incongruous in the
finding that an application under section 8 is made in the action in
which it is taken out. Nor is there any inconsistency or incongruity in
the finding that the effect of the order under section 8 is on the
application in which it is made.
29. That section 8 confers the power upon a Court to also pass an
order referring the parties to arbitration has been recognized in a series
of judgments which we now refer to. In fact section 8 has been held
to be mandatory.
30. In Hindustan Petroleum Corpn. Ltd. vs. Pinkcity Midway
Petroleums, (2003) 6 SCC 503, the Supreme Court referred to
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judgment in P. Anand Gajapathi Raju v. P.V.G. Raju, 2 (2000) 4 SCC
539 and held that the language of section 8 is peremptory in nature
where there is an arbitration clause, it is obligatory for the Court to
refer the parties to arbitration in terms of the arbitration agreement and
nothing remains to be decided in the original action. Where there is
an arbitration agreement between the parties, it is mandatory for the
Civil Court to refer the dispute to an arbitrator. The Civil Court has no
jurisdiction to entertain the suit after an application under section 8 is
made.
31. That the Court has the power to pass an order under section 8
and that an order in an application pursuant to or in accordance with
section 8(1) is one "under" section 8, is clear from the judgment of the
Supreme Court in SBP & Co. vs. Patel Engineering Ltd., 2005 (8)
SCC 618, where it was held :-
“5. Section 8 confers power on a judicial
authority before whom an action is brought in a
matter which is the subject of an arbitration
agreement, to refer the dispute to arbitration, if a
party applies for the same.”
(emphasis supplied)
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32. In Rashtriya Ispat Nigam Ltd. vs. Verma Transport Co. (2006) 7
SCC 275, the Supreme Court held as under :-
“19. Section 8 confers a power on the judicial
authority. He must refer the dispute which is the
subject-matter of an arbitration agreement if an
action is pending before him, subject to the fulfilment
of the conditions precedent. The said power, however,
shall be exercised if a party so applies not later than
when submitting his first statement on the substance
of the dispute.
... ... ...
34. Thus, they did not submit themselves to the
jurisdiction of the court. They did not waive their
right. They in effect and substance questioned the
jurisdiction of the court in proceeding with the matter.
In fact, in its application filed under Section 8 of the
1996 Act, the appellant raised a contention that the
suit was liable to be dismissed and the order of
injunction vacated in view of the arbitration clause.
... ... ...
36. The expression “first statement on the
substance of the dispute” contained in Section 8(1) of
the 1996 Act must be contradistinguished with the
expression “written statement”. It employs
submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a
finding on the part of the judicial authority that the
party has waived its right to invoke the arbitration
clause. If an application is filed before actually filing
the first statement on the substance of the dispute, in
our opinion, the party cannot be said to have waived
its right or acquiesced itself to the jurisdiction of the
court. What is, therefore, material is as to whether the
petitioner has filed his first statement on the
substance of the dispute or not, if not, his application
under Section 8 of the 1996 Act, may not be held
wholly unmaintainable. We would deal with this
question in some detail, a little later.” (emphasis supplied)
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33. In Ardy International (P) Ltd. vs. Inspiration Clothes & U,
(2006) 1 SCC 417, the Supreme held as under :-
“4. We have extensively heard the learned counsel
for both the sides and at the end of the day we are
satisfied that the whole proceedings were started,
continued and concluded under misconception of law.
In the first place, Section 8 is not intended to restrain
arbitration proceedings before an Arbitral Tribunal.
The situation contemplated by Section 8 can arise
only at the first instance of an opponent and
defendant in a judicial proceeding, or, at the highest,
suo motu at the instance of the judicial authority,
when the judicial authority comes to know of the
existence of an arbitration agreement. In either event,
there is no question of the court under Section 8 of the
1996 Act restraining the arbitral proceedings from
commencing or continuing. In fact, Section 8 is
intended to achieve, so to say, the converse result.
Unfortunately, in this case the application for interim
relief was made by the respondent who was the
plaintiff before the civil court. The relief sought
therein is the restraint of arbitral proceedings. It
could only have been decided as an application under
Order 39 Rules 1 and 2 for whatever it was worth.
Once the objection to this application was filed by the
appellant bringing to the notice of the court the
existence of an arbitration agreement, thereafter the
proceedings could have been continued only within
the parameters of Section 8 of the 1996 Act. A
proceeding under Section 8 could never result in an
order restraining the arbitral proceedings, which is
what finally the impugned order before us does.”
(emphasis supplied)
This judgment puts the point beyond doubt. The Supreme
Court held that the proceedings under section 8 bringing to the notice
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of the Court the existence of an arbitration agreement could be
continued only within the parameters of section 8. This clearly
indicates that such proceedings, i.e., the proceedings under section 8
continued only within the parameters of section 8. It follows therefore
that such proceedings are under section 8 and that is precisely the
language of the Supreme Court in the last sentence of paragraph 4,
quoted above.
34. In Agri Gold Exims Ltd. vs. Sri Lakshmi Knits & Wovens,
(2007) 3 SCC 686, the Supreme Court held as under :-
“22. Section 8 of the 1996 Act is peremptory in
nature. In a case where there exists an arbitration
agreement, the court is under obligation to refer the
parties to arbitration in terms of the arbitration
agreement. (See Hindustan Petroleum Corpn. Ltd. v.
Pinkcity Midway Petroleums (2003) 6SCC 503 and
Rashtriya Ispat Nigam Ltd.(2006) 7 SCC 275) No
issue, therefore, would remain to be decided in a
suit."
The Court, it is held, is under an obligation to refer the parties to
arbitration in terms of the arbitration agreement. This obligation arises
from and under section 8. It does not arise from or under any other
provision of law, statutory or otherwise. It certainly does not arise
from the provisions of law that may have entitled the plaintiff to file
the above suit.
35. A Full Bench of this Court in Fountain Head Developers vs.
Mrs.Maria Arcangla Sequeira (since deceased through LRs.) & Ors.,
AIR 2007 Bom. 149, held that section 8 confers power to refer the
parties to arbitration where there is an arbitration agreement and that
such power under section 8 can be exercised by a judicial authority.
36. The Supreme Court in State of Goa vs. Praveen Enterprises, JT
2011 (8) SCC 359, held as under :-
“12 'Reference to arbitration' can be in respect of
reference of disputes between the parties to
arbitration, or may simply mean referring the parties
to arbitration. S. 8 of the Act is an example of
referring the parties to arbitration. While s. 11
contemplates appointment of arbitrator [vide
sub-sections (4), (5) and (9)] or taking necessary
measure as per the appointment procedure under the
arbitration agreement [vide sub-section (6)], s. 8 of
the Act does not provide for appointment of an
arbitrator, nor referring of any disputes to arbitration,
but merely requires the judicial authority before
whom an action is brought in a matter in regard to
which there is an arbitration agreement, to refer the
parties to arbitration. When the judicial authority
finds that the subject matter of the suit is covered by a
valid arbitration agreement between the parties to the
suit, it will refer the parties to arbitration, by refusing
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to decide the Action brought before it and leaving it to
the parties to have recourse to their remedies by
arbitration. When such an order is made, parties may
either agree upon an arbitrator and refer their
disputes to him, or failing agreement, file an
application u/s. 11 of the Act for appointment of an
arbitrator. The judicial authority 'referring the parties
to arbitration' under s. 8 of the Act, has no power to
appoint an arbitrator. It may however record the
consent of parties to appoint an agreed arbitrator.”
These findings do not militate against and are not contrary to
what we have held. The Supreme Court in this case merely held the
nature of the orders that can be passed under section 8. The Supreme
Court did not deal with the question whether such an application can
be said to have been made under section 8 and the order passed
thereunder can be said to be one under section 8.
37. This leads to the second stage. Mr. Sawant's reliance upon the
judgment of the Full Bench of the Calcutta High Court in Rabindra
Nath vs. Gour Mondal (FB), AIR 1957, Calcutta 274 in this regard is
well founded. The Full Bench held as under :-
“(21) In my opinion, the Act suffers from the same
limitations as the Ordinance. The material section is
Section 2. It is in the same terms as Cl. 2 of the
Ordinance except that a second proviso, which is not
material for our present purpose, has been added at
the end of the provision and that in sub-sec. 1 (a) (i),
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corresponding to sub-cl. 1 (a) (i) of the Ordinance, the
words "or any application for revision" have been
added. The words added do not in any way alter the
position I have found in regard to the Ordinance. Like
the proceedings set out under items (i), (ii) and (iii) of
Cl. 2 (1) (a) of the Ordinance, the different kinds of
proceedings set out under items (i), (ii) and (iii) of S.
2 (1) (a) of the Act are all proceedings "under the
West Bengal Bargadars Act, 1950". That
qualification, expressly made in the prefatory
paragraph of sub-section and sub-clause 2(1),
controls the rest of the provision in both the Act and
the Ordinance. In view of the collocation of the words
"under the West Bengal Bargadars Act, 1950" as
placed in the Ordinance and now in the Act, it is not
even possible to argue that they have been used
loosely in a general sense and are really intended to
refer to all proceedings to which the Act is relevant,
whether they were initiated under the Act or under
other laws, because such a meaning can never be
conveyed by the form of expression adopted which is
"where, under the West Bengal Bargadars Act, 1950,
any appeal or application..........was pending". What
such an expression can comprise and cover are only
appeals and applications authorised by and initiated
under the Act itself.
(28) I would only add that having regard to the
provisions of the Bargadars Act, 1950, which is a
complete code by itself and lays down the rights as
also the procedure by which the same can be
enforced, and the way in which the material section in
this Act has been worded, the expression "under the
Act" can only mean "authorised by the Act."”
We are entirely in agreement with the view that where the
legislature uses the word “under” in relation to an enactment, it
signifies not only that the application is authorized by the enactment
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but also that it is initiated under that particular enactment. The
application authorized by an enactment is made under that enactment
and an order passed on such an application is one under that
enactment. As we mentioned earlier, section 8 authorizes an
application of the nature stipulated in sub-section (1) thereof. The
Court is not only authorized but bound to pass an order allowing the
application under section 8. When a Court has the power to pass an
order in terms stipulated in an enactment, the order is one passed
under that enactment.
38. We find support for this view in the judgment of a Division
Bench of the Punjab & Haryana High Court in Smt.Sudershan Chopra
vs. Vijay Kumar Chopra, (2003) 117, Company Cases 660. The
Division Bench considered a case where the respondent had filed a
company petition under sections 397 and 398 of the Companies Act
before the Company Law Board (CLB) and in which the appellant
filed an application under section 8 of the 1996 Act. The CLB held
that the application was not sustainable and refused to refer the
disputes to arbitration. The decision of the CLB was challenged in the
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appeal under section 10-F of the Companies Act. The respondent
contended that the appeal was not maintainable. The Division Bench
considered the issue of maintainability. The appellant contended that
while considering the issue of jurisdiction, reference must be made to
the Companies Act. The respondent on the other hand contended that
the answer to the question of maintainability must be decided on the
basis of the provisions of the 1996 Act. The Division Bench first
determined which of the two statues was applicable to determine the
question of maintainability of the appeal under section 10-F. The
Division Bench held :-
“In our view, in order to adjudicate upon the
aforesaid contention, it would be imperative for us to
first determine the legislative provision under which
the impugned order dated December 8, 2000, has
been passed. If in the aforesaid determination, this
court arrives at the conclusion that the order was
passed by the CLB in exercise of its jurisdiction to
settle a dispute flowing out of the provisions of the
Companies Act, 1956, then and only then, the instant
plea advanced on behalf of the appellants would
merit acceptance. In such an eventuality, it would
have to be concluded that the search for the appellate
forum would have to be restricted to the Companies
Act, 1956. However, if this court arrives at the
conclusion that the impugned order dated December
8, 2000, had been passed by the CLB in its capacity
of 'judicial authority' in exercise of obligations
flowing out of the Arbitration Act, 1996, in
furtherance of the provisions of the Arbitration Act,
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1996, then certainly, the remedy must be searched for,
from within the provisions of the Arbitration Act,
1996. In such an eventuality, the contention advanced
on behalf of the appellants would not merit
acceptance.
Undoubtedly, when the petition was filed by the
respondents (herein) before the CLB, the CLB was
exercising jurisdiction under the provisions of
Sections 397 and 398 of the Companies Act, 1956.
However, when the appellants (herein) moved an
application under Section 8 of the Arbitration Act,
1996, before the CLB, the CLB while deciding the
said application acted in its capacity as “judicial
authority'' under Section 8 of the Arbitration Act,
1996. There can be no doubt that the impugned order
determines rights flowing out of the provisions of the
Arbitration Act, 1996, and not the provisions of the
Companies Act, 1956. Since the CLB did not
adjudicate the dispute between the parties under
Sections 397 and 398 of the Companies Act, 1956
(which was really the subject matter of Company
Petition No. 76 of 1999) through the order impugned
before us it is not possible for us to accept the
contention advanced on behalf of the appellants that
in disposing of the application filed under Section 8
of the Arbitration Act, 1996, the CLB was exercising
jurisdiction vested in it under the Companies Act,
1956. The conclusion has to be, as noticed in the
foregoing paragraphs, that the right to prefer an
appeal against an order passed by the CLB in its
capacity as “judicial authority” while deciding an
application filed under Section 8 of the Arbitration
Act, 1996, must be searched for, from within the
provisions of the Arbitration Act, 1996, more so,
because the impugned order is not referable to any
provision of the Companies Act, 1956.”
We are in respectful agreement with these observations. The
Court exercises powers under the provisions of law pursuant to which
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the proceedings are filed. However, the application under section 8 is
decided in accordance with the provisions thereof. The order on such
an application is passed in view of the power conferred by the section
to do so.
We are also in respectful agreement with the conclusion that the
1996 Act is exhaustive and comprehensive code. This, as noted, is
evident from section 5 of the 1996 Act, which reads as under :-
“5. Extent of judicial intervention.—
Notwithstanding anything contained in any other law
for the time being in force, in matters governed by
this Part, no judicial authority shall intervene except
where so provided in this Part.”
In Union of India vs. Mohindra Supply Company AIR 1962 SC
256, it was held that the Arbitration Act 1940 was an exhaustive and
comprehensive code which had consolidated the law relating to
arbitration. The provisions of the 1996 Act, including section 5
thereof, make it abundantly clear that it is a self-contained code of the
matters relating to domestic arbitration. We are not concerned with an
international arbitration in this case. We are in respectful agreement
with the observation insofar as it holds that the order under section 8
is in exercise of powers “flowing out of” the Arbitration Act, 1996, in
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furtherance of the provisions of that Act and therefore, the remedy of
an appeal must be sought from within the provisions of that Act. In
other words, the order of the CLB was under section 8 of the
Arbitration Act, 1996 and determined the rights flowing out of the
provisions thereof and not the provisions of the Companies Act, 1956.
On parity of reasoning, we hold that the order impugned in the above
appeal was one passed under section 8 of the Arbitration Act, 1996. In
that view of the matter, the appeal is not maintainable in view of
section 37 of the 1996 Act.
39. In that view of the matter, the judgment of the Supreme Court in
Shyam Sundar Sarma vs. Pannalal Jaiswal, 2005(1) SCC 436 is of no
assistance to the appellant. Dr. Saraf relied upon the judgment to
contend that the impugned order was passed in the suit. In paragraph
10, the Supreme Court observed that an appeal filed along with an
application for condoning the delay in filing that appeal when
dismissed on the refusal to contend the delay is nevertheless a
decision in the appeal. Our views are not contrary to this judgment.
Even assuming on a parity of reasoning that the impugned order is a
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decision in the suit, it does not follow as suggested by Dr. Saraf that
the impugned order is not a decision under section 8.
40. Dr. Saraf relied upon the judgment of the Supreme Court in P.
Anand Gajapathi Raju vs. P.V.G. Raju, (2000) 4 SCC 539 = AIR 2000
SC 1886, in support of his contention that an application under
section 8 is not under Part I of the Arbitration & Conciliation Act,
1996.
In an appeal before the Supreme Court, the parties had entered
into an arbitration agreement by which they referred their disputes to
a sole arbitrator. The agreement was in the form of an application
signed by all the parties and met the requirements of section 7. The
question that arose for consideration was whether the Supreme Court
in an appeal could refer the parties to arbitration under the 1996 Act.
In paragraph 5 the Supreme Court enumerated the conditions required
to be satisfied under sections 8(1) (2) before the Court could exercise
its powers. The Supreme Court held that the phrase in “which is
subject of an arbitration agreement” does not necessarily require the
agreement to be already in existence before an action is brought in the
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Court and that the phrase also connotes an arbitration agreement being
brought into existence while an action is pending. Dr. Saraf relied
upon the following observations in paragraph 8 of the judgment :-
“8. In the matter before us, the arbitration
agreement covers all the disputes between the parties
in the proceedings before us and even more than that.
As already noted, the arbitration agreement satisfies
the requirements of Section 7 of the new Act. The language
of Section 8 is peremptory. It is, therefore,
obligatory for the Court to refer the parties to arbitration
in terms of their arbitration agreement. Nothing
remains to be decided in the original action or the
appeal arising therefrom. There is no question of stay
of the proceedings till the arbitration proceedings
conclude and the award becomes final in terms of the
provisions of the new Act. All the rights, obligations
and remedies of the parties would now be governed
by the new Act including the right to challenge the
award. The court to which the party shall have recourse
to challenge the award would be the court as
defined in clause (e) of Section 2 of the new Act and
not the court to which an application under Section 8
of the new Act is made. An application before a court
under Section 8 merely brings to the court’s notice
that the subject-matter of the action before it is the
subject-matter of an arbitration agreement. This
would not be such an application as contemplated under
Section 42 of the Act as the court trying the action
may or may not have had jurisdiction to try the suit to
start with or be the competent court within the meaning
of Section 2(e) of the new Act.”
Dr. Saraf placing strong reliance upon the last sentence in
paragraph 8, contended that an application under section 8 is not an
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application under Part-I. Section 42 of the Arbitration & Conciliation
Act, 1996 reads as under :-
“42. Jurisdiction.—Notwithstanding anything
contained elsewhere in this Part or in any other law
for the time being in force, where with respect to an
arbitration agreement any application under this Part
has been made in a Court, that Court alone shall have
jurisdiction over the arbitral proceedings and all
subsequent applications arising out of that agreement
and the arbitral proceedings shall be made in that
Court and in no other Court.”
The last sentence in paragraph 8 and section 42 of the 1996 Act
has been read out of context by Dr. Saraf. It does not support his
contention. The question before us was neither raised before nor
decided by the Supreme Court. The observations relied upon by Dr.
Saraf were obviously in relation to what is to happen to future
applications. It is true that section 42 refers to any application “under
this part”, i.e., Part I. The Supreme Court does not state that the
application under section 8 is not one under Part I of the Act. What
the judgment holds is that an application under section 8 would not be
“such an application as contemplated under section 42 of the Act”.
What is held therefore, is not that an application under section 8, is not
one under Part I, but that it is not an application as contemplated
under section 42. The reason is obvious. Section 42 mandates that
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all the subsequent applications arising out of an arbitration agreement
and that arbitral proceeding shall be made in the Court, in which any
application under Part I has been made. The object was to consolidate
all the applications in the same Court rather than have parties filing
the applications before the different Courts all over the country in
respect of the same arbitration agreement and the same arbitral
proceedings. Now an application under the section is by its very
nature not one which deals with the arbitral proceedings per-se but an
application to compel the parties to refer the disputes in accordance
with the arbitration agreement. Nowhere in the judgment, has the
Supreme Court held that an application under section 8 is not an
application under Part I of the 1996 Act.
In fact the judgment read as a whole indicates quite clearly that
the application is one under section 8 and that the Court exercises its
powers upon being satisfied that the conditions in section 8 are met.
The judgment is authority for the proposition that an application
under section 8 is not an application as contemplated by section 42
and not that it is not an application under Part I of the Act or under the
1996 Act. This is clear from the concluding words from the last
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sentence ; “as the Court trying the action may or may not have had
jurisdiction to try the suit to start with or be the competent Court
within the meaning of Section 2(e) of the new Act......” The basis of
the judgment is obvious and is furnished in these words. It would
otherwise lead to the absurdity that merely because the action is filed
in a Court without territorial, pecuniary or subject matter jurisdiction,
all the applications in respect of the arbitration agreement and in
relation to the arbitral proceedings must be filed in the Court. A view
to the contrary would entitle a party to subject the other parties to the
jurisdiction of his choice although the Courts within that jurisdiction,
lack jurisdiction by the simple expedient of filing an application in
such a Court.
41. By filing the application under section 8, the party does not
subject itself to the jurisdiction of the Court - pecuniary, territorial or
subject matter. A party merely brings to the notice of that Court the
existence of the arbitration agreement and seeks an order referring the
party bringing the action to arbitration in accordance therewith.
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42. This view is supported by a judgment of the Supreme Court in
Bahrein Petroleum Co. Ltd. vs. P.J. Pappu & Ors., (1966) 1 SCR 461.
= AIR 1966 SC 634. The Supreme Court held in paragraph 6 :-
“6. The High Court was of the view that the
effect of Sections 2(c), 34 and 39 of the Indian
Arbitration Act was that by filing the appeal under
Section 39 against the order of the Cochin Court
refusing to stay the suit the defendants must be
deemed to have conceded that the Cochin Court was
a Court having jurisdiction to try the suit. An
application under Section 34 lies to the judicial
authority, before which the suit is pending. Section
39(1) permits an appeal from an order of a Court
under Section 34. Section 2(c) defines a “Court” as a
civil court having jurisdiction, to decide the questions
forming the subject-matter of the reference if the
same had been the subject-matter of a suit. On a
combined reading of Sections 2(c), 34 and 39, the
High Court concluded that by filing the appeal under
Section 39(1) the defendants conceded that the
Cochin Court before which the application under
Section 34 was made was a Court as defined in
Section 2(c), and, therefore, a Court having
jurisdiction to try the suit. We are unable to accept
this line of reasoning. Even substituting the word
“Court” for the words “judicial authority” in Section
34, it would appear that the general definition of
“Court” in Section 2(c) cannot be imported into
Section 34. An application for stay of a suit must be
made to the Court before which it is pending. That
Court may or may not be the Court having
jurisdiction to decide the questions forming the
subject-matter of the reference, if the same had been
the subject-matter of a suit. Still, the application must
be made to the Court and to no other. An application
to the Court before which the suit is pending for stay
of the suit under Section 34 is in no way a recognition
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that that Court has jurisdiction to try the suit, nor can
an appeal from an order of the Court under Section
34 have that effect. We, therefore, hold that the defendants
did not waive their objection as to the territorial
jurisdiction of the Cochin Court.”
43. The decision of the Supreme Court in Fuerst Day Lawson Ltd.
vs. Jindal Exports Ltd., (2011) 8 SCC 333, virtually concludes the
matter against the appellant. That the judgment dealt with section 50
of the 1996 Act makes no difference. In fact, the ratio applies with
greater force as the language of section 37 is far stricter and restrictive
than that of section 50.
Paragraphs 1, 2, 3, 89 and 90 of the judgment read as under :-
“1. Leave granted in SLP (C) No. 31068 of 2009 and
SLP (C) No. 4648 of 2010. The common question that
arises for consideration by the Court in this batch of
cases is whether an order, though not appealable
under Section 50 of the Arbitration and Conciliation
Act, 1996 (hereinafter “the 1996 Act”), would
nevertheless be subject to appeal under the relevant
provision of the Letters Patent of the High Court. In
other words even though the Arbitration Act does not
envisage or permit an appeal from the order, the
party aggrieved by it can still have his way, bypassing
the Act and taking recourse to another jurisdiction.
2. Mr C.A. Sundaram, Senior Advocate, however, who
led the arguments on behalf of the appellants, would
like to frame the question differently. He would ask
whether there is any provision in the 1996 Act that
can be said to exclude the jurisdiction of the High
Court under its Letters Patent either expressly or even
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impliedly. He would say that the jurisdiction of the
High Court under the Letters Patent is an
independent jurisdiction and as long as the order
qualifies for an appeal under the Letters Patent an
appeal from that order would be, undoubtedly, maintainable
before the High Court.
3. A correct answer to both the questions would
depend upon how the 1996 Act is to be viewed. Do the
provisions of the 1996 Act constitute a complete code
for matters arising out of an arbitration proceeding,
the making of the award and the enforcement of the
award? If the answer to the question is in the
affirmative then, obviously, all other jurisdictions,
including the Letters Patent jurisdiction of the High
Court would stand excluded but in case the answer is
in the negative then, of course, the contention of Mr
Sundaram must be accepted.
... ... ... ...
89. It is, thus, to be seen that Arbitration Act, 1940,
from its inception and right through to 2004 (in P.S.
Sathappan) was held to be a self-contained code.
Now, if the Arbitration Act, 1940 was held to be a
self-contained code, on matters pertaining to
arbitration, the Arbitration and Conciliation Act,
1996, which consolidates, amends and designs the
law relating to arbitration to bring it, as much as
possible, in harmony with the UNCITRAL Model must
be held only to be more so. Once it is held that the
Arbitration Act is a self-contained code and
exhaustive, then it must also be held, using the lucid
expression of Tulzapurkar, J., that it carries with it “a
negative import that only such acts as are mentioned
in the Act are permissible to be done and acts or
things not mentioned therein are not permissible to be
done”. In other words, a letters patent appeal would
be excluded by the application of one of the general
principles that where the special Act sets out a
self-contained code the applicability of the general
law procedure would be impliedly excluded.
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90. We, thus, arrive at the conclusion regarding the
exclusion of a letters patent appeal in two different
ways; one, so to say, on a micro basis by examining
the scheme devised by Sections 49 and 50 of the 1996
Act and the radical change that it brings about in the
earlier provision of appeal under Section 6 of the
1961 Act and the other on a macro basis by taking
into account the nature and character of the 1996 Act
as a self-contained and exhaustive code in itself.”
The Supreme Court answered the questions posed in paragraph
3 as to whether the Act constitutes a complete code in the affirmative.
In view of paragraph 3 of the judgment, it would follow that the
Letters Patent jurisdiction of the High Court stands excluded.
Paragraphs 3 and 89 read together puts the matter beyond controversy.
In paragraph 3, it is held that if the 1996 Act constitutes a complete
code for matters arising out of an arbitration proceeding, other
jurisdictions, including the Letters Patent jurisdiction of the High
Court would stand excluded. In paragraph 89, the Supreme Court held
that the 1996 Act is exhaustive and a self-contained code. This ratio is
irrespective of whether the case deals with the provisions of Part I or
Part II of the 1996 Act. That section 50 of the 1996 Act fell for
consideration makes no difference. In fact the ratio would apply with
greater force to section 37. Section 50 of the 1996 Act reads as
under :-
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“50. Appealable orders.—(1) An appeal shall lie
from the order refusing to—
(a) refer the parties to arbitration under Section 45;
(b) enforce a foreign award under Section 48;
to the Court authorised by law to hear appeals from
such order.
(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.”
Section 50 does not even contain the words “(and from no
others)”. These words in parenthesis appears in section 37.
44. The contention that there is an absolute bar against a reference
to the provisions of the 1940 Act and the judgments rendered
thereunder while considering the provisions of the 1996 Act is not
well founded. In Fuerst Day Lawson Ltd. vs. Jindal Exports Limited's
case (supra) for instance, the Supreme Court in fact referred to the
judgment under the 1940 Act on the question whether an appeal is
maintainable from the orders passed under section 45 in view of
section 50. In paragraph 38, the Supreme Court referred to its earlier
judgment in Union of India vs. Mohindra Supply Company (supra) in
considerable detail in paragraphs 86, 87 and 88. In paragraph 39 of
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the judgments of the Supreme Court in State of W.B. vs. Gourangalal
Chatterjee, (1993) 3 SCC 1 and Union of India vs. Aradhana Trading
Co. (2002) 4 SCC 447, the were referred to.
Paragraph 62 reads as under :-
“62. Having come to this conclusion, it would
appear that the decisions rendered by the Court on
the interplay between Section 39 of the 1940 Act and
the Letters Patent jurisdiction of the High Court shall
have no application for deciding the question in hand.
But that would be only a superficial view and the
decisions rendered under Section 39 of the 1940 Act
may still give the answer to the question under
consideration for a very basic and fundamental
reason.”
The Supreme Court therefore, clarified that though it would
appear that the decisions referred under section 39 of the 1940 Act
shall have no application for deciding the question under sections 45
and 50 of the 1996 Act; it is not so. That would be only a superficial
view and that the decisions referred under section 39 of the 1940 Act
may still give the answer to the question as to whether an appeal from
the order against under section 45 is barred in view of section 50 of
the 1996 Act. It is important to note that the Supreme Court in Fuerst
Day Lawson Ltd. vs. Jindal Exports Limited's case (supra), in
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paragraph 37, set out section 39 of the 1940 Act and observed as
under :-
“(Insofar as relevant for the present, Section 37 of
the 1996 Act, is very similar to Section 39 of the
previous Act as quoted above.)”
In paragraph 52, the Supreme Court again observed that section
39 of the 1940 Act is equivalent to section 37 of the 1996 Act. The reliance
upon the judgments under section 39 of the 1940 Act is, therefore,
justified.
55. In the circumstances, the reference is answered as follows :-
An appeal against an order passed in an application under
section 8 of the Arbitration & Conciliation Act, 1996 is not
maintainable under clause 15 of the Letters Patent being barred by the
provisions of section 37 of the Arbitration and Conciliation Act, 1996.
56. The appeal shall be placed before the appropriate Bench for disposal
in accordance with this judgment
A.K. MENON, J. S.J. VAZIFDAR, J. K.R. SHRIRAM, J.
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Print Page
1940 Act nor the judgments rendered in respect of the provisions
thereunder are relevant or can be relied upon while construing the
provisions of the 1996 Act, Dr. Saraf relied upon the following observations
of the Supreme Court in M/s. Sudaram Finance Ltd. vs. M/s.
NEPC India Ltd., (1999) 2 SCC 479 = AIR 1999 SC 565.
“9. The 1996 Act is very different from the
Arbitration Act, 1940. The provisions of this Act have,
therefore, to be interpreted and construed
independently and in fact reference to the 1940 Act
may actually lead to misconstruction. In other words,
the provisions of the 1996 Act have to be interpreted
being uninfluenced by the principles underlying the
1940 Act. In order to get help in construing these
provisions, it is more relevant to refer to the
UNCITRAL Model Law rather than the 1940 Act.”
We do not read the judgment as laying down an absolute
proposition that the provisions of the 1940 Act and the judgments rendered
thereunder can never be relied upon while construing the provisions
of the 1996 Act. The Supreme Court held that the provisions of
the 1940 Act “may” actually lead to misconstruction and not that the
provisions of the 1940 Act necessarily would in all cases lead to misconstruction.
If the provisions of the two Acts are almost identical
and if there is nothing in the framework in the new Act that suggests
that the provisions of the old Act are different, we see no reason why
the provisions of the old Act and the judgments rendered thereunder
cannot be relied upon to construe or at least to indicate the possible
construction of the provisions of the 1996 Act.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 806 OF 2011
IN
NOTICE OF MOTION NO. 3709 OF 2010
IN
SUIT NO. 2358 OF 2010
Conros Steels Pvt. Ltd.,
Versus
Lu Qin (Hong Kong) Company Ltd.,
CORAM : S.J. VAZIFDAR, K.R. SHRIRAM
& A.K. MENON, JJ.
PRONOUNCED ON: 27TH NOVEMBER, 2014
Citation; 2015(1) MHLJ 434
Read original judgment here;click here
1. A Division Bench of this Court, by an order dated 13th March,
2012, directed the office to place the papers before the Chief Justice
for appropriate orders. The Division Bench opined that the following
question ought to be referred for consideration to a larger bench.
“Whether an appeal under the provisions of clause 15 of
the Letters Patent, against an order passed by the learned
Single Judge of this Court in a civil suit in an application filed
in that civil suit because of the provisions of section 8 of the
Arbitration and Conciliation Act, is maintainable or not ?”
The learned Chief Justice constituted this Full Bench and
referred the above question to it.
2. We have held that an appeal against an order in an application
under section 8 is not maintainable under clause 15 of the Letters
Patent. Our conclusion is based on principle and on authority. It is
based on our interpretation of the Arbitration and Conciliation Act,
1996 in the framework in which it now stands. It is also based on
precedent. The precedents are under the Arbitration Act, 1940 and
under the 1996 Act.
3. It is not necessary to deal with the merits of the case and it is
sufficient to refer to the facts only briefly. The appellant filed the
above suit to recover a sum of about Rs.4.19 crores together with
interest from the first defendant. No relief has been claimed against
the second and third defendants. The reference to the respondent /
defendant in this judgment will be to respondent No.1 / defendant
No.1. The respondent filed the above Notice of Motion for an order
that the disputes raised in the suit be referred to arbitration in
accordance with the arbitration agreement between the parties as
stipulated in the sales contracts dated 28th April, 2010, and for an
order terminating the above suit. In the affidavit in support, the
respondent stated that the Notice of Motion was also for an order
referring the parties to arbitration in view of the arbitration agreement.
The learned single Judge granted the prayers in the Notice of
Motion. The above appeal is filed against that order.
4. The respondent raised a preliminary objection as to the
maintainability of the appeal. The respondent contended that the
appeal is not maintainable in view of section 37 of the Arbitration &
Conciliation Act, 1996. The Division Bench, after recording the
submissions and noting the authorities relied upon, passed the said
order dated 13th March, 2012, which ultimately lead to the present
reference. The contentions raised before the Division Bench were
reiterated before us.
5. Several High Courts, have taken the view that an appeal against
an order under section 8 of the Act is not maintainable. We are in
respectful agreement with the judgments. Dr. Saraf, the learned
counsel appearing on behalf of the appellant, however, submitted that
none of the judgments have considered his submissions before us. He
invited us to take a different view, also on the ground that most of
these judgments relied upon the judgments rendered under the
Arbitration Act, 1940. This, according to him, is impermissible, both
on authority and in principle.
6. Sections 8 and 37 of the Arbitration and Conciliation Act, 1996,
read as under :
“8. Power to refer parties to arbitration where there
is an arbitration agreement.- (1) A judicial authority
before which an action is brought in a matter which is
the subject of an arbitration agreement shall, if a
party so applies not later than when submitting his
first statement on the substance of the dispute, refer
the parties to arbitration.
(2) The application referred to in sub-section 1
shall not be entertained unless it is accompanied by
the original arbitration agreement or a duly certified
copy thereof.
(3) Notwithstanding that an application has
been made under sub-section (1) and that the issue is
pending before the judicial authority, an arbitration
may be commenced or continued and an arbitral
award made.
... ... ... ...
37. Appealable orders.-(1) An appeal shall lie
from the following orders (and from no others) to the
Court authorised by law to hear appeals from
original decrees of the Court passing the order,
namely:-
(a) Granting or refusing to grant any measure
under section 9;
(b) Setting aside or refusing to set aside an
arbitral award under section 34.
(2) An appeal shall also lie to a Court from an
order of the arbitral tribunal -
(a) Accepting the plea referred to in sub-section
(2) or sub-section (3) of section 16; or
(b) Granting or refusing to grant an interim
measure under section 17.
(3) 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."
7. It would be appropriate first to refer to some of the judgments
under the 1996 Act relied upon by Mr. V.P. Sawant, the learned
counsel appearing on behalf of the respondent in support of his
submission that an appeal from an order under section 8 of the Act is
not maintainable in view of section 37 of the Act.
8. In Canbank Financial Services Limited vs. Punjab & Haryana
Papers Chemical and another, 2008(2) Arb.LR 365 (Delhi), a Division
Bench of the Delhi High Court dealt with an identical issue. The
appeal was against an order of the learned single Judge allowing the
first respondent's application for referring the disputes in the suit to
arbitration. It was contended that the impugned order amounted to the
plaint being rejected and therefore, the appeal was maintainable under
section 96 of the Code of Civil Procedure and under section 10 of the
Delhi High Court Act, 1966. The Division Bench held that the
embargo on appeals in section 37 is absolute and categorical ; that
the Act which is a special Act dealing with arbitrations, specifically
limits the extent of judicial intervention. It was further held that the
language of section 37 consciously takes away the right of the
appellant against the orders other than those mentioned thereunder and
that any other interpretation would render the expression “and from no
others” otiose or nugatory. The Division Bench referred to the similar
provisions in section 39 of the Arbitration Act, 1940 and to the
judgment of the Supreme Court in Union of India vs. Mohindra
Supply Company AIR 1962 SC 256, and the judgments of the Delhi
High Court also under the 1940 Act in support of the conclusions.
We are in respectful agreement with the observations even
without recourse to section 5.
9. A Division Bench of this Court by a judgment dated 19th March,
2009 in the case of International Technology Kirchner Italia Branch,
S.P.A. vs. Esteem Projects Pvt. Ltd. in Appeal No.485 of 2005 in
Notice of Motion No.1238 of 2003 in Summary Suit No.332 of 2003
dealt with a similar case. That was an appeal against the order of the
learned single Judge, dismissing the appellant's motion for referring
the disputes under section 8 of the Act. The Division Bench held that
on a plain construction of the provisions of section 37, it is clear that
an appeal is provided only from the orders specified therein. The
Division Bench held in paragraphs 4 and 5 :-
“4. The words in parenthesis (and from no
others), are equally important. These words are
intended to remove any doubt that might arise about
the maintainability of an appeal from any order other
than those specified. The words emphasise that an
appeal only lies from orders specified in the section
and no others. The only thing that needs to be seen
therefore is whether an appeal lies from an order
under section 8 of the Arbitration and Conciliation
Act, 1996. It is clear that an appeal is not provided
under section 37. An order refusing to refer the
dispute to arbitration under section 8 is not an order
which falls in any of the categories specified in
section 37 and therefore is not appealable.
5. The view taken by us finds support in a decision of
a Division Bench of the Punjab and Haryana High
Court in the case of Hind Samachar Limited,
Jalandhar – Smt.Sudarshan Chopra and others V.
Vijay Kumar Chopra and others, reported in (2002) 4
Company Law Journal 1, pointed out by Ms Shah, the
learned Counsel for the respondent. The Division
Bench of Punjab and Haryana High Court observed
in para 36 as follows:-
"Having dealt with all issues canvassed by
learned counsel, we now endeavour to draw
conclusions based on our interpretation of
section 37 of the Arbitration Act, 1996. In the
absence of judicial precedent on the pointed
issue, we will embark upon the controversy on
first principles. We have already concluded
above that even a remedy of appeal would not
be available unless expressly provided for, while
interpreting section 5 of the Arbitration Act,
1996. We have also concluded that the term
"orders" referred in Section 37 of the
Arbitration Act, 1996, refers to orders passed
under Part I of the Arbitration Act, 1996. The
question then is whether the remedy of appeal is
excluded against an order passed by a "judicial
authority" under section 8 of the Arbitration
Act, 1996? In our view, it is. The reason for the
aforesaid conclusion are the words ’and from no
others’ qualifying the word ’orders’ it leaves no
doubt that section 37 (1) of the Arbitration Act,
1996, does not delineate an inclusive list of
appealable order, but defines the exhaustive list
of orders from which an appeal under the
provisions of the Arbitration Act, 1996, is
competent. Since the list is exhaustive, and since
an order passed by a "judicial authority" under
section 8 of the Arbitration Act, 1996, is not
included therein, it would been enevitable to
conclude that the remedy of appeal there from is
expressly excluded."
Dr. Saraf relied upon the judgment of the Supreme Court in P.
Anand Gajapathi Raju vs. P.V.G. Raju, AIR 2000 SC 1886 in support
of his contention that an application taken out pursuant to the
provisions of section 8 is not one under Part I of the 1996 Act. We
will refer to this judgment of the Supreme Court in another context
later. Suffice it to note at this stage that that in our view the Supreme
Court did not hold that an order under section 8, does not fall under
Part I of the Act.
10. In Rites Limited vs. JMC Projects (India) Ltd. 2009 (2) Arb. LR
64 (Delhi), another Division Bench of the Delhi High Court
considered the appeal against an order of the learned single Judge
dismissing the application under section 8. The Division Bench relied
upon several judgments, including the earlier judgment of the Division
Bench of the Delhi High Court in Canbank (supra). The contention
that the judgment in Canbank was per-incuriam was rejected. The
Division Bench held :-
“17. It is, therefore, clear that no appeal could be
maintained from an order of the Court passed under
the old Act, by resort either to the Letters Patent or
Section 104 CPC, unless the same fell within Section
39 of the old Act, even though the order passed by the
Court may qualify as being a “judgment” within the
meaning ascribed to that term in Shah Babulal
Khimji (supra). The Act, having adopted the same
terminology in so far as it defines the scope of the
right to appeal against the orders of the Court passed
under the Act, as used in the old Act, in our view the
decision in Mohindra Supply Co. (supra) is squarely
applicable, and resort cannot be had by the appellant
to either the Letters Patent or Section 104 of the CPC
to maintain the present appeal.
20. Reliance placed by the appellant on the
Constitution Bench’s decision in P.S. Sathaappan
(supra) appears to be misplaced. Firstly, we may
notice that in P.S. Sathaappan (supra), the earlier
decision of the Supreme Court in Mohindra Supply
Co. (supra) was approved. Secondly, the Supreme
Court in P.S. Sathaappan (supra) observed “a
specific exclusion may be clear from the words of a
statute even though no specific reference is made to
Letters Patent”.
In the face of a specific exclusion of the right to
appeal contained in Section 37 of the Act, except in
respect of orders passed by the Court:
(a) Granting or refusing to grant any measure under
Section 9
(b) Setting aside or refusing to set aside any arbitral
award under Section 34;
it cannot be said that a Letters Patent appeal is
maintainable against an order passed under Section
8 of the Act. In our view the legislative intent to
exclude a Letters Patent appeal from orders passed
under the Act, except those specifically mentioned in
Section 37(1) of the Act is clear.
22. We find no merit in the appellant’s
submission that the impugned order having been
passed in a civil suit, Section 37 of the Act cannot be
invoked to bar the appeal. The order has been passed
by the learned Single Judge on an application
preferred by the appellant by invoking Section 8 of
the Act. Obviously, it is an order passed under the
Act. This submission of the appellant is, therefore,
rejected.”
11. In Tandav Films Entertainment Pvt. Ltd. vs. Four Frames
Pictures 2010(1) Arb.LR, 79 (Delhi), the appeal was against the order
allowing the application under section 8 in the appellant's suits which
were actions, inter-alia, for infringement of copyright. Following the
earlier judgment of the Delhi High Court in Canbank (supra), the
Division Bench held :-
“12. A bare reading of the provisions of the
aforesaid section is sufficient to show that the only
orders of a court arising out of the Act against which
an appeal lies under Section 37(1) of the Act are
those granting or refusing to grant any measure
under Section 9 [clause(a)] and setting aside or
refusing to set aside an arbitral award under Section
34 of the Act [clause (b)]. The legislature in order to
place matters beyond the pale of controversy has
mandated that “an appeal shall lie only from the
orders covered by clause (a) and clause (b) of
sub-section (1) of Section 37 and from no others”.
There is no manner of doubt that the impugned order
passed by the learned Single Judge under Section 8 of
the Act is neither an order granting or refusing to
grant any measure under Section 9 of the Act nor an
order setting aside or refusing to set aside an arbitral
award under Section 34. Sub-section (2) of Section 37
clearly has no application since the said sub-section
deals with the appeals to the court from orders of the
arbitral tribunal. Mr. Sagar, the learned counsel for
the appellant, when faced with this situation
contended that even if the impugned order was
otherwise a correct order under Section 8 of the Act
(and not erroneous as it is), the decision to dismiss
the appellant's suit would still be appealable in view
of the fact that the Arbitration and Conciliation Act,
1996 does not contemplate such an order of dismissal
nor even requires stay of the suit upon reference to
arbitration.
18. In a recent Division Bench judgment of this
court in RITES Limited vs. JMC Projects (India) Ltd.
in FAO (OS) No.173/2007 decided on 18.03.2009
(reported as 2009(2) Arb. LR 64 (Del.) (DB) another
Division Bench of the Delhi High Court while dealing
with the scope and ambit of Section 37 of the 1996
Act, after referring to several judgments of the
Hon'ble Supreme Court and the Delhi High Court,
including Groupe Chimique Tunisien SA vs. Southern
Petrochemicals Industries Corpn. Ltd., (2006) 5 SCC
275=2006 SCACTC 332 (SC) = 2006(2) Arb. LR 435
(SC); P.S. Sathappan (Dead) by LRs. vs. Andhra Bank
Ltd. and others, AIR 2004 SC 5152; Vanita M.
Khanolkar vs. Pragna M. Pai, AIR 1998 SC 424; R.K.
Sharma vs. Ashok Nagar Welfare Association & Co.,
AIR 2001 Delhi 272; Gurmauj Saran Baluja vs. Joyce
C. Salim and others, AIR 1990 Delhi 13; Jugal
Kishore Paliwal vs. Sat Jit Singh, (1984) 1 SCC 358;
Shah Babulal Khimji; Mohindra Supply Co.; A.S.
Dhupia; and Banwari Lal Radhey Mohan expressed
concurrence with the view taken by the Division
Bench in the Canbank case. The Division Bench also
rejected the contention of the respondent that the
judgment rendered in Canbank was per incuriam. In
paragraph 22 of its judgment, it held as follows (at
p.73 of Arb.LR ) :
“22. We find no merit in the appellant's
submission that the impugned order having been
passed in a civil suit, Section 37 of the Act cannot be
invoked to bar the appeal. The order has been passed
by the learned Single Judge on an application
preferred by the appellant by invoking Section 8 of the
Act. Obviously, it is an order passed under the Act.
This submission of the appellant is, therefore,
rejected.”
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12. In Maruti Clean Coal & Power Limited vs. Kolahai Infotech
Pvt. Ltd. MANU/DE/1387/2010, the Division Bench considered the
maintainability of an appeal against an order allowing an application
under section 8. The Division Bench held that the appeal was not
maintainable in view of section 37 of the Act.
The earlier decisions of the Delhi High Court, some of which
we have referred to were followed. The Division Bench also held that
section 39 of the 1940 Act is analogous to section 37 of the 1996 Act.
This view has also been taken by the Supreme Court in a judgment we
will refer to later.
13. A learned single Judge of this Court dealt with this issue in
considerable detail, in an order and judgment dated 6th November,
2012 in a group of matters, the first of which was in Masusmi SA
Investment LLC vs. Keystone Realtors Pvt. Ltd. & Ors., Company
Appeal (Lodging) No.47 of 2012 in Company Law Board No.57 of
2012 and came to the same conclusion. The learned Judge referred to
the above judgments and to other judgments as well in coming to this
conclusion. We are entirely in agreement with this submission.
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14. We are in respectful agreement with the above judgments.
15. As we also noted earlier, Dr. Saraf however, contended that
reliance cannot be placed upon the provisions of the Arbitration Act,
1940 and the judgments, even of the Supreme Court rendered
thereunder. He submitted therefore, that the judgment of the Supreme
Court in Union of India vs. Mohindra Supply Company AIR 1962 SC
256, can be of no assistance in answering this reference.
The opening words of section 39(1) of the 1940 Act are identical
to section 37(1) of the 1996 Act. Only the orders against which
appeals are maintainable are different. It is settled law that an appeal
against an order not referred to in section 39 of the 1940 Act is not
maintainable even under clause 15 of the Letters Patent. There is no
reason to take a different view with respect to section 37(1). We are
bound by the judgment of the Supreme Court in Union of India vs.
Mohindra Supply Company.
16. In support of his contention that neither the provisions of the
1940 Act nor the judgments rendered in respect of the provisions
thereunder are relevant or can be relied upon while construing the
provisions of the 1996 Act, Dr. Saraf relied upon the following observations
of the Supreme Court in M/s. Sudaram Finance Ltd. vs. M/s.
NEPC India Ltd., (1999) 2 SCC 479 = AIR 1999 SC 565.
“9. The 1996 Act is very different from the
Arbitration Act, 1940. The provisions of this Act have,
therefore, to be interpreted and construed
independently and in fact reference to the 1940 Act
may actually lead to misconstruction. In other words,
the provisions of the 1996 Act have to be interpreted
being uninfluenced by the principles underlying the
1940 Act. In order to get help in construing these
provisions, it is more relevant to refer to the
UNCITRAL Model Law rather than the 1940 Act.”
We do not read the judgment as laying down an absolute
proposition that the provisions of the 1940 Act and the judgments rendered
thereunder can never be relied upon while construing the provisions
of the 1996 Act. The Supreme Court held that the provisions of
the 1940 Act “may” actually lead to misconstruction and not that the
provisions of the 1940 Act necessarily would in all cases lead to misconstruction.
If the provisions of the two Acts are almost identical
and if there is nothing in the framework in the new Act that suggests
that the provisions of the old Act are different, we see no reason why
the provisions of the old Act and the judgments rendered thereunder
cannot be relied upon to construe or at least to indicate the possible
construction of the provisions of the 1996 Act.
Dr. Saraf has not invited our attention to any other aspect of the
1996 Act in general or of section 37 thereof in particular that would be
contrary to or even at a variance with the provisions of section 39 of
the 1940 Act and the construction thereof in the judgment of the
Supreme Court in Union of India vs. Mohindra Supply Company,
(1962) 3 SCR 497 = AIR 1962 SC 256. The ratio of the judgment is
applicable to section 37 of the 1996 Act and has, with respect, been
rightly relied upon by the judgments of the various High Courts in
deciding this issue.
17. This view is also supported by the judgment of the Supreme
Court in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2011) 8 SCC
333. We will be dealing with this judgment on the main issue later.
We find it convenient, however, to deal with this judgment even on the
present aspect towards the end of our judgment.
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18. Dr. Saraf contended that the 1940 Act does not have a provision
similar to section 8 of the 1996 Act and therefore, the judgments regarding
the maintainability of an appeal under the 1940 Act ought not
to be relied upon.
The fallacy in this argument is that what must be seen is
whether the 1940 Act has a provision similar to section 37 of the 1996
Act and not whether it has a provision similar to section 8. This is
obvious for we are here concerned with the maintainability of an
appeal and not with the rights of a defendant or respondent seeking
enforcement of the right under an arbitration agreement.
19. Dr. Saraf relied upon the following observations from the
judgment of the Privy Council in The Administrator - General of
Bengal vs. Premlal Mullick, 1895(22), ILR 788.
"The respondent maintained this singular proposition,
that, in dealing with a consolidating Statute, each enactment
must be traced to its original source, and
when that is discovered must be construed according
to the state of circumstances which existed when it
first became law. The proposition has neither reason
nor authority to recommend it. The very object of consolidation
is to collect the statutory law bearing upon
a particular subject, and to bring it down to date, in
order that it may form a useful code applicable to the
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circumstances existing at the time when the consolidating
Act is passed."
We do not read the judgment as having held that the provisions
of the previous enactments cannot be relied upon and that the judgments
rendered in respect of the previous enactments can never be of
any assistance in interpreting a consolidating statutes. The Privy
Council merely held that the consolidating Statutes must be interpreted
considering inter-alia the circumstances existing at the time when
the consolidating act is passed. We have done so. Having done so, we
see no reason to take a view in respect of section 37 of the 1996 Act
different from the view taken in respect of section 39 o the 1940 Act.
20. Dr. Saraf also relied upon the following observations of Lord
Wrenbury in Food Controller vs. Cork, 1923 All ER 463 (HL):-
"I listened with interest to the historical review which
the Attorney-General gave your Lordships of the
development of the statute law relevant to the matter
before the House. But I derive little, if any, assistance
from the knowledge that, for instance, a particular
section is in terms identical with a section which, as
the law previously stood, was found in a framework
different from that in which it is now found. To ascertain
the present law it is necessary to consider such a
section in the framework in which it now stands."
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The judgment does not hold that the provisions of an enactment
and the judgments rendered in respect thereof can never be relied upon
while construing similar or identical provisions of a subsequent
enactment. If the framework of two enactments is different, it would
be another matter. It is indeed necessary to consider section 37 in the
framework in which now it stands. There is nothing in the framework
of the 1996 Act that persuades us to take a different view in respect of
section 37 of the 1996 Act different from the one taken by the judgments
rendered in respect of section 39 of the 1940 Act.
21. This brings us to Dr. Saraf's contention which he says has not
been considered in detail in any of the above cases. His submission is
as follows: Section 8 is only a provision whereby a defendant /
respondent brings to the notice of the judicial authority the fact that
the subject matter of the proceedings are covered by an arbitration
agreement between the parties. If the contention is accepted, the
judicial authority declines to entertain the proceeding. Such an order
is akin and similar to the orders upholding objections as to the
maintainability of a proceeding or jurisdiction of the Court raised in
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the proceedings. The bar contained in section 37 is to the orders in
the applications made and decided under the 1996 Act. An order on
an objection taken on the basis of section 8 is not under the 1996 Act.
Section 37 would not be a bar to an appeal from such an order.
Therefore, the order in cases where section 8 is invoked are passed in
the proceedings (in this case the above suit) and are not orders under
the Arbitration & Conciliation Act, 1996. The reference is only by
refusing to entertain the suit. (For the purposes of our judgments, we
will presume that to be so.) Section 37 only relates to the applications
which originate under the Act and are contemplated to be made to the
Court as defined under section 2(e) of the 1996 Act, which reads as
under :-
“2. Definitions.—(1) In this Part, unless the context
otherwise requires,—
(e) “Court” means the Principal Civil Court of
Original Jurisdiction in a district, and includes the
High Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the
arbitration if the same had been the subject-matter of
a suit, but does not include any civil court of a grade
inferior to such Principal Civil Court, or any Court of
Small Causes;”
Section 8 is not an application that originates under the Act. It
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is but a permissible objection to the proceeding which is not under the
Act, such as a suit. The order is on an objection in the proceedings,
which are sought to be terminated. It follows therefore, that the order
is not on an application under the Act but in the proceeding.
An application under section 8 is not an application under Part-I
of the Act. Section 37 is applicable only to the orders passed by the
Court on the applications made under Part-I and the application must
be made under the Act. If it is held that an order passed on an
application taken in view of the provisions of section 8 is not an
application under the Act, it must follow that section 37 is inapplicable
to such an order. In other words, the bar under section 37 does not
apply to the orders which are the passed in applications not made
under the Act although they may be made on the basis of the
provisions of the Act.
Relying upon the judgment of the Supreme Court in State of
Goa vs. Praveen Enterprises, JT 2011 (8) 359, Dr. Saraf contended
that the Court does not actually make a reference to the Arbitral
Tribunal inter-alia by appointing the arbitrator and compelling the
parties to proceed with the arbitration.
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As section 8 does not empower the judicial authority to refer the
parties to arbitration establishes that the authority decides only an
objection and not an application.
22. Before we deal with these submissions, we must note that Dr.
Saraf rightly conceded that if the order under section 8 is held to be
one under the Act and it is found that the appeal against the same is
barred by the provisions of section 37 of the Act, no appeal would lie
against it under clause 15 of the Letters Patent. The crucial question
therefore, is whether an order under section 8 is one under the Act or
not. The impugned order was passed in an application in terms of
section 8 made in the above suit. The question therefore, is whether
the impugned order was passed under the provisions of section 8 or
not. We are of the view that it is.
23. We come to the conclusion that the impugned order was passed
"under" section 8 in two stages. Firstly section 8 confers upon the
judicial authority the power to pass the order referring the parties to
arbitration. Secondly, an application made pursuant to such a
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provision and the order passed thereon are "under" and are said and
considered to be "under" that provision. The word "under" in an
enactment signifies that the application made in accordance with or
pursuant to the provisions thereof is authorized by the provisions and
initiated under it.
24. The first indication that the application is under section 8 is
contained in the section itself. Sub-section (3) of section 8 itself
establishes that an application to refer a party to arbitration is under
sub-section (1) of section 8. This is clear from the opening words of
sub section (3) : “Notwithstanding that an application has been made
under sub-section (1) …... (emphasis supplied).
Dr. Saraf however, submitted that the use of the expression
“under sub-section (1)” in sub-section (3) of section 8 is not
conclusive of the matter and the Court must determine whether in law
it can be said that the application is under section 8.
25. Firstly, we see no reason to ignore or brush aside the language
used in the legislation. It clearly indicates that the application referred
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to in sub-section (1) of section 8 is "under" section 8(1). This is the
language of the section. There is nothing either in the Act generally or
in section 8 in particular that suggests that the word “under” is used
casually.
26. Even otherwise an application pertaining to the reliefs claimed
in section 8 is clearly under section 8 and thereby is one under the
provisions of the Act and in particular Part-I thereof which relates to
domestic arbitrations. Where a matter is subject of an arbitration
agreement, sub-section (1) of section 8 requires a party, (in this case
the defendant / respondent,) to apply to the judicial authority (in this
case this Court) before which the action (in this case the suit) is
brought to refer the parties to arbitration. The application is therefore,
undoubtedly to be made in the action but the power to refer the parties
to arbitration as mandated by sub-section (1) is conferred by and flows
from section 8 (1).
27. The present suit is filed to recover money. The suit obviously is
not filed under the Arbitration & Conciliation Act, 1996. It makes no
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difference which enactment the suit is filed under or pursuant to. It is
filed neither under the 1996 Act nor pursuant or in relation to any of
the provisions thereof. The application to refer the parties to
arbitration is not and could never have been under any enactment or
other law in force under which the suit was filed. To refer the parties
to arbitration upon an application for the same, the court must derive
its power from an enactment or other law in force. It was not even
suggested that there is any enactment or law in force other than the
1996 Act which entitles the Court to refer the parties to arbitration
where the action is brought in a matter which is the subject of an
arbitration agreement. It follows, therefore, even by elimination that
the power of the Court to refer the parties to arbitration is contained in
section 8 alone. Once section 8 (1) is held to be the source of power
to pass such an order, it must follow that the application in which such
an order is passed is under section 8 in general and under sub-section
(1) thereof in particular.
28. Section 8 being mandatory, it must follow that an order made on
an application under section 8 (1) is under the section, albeit in the
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application. It is not even suggested that such an order is made under
any other provision of law, statutory or otherwise. Even assuming
that the order is made in the action in which the section 8 application
is taken out as contended by Dr. Saraf, it would make no difference.
Merely because the order is made in the action and the effect thereof
operates on the application, it does not follow that the order is not
under section 8. There is nothing inconsistent or incongruous in the
finding that an application under section 8 is made in the action in
which it is taken out. Nor is there any inconsistency or incongruity in
the finding that the effect of the order under section 8 is on the
application in which it is made.
29. That section 8 confers the power upon a Court to also pass an
order referring the parties to arbitration has been recognized in a series
of judgments which we now refer to. In fact section 8 has been held
to be mandatory.
30. In Hindustan Petroleum Corpn. Ltd. vs. Pinkcity Midway
Petroleums, (2003) 6 SCC 503, the Supreme Court referred to
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judgment in P. Anand Gajapathi Raju v. P.V.G. Raju, 2 (2000) 4 SCC
539 and held that the language of section 8 is peremptory in nature
where there is an arbitration clause, it is obligatory for the Court to
refer the parties to arbitration in terms of the arbitration agreement and
nothing remains to be decided in the original action. Where there is
an arbitration agreement between the parties, it is mandatory for the
Civil Court to refer the dispute to an arbitrator. The Civil Court has no
jurisdiction to entertain the suit after an application under section 8 is
made.
31. That the Court has the power to pass an order under section 8
and that an order in an application pursuant to or in accordance with
section 8(1) is one "under" section 8, is clear from the judgment of the
Supreme Court in SBP & Co. vs. Patel Engineering Ltd., 2005 (8)
SCC 618, where it was held :-
“5. Section 8 confers power on a judicial
authority before whom an action is brought in a
matter which is the subject of an arbitration
agreement, to refer the dispute to arbitration, if a
party applies for the same.”
(emphasis supplied)
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32. In Rashtriya Ispat Nigam Ltd. vs. Verma Transport Co. (2006) 7
SCC 275, the Supreme Court held as under :-
“19. Section 8 confers a power on the judicial
authority. He must refer the dispute which is the
subject-matter of an arbitration agreement if an
action is pending before him, subject to the fulfilment
of the conditions precedent. The said power, however,
shall be exercised if a party so applies not later than
when submitting his first statement on the substance
of the dispute.
... ... ...
34. Thus, they did not submit themselves to the
jurisdiction of the court. They did not waive their
right. They in effect and substance questioned the
jurisdiction of the court in proceeding with the matter.
In fact, in its application filed under Section 8 of the
1996 Act, the appellant raised a contention that the
suit was liable to be dismissed and the order of
injunction vacated in view of the arbitration clause.
... ... ...
36. The expression “first statement on the
substance of the dispute” contained in Section 8(1) of
the 1996 Act must be contradistinguished with the
expression “written statement”. It employs
submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a
finding on the part of the judicial authority that the
party has waived its right to invoke the arbitration
clause. If an application is filed before actually filing
the first statement on the substance of the dispute, in
our opinion, the party cannot be said to have waived
its right or acquiesced itself to the jurisdiction of the
court. What is, therefore, material is as to whether the
petitioner has filed his first statement on the
substance of the dispute or not, if not, his application
under Section 8 of the 1996 Act, may not be held
wholly unmaintainable. We would deal with this
question in some detail, a little later.” (emphasis supplied)
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33. In Ardy International (P) Ltd. vs. Inspiration Clothes & U,
(2006) 1 SCC 417, the Supreme held as under :-
“4. We have extensively heard the learned counsel
for both the sides and at the end of the day we are
satisfied that the whole proceedings were started,
continued and concluded under misconception of law.
In the first place, Section 8 is not intended to restrain
arbitration proceedings before an Arbitral Tribunal.
The situation contemplated by Section 8 can arise
only at the first instance of an opponent and
defendant in a judicial proceeding, or, at the highest,
suo motu at the instance of the judicial authority,
when the judicial authority comes to know of the
existence of an arbitration agreement. In either event,
there is no question of the court under Section 8 of the
1996 Act restraining the arbitral proceedings from
commencing or continuing. In fact, Section 8 is
intended to achieve, so to say, the converse result.
Unfortunately, in this case the application for interim
relief was made by the respondent who was the
plaintiff before the civil court. The relief sought
therein is the restraint of arbitral proceedings. It
could only have been decided as an application under
Order 39 Rules 1 and 2 for whatever it was worth.
Once the objection to this application was filed by the
appellant bringing to the notice of the court the
existence of an arbitration agreement, thereafter the
proceedings could have been continued only within
the parameters of Section 8 of the 1996 Act. A
proceeding under Section 8 could never result in an
order restraining the arbitral proceedings, which is
what finally the impugned order before us does.”
(emphasis supplied)
This judgment puts the point beyond doubt. The Supreme
Court held that the proceedings under section 8 bringing to the notice
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of the Court the existence of an arbitration agreement could be
continued only within the parameters of section 8. This clearly
indicates that such proceedings, i.e., the proceedings under section 8
continued only within the parameters of section 8. It follows therefore
that such proceedings are under section 8 and that is precisely the
language of the Supreme Court in the last sentence of paragraph 4,
quoted above.
34. In Agri Gold Exims Ltd. vs. Sri Lakshmi Knits & Wovens,
(2007) 3 SCC 686, the Supreme Court held as under :-
“22. Section 8 of the 1996 Act is peremptory in
nature. In a case where there exists an arbitration
agreement, the court is under obligation to refer the
parties to arbitration in terms of the arbitration
agreement. (See Hindustan Petroleum Corpn. Ltd. v.
Pinkcity Midway Petroleums (2003) 6SCC 503 and
Rashtriya Ispat Nigam Ltd.(2006) 7 SCC 275) No
issue, therefore, would remain to be decided in a
suit."
The Court, it is held, is under an obligation to refer the parties to
arbitration in terms of the arbitration agreement. This obligation arises
from and under section 8. It does not arise from or under any other
provision of law, statutory or otherwise. It certainly does not arise
from the provisions of law that may have entitled the plaintiff to file
the above suit.
35. A Full Bench of this Court in Fountain Head Developers vs.
Mrs.Maria Arcangla Sequeira (since deceased through LRs.) & Ors.,
AIR 2007 Bom. 149, held that section 8 confers power to refer the
parties to arbitration where there is an arbitration agreement and that
such power under section 8 can be exercised by a judicial authority.
36. The Supreme Court in State of Goa vs. Praveen Enterprises, JT
2011 (8) SCC 359, held as under :-
“12 'Reference to arbitration' can be in respect of
reference of disputes between the parties to
arbitration, or may simply mean referring the parties
to arbitration. S. 8 of the Act is an example of
referring the parties to arbitration. While s. 11
contemplates appointment of arbitrator [vide
sub-sections (4), (5) and (9)] or taking necessary
measure as per the appointment procedure under the
arbitration agreement [vide sub-section (6)], s. 8 of
the Act does not provide for appointment of an
arbitrator, nor referring of any disputes to arbitration,
but merely requires the judicial authority before
whom an action is brought in a matter in regard to
which there is an arbitration agreement, to refer the
parties to arbitration. When the judicial authority
finds that the subject matter of the suit is covered by a
valid arbitration agreement between the parties to the
suit, it will refer the parties to arbitration, by refusing
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to decide the Action brought before it and leaving it to
the parties to have recourse to their remedies by
arbitration. When such an order is made, parties may
either agree upon an arbitrator and refer their
disputes to him, or failing agreement, file an
application u/s. 11 of the Act for appointment of an
arbitrator. The judicial authority 'referring the parties
to arbitration' under s. 8 of the Act, has no power to
appoint an arbitrator. It may however record the
consent of parties to appoint an agreed arbitrator.”
These findings do not militate against and are not contrary to
what we have held. The Supreme Court in this case merely held the
nature of the orders that can be passed under section 8. The Supreme
Court did not deal with the question whether such an application can
be said to have been made under section 8 and the order passed
thereunder can be said to be one under section 8.
37. This leads to the second stage. Mr. Sawant's reliance upon the
judgment of the Full Bench of the Calcutta High Court in Rabindra
Nath vs. Gour Mondal (FB), AIR 1957, Calcutta 274 in this regard is
well founded. The Full Bench held as under :-
“(21) In my opinion, the Act suffers from the same
limitations as the Ordinance. The material section is
Section 2. It is in the same terms as Cl. 2 of the
Ordinance except that a second proviso, which is not
material for our present purpose, has been added at
the end of the provision and that in sub-sec. 1 (a) (i),
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corresponding to sub-cl. 1 (a) (i) of the Ordinance, the
words "or any application for revision" have been
added. The words added do not in any way alter the
position I have found in regard to the Ordinance. Like
the proceedings set out under items (i), (ii) and (iii) of
Cl. 2 (1) (a) of the Ordinance, the different kinds of
proceedings set out under items (i), (ii) and (iii) of S.
2 (1) (a) of the Act are all proceedings "under the
West Bengal Bargadars Act, 1950". That
qualification, expressly made in the prefatory
paragraph of sub-section and sub-clause 2(1),
controls the rest of the provision in both the Act and
the Ordinance. In view of the collocation of the words
"under the West Bengal Bargadars Act, 1950" as
placed in the Ordinance and now in the Act, it is not
even possible to argue that they have been used
loosely in a general sense and are really intended to
refer to all proceedings to which the Act is relevant,
whether they were initiated under the Act or under
other laws, because such a meaning can never be
conveyed by the form of expression adopted which is
"where, under the West Bengal Bargadars Act, 1950,
any appeal or application..........was pending". What
such an expression can comprise and cover are only
appeals and applications authorised by and initiated
under the Act itself.
(28) I would only add that having regard to the
provisions of the Bargadars Act, 1950, which is a
complete code by itself and lays down the rights as
also the procedure by which the same can be
enforced, and the way in which the material section in
this Act has been worded, the expression "under the
Act" can only mean "authorised by the Act."”
We are entirely in agreement with the view that where the
legislature uses the word “under” in relation to an enactment, it
signifies not only that the application is authorized by the enactment
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but also that it is initiated under that particular enactment. The
application authorized by an enactment is made under that enactment
and an order passed on such an application is one under that
enactment. As we mentioned earlier, section 8 authorizes an
application of the nature stipulated in sub-section (1) thereof. The
Court is not only authorized but bound to pass an order allowing the
application under section 8. When a Court has the power to pass an
order in terms stipulated in an enactment, the order is one passed
under that enactment.
38. We find support for this view in the judgment of a Division
Bench of the Punjab & Haryana High Court in Smt.Sudershan Chopra
vs. Vijay Kumar Chopra, (2003) 117, Company Cases 660. The
Division Bench considered a case where the respondent had filed a
company petition under sections 397 and 398 of the Companies Act
before the Company Law Board (CLB) and in which the appellant
filed an application under section 8 of the 1996 Act. The CLB held
that the application was not sustainable and refused to refer the
disputes to arbitration. The decision of the CLB was challenged in the
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appeal under section 10-F of the Companies Act. The respondent
contended that the appeal was not maintainable. The Division Bench
considered the issue of maintainability. The appellant contended that
while considering the issue of jurisdiction, reference must be made to
the Companies Act. The respondent on the other hand contended that
the answer to the question of maintainability must be decided on the
basis of the provisions of the 1996 Act. The Division Bench first
determined which of the two statues was applicable to determine the
question of maintainability of the appeal under section 10-F. The
Division Bench held :-
“In our view, in order to adjudicate upon the
aforesaid contention, it would be imperative for us to
first determine the legislative provision under which
the impugned order dated December 8, 2000, has
been passed. If in the aforesaid determination, this
court arrives at the conclusion that the order was
passed by the CLB in exercise of its jurisdiction to
settle a dispute flowing out of the provisions of the
Companies Act, 1956, then and only then, the instant
plea advanced on behalf of the appellants would
merit acceptance. In such an eventuality, it would
have to be concluded that the search for the appellate
forum would have to be restricted to the Companies
Act, 1956. However, if this court arrives at the
conclusion that the impugned order dated December
8, 2000, had been passed by the CLB in its capacity
of 'judicial authority' in exercise of obligations
flowing out of the Arbitration Act, 1996, in
furtherance of the provisions of the Arbitration Act,
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1996, then certainly, the remedy must be searched for,
from within the provisions of the Arbitration Act,
1996. In such an eventuality, the contention advanced
on behalf of the appellants would not merit
acceptance.
Undoubtedly, when the petition was filed by the
respondents (herein) before the CLB, the CLB was
exercising jurisdiction under the provisions of
Sections 397 and 398 of the Companies Act, 1956.
However, when the appellants (herein) moved an
application under Section 8 of the Arbitration Act,
1996, before the CLB, the CLB while deciding the
said application acted in its capacity as “judicial
authority'' under Section 8 of the Arbitration Act,
1996. There can be no doubt that the impugned order
determines rights flowing out of the provisions of the
Arbitration Act, 1996, and not the provisions of the
Companies Act, 1956. Since the CLB did not
adjudicate the dispute between the parties under
Sections 397 and 398 of the Companies Act, 1956
(which was really the subject matter of Company
Petition No. 76 of 1999) through the order impugned
before us it is not possible for us to accept the
contention advanced on behalf of the appellants that
in disposing of the application filed under Section 8
of the Arbitration Act, 1996, the CLB was exercising
jurisdiction vested in it under the Companies Act,
1956. The conclusion has to be, as noticed in the
foregoing paragraphs, that the right to prefer an
appeal against an order passed by the CLB in its
capacity as “judicial authority” while deciding an
application filed under Section 8 of the Arbitration
Act, 1996, must be searched for, from within the
provisions of the Arbitration Act, 1996, more so,
because the impugned order is not referable to any
provision of the Companies Act, 1956.”
We are in respectful agreement with these observations. The
Court exercises powers under the provisions of law pursuant to which
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the proceedings are filed. However, the application under section 8 is
decided in accordance with the provisions thereof. The order on such
an application is passed in view of the power conferred by the section
to do so.
We are also in respectful agreement with the conclusion that the
1996 Act is exhaustive and comprehensive code. This, as noted, is
evident from section 5 of the 1996 Act, which reads as under :-
“5. Extent of judicial intervention.—
Notwithstanding anything contained in any other law
for the time being in force, in matters governed by
this Part, no judicial authority shall intervene except
where so provided in this Part.”
In Union of India vs. Mohindra Supply Company AIR 1962 SC
256, it was held that the Arbitration Act 1940 was an exhaustive and
comprehensive code which had consolidated the law relating to
arbitration. The provisions of the 1996 Act, including section 5
thereof, make it abundantly clear that it is a self-contained code of the
matters relating to domestic arbitration. We are not concerned with an
international arbitration in this case. We are in respectful agreement
with the observation insofar as it holds that the order under section 8
is in exercise of powers “flowing out of” the Arbitration Act, 1996, in
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furtherance of the provisions of that Act and therefore, the remedy of
an appeal must be sought from within the provisions of that Act. In
other words, the order of the CLB was under section 8 of the
Arbitration Act, 1996 and determined the rights flowing out of the
provisions thereof and not the provisions of the Companies Act, 1956.
On parity of reasoning, we hold that the order impugned in the above
appeal was one passed under section 8 of the Arbitration Act, 1996. In
that view of the matter, the appeal is not maintainable in view of
section 37 of the 1996 Act.
39. In that view of the matter, the judgment of the Supreme Court in
Shyam Sundar Sarma vs. Pannalal Jaiswal, 2005(1) SCC 436 is of no
assistance to the appellant. Dr. Saraf relied upon the judgment to
contend that the impugned order was passed in the suit. In paragraph
10, the Supreme Court observed that an appeal filed along with an
application for condoning the delay in filing that appeal when
dismissed on the refusal to contend the delay is nevertheless a
decision in the appeal. Our views are not contrary to this judgment.
Even assuming on a parity of reasoning that the impugned order is a
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decision in the suit, it does not follow as suggested by Dr. Saraf that
the impugned order is not a decision under section 8.
40. Dr. Saraf relied upon the judgment of the Supreme Court in P.
Anand Gajapathi Raju vs. P.V.G. Raju, (2000) 4 SCC 539 = AIR 2000
SC 1886, in support of his contention that an application under
section 8 is not under Part I of the Arbitration & Conciliation Act,
1996.
In an appeal before the Supreme Court, the parties had entered
into an arbitration agreement by which they referred their disputes to
a sole arbitrator. The agreement was in the form of an application
signed by all the parties and met the requirements of section 7. The
question that arose for consideration was whether the Supreme Court
in an appeal could refer the parties to arbitration under the 1996 Act.
In paragraph 5 the Supreme Court enumerated the conditions required
to be satisfied under sections 8(1) (2) before the Court could exercise
its powers. The Supreme Court held that the phrase in “which is
subject of an arbitration agreement” does not necessarily require the
agreement to be already in existence before an action is brought in the
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Court and that the phrase also connotes an arbitration agreement being
brought into existence while an action is pending. Dr. Saraf relied
upon the following observations in paragraph 8 of the judgment :-
“8. In the matter before us, the arbitration
agreement covers all the disputes between the parties
in the proceedings before us and even more than that.
As already noted, the arbitration agreement satisfies
the requirements of Section 7 of the new Act. The language
of Section 8 is peremptory. It is, therefore,
obligatory for the Court to refer the parties to arbitration
in terms of their arbitration agreement. Nothing
remains to be decided in the original action or the
appeal arising therefrom. There is no question of stay
of the proceedings till the arbitration proceedings
conclude and the award becomes final in terms of the
provisions of the new Act. All the rights, obligations
and remedies of the parties would now be governed
by the new Act including the right to challenge the
award. The court to which the party shall have recourse
to challenge the award would be the court as
defined in clause (e) of Section 2 of the new Act and
not the court to which an application under Section 8
of the new Act is made. An application before a court
under Section 8 merely brings to the court’s notice
that the subject-matter of the action before it is the
subject-matter of an arbitration agreement. This
would not be such an application as contemplated under
Section 42 of the Act as the court trying the action
may or may not have had jurisdiction to try the suit to
start with or be the competent court within the meaning
of Section 2(e) of the new Act.”
Dr. Saraf placing strong reliance upon the last sentence in
paragraph 8, contended that an application under section 8 is not an
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application under Part-I. Section 42 of the Arbitration & Conciliation
Act, 1996 reads as under :-
“42. Jurisdiction.—Notwithstanding anything
contained elsewhere in this Part or in any other law
for the time being in force, where with respect to an
arbitration agreement any application under this Part
has been made in a Court, that Court alone shall have
jurisdiction over the arbitral proceedings and all
subsequent applications arising out of that agreement
and the arbitral proceedings shall be made in that
Court and in no other Court.”
The last sentence in paragraph 8 and section 42 of the 1996 Act
has been read out of context by Dr. Saraf. It does not support his
contention. The question before us was neither raised before nor
decided by the Supreme Court. The observations relied upon by Dr.
Saraf were obviously in relation to what is to happen to future
applications. It is true that section 42 refers to any application “under
this part”, i.e., Part I. The Supreme Court does not state that the
application under section 8 is not one under Part I of the Act. What
the judgment holds is that an application under section 8 would not be
“such an application as contemplated under section 42 of the Act”.
What is held therefore, is not that an application under section 8, is not
one under Part I, but that it is not an application as contemplated
under section 42. The reason is obvious. Section 42 mandates that
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all the subsequent applications arising out of an arbitration agreement
and that arbitral proceeding shall be made in the Court, in which any
application under Part I has been made. The object was to consolidate
all the applications in the same Court rather than have parties filing
the applications before the different Courts all over the country in
respect of the same arbitration agreement and the same arbitral
proceedings. Now an application under the section is by its very
nature not one which deals with the arbitral proceedings per-se but an
application to compel the parties to refer the disputes in accordance
with the arbitration agreement. Nowhere in the judgment, has the
Supreme Court held that an application under section 8 is not an
application under Part I of the 1996 Act.
In fact the judgment read as a whole indicates quite clearly that
the application is one under section 8 and that the Court exercises its
powers upon being satisfied that the conditions in section 8 are met.
The judgment is authority for the proposition that an application
under section 8 is not an application as contemplated by section 42
and not that it is not an application under Part I of the Act or under the
1996 Act. This is clear from the concluding words from the last
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sentence ; “as the Court trying the action may or may not have had
jurisdiction to try the suit to start with or be the competent Court
within the meaning of Section 2(e) of the new Act......” The basis of
the judgment is obvious and is furnished in these words. It would
otherwise lead to the absurdity that merely because the action is filed
in a Court without territorial, pecuniary or subject matter jurisdiction,
all the applications in respect of the arbitration agreement and in
relation to the arbitral proceedings must be filed in the Court. A view
to the contrary would entitle a party to subject the other parties to the
jurisdiction of his choice although the Courts within that jurisdiction,
lack jurisdiction by the simple expedient of filing an application in
such a Court.
41. By filing the application under section 8, the party does not
subject itself to the jurisdiction of the Court - pecuniary, territorial or
subject matter. A party merely brings to the notice of that Court the
existence of the arbitration agreement and seeks an order referring the
party bringing the action to arbitration in accordance therewith.
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42. This view is supported by a judgment of the Supreme Court in
Bahrein Petroleum Co. Ltd. vs. P.J. Pappu & Ors., (1966) 1 SCR 461.
= AIR 1966 SC 634. The Supreme Court held in paragraph 6 :-
“6. The High Court was of the view that the
effect of Sections 2(c), 34 and 39 of the Indian
Arbitration Act was that by filing the appeal under
Section 39 against the order of the Cochin Court
refusing to stay the suit the defendants must be
deemed to have conceded that the Cochin Court was
a Court having jurisdiction to try the suit. An
application under Section 34 lies to the judicial
authority, before which the suit is pending. Section
39(1) permits an appeal from an order of a Court
under Section 34. Section 2(c) defines a “Court” as a
civil court having jurisdiction, to decide the questions
forming the subject-matter of the reference if the
same had been the subject-matter of a suit. On a
combined reading of Sections 2(c), 34 and 39, the
High Court concluded that by filing the appeal under
Section 39(1) the defendants conceded that the
Cochin Court before which the application under
Section 34 was made was a Court as defined in
Section 2(c), and, therefore, a Court having
jurisdiction to try the suit. We are unable to accept
this line of reasoning. Even substituting the word
“Court” for the words “judicial authority” in Section
34, it would appear that the general definition of
“Court” in Section 2(c) cannot be imported into
Section 34. An application for stay of a suit must be
made to the Court before which it is pending. That
Court may or may not be the Court having
jurisdiction to decide the questions forming the
subject-matter of the reference, if the same had been
the subject-matter of a suit. Still, the application must
be made to the Court and to no other. An application
to the Court before which the suit is pending for stay
of the suit under Section 34 is in no way a recognition
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that that Court has jurisdiction to try the suit, nor can
an appeal from an order of the Court under Section
34 have that effect. We, therefore, hold that the defendants
did not waive their objection as to the territorial
jurisdiction of the Cochin Court.”
43. The decision of the Supreme Court in Fuerst Day Lawson Ltd.
vs. Jindal Exports Ltd., (2011) 8 SCC 333, virtually concludes the
matter against the appellant. That the judgment dealt with section 50
of the 1996 Act makes no difference. In fact, the ratio applies with
greater force as the language of section 37 is far stricter and restrictive
than that of section 50.
Paragraphs 1, 2, 3, 89 and 90 of the judgment read as under :-
“1. Leave granted in SLP (C) No. 31068 of 2009 and
SLP (C) No. 4648 of 2010. The common question that
arises for consideration by the Court in this batch of
cases is whether an order, though not appealable
under Section 50 of the Arbitration and Conciliation
Act, 1996 (hereinafter “the 1996 Act”), would
nevertheless be subject to appeal under the relevant
provision of the Letters Patent of the High Court. In
other words even though the Arbitration Act does not
envisage or permit an appeal from the order, the
party aggrieved by it can still have his way, bypassing
the Act and taking recourse to another jurisdiction.
2. Mr C.A. Sundaram, Senior Advocate, however, who
led the arguments on behalf of the appellants, would
like to frame the question differently. He would ask
whether there is any provision in the 1996 Act that
can be said to exclude the jurisdiction of the High
Court under its Letters Patent either expressly or even
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impliedly. He would say that the jurisdiction of the
High Court under the Letters Patent is an
independent jurisdiction and as long as the order
qualifies for an appeal under the Letters Patent an
appeal from that order would be, undoubtedly, maintainable
before the High Court.
3. A correct answer to both the questions would
depend upon how the 1996 Act is to be viewed. Do the
provisions of the 1996 Act constitute a complete code
for matters arising out of an arbitration proceeding,
the making of the award and the enforcement of the
award? If the answer to the question is in the
affirmative then, obviously, all other jurisdictions,
including the Letters Patent jurisdiction of the High
Court would stand excluded but in case the answer is
in the negative then, of course, the contention of Mr
Sundaram must be accepted.
... ... ... ...
89. It is, thus, to be seen that Arbitration Act, 1940,
from its inception and right through to 2004 (in P.S.
Sathappan) was held to be a self-contained code.
Now, if the Arbitration Act, 1940 was held to be a
self-contained code, on matters pertaining to
arbitration, the Arbitration and Conciliation Act,
1996, which consolidates, amends and designs the
law relating to arbitration to bring it, as much as
possible, in harmony with the UNCITRAL Model must
be held only to be more so. Once it is held that the
Arbitration Act is a self-contained code and
exhaustive, then it must also be held, using the lucid
expression of Tulzapurkar, J., that it carries with it “a
negative import that only such acts as are mentioned
in the Act are permissible to be done and acts or
things not mentioned therein are not permissible to be
done”. In other words, a letters patent appeal would
be excluded by the application of one of the general
principles that where the special Act sets out a
self-contained code the applicability of the general
law procedure would be impliedly excluded.
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90. We, thus, arrive at the conclusion regarding the
exclusion of a letters patent appeal in two different
ways; one, so to say, on a micro basis by examining
the scheme devised by Sections 49 and 50 of the 1996
Act and the radical change that it brings about in the
earlier provision of appeal under Section 6 of the
1961 Act and the other on a macro basis by taking
into account the nature and character of the 1996 Act
as a self-contained and exhaustive code in itself.”
The Supreme Court answered the questions posed in paragraph
3 as to whether the Act constitutes a complete code in the affirmative.
In view of paragraph 3 of the judgment, it would follow that the
Letters Patent jurisdiction of the High Court stands excluded.
Paragraphs 3 and 89 read together puts the matter beyond controversy.
In paragraph 3, it is held that if the 1996 Act constitutes a complete
code for matters arising out of an arbitration proceeding, other
jurisdictions, including the Letters Patent jurisdiction of the High
Court would stand excluded. In paragraph 89, the Supreme Court held
that the 1996 Act is exhaustive and a self-contained code. This ratio is
irrespective of whether the case deals with the provisions of Part I or
Part II of the 1996 Act. That section 50 of the 1996 Act fell for
consideration makes no difference. In fact the ratio would apply with
greater force to section 37. Section 50 of the 1996 Act reads as
under :-
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“50. Appealable orders.—(1) An appeal shall lie
from the order refusing to—
(a) refer the parties to arbitration under Section 45;
(b) enforce a foreign award under Section 48;
to the Court authorised by law to hear appeals from
such order.
(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.”
Section 50 does not even contain the words “(and from no
others)”. These words in parenthesis appears in section 37.
44. The contention that there is an absolute bar against a reference
to the provisions of the 1940 Act and the judgments rendered
thereunder while considering the provisions of the 1996 Act is not
well founded. In Fuerst Day Lawson Ltd. vs. Jindal Exports Limited's
case (supra) for instance, the Supreme Court in fact referred to the
judgment under the 1940 Act on the question whether an appeal is
maintainable from the orders passed under section 45 in view of
section 50. In paragraph 38, the Supreme Court referred to its earlier
judgment in Union of India vs. Mohindra Supply Company (supra) in
considerable detail in paragraphs 86, 87 and 88. In paragraph 39 of
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the judgments of the Supreme Court in State of W.B. vs. Gourangalal
Chatterjee, (1993) 3 SCC 1 and Union of India vs. Aradhana Trading
Co. (2002) 4 SCC 447, the were referred to.
Paragraph 62 reads as under :-
“62. Having come to this conclusion, it would
appear that the decisions rendered by the Court on
the interplay between Section 39 of the 1940 Act and
the Letters Patent jurisdiction of the High Court shall
have no application for deciding the question in hand.
But that would be only a superficial view and the
decisions rendered under Section 39 of the 1940 Act
may still give the answer to the question under
consideration for a very basic and fundamental
reason.”
The Supreme Court therefore, clarified that though it would
appear that the decisions referred under section 39 of the 1940 Act
shall have no application for deciding the question under sections 45
and 50 of the 1996 Act; it is not so. That would be only a superficial
view and that the decisions referred under section 39 of the 1940 Act
may still give the answer to the question as to whether an appeal from
the order against under section 45 is barred in view of section 50 of
the 1996 Act. It is important to note that the Supreme Court in Fuerst
Day Lawson Ltd. vs. Jindal Exports Limited's case (supra), in
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paragraph 37, set out section 39 of the 1940 Act and observed as
under :-
“(Insofar as relevant for the present, Section 37 of
the 1996 Act, is very similar to Section 39 of the
previous Act as quoted above.)”
In paragraph 52, the Supreme Court again observed that section
39 of the 1940 Act is equivalent to section 37 of the 1996 Act. The reliance
upon the judgments under section 39 of the 1940 Act is, therefore,
justified.
55. In the circumstances, the reference is answered as follows :-
An appeal against an order passed in an application under
section 8 of the Arbitration & Conciliation Act, 1996 is not
maintainable under clause 15 of the Letters Patent being barred by the
provisions of section 37 of the Arbitration and Conciliation Act, 1996.
56. The appeal shall be placed before the appropriate Bench for disposal
in accordance with this judgment
A.K. MENON, J. S.J. VAZIFDAR, J. K.R. SHRIRAM, J.
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