The governing principles which are applied while considering an
application under Order VI Rule 17 cannot be applied when a person seeks amendment of the application filed under Section 34 of the Act. This Court is of the view that some amount of discretion in the matter of amendment is still available with the Court and the Court while exercising such discretion judiciously cannot refuse unless this Court has reasons to believe that the amendment proposed are not legitimate or that the amendment is likely to take away the right accrued to the other side. {Para 17}
IN THE HIGH COURT OF JUDICATURE AT MADRAS
C.R.P.(PD) No.3790 of 2019
Bharat Heavy Electricals Ltd. Vs. Sudhir Cranes Pvt. Ltd.,
CORAM
MR. JUSTICE S.S.SUNDAR
DATED: 04.01.2022
The Civil Revision Petition is directed against the order of the learned II
Additional District and Sessions Judge, Vellore District, Vellore at Ranipet dated
17.09.2019 in I.A.No.1 of 2019 in AR.O.P.No.1 of 2015.
2. The revision petitioner herein entered into a contract dated 08.12.2011 with
the respondent and the respondent herein was to supply ten tonne mobile cranes/ on
tonnage basis for material handling at the rate of Rs.44/- per ton. Disputes arose at
the time when the contract was about to be completed. The respondent made various
claims and the revision petitioner disputed such claims.
3. Thereafter, the respondent raised a dispute before the Arbitral Tribunal
consisting of a sole Arbitrator. As provided under the agreement, as against the claim
for a sum of Rs.2,13,51,346.19/-, the revision petitioner also made a counter claim
for a sum of Rs.3,31,36,000/-. The Arbitral Tribunal considering the facts,
documents and arguments of both sides was pleased to pass an award dated
09.04.2015. The Arbitral Tribunal rejected the claim of the respondent and the
counter claim of the petitioner.
4. Aggrieved by the award of the Arbitral Tribunal dated 09.04.2015, the
revision petitioner as well the respondent filed independent application under Section
34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'Act'). The
revision petitioner is the applicant in the application in AR.O.P.No. 3 of 2015 filed
before the II Additional District Judge at Ranipet, Vellore District. The respondent is
the applicant in AR.O.P.No.1 of 2015 filed before the same Court. After presenting
the AR.O.P. on 13.06.2015, the respondent filed I.A.No.1 of 2019 seeking
permission to amend the arbitration petition filed under Section 34 of the Act.
5. According to the learned counsel for the revision petitioner, the amendments
are not only to correct certain errors and mistakes in the cause title but also to
introduce additional grounds. Therefore, the said application was opposed by the
revision petitioner on the ground that such amendments introducing new facts or
pleading is not permissible. However, the lower Court allowed the application filed
by the respondent by order dated 17.09.2019 and therefore, the revision petitioner
has preferred the above Civil Revision Petition.
6. Mr.V.Karthik, learned Senior Counsel appearing for Mr.John Zachariah,
learned counsel for the revision petitioner submitted the following points:
(i) The lower Court failed to see that the application for amendment
introducing new ground cannot be entertained at the belated stage after the limitation
for filing an application under Section 34 itself is over.
(ii) The provisions of the Code of Civil Procedure, 1908 (CPC) would not
apply to the proceedings either before the Arbitrator or before the lower Court when
the petition is filed under Section 34 of the Act.
(iii) Though it is permissible in law that some error in figures or typographical
mistakes can be corrected by way of amendment, the deletion and inclusion of
substantial pleading and grounds, which are not raised at the time of filing the
application, cannot be entertained.
(iv) The respondent is trying to introduce entirely new grounds based on new
facts by way of amendment and the lower Court has, in fact, allowed the respondent
to reopen the proceedings by allowing new grounds which were not taken at the first
instance.
7. From the narration of events and submissions on the legal issues raised by
the learned Senior Counsel appearing for the petitioner, one of the issues that arise
for consideration before this Court is whether the lower Court has power to entertain
an application under Order VI Rule 17 of the CPC. Several arguments are advanced
and precedents cited before this Court.
8. This Court is able to see that the Hon'ble Supreme Court has in several
cases recognized the application for amendment of an application under Section 34
of the Act under Order VI Rule 17 of C.P.C. In particular, a learned Single Judge of
this Court has specifically dealt with the issue in the case of Srikumar Textiles (P)
Ltd. And Others Vs. Sundaram Finance Ltd., [(2008) 1 ARB LR 217 (Mad)]. The
question that arose in that case was whether Order IX Rule 9 read with Section 151
CPC is applicable to restore Arbitral Original Petition which was dismissed for
default. After considering the provisions to understand the scope of the Act in
extenso, the Court though accepted the position that the Civil Procedure Code (CPC)
is not specifically provided for, came to the conclusion that unless there being
express prohibition against the application of the Code to a proceeding arising out of
the Act before the Civil Court, the Court need not infer that the Civil Procedure Code
is not applicable. The learned Single Judge also held that the proceedings before the
Arbitrator is slightly different when the matter comes before the Court arising out of
certain orders and in the application filed under Section 34 of the Act. It is relevant to
extract the statement expressed by the learned Single Judge in para 30 of the
judgment:
30. The extent of judicial intervention or the restriction placed on the
Court is confined only to the proceedings pending before the Arbitral Tribunal to
the extent so provided under the Act. In other words, the provisions of the Code of
Civil Procedure, may not be applicable to the proceedings pending before the
Arbitral Tribunal except so provided in part-I of the Act. The jurisdiction of a
Civil Court is determinable by application of the provisions of Civil Procedure
Code. Once the matter goes out of the hands of the Arbitral Tribunal to the Civil
Court, the provisions, contained in the Civil Procedure Code are applicable to all
the proceedings, i. e., orders or appeals arising out of provisions of Arbitration
Act. Since the proceedings before the Court are of civil nature, whatever procedure applicable and followed for other civil proceedings, equally apply to
the proceedings arising out of orders passed under Sections 9, 27, 34, 36 and 37
of the Act. In view of the decision of the Supreme Court and this Court, the issue
as to whether the civil Procedure Code is applicable to the Arbitral proceedings
pending on the file of the civil Court is no longer res integra. The statute does not
exclude the applicability of Civil Procedure Code to the proceedings arising out
of the Arbitration Act. The non- obstante clause in Section 5 of Act does not take
away the powers of the Principal Civil Court i. e., original jurisdiction in a
District of the High Court in applying the Civil Procedure Code, while deciding
the matters arising out of the Act. As regards the decision made by the Arbitral
Tribunal, any party aggrieved by the decision can apply to the Civil Court under
Section 34 of the Act to set aside the award. Judicial intervention is permissible in
any matters arising out of Sections 9, 27, 34, 36 and 37 in part-I of the Act and
provisions of the Code of Civil Procedure Code are applicable to such
proceedings.
9. Learned counsel appearing for the respondent, however, cited several
judgments of the Hon'ble Supreme Court relating to amendment of pleadings as
contemplated under Order VI Rule 17 of the CPC. The Hon'ble Supreme Court in a
few judgments has recognized the application of Order VI Rule 17 of C.P.C., when
the question arose in relation to amendment of memorandum of an application filed
under Section 34 of the Act.
10. Learned counsel for the petitioner relied on a decision of the Hon'ble
Supreme Court in the case of State of Maharashtra Vs. Hindustan Construction
Company Limited [(2010) 4 SCC 518], wherein the Hon'ble Supreme Court has
upheld the maintainability of a petition for amendment of the application filed under
Section 34 of the Act or the memo of appeal filed under Section 37 of the Act.
However, while accepting the legal position governing the amendment of pleadings in
the suit or memorandum of appeal, the Hon'ble Supreme Court was reluctant to
apply the same principles to an application for amendment of petition filed under
Section 34 of the Act to set aside the award. It is further held that the application
seeking to add new grounds in the memorandum of appeal for which no foundation
had been laid in the application for setting aside the award cannot be entertained. It
is useful to refer to the relevant portions of the judgment of the Hon'ble Supreme
Court which are in paragraph 29 to 36, which are extracted below:
29. There is no doubt that application for setting aside an arbitral award
under Section 34 of 1996 Act has to be made within time prescribed under subsection(
3) i.e., within three months and a further period of thirty days on
sufficient cause being shown and not thereafter. Whether incorporation of
additional grounds by way of amendment in the application under Section 34
tantamounts to filing a fresh application in all situations and circumstances. If
that were to be treated so, it would follow that no amendment in the application
for setting aside the award howsoever material or relevant it may be for
consideration by the Court can be added nor existing ground amended after the
prescribed period of limitation has expired although application for setting aside
the arbitral award has been made in time. This is not and could not have been the
intention of Legislature while enacting Section 34.
30. Moreso, Section 34 (2) (b) enables the Court to set aside the arbitral
award if it finds that the subject matter of the dispute is not capable of settlement
by arbitration under the law for the time being in force or the arbitral award is in
conflict with the public policy of India. The words in Clause (b) "the Court finds
that" do enable the Court, where the application under Section 34 has been made
within prescribed time, to grant leave to amend such application if the very
peculiar circumstances of the case so warrant and it is so required in the interest
of justice.
31. L.J. Leach and Company Ltd.1 and Pirgonda Hongonda Patil2, seem
to enshrine clearly that courts would, as a rule, decline to allow amendments, if a
fresh claim on the proposed amendments would be barred by limitation on the
date of application but that would be a factor for consideration in exercise of the
discretion as to whether leave to amend should be granted but that does not affect
the power of the court to order it, if that is required in the interest of justice.
There is no reason why the same rule should not be applied when the Court is
called upon to consider the application for amendment of grounds in the
application for setting aside the arbitral award or the amendment in the grounds
of appeal under Section 37 of 1996 Act.
32. It is true that, the Division Bench of Bombay High Court in Vastu
Invest and Holdings Pvt. Ltd.4 held that independent ground of challenge to the
arbitral award cannot be entertained after the period of three months plus the
grace period of thirty days as provided in the proviso of sub-section (3) of Section
34, but, in our view, by `an independent ground' the Division Bench meant a
ground amounting to a fresh application for setting aside an arbitral award. The
dictum in the aforesaid decision was not intended to lay down an absolute rule
that in no case an amendment in the application for setting aside the arbitral
award can be made after expiry of period of limitation provided therein.
33. Insofar as Bijendra Nath Srivastava8 is concerned, this Court did not
agree with the view of the High Court that the trial court did not act on any
wrongprinciple while allowing the amendments to the objections for setting aside
award under 1940 Act. This Court highlighted the distinction between `material
facts' and `material particulars' and observed that amendments sought related to
material facts which could not have been allowed after expiry of limitation.
Having held so, this Court even then went into the merits of objection introduced
by way of amendment. In our view, a fine distinction between what is permissible
amendment and what may be impermissible, in sound exercise of judicial
discretion, must be kept in mind. Every amendment in the application for setting
aside an arbitral award cannot be taken as fresh application.
34. In the case of Dhartipakar Madan Lal Agarwal9 this Court held that a
new ground cannot be raised or inserted in an election petition by way of an
amendment after the expiry of the period of limitation. It may not be proper to
extend the principles enunciated in Dhartipakar Madan Lal Agarwal9 in the
context of the provisions contained in Section 81 of the Representation of the
People Act, 1951 to an application seeking amendment to the application under
Section 34 forsetting aside an arbitral award or an appeal under Section 37of
1996 Act for the reasons we have already indicated above.
35. The question then arises, whether in the facts and circumstances of the
present case, the High Court committed any error in rejecting the appellant's
application for addition of new grounds in the memorandum of arbitration
appeal.
36. As noticed above, in the application for setting aside the award,
appellant set up only five grounds viz., waiver, acquiescence, delay, laches and
res judicata. The grounds sought to be added in the memorandum of arbitration
appeal by way of amendment are absolutely new grounds for which there is no
foundation in the application for setting aside the award. Obviously, such new
grounds containing new material/facts could not have been introduced for the first
time in an appeal when admittedly these grounds were not originally raised in the
arbitration petition for setting aside the award. Moreover, no prayer was made by
the appellant for amendment in the petition under Section 34 before the concerned
court or at the appellate stage.
11. Learned Senior Counsel for the petitioner further relied upon a judgment
of the High Court of Calcutta in the case of Prakash Industries Limited Vs. Bengal
Energy Limited and Another [2020 AIR Cal 279]. After referring to several
judgments of the Hon'ble Supreme Court, a learned Single judge of the Calcutta High
Court rejected an application filed for amendment of the grounds by applying the test
whether the proposed grounds would necessitate filing of a fresh application for
setting aside the award. When the new grounds do not have a foundation or basis in
the application already filed, it was held that the applicant before the Court cannot
contend that the amendment is just an amplification of existing grounds. It is also
useful to refer to judgments of the Hon'ble Supreme Court in Fiza Developers and
Inter-Trade Private Limited Vs. AMCI (India) Private Limited [(2009) 17 SCC
796], Venture Global Engineering Vs. Satyam Computer Services Ltd. [(2010) 8
SCC 660], Emkay Global Financial Services Limited Vs. Girdhar Sondhi [(2018) 9
SCC 49] and State of Maharashtra Vs. Hindustan Construction Company [(2010) 4
SCC 518], wherein the Hon'ble Supreme Court had occasion to recognize the power
to entertain a petition for amendment of the application filed under Section 34 of the
Act. However, the question before this Court is whether the application for
amendment is just to amplify the grounds which are already in existence or the object
of amendment is to introduce additional grounds for which there is no foundation in
the existing application filed under Section 34 of the Act. It is also to be seen whether
the new grounds introduced by amendment would change the character of the
petition originally filed under Section 34 of the Act.
12. Learned Senior Counsel himself has fairly conceded that up to Item nos. 1
to 6, there is no difficulty as the amendment is regarding some corrections in the
cause title and mistakes which are typographical errors. However, it is not in dispute
that item nos. 7 to 20 contemplate introduction of additional facts and grounds.
Learned counsel, though argued the matter elaborately, did not point out with
reference to each item of amendment as to how it has no factual foundation from the
existing application filed under Section 34.
13. It is seen that the original application filed by the respondent contains 33
paragraphs with additional paragraphs relating to the prayers. Up to paragraph nos.
1 to 15 the facts of the case, the pleadings of the respective parties and the nature of
award are narrated. Thereafter, paragraph nos. 16 to 30 are the grounds raised by the
respondent. The arbitral award of the sole Arbitrator was challenged on many
grounds in the original petition. Reference to some of the grounds raised by the
respondent in the application filed under Section 34 are necessary and hence they are
extracted below in a truncated form:
(a) The award of the arbitrator is against law and facts and contrary to the
material on record and hence it is against public policy.
(b) The interpretation of some of clauses in the agreement particularly clause
41 by the Arbitrator is erroneous and the arbitrator failed to appreciate the contents
of the letter marked as Ex. P9 dated 26.11.2012.
(c) The conclusion of the Arbitrator is contrary to the findings on facts.
(d) The Arbitrator failed to appreciate the rights, liabilities and obligations of
the parties arising under the contract and the Arbitrator failed to appreciate the
deposition of witnesses.
(e) The Arbitrator failed to appreciate the nature of contract and omitted to
take into account several factors.
(f) The Arbitrator failed to consider several factors and communications to
infer that the respondent before Arbitrator has promised to provide minimum
quantity of 10,70,000 MT and to compensate if there is reduction of quantity to be
handled.
(g) Though material was available, the respondent before Arbitrator did not
give any valid explanation for reduction of quantity to be handled by claimant and
the Arbitrator failed to appreciate the consequential loss caused to the claimant by
reeducation of volume. When the agreement was also to handle all materials, finished
goods, steel coil etc, the respondent before Arbitrator gave only finished goods for
handling to the claimant whereas other materials were allowed to be handled by
other persons. The Arbitrator, however, came to a wrong conclusion that the
claimant fell short in deploying sufficient number of cranes.
(h) The arbitrator failed to consider oral representations which are not
disputed by the respondents and erred in observing that there was substantial delay
in raising the issue regarding losses on account of reduction in quantity.
(i) The learned sole Arbitrator erred in concluding that the risk and loss due to
reduction of volume cannot be the basis of claim on an erroneous interpretation of
Clause 44 of the agreement dated 08.12.2011.
14. By way of amendments as stated earlier, additional grounds were
introduced. For example Item No. 8 relates to introduction of additional facts. The
respondent raised an additional ground that the Arbitrator failed to appreciate that
the petitioner ensured deployment of sufficient number of cranes to report in full
readiness throughout contract period without any break. Item No. 9 of the proposed
amendment was relating to clause 41 of the agreement. Though the existing
application refers to clause 41 and the findings of the Arbitrator, the addition appears
to be to amplify the grounds which are already in existence. Similarly all other
grounds are relating to the conclusions of the Arbitrator explaining how they are
contrary to the agreement and the obligation of respondent before Arbitrator to
compensate the loss on account of reduction of volume which was promised to the
claimant. The additional grounds are all about the loss incurred by the claimant while
performing the contract in terms of the agreement, due to the reduction of quantity of
material offered by M/s.Bharat Heavy Electricals Ltd. for handling.
15. This Court is unable to find any new ground which is either outside the
scope of the original Arbitral proceeding or without the factual background. None of
the grounds will change the character of original application. This Court is also
unable to find any new ground for which no foundation is laid in the application for
setting aside the award under Section 34. It is to be noted that the original
application filed under Section 34 is elaborate and this Court is unable to find a
totally new ground which changes the very nature of the grounds raised in the
application filed under Section 34. This Court cannot precisely determine, at this
stage, whether any of the new grounds go contrary to the agreement. It is a matter to
be considered on merits.
16. Under the pretext of amendment, it is not open to the respondent to go
beyond the original pleadings. Any elaboration of the original application or
amplification is permissible in law. This Court is unable to find any candid reason
which is analogous to one identified by the Calcutta High Court in Prakash
Industries Limited (supra) to reject the proposed amendment in the application filed
under Section 34 of the Act.
17. The governing principles which are applied while considering an
application under Order VI Rule 17 cannot be applied when a person seeks
amendment of the application filed under Section 34 of the Act. This Court is of the
view that some amount of discretion in the matter of amendment is still available
with the Court and the Court while exercising such discretion judiciously cannot
refuse unless this Court has reasons to believe that the amendment proposed are not
legitimate or that the amendment is likely to take away the right accrued to the other
side.
18. It is admitted that the revision petitioner has also filed a petition under
Section 34 of the Act which is numbered as AR.O.P.No. 3 of 2015. When both sides
have challenged the Arbitral award on various grounds, this Court is of the view that
the amendments are necessary and not for enlarging the scope of arbitral
proceedings. Since the lower Court is expected to consider the application under
Section 34, strictly in accordance with law, this Court is inclined to dismiss the Civil
Revision Petition subject to the right of the revision petitioner opposing any existing
or additional ground which has no factual foundation.
19. The observation of this Court cannot be construed or misunderstood to
interpret as if this Court has given liberty to the revision petitioner to raise all the
grounds that were raised by the revision petitioner in the Civil Revision Petition.
20. This Civil Revision Petition is dismissed. The lower Court is directed to
dispose of both AR.O.P.Nos.1 of 2015 and 3 of 2015 as expeditiously as possible,
preferably within a period of three months from the date of receipt of a copy of this
order. No costs.
04.01.2022
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