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The Water Base Limited, Chennai v/s M/s. KAP (India) Project and Construction Private Limited, Nishat Kuraichira, Rep. by its Managing Director, K.V. Mohamed Zakir

    OSA No. 97 of 2020 & CMP No. 4341 of 2020
    Decided On, 04 October 2021
    At, High Court of Judicature at Madras
    For the Appellant: Saundararaja Appa Rajan, Advocate. For the Respondent: Vijay Narayan, Senior Counsel, T.M. Pappiah, Advocate.

Judgment Text
(Prayer: Appeal filed under Order XXXVI Rule 1 of the O.S. Rules read with Clause 15 of the Letters Patent against the judgment and decree dated 05.12.2019 passed in Application No.2342 of 2019 on the file of original side of this court.)

Sanjib Banerjee, CJ.

1. There is a lesson in every matter and the present case brings out the tardiness in court proceedings, primarily because of the mistakes committed by or on behalf of the parties. Here is a dispute which arose in the year 1996 and is no where near its conclusion more than a quarter of a century later.

2. A request was made by the respondent herein to the appellant prior to the Arbitration and Conciliation Act, 1996 or the ordinance preceding it coming into effect for an arbitral reference. After several failed attempts to get an arbitrator appointed or a reference started, a Division Bench of this court passed an order on December 22, 2014, appointing a retired Judge of this court to take up the reference.

3. There is no dispute that by a notice dated February 11, 2015, the arbitrator called upon the parties to address him on the preliminary issues on February 19, 2015. Thus, it can be taken that the arbitrator entered upon reference on February 19, 2015.

4. In terms of Section 3 of the Arbitration Act, 1940 read with the First Schedule thereto, unless a contrary intention appeared from the arbitration agreement between the parties, the clauses set out in the First Schedule to the Act were deemed to be incorporated as a part of the arbitration agreement. The third clause of the First Schedule to the Act required an arbitral reference to be heard and the award pronounced thereon within a period of four months from the date of the arbitrator entering on reference.

5. Accordingly, in terms of such provision, the arbitral reference ought to have been concluded with an award pronounced by or about June 19, 2015. However, though the hearing before the arbitrator concluded by the first week of April, 2017, the award came to be pronounced on May 16, 2018, some 39 months after the arbitrator entered upon the reference. Neither side objected to the continuation of the proceedings beyond June 19, 2015, nor did it dawn on either side to apply to the court under Section 28 of the 1940 Act.

6. The award is said to have been filed with the Registrar shortly after it was made, but even the exact date of the filing of the award is not available at the moment. No steps were taken for the issuance of any notice under Section 14(2) of the Act of 1940. It must also be remembered that the award was required to be filed within 30 days of the making and publishing thereof.

7. Though the time for a party seeking to challenge the arbitral award under the 1940 Act started only upon receipt of a notice under Section 14(2) of the Act, the appellant herein applied under Sections 30 and 33 of the Act to question the propriety of the Act under divers grounds even before receiving any notice under Section 14(2) of the Act. But, it appears that there were certain defects in the petition and the same remained unnumbered since the defects had not been removed.

8. Thereafter, only upon the respondent herein applying under Section 17 of the Act for the court to pass a decree in terms of the award and the appellant herein being served a copy of the relevant petition, did the appellant attempt to contest the award. However, since the appellant’s relevant petition remained defective and had not been numbered, the Arbitration Court disregarded the objection and proceeded with the petition for pronouncing judgment on the basis of the award. Indeed, the Arbitration Court was of the opinion that the decree ought to be passed first before it could be challenged by the appellant herein.

9. Just like Section 34 of the Arbitration and Conciliation Act, 1996 read with Section 36 thereof contemplates enforcement of an arbitral award after the time to set aside had expired or upon no interim order being granted in the petition for setting aside an award, Section 17 of the Act of 1940 permitted the court to proceed to pronounce judgment according to the award “after the time for making an application to set aside the award has expired, or such application having been made, after refusing it”. It was obligatory on the part of the court to deal with the challenge to the award before proceeding to make a decree on the basis thereof.

10. The appellant has referred to several judgments, including those reported at (1985) 2 SCC 629 (State of Punjab vs. Hardyal), AIR 1962 SC 78 (Hari Shanker Lal vs. Shambhu Nath) and (1987) 4 SCC 93 (Hindustan Steel Works Construction Ltd vs. Rajasekhar Rao), for the proposition that it is only a court which can enlarge the time to make and publish an award unless the arbitration agreement between the parties confers any right on the parties to consent thereto. It must also be noticed that courts have been lenient in enlarging the time to make and publish the award, particularly since Section 28(1) of the Act of 1940 permitted the enlargement of the time even before or after the award had been made and published.

11. The exercise to extend the time to make and publish an award must be on established and judicious considerations. In the present case, the disputes between the parties that commenced in 1996 have not attained a closure. It took almost 18 years for the claimant to discover the forum before which the claim could be pursued. The parties proceeded in the reference and continued at least ten months after the original time had expired before the hearing in the arbitral reference was concluded and the matter was reserved for judgment. The judgment came to be pronounced a year later and the circumstances in which the award came to be filed in court or the steps taken by the parties thereafter betray that the procedure in the 1940 Act had completely gone out of the minds of all concerned, including the department of this court.

12. In such circumstances, it would be unreasonable to not extend the time to make and publish the award and require the parties to start the process all over again. Accordingly, in exercise of the authority available under Section 28(1) of the Act of 1940, the time to make and publish the award is extended such that the award is now deemed to have been passed within time.

13. Two other issues remain. The first pertains to when the award come to be filed in this court. By way of abundant caution and since Mr.V.Srikanth has appeared before us and affirmed that he had personally made over the original award to a Registrar of this court, the delay, if any, in filing the award in this court is condoned. The appellant herein is also permitted four weeks from today to re-present the petition filed under Sections 30 and 33 of the Act of 1940 upon removing the defects originally detected. It is made clear that if the defects are not removed or the re-presentation made within the time permitted, the appellant will forfeit the right to challenge the award.

14. The judgment and decree impugned herein cannot be sustained since the court proceeded to make the award a decree of court despite noticing

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that a previous challenge to the award –may be it was defective–was pending without affording the challenger a reasonable time to remove the defects. The judgment and decree impugned dated December 5, 2019 stand set aside. The respondent’s petition under Section 17 of the 1940 Act, Application No.2342 of 2019, is restored to the board of Arbitration Court. It will be open to the respondent herein to prosecute such application if, within four weeks from date, the appellant’s petition for setting aside the award is not re-presented after removing the defects therefrom. It will be open to the appellant to re-construct the petition for setting aside the award if the original papers are not available. OSA No.97 of 2020 is allowed as above without any order as to costs. CMP No.4341 of 2020 is closed.